U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19470 / November 17, 2005
Securities and Exchange Commission v. Amerindo Investment Advisors Inc., et al., Civil Action No. 05 CV 5231 (LTS)(DFE) (S.D.N.Y.)
SEC AMENDS COMPLAINT TO INCLUDE ADDITIONAL CLAIMS AGAINST ALBERTO W. VILAR AND GARY A. TANAKA, CO-FOUNDERS AND PRINCIPALS OF AMERINDO INVESTMENT ADVISORS INC., AS WELL AS OTHER AFFILIATED ENTITIES
The United States Securities and Exchange Commission filed an amended complaint today alleging that Alberto W. Vilar, Gary Alan Tanaka, Amerindo Investment Advisors Inc. ("Amerindo US") and other affiliated investment advisers and entities engaged in a scheme to defraud numerous investors, including an individual client, investors in Guaranteed Fixed Rate Deposit Accounts ("GFRDAs") and investors in two offshore hedge funds, Amerindo Technology Growth Fund, Inc. ("ATGF") and Amerindo Technology Growth Fund II, Inc. ("ATGF II").
The Commission filed its initial complaint on June 1, 2005 against Vilar, Tanaka and Amerindo US alleging that they defrauded a client, L.C., by misappropriating funds she invested in the Amerindo Venture Fund LP, a limited partnership that was purportedly being organized to qualify and be operated as a Small Business Investment Company.
The amended complaint expands upon these allegations and includes allegations against the following additional defendants:
The amended complaint alleges that Amerindo US, Amerindo UK and Amerindo Panama (collectively, "Amerindo"), Vilar, Tanaka and other affiliated entities, including Techno Raquia, defrauded individuals and entities who invested in GFRDAs. Vilar and Tanaka, as well as other Amerindo employees, solicited clients to invest funds in GFRDAs, a product in which Amerindo guaranteed that investors would earn a fixed rate of return per year on their investment, and would receive their principal at maturity. Amerindo represented to investors that it would invest the majority of their funds in short-term debt instruments and invest the remaining portion of their funds in equities. After individuals and entities invested funds in the GFRDAs, however, Vilar, Tanaka and Amerindo failed to invest the funds in accordance with the representations to investors. Rather, Vilar and Tanaka largely invested in equity securities, such as emerging technology and biotechnology stocks. Moreover, especially during the post-2000 bear market, these equity investments did not perform well and Amerindo was often unable to pay GFRDA investors their promised returns, or to return investors' principal at maturity. Consequently, when investors sought to redeem their GFRDAs, Amerindo generally either refused to honor redemption requests, or redeemed the GFRDAs with other investors' funds taken from unrelated brokerage accounts in, for example, the name of AMI, ATGF and/or ATGF II.
Additionally, the amended complaint alleges that Vilar, Tanaka and Amerindo defrauded investors who invested in two offshore hedge funds, ATGF and ATGF II. According to offering circulars, ATGF and ATGF II planned to invest in emerging growth companies. Rather than using investor funds solely to invest in such companies' securities, however, Tanaka directed ATGF and ATGF II to transfer investor funds from the funds' brokerage accounts to other accounts for Vilar's and Tanaka's own business and personal benefit.
The Commission's amended complaint alleges that, based on the foregoing, Amerindo US, Amerindo Panama, Amerindo UK, Vilar, and Tanaka violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the amended complaint alleges that AMI, Techno Raquia, ATGF and ATGF II aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The amended complaint further alleges that Amerindo US, Amerindo Panama and Amerindo UK violated, and Vilar, Tanaka, AMI, ATGF, ATGF II, and Techno Raquia aided and abetted violations of, Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Finally, the amended complaint alleges that Amerindo US violated, and Vilar and Tanaka aided and abetted violations of, Section 206(4) of the Advisers Act and Rule 206(4)-2(a) thereunder.
The Commission's amended complaint seeks disgorgement of the defendants' ill-gotten gains, civil penalties, and permanent injunctions from future violations of the antifraud provisions of the federal securities laws.
The Commission acknowledges the assistance of the United States Attorney for the Southern District of New York and the United States Postal Inspection Service in connection with this matter.
For information about earlier developments in this matter, please see Litigation Release Number 19245 / June 2, 2005.