SEC Bars Former Audit Chief for Fraudulent Expense Scheme
May 17, 2024
ADMINISTRATIVE PROCEEDING
File No. 3-21938
May 17, 2024 - The Securities and Exchange Commission today announced settled charges against Varun Aggarwal, the former head of audit and IT of a registered investment adviser ("the Adviser"), for fraudulent conduct involving irregular billing practices that harmed three Real Estate Investment Trusts (REITs) that were clients of the Adviser.
As set forth in the SEC's order, Aggarwal assisted certain vendors controlled by his friends and family in either overcharging the Adviser for services performed or billing the Adviser for services never performed. The order finds that the Adviser then passed some of these expenditures on to three REITs it advised, pursuant to their advisory agreements. The order further finds that, after the invoices were paid, the vendors provided kickbacks to Aggarwal. Since December 22, 2018, according to the order, Aggarwal received more than $1 million in kickbacks attributable to the fraudulent expenses passed on to the REITs.
The SEC's order finds that Aggarwal willfully aided and abetted and caused the Adviser to violate the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Aggarwal consented to an order requiring him to cease and desist from any violations and any future violations of the aforementioned provisions, and imposing an associational bar and an investment company prohibition. Aggarwal agreed to be suspended from appearing and practicing before the SEC as an accountant. The order does not provide Aggarwal an express right to apply for reinstatement. Aggarwal also agreed to pay disgorgement of $1,100,948 and prejudgment interest of $90,349, which will be deemed satisfied by an order of restitution in the criminal matter of United States v. Varun Aggarwal, No. SA CR 22-173-CJC, in the United States District Court for the Central District of California.
The SEC's investigation was conducted by HelenAnne Listerman and accountant Deborah Russell and supervised by Brianna Ripa, Corey Schuster and Andrew Dean, all of the Division of Enforcement's Asset Management Unit, and also supervised by Amy Friedman of the SEC's Washington, D.C. office.