U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23706 / December 21, 2016
United States v. Charles J. Dushek, No. 16-cr-811 (N.D. Ill. filed Dec. 14, 2016)
Securities and Exchange Commission v. Charles J. Dushek, et al., Civil Action No. 1:13-cv-3669 (N.D. Ill.)
Illinois Advisory Firm President Indicted for Securities Fraud
A federal grand jury in Chicago has indicted a suburban investment advisor on securities fraud charges for allegedly allocating profitable trades to his personal accounts while assigning unprofitable trades to his client accounts. The indictment, announced on December 15, charges Charles J. Dushek, of Warrenville, Illinois, with nine counts of securities fraud and one count of employing a scheme to defraud a client.
According to the indictment, Dushek, the president of Lisle, Illinois-based Capital Management Associates Inc. ("CMA") allegedly made more than 16,000 purchases of publicly traded securities valued at more than $400 million without designating in advance whether he was trading personal funds or client funds. He then allegedly waited up to five days to allocate the trades so that he could select the profitable ones for his personal accounts and assign the losing ones to the accounts of unsuspecting clients. From July 2008 to August 2012, Dushek allegedly withdrew from his personal accounts more than $1 million in gains realized from the scheme.
On May 16, 2013, the Securities and Exchange Commission filed a civil action against Dushek, CMA and others. The SEC's complaint arose out of similar facts alleged in the indictment. On June 4, 2014, the SEC obtained a final judgment against Dushek, ordering him to pay $1.9 million in disgorgement and prejudgment interest and a $150,000 civil penalty, and permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940.
In a separate administrative proceeding, on December 2, 2013, the Commission permanently barred Dushek from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.