Friday, November 18, 2005

SEC Files Amended Complaint Against Amerindo and Its Founders

The SEC announced the filing of an amended complaint (here) against Amerindo Investment Advisors and its founders, Alberto Vilar and Gary Tanaka, alleging a scheme to defraud investors in two off-shore funds and in Guaranteed Fixed Rate Deposit Accounts.  The Commission Litigation Release (here) describes the additional fraud:

Amerindo, Vilar, Tanaka and other affiliated entities, including Techno Raquia, defrauded individuals and entities who invested in GFRDAs. Vilar and Tanaka, as well as other Amerindo employees, solicited clients to invest funds in GFRDAs, a product in which Amerindo guaranteed that investors would earn a fixed rate of return per year on their investment, and would receive their principal at maturity. Amerindo represented to investors that it would invest the majority of their funds in short-term debt instruments and invest the remaining portion of their funds in equities. After individuals and entities invested funds in the GFRDAs, however, Vilar, Tanaka and Amerindo failed to invest the funds in accordance with the representations to investors. Rather, Vilar and Tanaka largely invested in equity securities, such as emerging technology and biotechnology stocks. Moreover, especially during the post-2000 bear market, these equity investments did not perform well and Amerindo was often unable to pay GFRDA investors their promised returns, or to return investors' principal at maturity. Consequently, when investors sought to redeem their GFRDAs, Amerindo generally either refused to honor redemption requests, or redeemed the GFRDAs with other investors' funds taken from unrelated brokerage accounts in, for example, the name of AMI, ATGF and/or ATGF II.

Additionally, the amended complaint alleges that Vilar, Tanaka and Amerindo defrauded investors who invested in two offshore hedge funds, ATGF and ATGF II. According to offering circulars, ATGF and ATGF II planned to invest in emerging growth companies. Rather than using investor funds solely to invest in such companies' securities, however, Tanaka directed ATGF and ATGF II to transfer investor funds from the funds' brokerage accounts to other accounts for Vilar's and Tanaka's own business and personal benefit.

Vilar and Tanaka were arrest in May 2005 on securities fraud charges related to siphoning funds from an account of an Amerindo investor, and Vilar was forced to spend almost three weeks in jail when he could not meet the bail requirements to be released.  Both men are awaiting trial on the criminal charges in addition to the SEC civil enforcement action. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/11/sec_files_amend.html

Civil Enforcement, Securities | Permalink

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