U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17444 / March 27, 2002
UNREGISTERED INVESTMENT ADVISER CHARGED WITH CONSPIRACY TO OBSTRUCT JUSTICE, FRAUD AND MONEY LAUNDERING
U.S. v. REED E. SLATKIN, No. CR 02-313 (C.D. Cal.)
The Securities and Exchange Commission announced today that Reed E. Slatkin was charged with 15 felony charges, including mail and wire fraud, money laundering and conspiracy to obstruct justice during an SEC enforcement investigation, for soliciting nearly $600 million from over 800 investors during a 15-year period. Slatkin agreed to plead guilty to the 15 charges and he agreed to surrender to federal custody when he is arraigned in April.
In his plea agreement, Slatkin admitted that, when the SEC began a formal investigation of his activities in 1999, he and other co-conspirators provided false documents to the SEC to obstruct the investigation and to conceal the fact that his investment program was a massive Ponzi scheme. These documents included fabricated correspondence and account statements. Slatkin also admitted that he had lied to the SEC under oath about the success of his investments, the accuracy of account statements, and his intention not to accept additional investor funds.
On May 11, 2001, the Securities and Exchange Commission ("Commission") obtained a temporary restraining order and asset freeze against Slatkin, a co-founder, former director and substantial shareholder of Earthlink, Inc., in federal district court in Los Angeles. The Commission alleged that Slatkin defrauded hundreds of clients through his unregistered investment advisory business located in Santa Barbara, California.
On June 7, 2001, the U.S. District Court for the Central District of California entered a Judgment of Permanent Injunction against Reed E. Slatkin. The judgment enjoins Slatkin from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and the investment adviser registration provisions of Section 203(a) of the Advisers Act. The judgment provides that the amount of disgorgement and civil penalties that Slatkin will have to pay, will be determined later. Slatkin, without admitting or denying the allegations in the complaint, consented to the entry of the injunction. Slatkin has also been barred by the Commission from associating with any investment adviser.
The criminal case was prosecuted by the U.S. Attorney's Office for the Central District of California. Additional information can be found in Litigation Release No. 16998 (May 15, 2001) and No. 17033 (June 12, 2001) and Advisers Act Release No. 2006 (January 2, 2002).