SECURITIES ACT OF 1933
Release No. 8430 / June 16, 2004

SECURITIES EXCHANGE ACT OF 1934
Release No. 49870 / June 16, 2004

INVESTMENT ADVISERS ACT OF 1940
Release No. 2250 / June 16, 2004

INVESTMENT COMPANY ACT OF 1940
Release No. 26469 / June 16, 2004

Admin. Proc. File No. 3-11521


In the Matter of

SAMER M. EL BIZRI and BIZRI CAPITAL PARTNERS, INC.

Respondents.



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ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933, SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, SECTIONS 203(e), 203(f), AND 203(k) OF THE INVESTMENT ADVISERS ACT OF 1940, AND SECTION 9(b) OF THE INVESTMENT COMPANY ACT OF 1940

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act"), and Section 9(b) of the Investment Company Act of 1940 ("Investment Company Act") against Samer M. El Bizri and Bizri Capital Partners, Inc. ("BCP") (collectively, the "Respondents").

II.

In anticipation of the institution of these proceedings, Respondents Bizri and BCP have submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, Respondents consent to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934, Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940 ("Order"), as set forth below.

III.

On the basis of this Order and Respondents' Offer, the Commission finds1 that

RESPONDENTS

1. Samer M. El Bizri, age 30, resides in Los Angeles, California. Bizri has been the president, chairman and sole shareholder of BCP, since its incorporation in 1997.

2. Bizri Capital Partners, Inc. ("BCP") was formed as a California corporation in 1997 and has been continuously controlled by Bizri. From 1998 through late 2001, BCP's primary business was providing investment advisory services to Integral Investment Management, LP, the general partner of three hedge funds, Integral Hedging, LP, Integral Arbitrage, LP, and Integral Equity, LP (collectively, the "Funds"). BCP was an unregistered investment adviser during the relevant period.

RELATED ENTITIES

3. Integral Investment Management, LP, ("Integral") is a Texas limited partnership formed in 1998. Integral was the general partner of the Funds and was responsible for investing the Funds' assets. Since September 2003, Integral has been controlled by a receiver appointed by a Texas state court, stemming from a lawsuit by an investor in two of the Funds against various defendants, including Integral, Integral Management LLC, and the Funds.

4. Integral Management, LLC, is a Texas limited liability company formed in 1998. Integral Management is the general partner of Integral. Since September 2003, Integral Management has been controlled by the Texas receiver.

5. Integral Hedging, LP, Integral Arbitrage, LP, and Integral Equity, LP, are Texas limited partnerships formed in 1998. The Funds are hedge funds operated by Integral and are unregistered investment companies. Since August 2002, Integral Hedging and Integral Arbitrage have been controlled by the Texas receiver, and, since September 2003, Integral Equity has been controlled by the receiver.

6. Galileo Fund, LP is a Texas limited partnership formed in 1999 by Bizri, and its general partner is BCP. The Galileo Fund was the primary vehicle through which BCP invested the Funds' assets. The Galileo Fund is not currently conducting business.

FACTS

7. This case concerns hedge fund fraud. From June 2000 through September 2001, with the exception of a three month period, Integral fraudulently caused the Funds to overstate to investors the value of their investments in the Funds by anywhere from 13% to 77% per month and thereby misrepresented rates of returns. Bizri and his company, BCP, were primarily responsible for investing the majority of the Funds' assets through an account at a broker-dealer in the name of the Galileo Fund, LP. By the end of March 2001, Bizri believed that there were errors in the Galileo Fund account and that these errors prevented Bizri from valuing the Galileo Fund account. Despite his inability to value the Galileo Fund account, Bizri continued to accept new investor funds and trade the Funds' assets in the Galileo Fund account. In addition, by the end of March 2001, Bizri knew that the Galileo Fund account statements reported substantial losses. Bizri received monthly account statements reflecting the value of BCP's holdings in the Funds. These statements failed to show the substantial losses the Funds incurred in the Galileo Fund account. Thus, Bizri knew, or was reckless in not knowing, that investors received account statements that materially overstated the value of their interests in the Funds.

8. The Funds were hedge funds that invested in securities. In exchange for a monetary investment in one of the Funds, the investor received a limited partnership interest in the Fund that entitled the investor to a pro rata share of the Fund's profits and losses. From June 2000 through September 2001, Integral raised over $71.6 million from at least 30 new and existing investors in the Funds.

9. In late 1998, Integral began transferring the Funds' assets to Bizri for investment. Bizri, through BCP, was to invest the assets pursuant to a purported proprietary hedging strategy that he had developed.

10. In June 1999, Bizri opened the Galileo Fund account at a registered broker-dealer (the "Galileo Fund Account") to invest the Funds' assets. Although Integral held other investments outside of the Galileo Fund, by June 2000, Integral had transferred the vast majority of the Funds' assets to the Galileo Fund Account. Bizri was primarily responsible for investing the Funds' assets in the Galileo Fund Account.

11. From June 2000 through November 2000, Bizri held over 90% of the Funds' assets in the Galileo Fund Account in cash or money market funds. There were no trades in the Galileo Fund Account from June 2000 until November 2000, when Bizri began trading Nasdaq 100 options. From December 2000 until July 2001, Bizri traded mostly Nasdaq 100 options in the Galileo Fund Account. From December 2000 through mid-July 2001, the Galileo Fund Account sustained combined realized and unrealized losses of approximately $19 million.

12. In January 2001, Bizri discovered what he believed to be significant errors by the broker-dealer in the Galileo Fund Account. Bizri believed these errors included incorrect mark to market pricing, unauthorized trades, duplicative trades, and margin errors. Bizri believed that these perceived errors in the Galileo Fund Account went largely unresolved through mid-July 2001, when Bizri and Integral transferred the Fund's assets in the Galileo Fund Account to another broker-dealer.

13. Until at least March 2001, Bizri and Integral's control person each reviewed the Galileo Fund Account's monthly statements and then agreed upon the value of the Funds' investments. By the end of March 2001, Bizri believed that he was no longer able to value the Galileo Fund Account because of the perceived errors in the account. Despite his inability to value the Galileo Fund account, Bizri continued to accept new investor funds and to trade Fund assets in the Galileo Fund Account. In addition, by the end of March 2001, Bizri knew that the Galileo Fund Account statements reported substantial losses in the account.

14. In July 2001, because of the perceived errors, Bizri and Integral transferred the Funds' assets in the Galileo Fund Account to accounts at another registered broker-dealer (the "Galileo Fund Replacement Accounts"). Bizri traded the Galileo Fund Replacement Accounts primarily pursuant to Integral's control person's instructions until sometime in September 2001, when he stopped trading the accounts. There were no allegations of unresolved trading errors at this broker-dealer. Nevertheless, from mid-July through September 2001, the Funds, through their investment in the two accounts, suffered additional losses of over $10.2 million, or approximately 22% of the Funds' total assets as of September 30, 2001.

15. From June 2000 through September 2001, Integral sent investors monthly and quarterly account statements. With the exception of a three month period, these investor account statements overstated the value of their investments in the Funds by anywhere from approximately 13% to approximately 77% per month and thereby misrepresented rates of returns.

16. During this period, Bizri received monthly account statements purporting to reflect the value of BCP's holdings in the Funds. These statements failed to show the substantial losses the Funds incurred in the Galileo Fund Account and Galileo Fund Replacement Accounts.

LEGAL ANALYSIS

Violations of the Antifraud Provisions: Section 17(a) of the Securities Act,
Section 10(b) of the Exchange Act and Rule 10b 5 Thereunder,
and Sections 206(1) and 206(2) of the Advisers Act

17. Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit fraud in the offer or sale of securities and in connection with the purchase or sale of securities, respectively. Sections 206(1) and 206(2) of the Advisers Act similarly prohibit an investment adviser from defrauding any client or prospective client. Fraudulent conduct prohibited by these provisions includes employing any device, scheme or artifice to defraud; making any untrue statement of material fact, or omitting to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or engaging in any transaction, practice or course of business which operates or would operate as a fraud or deceit.

18. The antifraud provisions require that the fraud concern material information. Information is material if there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision. See Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988); TSC Indus. Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). Information concerning a company's financial condition and profitability is material information. See, e.g., SEC v. Murphy, 626 F.2d 633, 653 (9th Cir. 1980).

19. Scienter is required to establish a violation of Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 206(1) of the Advisers Act. Aaron v. SEC, 446 U.S. 680, 701-02 (1980); Steadman v. SEC, 603 F.2d 1126, 1134 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). Scienter is established by showing a "mental state embracing intent to deceive, manipulate, or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976). The Ninth Circuit has held that recklessness satisfies the scienter requirement. Vernazza v. SEC, 327 F.3d 851, 860 (9th Cir. 2003); Hollinger v. Titan Capital Corp. , 914 F.2d 1564, 1568-69 (9th Cir. 1990).

20. Bizri and BCP willfully violated the antifraud provisions of the Securities Act, the Exchange Act, and the Advisers Act by recklessly participating in a scheme to provide investors with account statements that materially overstated their interests in the Funds and rates of returns. A reasonable investor would consider this information material because the misrepresented and omitted information concerned the Funds' investment performance.

21. Bizri knew, or was reckless in not knowing, that investors received account statements that materially overstated their interests in the Funds. BCP, which is wholly owned and controlled by Bizri, is equally culpable. SEC v. Franco, 253 F. Supp. 2d 720, 728-30 (S.D.N.Y. 2003) ("where an individual so dominates or controls the activities of some entity such as a trust, the entity may also be held responsible for the same acts committed by the individual"). See also SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1089 n.3, 1096 n.17 (2d Cir. 1972) (individual's "knowledge is imputed to the corporations which he controlled").

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Respondents Bizri and BCP's Offer.

Accordingly, it is hereby ORDERED:

A. Pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act, and Section 203(k) of the Advisers Act, that Respondents Bizri and BCP cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act;

B. Pursuant to Section 203(f) of the Advisers Act, that Respondent Bizri be, and hereby is barred from association with any investment adviser, with the right to reapply for association after five (5) years to the appropriate self-regulatory organization, or if there is none, to the Commission;

C. Pursuant to Section 9(b) of the Investment Company Act, Respondents Bizri and BCP are prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, with the right to reapply for service in any such capacity with the Commission after five (5) years from the date of the Order;

D. Any reapplication for association by Respondents will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against the Respondents, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order; and

E. It is further ordered that Respondents Bizri and BCP shall, within sixty (60) days of the entry of this Order, jointly and severally pay a civil money penalty in the amount of $50,000.00 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Bizri and BCP as Respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Sandra J. Harris, Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 5670 Wilshire Blvd., 11th Floor, Los Angeles, CA 90036.

By the Commission.

Jonathan G. Katz
Secretary


Endnotes