U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23015 / June 5, 2014
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 Final Judgment Against Charles J. Dushek, Charles S. Dushek, and Capital Management Associates, Inc.
The Securities and Exchange Commission announced today that on June 4, 2014, the Honorable Gary Feinerman of the United States District Court for the Northern District of Illinois entered final judgment against defendants Charles J. Dushek, Charles S. Dushek, and Capital Management Associates, Inc. (CMA). The final judgment permanently enjoins the defendants from violating certain antifraud provisions of the federal securities laws, orders the defendants to pay $2,058,514 in total disgorgement and $244,222 in prejudgment interest thereon, and orders defendants Charles J. Dushek and Charles S. Dushek (the Dusheks) to each pay a $150,000 civil penalty. The final judgment also states that relief defendant Margaret Dushek is jointly and severally liable for $1,690,546 of the total disgorgement amount and $202,655 of the prejudgment interest thereon.
In its Complaint, the Commission alleged that the Dusheks used their Lisle, Illinois-based investment advisory firm, CMA, to defraud CMA clients by conducting a “cherry-picking” scheme that garnered the Dusheks nearly $2 million in illicit profits. The Complaint alleged 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.
In addition to ordering defendants to pay disgorgement, prejudgment interest thereon, and civil penalties, the final judgment permanently enjoined 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.
In an earlier administrative proceeding relating to this case, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 against Charles J. Dushek and Charles S. Dushek. The Order, which was issued on December 2, 2013, permanently barred the Dusheks from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.For further information, see Litigation Release No. 22703 (May 17, 2013) and Litigation Release No. 22840 (Oct. 10, 2013).