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U.S. Securities and Exchange Commission

SEC Charges Investment Adviser With Defrauding Investors in Two Upstate New York Real Estate Funds


Washington, D.C., May 13, 2011 – The Securities and Exchange Commission today charged a Monticello, N.Y.-based investment adviser with fraudulently offering and selling securities in two upstate New York real estate funds he managed.

The SEC alleges that Lloyd V. Barriger told investors in the Gaffken & Barriger Fund (G&B Fund) that it was a relatively safe and liquid investment that generated a minimum return of 8 percent per year. However, the fund’s actual performance did not justify these performance claims. The SEC further alleges that Barriger defrauded investors in Campus Capital Corp. by raising money from them to prop up the ailing G&B Fund without disclosing that was how their money was actually being used. Barriger also caused Campus to engage in other transactions that personally benefitted him, unbeknownst to Campus investors.

“In the midst of the credit crisis, Barriger chose to lie about the solvency and liquidity of his fund rather than admit the somber truth of a collapsing business,” said George Canellos, Director of the SEC's New York Regional Office. “He continued to solicit new investor funds based on the same misrepresentations up until the day before the fund collapsed.”

According to the SEC’s complaint filed in federal court in Manhattan, the G&B Fund raised approximately $20 million from January 1998 to March 2008, and Campus raised approximately $12 million from October 2001 to July 2008. Barriger froze the G&B Fund in March 2008 and disclosed its true financial condition to investors.

The SEC’s complaint alleges that Barriger misused G&B Fund assets by causing the fund to pay cash distributions of “Preferred Returns” to those investors who requested them. Barriger also caused the fund to redeem investors at values reflecting the purported accrued 8 percent per year return when the fund lacked the income to support those allocations and payments.

According to the SEC’s complaint, Barriger caused Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 when the G&B Fund was in distress. Barriger did not disclose this information to investors.

The SEC’s complaint alleges that Barriger violated Sections 5(a), 5(c) and 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 SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.

The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

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For more information about this enforcement action, contact:

Andrew M. Calamari
Associate Director, Enforcement – SEC’s New York Regional Office
(212) 336-0042

Leslie Kazon
Assistant Director, Enforcement – SEC’s New York Regional Office
(212) 336-0107



Modified: 05/13/2011