U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20595A / May 22, 2008
SEC v. James G. Marquez, Civil Action No. 08-CIV-4773 (S.D.N.Y. May 22, 2008)
SEC Charges James G. Marquez, Former Co-Principal of Bayou Hedge Fund
The Securities and Exchange Commission (Commission) today filed a civil injunctive action alleging antifraud violations against James G. Marquez, in the United States District Court for the Southern District of New York. Marquez was a portfolio manager and principal of the failed Connecticut-based hedge fund Bayou Fund, LLC (Bayou) from 1996 until October 2001. Marquez has agreed to settle the charges by consenting, without admitting or denying the allegations in the Commission'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, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder (Exchange Act). The settlement terms are subject to court approval.
The Commission's complaint alleges that from 1996 until October 2001, Marquez and his partners, Samuel Israel III and Daniel E. Marino, systematically concealed from then-current and prospective investors Bayou's mounting trading losses by materially misrepresenting the fund's performance in correspondence, periodic account statements, and promotional materials. The complaint further alleges that, with Marquez's knowledge, Bayou created a sham accounting firm known as Richmond-Fairfield Associates (Richmond-Fairfield) to issue and certify phony "independent" yearly audits of the Bayou's performance, and that, beginning in 1999, Bayou distributed fabricated audit opinions by Richmond-Fairfield attesting to the accuracy and truthfulness of the fund's year-end financial statements. The complaint further alleges that 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 Bayou to attract millions of dollars in new investor capital. The complaint further alleges that in or about October 2001, Marquez dissociated himself from Bayou, but took no steps to expose Bayou's continuing fraudulent scheme.
On December 14, 2006, Marquez pleaded guilty to one count of criminal conspiracy for his conduct relating to Bayou. On January 22, 2008, Marquez was sentenced to fifty-one months in prison and ordered to pay $6,259,650 in criminal restitution.
The Commission acknowledges the assistance of the White Plains Division of the United States Attorney's Office for the Southern District of New York, and of the Federal Bureau of Investigation. The Commission's investigation continues.