SEC Charges Former Law Firm Partner in Multi-Million Dollar Scheme

FOR IMMEDIATE RELEASE
2010-248

Washington, D.C., Dec. 16, 2010 — The Securities and Exchange Commission today charged Jonathan Star Bristol, attorney for former financial advisor Kenneth Ira Starr, with aiding and abetting Starr's multi-million dollar fraud by allowing Starr to use his attorney trust accounts as conduits when Starr stole money from advisory clients.

The SEC alleges that more than $25 million belonging to Starr's clients flowed through Bristol's attorney trust accounts. Without his clients' authorization, Starr would transfer their funds into the attorney trust accounts, and then Bristol would transfer the stolen funds to Starr and his two companies for personal use.

The SEC alleges that Bristol never disclosed the existence of the attorney trust accounts to the prominent international law firm where he worked at the time. Monthly account statements clearly listing the names of Starr's clients as the source of the incoming transfers were sent directly to Bristol's home address instead of the law firm. Meanwhile, Bristol touted his relationship with Starr to his colleagues and others, claiming that Starr managed $70 billion in assets. In fact, Starr managed only a fraction of that amount.

"Bristol had a legal and professional responsibility not to assist Ken Starr in conduct that he knew was unlawful," said George S. Canellos, Director of the SEC's New York Regional Office. "Bristol crossed the line from lawyer to conspirator when he failed to safeguard funds entrusted to him, helped Starr steal client money, and lied to the victims to perpetuate the scheme."

The SEC previously charged Starr, Starr Investment Advisors LLC, and Starr & Company LLC with violating securities laws pertaining to custody of clients' assets and misusing client funds to buy a multi-million dollar luxury condominium on Manhattan's Upper East Side among other things.

The SEC's amended complaint, filed today in federal court in Manhattan, adds Bristol as a defendant, alleging that beginning around November 2008 and continuing until Starr's arrest in May 2010, Bristol repeatedly allowed Starr to use his attorney trust accounts to funnel money stolen from Starr clients. Notwithstanding his personal role in the scheme, Bristol represented Starr and his companies throughout the SEC's investigation and in an investment advisory examination by SEC staff.

According to the SEC's amended complaint, Bristol was confronted by one of Starr's victims about an unauthorized $1 million transfer from the victim's account. Bristol lied to the victim that the funds were being bundled with other clients' funds for an investment with UBS Financial Services. In fact, Bristol had already used the misappropriated funds to pay a multi-million dollar legal settlement with one of Starr's former clients. Bristol subsequently sought to represent that same victim after the victim was contacted by SEC staff in its investigation. In addition to the fact that such representations violated the ethical obligations of lawyers, Bristol's clear intent was to obstruct and undermine the SEC's investigation in order to conceal the wrongdoing.

The SEC's amended complaint charges Bristol with aiding and abetting the Starr Parties' violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains with pre-judgment interest and financial penalties. The SEC also will seek an order barring Bristol from practicing before the Commission pursuant to Rule 102(e) of the Commission's Rules of Practice.

Sanjay Wadhwa, Maureen F. Lewis, Timothy Casey and Sandeep Satwalekar, all members of the SEC's Market Abuse Unit in New York, and George O'Kane of the New York Regional Office conducted the agency's investigation, which is continuing. The SEC's litigation effort will be led by Todd Brody. The SEC thanks the U.S. Attorney's Office for the Southern District of New York, the New York County District Attorney's Office, and the New York Office of the Internal Revenue Service's Criminal Investigation Division for their assistance in this matter.

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For more information about this enforcement action, contact:

George S. Canellos
Director, SEC's New York Regional Office
(212) 336-1020

Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, SEC's Division of Enforcement
(212) 336-0181

Maureen F. Lewis
Assistant Director, Market Abuse Unit, SEC's Division of Enforcement
(212) 336-0125