Corporate & Securities Law

SNSFE Investigates James Putnam And Wealth Management LLC Of Wisconsin Following Charges Of Fraud And Kickbacks Filed By The SEC

By James Eccleston

A past NAPFA President has been charged in a kickback scheme.

A former president of the National Association of Personal Financial Advisors has been charged with taking kickbacks from unregistered investment pools in which his Wisconsin advisory firm placed $102 million in client assets.

James Putman, founder, majority owner and CEO of Wealth Management LLC in Appleton, Wisconsin and Simone Fevola, the firm's former president, a minority owner and chief investment officer, each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools, according to a civil complaint filed by the Securities and Exchange Commission.  Putman could not be reached for comment on the charges by press time.

The SEC announced that it obtained an emergency court order freezing Wealth Management's assets because the firm is charged with engaging in a kickback scheme and other fraudulent conduct involving six unregistered investment pools it managed.  The SEC also alleges that Wealth Management, Putman and Fevola misrepresented the safety and stability of the two largest investment pools and placed clients into these investments even though they were inconsistent with some clients' objectives.

The ADV for Wealth Management LLC lists seven funds for which Wealth Management is a partner, manager or advisor, with a total value of approximately $104 million and minimum investments ranging from $50,000 to $1 million.  The largest of these funds is the WML Gryphon Fund, with $38 million in assets, and the WML Watchstone Partners fund with $50 million in assets.

According to the SEC's complaint, Wealth Management, Putman and Fevola caused clients to invest in the pools from May 2003 through August 2008, and Wealth Management claims to currently have approximately $102 million of its clients' assets invested in these pools.  The SEC's complaint alleges that the pools' assets are largely illiquid, the reported values of their assets appear to be substantially overstated, and Wealth Management and Putman have been providing redemptions to investors based on likely overstated valuations.

The SEC's complaint charges each of the defendants with violations of the antifraud provisions of the federal securities laws, and Putman and Fevola with aiding and abetting Wealth Management's violations.  In addition to seeking emergency relief, the SEC's complaint seeks permanent injunctions barring future violations of the charged provisions of the federal securities laws, disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, and financial penalties from the defendants. 

The SEC's investigation is continuing as well as SNSFE's investigation.  Those with information should feel free to contact SNSFE attorneys. 

Source: SEC Release 2009-119

Full post as published by FinancialCounsel on June 01, 2009 (boomark / email).