U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20240 / August 14, 2007
United States v. Anthony P. Postiglione, Jr. and William J. Lennon, Case No. 06-CR-572
Principals of Fountainhead Hedge Fund Sentenced to Prison for Defrauding Investors
The Securities and Exchange Commission announced today that Anthony P. Postiglione, Jr. ("Postiglione") and William J. Lennon ("Lennon"), the principals of Fountainhead Asset Mangement, LLC ("FAM"), the investment adviser they founded and which served as investment adviser to the Fountainhead Fund, LP (the "Fund"), were sentenced in the above-referenced criminal proceeding, based on their guilty pleas, by the Honorable Norma L. Shapiro of the Eastern District of Pennsylania.
Postiglione was sentenced on August 1, 2007 and, among other provisions of the sentence, was ordered to serve 60 months of incarceration, followed by three years of supervised release, including six months of that time in a community facility, and he was ordered to pay restitution of over $1.6 million, which restitution is owed jointly and severally with Lennon.
Lennon was sentenced on August 3, 2007; his sentencing expressly took into account the Government's recitation of his cooperation with the criminal investigation, as well as his cooperation with the Commission's civil enforcement action. Included in the sentence imposed, Lennon was ordered to serve one year and one day of incarceration, followed by three years of supervised release, and he was ordered to pay restitution of over $1.6 million, which restitution is jointly and severally owed with Postiglione.
Lennon pleaded guilty in November 2006, and Postiglione pleaded guilty in March 2007 to charges that they misrepresented the risks of the Fund to the early investors; and created and sent to investors false and misleading account statements and newsletters that represented the Fund was making money, when it was not. Fund investors never received accurate quarterly statements throughout the time of their investment.
In July 2004, the Commission halted the fraud by the filing of a civil enforcement action, by which it obtained emergency relief, including an asset freeze and the appointment of a receiver for the Fund, against Postiglione and Lennon. [SEC v. Postiglione, et al., Civil Action No. 04-cv-3604 (E.D. Pa.)]
In September 2005, the Commission settled its case with the defendants. Postiglione and Lennon each consented to the entry of a Final Judgment, permanently enjoining them from further violations of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act. In addition, Postiglione and Lennon agreed to waive their right to withdraw from the Fund any assets each had personally invested, which assets were valued, by the Receiver appointed by the Court, at $181,653.72 and $8,719.60, respectively. These assets remained in the Fund to be paid to Fund investors in accordance with the distribution plan approved by the Court. To date, the Court-appointed Receiver had distributed over $2 million to investors victimized by the fraud. Also in September 2005, following the settlement of the civil enforcement action, the Commission permanently barred Postiglione, and barred Lennon for a period of five years, from association with any investment adviser.
Additional information may be found in Litigation Release Nos. 19885 and 18824 and Investment Advisers Act Release Nos. 2432 and 2433.