U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22840 / October 10, 2013
Securities and Exchange Commission v. Charles J. Dushek, et al., Civil Action No. 13-cv-3669 (N.D. Ill., filed May 16, 2013)
SEC Obtains Judgments By Consent Against Charles J. Dushek, Charles S. Dushek, and Capital Management Associates, Inc.
The Securities and Exchange Commission announced today that on October 9, 2013, the Honorable Gary Feinerman of the United States District Court for the Northern District of Illinois entered judgments against defendants Charles J. Dushek, Charles S. Dushek, and Capital Management Associates, Inc. The judgments, to which the defendants consented without admitting or denying the allegations in the Complaint, permanently enjoin the defendants from future violations of certain antifraud provisions of the federal securities laws and order each defendant to pay disgorgement, prejudgment interest, and civil penalties in an amount to be determined by the court.
In its Complaint, the Commission alleges that the Dusheks used their Lisle, Illinois-based investment advisory firm, Capital Management Associates, Inc. (CMA), to defraud CMA clients by conducting a “cherry picking” scheme that garnered the Dusheks nearly $2 million in illicit profits. The Complaint alleges that the Dusheks placed millions of dollars in securities trades without designating in advance whether they were trading personal funds or client funds. They delayed allocating the trades so they could cherry pick winning trades for their personal accounts and dump losing trades on the accounts of unwitting clients at CMA. Meanwhile, CMA misrepresented the firm’s proprietary trading activities to clients.
The judgments permanently enjoin each of the defendants from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The judgments also order each of the defendants to pay disgorgement, prejudgment interest thereon, and civil penalties, but leave the determination of the amount of such monetary relief to the court upon the Commission’s motion.
For further information, see Litigation Release No. 22703 (May 17, 2013).