Management Company Partner Convicted on Multiple Fraud Counts

Management Company Partner Convicted on Multiple Fraud Counts

 A partner in an investment management company was convicted following a jury trial on multiple counts of mail and wire fraud as well as securities fraud. The charges stem from a scheme in which most of the $5 million in investor funds raised were siphoned off by the defendant and others for their personal use. U.S. v. Alexander, No. 5:10-cr-00730 (N.D. Cal. Verdict Sept. 3, 2013).

Michael Swanson was a partner in the management of investment company APS Funding, Inc. The company offered short term, high interest loans for business and real estate development. Mr. Swanson and his partners set-up several investment funds related to APS. Those included GCP Investment, LLC and Greenlight Fund.

Beginning in 2007, and continuing through 2009, Mr. Swanson and others solicited investors for the funds. Those investors were told that their money would be invested in the so-called “hard money lending” business of APS. Investor solicitations were successful. About $5 million was raised.

Client solicitations were not successful. Few clients were induced to take out loans from APS. Nevertheless, the investor funds were largely dissipated. About 90% of those funds were diverted to the personal expenses of the firm’s partners, including Mr. Swanson.

Mr. Swanson was convicted of one count of conspiracy to commit mail and wire fraud, twelve counts of mail fraud, fourteen counts of wire fraud and one count of securities fraud,. He was acquitted on one count of mail fraud and one count of securities fraud. Sentencing is scheduled for December 18, 2013.

For more commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.

For more information about LexisNexis products and solutions connect with us through our corporate site.