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U.S. Securities and Exchange Commission

United States of America
Before the
Securities and Exchange Commission

Securities Exchange Act of 1934
Release No. 48830 / November 24, 2003

Investment Advisers Act of 1940
Release No. 2196 / November 24, 2003

Administrative Proceeding
File No. 3-11344


In the Matter of

GEORGE F. FAHEY,

Respondent.


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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against George F. Fahey ("Fahey" or "Respondent").

II.

In anticipation of the institution of these proceedings, Respondent has 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 him and the subject matter of these proceedings, and the findings contained in Section III (2) and (4) below, which are admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds that:

1. Fahey was president of InverWorld, Inc. ("InverWorld"), formerly a Commission-registered investment adviser, and InverWorld Securities, Inc. ("InverWorld Securities), formerly a Commission-registered broker-dealer. Fahey managed and controlled the day-to-day activities of InverWorld and InverWorld Securities.

2. On October 23, 2003, the U.S. District Court for the Western District of Texas entered a final judgment by consent against Fahey, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of Sections 206(1) and 206(2) of the Advisers Act. Securities and Exchange Commission v. Inverworld, Inc., et al., Civil Action Number SA-99-CV-0822 (FB) (W.D. Tex.).

3. The Commission's complaint alleged that since January 1, 1997, InverWorld, at the direction of Fahey, managed approximately $433 million on behalf of at least 1,000 Mexican and other Latin American investors. Contrary to representations that client funds would be primarily invested in safe, secure investments, InverWorld instead invested a substantial portion of client funds in extremely risky and undisclosed investments. In addition, InverWorld grossly misrepresented the true value of client investments in monthly account statements. Further, InverWorld created a complex web of affiliated offshore entities, such as IWG Services, Ltd. and IG Services, Ltd., to disguise the true nature of InverWorld's investment activities.

4. On December 14, 2001, Fahey pleaded guilty to investment adviser fraud and conspiracy to launder money. Fahey's plea agreement arose out of his involvement in the fraudulent activities of InverWorld. On March 3, 2003, the court sentenced Fahey to 84 months imprisonment, and ordered criminal restitution of $139 million.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondent Fahey's Offer.

Accordingly, it is hereby ORDERED:

Pursuant to Section 15(b)(6) of the Exchange Act and Section 203(f) of the Advisers Act, that Respondent Fahey be, and hereby is barred from association with any broker, dealer, or investment adviser.

Any reapplication for association by the Respondent 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 Respondent, 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's order.

By the Commission.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/34-48830.htm


Modified: 11/25/2003