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

FINtech Focus: Fundbase Aims To Revolutionize Access To Hedge Funds

Jan 23 2015 | 11:03am ET

Global investment in financial technology—also known as fintech—is booming....

Lifestyle

Is Steven Cohen Going to Buy the Brooklyn Nets?

Jan 19 2015 | 6:49am ET

Rumors that Steve Cohen was interested in the Brooklyn Nets emerged after Scott...

Guest Contributor

Investors Benefit From Evolution Of Fund Of Hedge Funds Model

Jan 22 2015 | 12:27pm ET

The evolution of the fund of hedge funds model over the last few years represents...

 

Editor's Note