U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23843 / May 24, 2017
Securities and Exchange Commission v. Francisco Illarramendi, Highview Point Partners, LLC and Michael Kenwood Capital Management, LLC, as Defendants, and Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., Highview Point LP, Michael Kenwood Asset Management, LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar, LP, as Relief Defendants, 3:11cv-78 (JBA) (D. Conn. January 14, 2011).
United States v. Illarramendi, 3:11-cr-0041-SRU.
The Securities and Exchange Commission announced that on May 24, 2017, a federal court in Connecticut entered a final judgment against former Connecticut-based fund manager Francisco Illarramendi for perpetrating a years-long scheme to defraud investors, resulting in hundreds of millions of dollars in losses. Illarramendi is currently serving a sentence of 13 years in federal prison after his guilty plea and criminal conviction in a parallel case brought by the Connecticut U.S. Attorney.
In 2011, the SEC charged Illarramendi and various entities owned or controlled by him, including investment advisers Highview Point Partners LLC, and Michael Kenwood Capital Management LLC, with engaging in a multi-year Ponzi scheme. Also in the spring of 2011, the U.S. District Court for the District of Connecticut appointed a receiver in the case to marshal the assets of a number of entities formerly owned or controlled by Illarramendi, Highview Point Partners, and Michael Kenwood Capital Management. The receiver has already distributed more than $352 million to Illarramendi's victims.
On April 13, 2017, Judge Janet Bond Arterton of the U.S. District Court for the District of Connecticut granted the Commission's motion for summary judgment against Illarramendi in the SEC's case, and entered final judgment against Illarramendi on May 24, 2017. In her ruling on the SEC's motion for summary judgment, Judge Arterton found that "[o]n the basis of both Mr. Illarramendi's admissions to th[e] Court as well as the preclusive effect of his guilty plea [in the criminal case], … there are no genuine issues of material fact remaining." Judge Arterton found that Illarramendi - as he testified under oath in the SEC's case, and as he admitted under oath during his guilty plea in the criminal case - "made materially false and misleading representations to investors in the hedge funds to conceal that he had lost money in certain investments," "engaged in a scheme to defraud investors rather than disclosing the loss," and "used money from new investors to pay out returns promised to old investors." Accordingly, the court found Illarramendi liable for violating Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940, and ordered Illarramendi to disgorge $25,844,834 in ill-gotten gains from his fraudulent scheme, pay a $1 million civil penalty, and be subject to a permanent injunction against future violations of the Investment Advisers Act.
Prior to the court's ruling, in August 2011, the Commission issued an order barring Illarramendi from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
The SEC acknowledges and appreciates the work of the U.S. Attorney's Office for the District of Connecticut and the Federal Bureau of Investigation.
For further information, see Litigation Release No. 21828 (January 28, 2011), No. 21875 (March 7, 2011); No. 21970 (May 16, 2011); Litigation Release No. 22015 (June 28, 2011), Litigation Release No. 22245 (January 31, 2012), Litigation Release No. 23122 (October 28, 2014).