SEC Charges Former Co-Principal Of Bayou Hedge Fund

May 23 2008 | 11:08am ET

The Securities and Exchange Commission yesterday filed a civil injunctive action alleging antifraud violations against James Marquez, a portfolio manager and principal of failed Connecticut hedge fund Bayou Fund. Marquez and the SEC have settled the charges.

The complaint alleges that from 1996 until October 2001, Marquez and his partners, Samuel Israel and Daniel Marino, systematically hid from investors Bayou's mounting trading losses by lying about the fund's performance in account statements and promotional materials. The SEC further alleges that, with Marquez's knowledge, Bayou created a sham accounting firm known as Richmond-Fairfield Associates to issue and certify phony "independent" yearly audits of the Bayou's performance, and that, beginning in 1998, Bayou distributed fabricated audit opinions by Richmond-Fairfield attesting to the accuracy and truthfulness of the fund's year-end financial statements.

Marquez, Israel and Marino carefully concocted Bayou's artificial earnings to create the appearance that the fund had achieved modest, steady and believable growth, which enabled the firm to attract millions of dollars in new investor capital, according to the complaint. Marquez dissociated himself from Bayou in October 2001 but took no steps to expose Bayou's continuing fraudulent scheme, the SEC says.

In 2006, Marquez pleaded guilty to one count of criminal conspiracy for his conduct relating to Bayou and was sentenced in January to 51 months in prison and ordered to pay $6.2 million in criminal restitution.

Marquez has agreed to settle the charges by consenting, without admitting or denying the allegations in the SEC's complaint, to the entry of a final judgment permanently restraining and enjoining him from future violations of the antifraud provisions of the federal securities laws.


In Depth

bfinance: Fees Falling Across Asset Classes, Yet Overall Investor Costs Still Climbing

May 16 2017 | 9:53pm ET

Despite unprecedented attention on fees, new research from investment consultancy...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Risk-Based Compliance: Why Oversight Of Outsourcing Is Critical

May 10 2017 | 7:02pm ET

Compliance is notoriously one of the trickiest middle office functions for funds...

 

From the current issue of