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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19211 / May 2, 2005

Securities and Exchange Commission v. Vincent Montagna and Christine Palmer, 05 Civ. 4303 (KW)(S.D.N.Y.)

SEC CHARGES HEDGE FUND MANAGER WITH SECURITIES FRAUD

On May 2, 2005, the Commission filed a civil injunctive action in United States District Court for the Southern District of New York, charging Vincent Montagna, president of Quantus Holding Company, Inc. ("Quantus"), an unregistered investment adviser, with securities fraud., and naming his wife, Christine Palmer, as a relief defendant On the same day, the United States Attorney's Office for the Southern District of New York announced the unsealing of an indictment against Montagna concerning some of the same conduct alleged in the Commission's complaint.

The Complaint alleges that from at least August 2001 until at least August 5, 2002, Montagna defrauded investors and prospective investors in two hedge funds he managed through Quantus Tiburon Asset Management LLC and Tiburon Partners, Ltd. (collectively the "Funds"). Montagna allegedly defrauded the investors and prospective investors by: repeatedly causing extremely positive and false performance claims to be disseminated to them; failing to disclose to investors the declining value and increased risk of Fund holdings; failing to disclose conflicts of interest he had with respect to certain investments; converting Fund income and assets for his own (or his wife's) benefit; and causing the Funds to make payments to him and his associates in excess of the amounts to which they were entitled.

Specifically, the Complaint alleges, among other things, that:

  • Montagna knew or recklessly disregarded that by at least November 2001 two of the Funds' major assets were worthless, yet he continued to cause extremely positive performance claims e.g. that Tiburon Assset had increased in value 58.40 % over the year 2001 to be disseminated to investors and prospective investors. Montagna continued to obtain additional investments in the Funds using his false and inflated valuations until September 2002, when he announced that the Funds were being written down 45% and 60%, respectively.
     
  • Montagna converted a valuable Fund asset by transferring it to his wife for nominal consideration. In December 2002, Montagna caused one of the Funds to convey a property in Bensalem, Pennsylvania worth at least $325,000 to a partnership controlled by Palmer, his wife. In return, Palmer's partnership paid $1.
     

The Complaint alleges that through this conduct, Montagna violated the antifraud provisions of the Securities, Exchange, and Investment Advisers Acts, more specifically 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. In its complaint, the Commission seeks the following relief against Montagna: a permanent injunction, disgorgement plus prejudgment interest, and civil penalties . In addition, the Commission seeks disgorgement plus prejudgment interest from Palmer, whom the Complaint names as a relief defendant.

As alleged in the Complaint:

  • Vincent Montagna, age 32, is the co-founder, president, and chief executive officer of Quantus, the entity through which he managed Tiburon Asset Management LLC, and the founder, president, and chief executive officer of Tiburon Investment Management Ltd, the entity through which he managed Tiburon Partners Ltd. During the relevant period, Montagna was the sole owner of Quantus and Tiburon Investment Management, which operated out of offices in lower Manhattan, and was solely responsible for managing the Funds' investments.
     
  • Relief Defendant Christine Palmer, age 35, resides in Pennsylvania. She is Montagna's wife. Palmer received and may still control Fund assets or property traceable to such assets or to Montagna's ill-gotten gains, including the Pennsylvania property, which is worth approximately $325,000.
     
  • The Funds raised approximately $10 million from approximately seventy investors over the period beginning in or about February 1998 and ending in July 2002. Virtually all of the investors' money is gone most of it lost through investments in small, high-risk private companies, in some of which Montagna had undisclosed conflicts of interest. By at least June 2003, the Funds' only assets were a property in Nevada worth approximately $ 1 million, virtually worthless promissory notes issued by the private companies, a small amount of virtually worthless publicly trading stock, and rights to small amounts of income from the private investments.
     

The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and United States Postal Service in the investigation of this matter.

SEC Complaint in this matter


http://www.sec.gov/litigation/litreleases/lr19211.htm


Modified: 05/02/2005