SEC Accuses Kowalewski Of Contempt—Again

Aug 30 2011 | 1:29pm ET

For the second time, the Securities and Exchange Commission is seeking to have accused hedge fund fraudster Stanley Kowalewski held in contempt of court, this time for allegedly "looting" his Summerfield, N.C., home in defiance of an asset freeze.

The regulator won an emergency hearing on its petition, scheduled for tomorrow in Atlanta federal court. The move comes days after Kowalewski held the latest in an apparent series of "estate sales" that offered structural items from his $1.7 million home for cash.

According to the SEC, Kowalewski has removed and attempted to sell "fixtures, light fixtures, doors, kitchen cabinets and other items, the full extent of which is yet to be determined."

"There is no predicting what further damage he may cause," SEC attorney Alex Rue wrote; the SEC estimates Kowalewski may have already caused more than $200,000 in damage. In addition, Kowalewski has cancelled his homeowner's insurance on the house.

The SEC sued Kowalewski in January, accusing him of misappropriating $16.5 million from his hedge fund, SJK Investment Management, stealing about half of it. The agency first sought a contempt holding against him in May, after he withdrew some $200,000 in frozen assets. Kowalewski settled the SEC case in June, agreeing to pay back the frozen money over the next six-and-a-half years.

The SEC is seeking fines of restitution of more than $75 million.

"Kowalewski's conduct is egregious," Rue wrote. "He knew that he was removing valuable parts of the house that he knew was part of his frozen assets. Kowalewski should be made to replace the property and restore the damage he has caused by his defiance of the court's freeze order."

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