Hedge fund investment adviser Hennessee Group, LLC has reached an agreement with the Securities and Exchange Commission over its securities fraud probe into Bayou Group and hedge fund manage Samuel Goldberg. Investors lost some $400 million in the scam. Now, Hennessee Group and principal Charles J Gradante will pay over $814,000 to settle charges that Hennessee failed to do the correct due diligence before recommending Bayou Group to investors.
According to the SEC, investors placed over $65 million with Bayou Group between 2002 and 2005. Hennessee collected over $500,000 in advisory fees. However, the SEC charges that Hennessee failed to perform the type of due diligence they told investors that they engage in. The firm failed to check up on Bayou Group’s relationship with its auditor and did not follow up on emails sent by investors questioning the ties between the auditor and Bayou Group cofounder Daniel Marino. It would later come to light that Israel and Marino established a bogus accounting firm and Marino signed fake audits.
Israel was sentenced to 20-years in jail but pretended to kill himself and disappeared on the day he was supposed to go to jail. He later turned himself into authorities and is waiting to receive his sentence for fleeing. Marino is serving a 20-year prison term.
Also last week, Marino’s brother, Matthew Marino, was sentenced to 21-months in prison for his role in the investment fraud scam. He has been ordered to pay $60 million in restitution.
Prosecutors had accused Matthew of knowing that Bayou executives were committing investment fraud and that Richmond-Fairfield Associates was a bogus accounting firm. He was accused of helping conceal the fraud by taking part in the scheme, concealing documents, and making changes to a certain bogus document.
Related Web Resources:
Hennessee Group Settles SEC Charges In Bayou Hedge Fund Fraud; Agency Says Hennessee Skimped On Due Diligence, Ponzi News, April 22, 2009
Hennessee Settles SEC Case Over Bayou, Hedgefund.net, April 22, 2009
Ex-Bayou Exec’s Brother Sentenced To 21 Months In Prison, Wall Street Journal, April 22, 2009
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