UPDATE 1-SEC, Connecticut charge fund manager with fraud
Jonathan Stempel, 25 October 2010
NEW YORK, Oct 25 (Reuters) – A Connecticut hedge fund firm was sued on Monday by U.S. and state regulators for allegedly inflating the value of its holdings, allowing it to fraudulently collect millions of dollars of undeserved fees.
Southridge Capital Management LLC and its Chief Executive Stephen Hicks, 52, were sued by the U.S. Securities and Exchange Commission and Connecticut Banking Commissioner Howard Pitkin over their management and financial reporting of several funds.
The SEC said Hicks falsely valued Southridge’s largest holding, speech recognition company Fonix Corp, at $30 million or more based almost entirely on a 2004 transaction in which Fonix bought two companies from an entity he controlled.
It also said Hicks raised $78.9 million over the 2004 to 2007 period after falsely promising investors that more than 75 percent of assets would be put in liquid investments or cash.
Connecticut alleged the overvaluing of fund assets allowed Ridgefield-based Southridge to fraudulently collect more than $26 million in fees from 2004 to 2007. Continue reading “Article: UPDATE 1-SEC, Connecticut charge fund manager with fraud”
The Story of Deep Capture
By Mark Mitchell, with reporting by the Deep Capture Team
The Columbia School of Journalism is our nation’s finest. They grant the Pulitzer Prize, and their journal, The Columbia Journalism Review, is the profession’s gold standard. CJR reporters are high priests of a decaying temple, tending a flame in a land going dark. In 2006 a CJR editor (a seasoned journalist formerly with Time magazine in Asia, The Wall Street Journal Europe, and The Far Eastern Economic Review) called me to discuss suspicions he was forming about the US financial media. I gave him leads but warned, “Chasing this will take you down a rabbit hole with no bottom.” For months he pursued his story against pressure and threats he once described as, “something out of a Hollywood B movie, but unlike the movies, the evil corporations fighting the journalist are not thugs burying toxic waste, they are Wall Street and the financial media itself.” His exposé reveals a circle of corruption enclosing venerable Wall Street banks, shady offshore financiers, and suspiciously compliant reporters at The Wall Street Journal, Fortune, CNBC, and The New York Times. If you ever wonder how reporters react when a journalist investigates them (answer: like white-collar crooks they dodge interviews, lie, and hide behind lawyers), or if financial corruption interests you, then this is for you. It makes Grisham read like a book of bedtime stories, and exposes a scandal that may make Enron look like an afternoon tea.
Introduction By Patrick M. Byrne, Deep Capture Reporter
PDF (69 Pages): Deep Capture Story