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

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Thursday, December 16, 2010

SEC Charges Attorney in Adviser Kenneth Starr's Fraud

The SEC today charged Jonathan Star Bristol, attorney for former financial advisor Kenneth Ira Starr, with aiding and abetting Starr's multi-million dollar fraud by allowing Starr to use Bristol's attorney trust accounts to mask the misappropriation scheme. Beginning in November 2008 through Starr's arrest in May 2010, more than $25 million of Starr's clients' funds flowed through Bristol's attorney trust accounts. Throughout that time, Bristol was a partner with a prominent international law firm.

The SEC's amended complaint, filed in federal court in Manhattan, alleges that Bristol repeatedly allowed Starr to use Bristol's attorney trust accounts as conduits when Starr stole money from his advisory clients. Starr would transfer, without authorization, clients' funds into the attorney trust accounts, and then Bristol, who was the sole owner of the trust accounts, would transfer the stolen funds to, among others, Starr and two Starr-controlled entities — Starr Investment Advisors LLC and Starr & Company LLC. The account documentation for the attorney trust accounts was sent directly to Bristol's home address. Bristol received monthly statements for the attorney trust accounts, which clearly listed the names of Starr's clients as the source of the incoming transfers. Bristol never disclosed the existence of the accounts to his law firm. Bristol did, however, tout his relationship with Starr to his colleagues and others, even claiming that Starr managed $70 billion in assets, when in fact Starr managed a fraction of that amount.

The SEC further alleges that, when confronted by one of Starr's victims about an unauthorized $1 million transfer from the victim's account, Bristol lied to the victim that the funds were being bundled with other clients' funds for an investment with UBS Financial Services. In fact, Bristol had already used the misappropriated funds to pay a multi-million dollar legal settlement with one of Starr's former clients. Bristol subsequently sought to represent that same victim in connection with the SEC's investigation.

The SEC previously charged Starr, Starr Investment Advisors and Starr & Company (together, the "Starr Parties") with using misappropriated client funds to, among other things, buy a multimillion dollar luxury condominium on Manhattan's Upper East Side.  The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains with pre-judgment interest and financial penalties.

 

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