The Securities and Exchange Commission (SEC) has charged three New York investment firms – West End Financial Advisors LLC, West End Capital Management LLC, Sentinel Investment Management Corp. – and four senior officers – William Landberg, Kevin Kramer, Steven Gould and Janis Barsuk – of conning investors into believing their money was invested in stable, safe investments designed to provide steady streams of income. In reality, West End was in the throes of a deepening financial crisis stemming from failed investment strategies.
The misconduct reportedly occurred from at least January 2008 to May 2009, the SEC says.
“The investment advisers here grossly abused the trust of their clients,” said George S. Canellos, Director of the SEC’s New York Regional Office. “They misappropriated and commingled their clients’ assets and sustained the illusion of a viable and successful business through a range of false representations.”
David Rosenfeld, Associate Director of the SEC’s New York Regional Office, added, “West End raised millions from investors by touting false positive returns while concealing fraudulent bank loans, cash flow problems, and the misappropriation of investor assets.”
In its complaint, the SEC alleges that Landberg used substantial amounts of fraudulently obtained bank loans to make distributions to certain West End fund investors, thereby creating the false impression that West End’s investments were performing well. During the same period, Landberg also misappropriated at least $1.5 million for himself and his family. Landberg’s wife, Louise Crandall, and their family partnership are named as relief defendants in the SEC’s complaint.
The SEC further alleges that Gould and Barsuk knew, or were reckless in not knowing, that Landberg was defrauding the bank that provided loans to a West End fund by misusing funds in a related interest reserve account. Both officers nevertheless participated in the fraud by facilitating Landberg’s misappropriations from that account, the SEC says.
The SEC also alleges that Gould conceived and used improper accounting methods to conceal aspects of the fraud, as well as issued account statements to investors showing false investment returns. Barsuk facilitated Landberg’s uses of investor money to cover his personal obligations.
Similarly, Kramer knew, or was reckless in not knowing, that West End faced severe financial problems and had difficulty obtaining sufficient financing to sustain its investment strategy. Kramer failed to disclose those material facts to investors as he continued to market the funds to new and existing investors through April 2009.