SEC Charges Philadelphia Advisor with Mishandling Client Funds

by Wall Street Fraud on August 4, 2011

Unsuitable investmentsThe Securities and Exchange Commission has charged Philadelphia-based Sam Otto Folin (Folin), Benchmark Asset Managers LLC (Benchmark), and its parent company, Harvest Managers LLC (Harvest) with misappropriating approximately $8.7 million from advisory clients, friends, and family through material misrepresentations and omissions. The parties have agreed to pay over $8.7 million to settle the claims.

According the SEC, from approximately 2002 through October 2010, Folin, Benchmark, and Harvest offered and sold securities in Harvest, Benchmark, and Safe Haven Portfolios LLC (Safe Haven), a pooled investment vehicle, promising investors that their funds would be invested in public and private companies with “socially responsible” goals and purposes. Instead, the complaint alleges that Folin, Benchmark, and Harvest diverted a portion of the invested funds to pay previous investors as well as to sustain Benchmark’s and Harvest’s expenses, which included paying Folin’s salary.

More specifically, the complaint alleges that Benchmark and Harvest issued various “notes” to advisory clients, friends, and family promising guaranteed above-market interest rates. Folin, Benchmark, and Harvest also assured investors that such notes were conservative and safe.

According to the complaint, Folin, Benchmark and Harvest failed to disclose the true uses of those funds and continually misrepresented the value of the notes on quarterly statements.

According to the SEC, Folin and Benchmark also formed Safe Haven, which purported to offer investments in several different portfolios. The complaint alleges that Folin and Benchmark caused Benchmark’s advisory clients to invest in Safe Haven and that Folin and Benchmark also acted as investment advisers to Safe Haven.

From 2006 through 2009, the complaint alleges that Folin and Benchmark caused Safe Haven to pay over $1.7 million to Benchmark and Harvest under the guise of “development costs.” According to the SEC, these “development costs” did not relate to any actual expenses incurred by Harvest or Benchmark in connection with the formation or offering of Safe Haven securities. Rather, the complaint alleges, the payments coincided with Harvest and Benchmark’s need for funds to pay previous investors, expenses and Folin’s salary.

Lastly, the complaint alleges that Folin and Benchmark failed to disclose to their advisory clients Benchmark’s dire financial situation and inability to sustain itself but for the monies it received under the guise of “development costs” and the loans from Safe Haven.

To settle the charges, Folin, Benchmark, and Harvest consented to pay disgorgement of $8,706,620 plus prejudgment interest of $1,454,177. In addition, Folin consented to pay a civil penalty of $150,000 and Harvest and Benchmark have consented to pay civil penalties of $750,000 each.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud, please contact us today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.

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