U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22249 / February 2, 2012
SEC v. Lloyd V. Barriger, 11 Civ. 3250 (CS) (S.D.N.Y.)
Lloyd V. Barriger, Monticello, New York Investment Adviser, is Permanently Enjoined and Barred from the Securities Industry
On December 14, 2011, the Honorable Cathy Seibel, United States District Judge for the Southern District of New York, entered a judgment permanently enjoining Lloyd V. Barriger from violating the registration and antifraud provisions of the federal securities laws. The judgment further orders Barriger to disgorge ill-gotten gains, together with prejudgment interest, and pay a civil penalty, but defers the Court’s determination of the amount of disgorgement and penalty to be paid until a later date, pending a motion by the Commission. Barriger consented to entry of the judgment without admitting or denying the allegations in the Commission’s complaint.
In a related administrative proceeding, on January 11, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Barriger. The Order bars Barriger from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock. Lloyd V. Barriger, Exchange Act Release No. 66142 (January 11, 2012). Barriger consented to the issuance of the Order without admitting or denying any of the findings except he admitted to the entry of the final judgment.
The Commission’s complaint, filed on May 13, 2011 in federal court in White Plains, New York, charged Barriger with fraud in connection with two upstate New York real estate funds he managed — the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). The complaint alleged that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition — which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.
The Commission’s complaint also alleged that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments, causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purportedly accrued 8% per year Preferred Return.
Finally, the complaint alleged that Barriger defrauded Campus and its prospective investors by (1) causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress; (2) by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund; and (3) by causing Campus to engage in other transactions that personally benefitted Barriger, without disclosing that to prospective Campus investors.
The complaint alleged that, as a result of the foregoing, Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940). The judgment entered on December 14th permanently enjoins Barriger from violating those provisions.
Barriger has also been criminally charged in connection with the conduct alleged in the Commission’s complaint. United States v. Lloyd Barriger, 11 Cr. 416 (CS) (S.D.N.Y.)
See also Litigation Release No. 21968 (May 13, 2011).