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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, April 22, 2010

SEC Charges Detroit Private Equity Fund with Stealing Money from Public Pension Funds

The SEC charged Detroit-based Onyx Capital Advisors LLC and its founder Roy Dixon, Jr. with participating in a fraudulent scheme through which they stole more than $3 million invested by three Detroit-area public pension funds.  The SEC alleges that defendants raised $23.8 million from the three pension funds for a start-up private equity fund created to invest in small and medium-sized private companies. Dixon illegally withdrew money invested by the pension funds from the bank accounts of the private equity fund. Assisting in the scheme was Dixon’s friend Michael A. Farr, who controls three companies in which the Onyx fund invested millions of dollars. Farr diverted money invested in these entities to another company he owned, withdrew the money from that bank account, and gave the cash to Dixon. Farr also kept some money for himself, and used investor funds to make payments to contractors building a multi-million dollar house for Dixon, who lives primarily in Atlanta.

The SEC’s complaint, filed in federal district court in Detroit, also alleges that Dixon and Onyx Capital made a number of false and misleading statements to defraud the three pension funds about the private equity fund and the investments they were making. According to the SEC’s complaint, shortly after the three pension funds made their first contributions to the Onyx fund in early 2007, Dixon and Onyx Capital began illegally siphoning money. Dixon and Onyx Capital took more than $2.06 million under the guise of management fees, and Farr assisted in diverting approximately $1.05 million through the Onyx fund’s purported investments in companies Farr controlled. Dixon used the money to pay personal and business expenses, including construction of his house in Atlanta and mortgage payments on more than 40 rental properties Dixon owns in Detroit and Pontiac, Mich.

The SEC is seeking a court order for emergency relief, including temporary restraining orders, asset freezes and accountings. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains and financial penalties.

http://lawprofessors.typepad.com/securities/2010/04/sec-charges-detroit-private-equity-fund-with-stealing-money-from-public-pension-funds.html

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Comments

Pension plans can provide a very good degree of flexibility in planning for your retirement in the future. For example some body may want to retire early perhaps a few years before the date that one would qualify for the state pension or indeed the reverse one may be working past the state retirement age and want to defer taking your personal pension for that very reason.
Private Pension

Posted by: Alice M. | Apr 24, 2010 12:27:56 AM

What are the best way to asses Equity Fund company credibility before making a decision

Posted by: Kuldeep | Apr 26, 2010 7:31:58 AM

It is very bad to hear things like this. That a reputable company is doing that kind of thing. What will be the result of this to the pensioner? Now, do they really sure that the money that are entrusted to others for their future will surely go back into their hands? I doubt it!

Posted by: Vicky | May 20, 2010 10:45:46 AM

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