SEC Wins Trial and $1.8 Million Judgment Against Investment Adviser for Defrauding Clients
Litigation Release No. 24677 / November 26, 2019
Securities and Exchange Commission v. The Nutmeg Group LLC and Randall Goulding, Civil Action No. 09-cv-1775 (N.D. IL, filed March 23, 2009)
An Illinois federal judge entered a final judgment on November 12, 2019 against an investment adviser who the SEC charged in March 2009 with fraud for misappropriating client assets and misrepresenting the value of 15 unregistered investment pools.
Following a two week trial, on October 25, 2019 Magistrate Judge Jeffrey T. Gilbert of the United States District Court for the Northern District of Illinois issued findings of fact and conclusions of law that Randall Goulding - owner and managing member of registered investment adviser The Nutmeg Group LLC - commingled investor funds with his personal assets, implemented flawed internal systems and methods for valuing and reporting assets under management, and transferred millions of dollars out of the investment pools to himself and companies controlled by family members. The Court found that Goulding "used Nutmeg as his personal piggybank" to pay his personal expenses, including personal credit cards, buy a car, and purchase an entrance fee to a poker tournament. Judge Gilbert found Goulding knowingly violated, and permanently enjoined Goulding from future violations of, Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Court also ordered Goulding to pay over $1.8 million, consisting of $642,422 of disgorgement, $583,230 of prejudgment interest, and a $642,422 civil penalty.
In a separate order, the Court entered a final judgment against Nutmeg permanently enjoining it from violating Sections 204, 206(1), 206(2), and 206(4) of the Advisers Act and Rules 204-2, 206(4)-2 and 206(4)-8 thereunder. The Court had earlier granted partial summary judgment in favor of the SEC and found as a matter of law that Nutmeg and Goulding violated Sections 204, 206(2), and 206(4) of the Advisers Act and Rules 204-2, 206(4)-2, and 206(4)-8 thereunder.
The litigation is being handled by Andrew Shoenthal, Robert M. Moye, and Benjamin J. Hanauer of the Chicago Regional Office with assistance of Sheila Meaders and Sara L. Renardo. The investigation that led to the SEC's action was conducted by Mr. Shoenthal and Ann Tushaus of the Chicago Regional Office and was supervised by Paul A. Montoya.