SEC v. Angelo Haligiannis, et al.
Case No. 1:04-cv-06488-RJH-KNF (S.D.N.Y.)
On August 11, 2004, the Commission filed a complaint against Angelo Haligiannis ("Haligiannis"), Sterling Watters Group LP, a hedge fund ("Fund" or "Sterling Watters"), and the Fund's general partners, Sterling Watters Capital Advisors, LLC ("Sterling Advisors") and Sterling Watters Capital Management, Inc. ("Sterling Capital") (collectively, the "Defendants"). The complaint alleged that the Defendants had systematically been defrauding investors who purchased limited partnership interests in the Fund. From 1996 through 2004, Haligiannis raised at least $27 million in the Fund by grossly misrepresenting the Fund's performance to investors and potential investors. Haligiannis and Sterling Watters distributed phony account statements that recorded fictitious quarterly and annual investment gains and account balances to investors. Haligiannis and Sterling Watters also inflated the Fund's investment returns in marketing materials to induce investments in the Fund. See Complaint.
On January 18, 2007, the Court entered an opinion and order granting the Commission's motion for summary judgment. See Memorandum Opinion and Order. On January 22, 2007, the Court ordered that the Defendants were jointly and severally liable for a total of $33,273,967.84 comprised of $15,635,862.00 in disgorgement, $2,638,105.84 in prejudgment interest, and a $15,000,000.00 civil penalty. A total of $681,289.58 has been collected from the Defendants (the "Distribution Fund"). See the Court's Order.
On February 13, 2009, the Court entered an opinion and order addressing the multiple claims of liens on some of the funds in the Distribution Fund. Three of the liens were approved, and the Clerk was ordered to disburse a total of $163,861.35 from the Distribution Fund to pay the approved liens. The Commission was ordered to file a proposed plan of distribution for the remaining funds. See Memorandum Opinion and Order. On March 16, 2009, the Court entered an order to include post-judgment interest on the disbursements for two of the approved liens. See the Court's Order. On April 6, 2009, the Court entered an order to clarify its February 13, 2009 and March 16, 2009 Orders, to demonstrate how the interest was to be calculated on the two liens approved to receive interest. According to the order, a total of approximately $222,584.67, depending on the date of disbursement, would be disbursed from the Distribution Fund for payment of the three approved liens. See the Court's Order.
On September 15, 2009, the Court appointed Damasco & Associates LLP as the Tax Administrator to fulfill the tax obligations of the Distribution Fund.
The Commission was not able to propose a plan of distribution as ordered by the Court on February 13, 2009 because the net gains and losses of Sterling Watters' investors had not been calculated due to a lack of formal accounting of Sterling Watters. In a related action, Drenis v. Haligiannis, Case No. 1:04-cv-09263, the judge ordered that judgments against the defendants in that action could not be entered until the Court approved an accounting of Sterling Watters' assets. Consequently, the Court entered orders in both actions to refer the cases to a Magistrate Judge to resolve the issues regarding the accounting and to oversee the discovery in Drenis v. Haligiannis.
On December 1, 2009, the Court entered an order appointing James T. Ashe, CPA, CFFA, to serve as Special Master to assist Magistrate Judge Fox in the performance of an accounting. The order allowed for all fees and expenses of the Special Master to be paid from the Distribution Fund, with a maximum of $75,000.00. See the Court's Order.
On January 24, 2011 and May 11, 2012, the Court approved payment to the Special Master in the amount of $21,836.28 and $31,550.50, respectively, from the Distribution Fund. See the Court's Orders filed on January 24, 2011 and May 11, 2012.
The Special Master has filed his report of the accounting of Sterling Watters' assets and Drenis v. Haligiannis has been closed upon the entering of default judgments on September 12, 2014 and October 14, 2015.
For more information, please contact the Commission:
Office of Distributions