U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20250 / August 21, 2007
SEC v. John M. Fife and Clarion Management, LLC, Civil Action No. 07-CV-347 (N.D. Ill.)
Court Issues Final Judgment Against Defendants John M. Fife and Clarion Management Limited, LLC in Market Timing Case
The Securities and Exchange Commission ("Commission") announced today that on August 9, 2007, the Honorable Matthew F. Kennelly, U.S. District Court Judge for the Northern District of Illinois entered a Final Judgment against Defendants John M. Fife, a Chicago resident, and Clarion Management, LLC. The Final Judgment permanently restrained and enjoined the defendants from future violations of the Section 10(b) of the Securities Act of 1934 and Rule 10b-5 thereunder; required the Defendants, jointly and severally, to pay disgorgement in the amount of $234,399, plus prejudgment interest of $60,584; and additionally ordered Fife to pay a civil penalty of $234,399.
The Commission's complaint, filed on January 18, 2007, alleged that defendants engaged in a fraudulent scheme in 2002 and 2003 to purchase variable annuity contracts issued by the Lincoln National Life Insurance Company (Lincoln) for Clarion Capital, LP (Clarion Capital) in order to engage in market timing for the benefit of Clarion Capital, a now-dissolved Chicago hedge fund formed by Fife for the exclusive purpose of engaging in market timing in international mutual funds available through variable annuities. According to the complaint, Fife controlled both Clarion Capital and Clarion Management, and carried out the scheme through Clarion Management, the hedge fund's general partner and unregistered investment adviser. These tactics included using trusts and limited liability companies as nominee contract owners and beneficiaries to conceal Clarion Capital's financial interest in dozens of variable annuity contracts. The complaint further alleged that, through this deception, Fife and Clarion Management made hundreds of thousands of dollars in profits for themselves at the expense of the other shareholders in the mutual funds.
The defendants consented to the entry of this Final Judgment, without admitting or denying the allegations in the Commission's complaint. As part of the settlement of this case, defendant Fife also consented to the entry of a Commission Order barring him from associating with any investment adviser, with a right to reapply after 18 months.
For more information, see Litigation Release No. 19972, January 19, 2007.