U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19400 / September 29, 2005
SEC V. STEVEN M. BOLLA, WASHINGTON INVESTMENT NETWORK, SUSAN BOLLA AND ROBERT RADANO, CIVIL ACTION NO. 1:02CV01506 (D.D.C.) (CKK)
U.S. District Court Finds Robert Radano and Washington Investment Network Violated Federal Securities Laws; Court Orders Injunctions and Penalties
On September 22, 2005, the United States District Court for the District of Columbia found that Robert Radano and Washington Investment Network ("WIN") committed fraud by failing to disclose to WIN's clients that the Securities and Exchange Commission had barred Steven Bolla, the firm's co-founder, from associating with an investment adviser. The Court also found that Radano and WIN permitted Bolla to violate the SEC order barring Bolla. The Court entered final judgments against Radano and WIN, both of Bethesda, Maryland, permanently enjoining them from violating the antifraud and investment adviser bar provisions of the Investment Advisers Act of 1940 ("Advisers Act"). The judgment also imposes penalties of $15,000 against Radano and $50,000 against WIN.
Following a bench trial, the Honorable Colleen Kollar-Kotelly held that Radano and WIN committed securities fraud by failing to disclose to the firm's clients that, in June 2000, the SEC had barred Bolla from associating with any investment adviser based on his role in an earlier securities fraud. See SEC v. James L. Foster et al., Litigation Release No. 16567 (May 30, 2000); In the Matter of James L. Foster et al., Securities Exchange Act Release No. 42863 (June 20, 2000). Following the imposition of the bar, Bolla continued to associate with WIN by managing the firm's finances, serving as the point of contact for WIN clients, and providing investment advice to WIN clients.
Judge Kollar-Kotelly held that as a principal of WIN, Radano had a duty to inform the firm's clients that the SEC had barred Bolla from acting as an investment adviser. Radano's statements to WIN's clients that Bolla was "out of the office" or "had left the firm" were, according to Judge Kollar-Kotelly, "simply insufficient and -- without more -- constitute material omissions." By failing to make the appropriate disclosures to WIN's clients, Radano and WIN violated Sections 206(1) and (2) of the Advisers Act.
Judge Kollar-Kotelly also ruled that Radano and WIN violated Section 203(f) of the Advisers Act by allowing Bolla to associate with WIN in violation of the SEC bar order.
Judge Kollar-Kotelly found that, at the time they formed WIN in 1998, Radano and Bolla believed the SEC would likely bar Bolla from associating with any investment adviser. Judge Kollar-Kotelly found that WIN was established "as a front for Mr. Bolla to continue to operate with his wife as a mere nominee [owner] to officially mask his true interest and control."
Judge Kollar-Kotelly further found that after the SEC had barred Bolla, Radano took instructions from Bolla regarding client accounts, permitted Bolla to remain a point of contact for WIN clients and allowed Bolla to continue concealing his association with the firm by using his wife as a nominee. Judge Kollar-Kotelly held that Radano's actions and omissions, individually and on behalf of WIN, permitted Bolla to continue associating with WIN in violation of his bar.
In addition to Radano and WIN, the SEC's complaint charged Steven and Susan Bolla with various violations of the federal securities laws. See SEC v. Steven M. Bolla, Washington Investment Network, Susan Bolla and Robert Radano, Litigation Release No. 17642 (July 31, 2002). After filing the complaint, the SEC settled its charges against Steven and Susan Bolla, and Judge Kollar-Kotelly entered final judgments on July 27, 2004 permanently enjoining Steven and Susan Bolla from violating certain provisions of the federal securities laws, and requiring Steven Bolla to pay $175,000. See SEC v. Steven M. Bolla, Washington Investment Network, Susan Bolla and Robert Radano, Litigation Release No. 18837 (August 18, 2004); In the Matter of Steven M. Bolla and Susan Bolla, Securities Exchange Act Release No. 50222 (August 20, 2004).