Speech by SEC Staff:
Remarks at News Conference on the Case Against Francisco Illarramendi
Regional Director, Boston Regional Office
U.S. Securities and Exchange Commission
New Haven, Connecticut
March 7, 2011
Thanks David (Fein, U.S. Attorney for the District of Connecticut) and good afternoon.
Less than two months ago, the SEC filed an emergency action in Connecticut federal court against Francisco Illarramendi alleging that he misappropriated over $50 million from investors.
Today, thanks to our strong partnership with the U.S. Attorney’s office and FBI and the incredible work of the teams in those offices, we are expanding that action to reveal the greater breadth of Illarramendi’s fraud, which we now allege is in the hundreds of millions of dollars.
Mr. Illarramandi’s fraud was first identified by examiners from the SEC’s Office of Compliance Inspections and Examinations, who found certain irregularities during an exam of an SEC-registered adviser with which Illarramendi had been affiliated. That exam led to further inquiries by the SEC’s enforcement and examination staffs relating to the Michael Kenwood Group, MK Capital Management and other entities Illarramendi controlled.
Today’s action is an example of the critical importance of that office, which is made up of a force of accountants, examiners and other professionals on the front lines examining investment advisers, broker dealers and other financial services firms across the country.
In December 2010, SEC staff began its onsite examination of MK Capital Management LLC. Our team requested information regarding transactions, assets and holdings. We also requested the same information from third parties, such as auditors and clients.
As U.S. Attorney Fein has explained, we now know that Mr. Illarramendi went to extraordinary lengths to hide his misdeeds and specifically attempt to mislead the SEC’s staff.
Despite this obstruction, our examiners and enforcement attorneys still obtained evidence that Mr. Illarramendi was engaged in a significant fraud.
The SEC acted quickly to seek emergency relief.
In January, we obtained a federal court order freezing Mr. Illarramendi’s assets.
In February, at the SEC’s request, the court placed the companies Mr. Illarramendi used to perpetrate his fraud into receivership.
Meanwhile our investigation continued.
Now, as a result of our strong partnership with the U.S. Attorney’s Office and the FBI, the extent of Mr. Illarramendi’s fraud and deception has been further exposed.
I want to thank U.S. Attorney David Fein and Assistant Special Agent in Charge David Gelios of the FBI and their teams for the efforts that have led us to this day.
I also want to thank our SEC team working on the matter. From the enforcement staff, I want to acknowledge Carlos Costa-Rodrigues, Sofia Hussain, Michele Perillo, Rua Kelly and LeeAnn Gaunt. And from the examination staff, I want to acknowledge Zerubbabel Johnson, Steve Latin, Mike O’Connell, and Elizabeth Salini.