U.S. Securities and Exchange Commission
Litigation Release No. 21785 / December 20, 2010
SEC v. Alfred Clay Ludlum III, Printz Capital Management, LLC, Printz Financial Group, Inc., and PCM Global Holdings, LLC, Civil Action No. 10-7379 (E.D. Pa., December 20, 2010)
SEC CHARGES INVESTMENT ADVISER WITH SECURITIES FRAUD AND OTHER VIOLATIONS
The Securities and Exchange Commission today announced the filing of a civil injunctive action against Alfred Clay Ludlum III of Wilmington, Delaware and his wholly-controlled companies, Printz Capital Management, LLC, a registered investment adviser, Printz Financial Group, Inc., and PCM Global Holdings, LLC (the "Printz Entities"), accusing them of defrauding investors and Ludlum's advisory clients out of approximately $852,000.
The SEC's complaint, filed in U.S. District Court in Philadelphia, alleges that from approximately June 2006 through June 2009, Ludlum raised approximately $700,000 from at least 27 investors through unregistered offerings of equity and debt securities in the Printz Entities. At least 21 of Ludlum's investors were his advisory clients, including some of his most trusting and financially unsophisticated clients. The complaint also alleges that Ludlum fraudulently obtained approximately $80,000 in loans from one of his advisory clients and misappropriated approximately $72,000 more from three advisory clients' accounts without their authorization.
According to the SEC's complaint, Ludlum told investors and his advisory client lender that their funds would be used for working capital and to grow and operate the businesses of the Printz Entities. In fact, however, Ludlum used most of the funds to support his lavish lifestyle, pay his personal expenses, and repay other investors. During the relevant period, Ludlum withdrew more than $445,000 from the Printz Entities' three main business accounts in the form of cash withdrawals, wire transfers to his personal accounts, and checks written to himself and his family trusts. In addition to these direct withdrawals, Ludlum also spent approximately $251,000 from the three primary Printz Entity business accounts on personal expenses such as bars and restaurants, rent for his luxury riverside condominium, lease payments for his car, groceries, and medical bills. Ludlum induced investors, including his advisory clients to whom he owed a fiduciary duty, to buy securities by promising superior rates of return, but failed to disclose that the Printz Entities earned little revenue and were unable to cover their expenses out of earnings. The Printz Entities failed to register their securities offerings with the Commission, even though no exemption from registration applied, and Printz Capital violated multiple provisions governing registered investment advisers.
The SEC's complaint charges Ludlum and the Printz Entities with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Ludlum and Printz Capital with violations of Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act"), charges Printz Capital with violations of Advisers Act Sections 203A, 204, and 207, and charges Ludlum with aiding and abetting those Advisers Act violations. The complaint also charges Printz Financial with violations of Securities Act Rule 503(a) of Regulation D. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against Ludlum and the Printz Entities.
See Also: SEC Complaint