SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17031 \ June 7, 2001
SECURITIES EXCHANGE COMMISSION V IAN RENERT ET AL..,United States District Court for the District of Connecticut 301CV1027:PCD (June 6, 2001).
COMMISSION SUES IAN RENERT, ARCHITECT OF $22 MILLION FRAUD INVOLVING OFFSHORE MUTUAL FUNDS, AND OBTAINS EMERGENCY ASSET FREEZE
The Securities and Exchange Commission announced that on June 7, 2001, Judge Peter C. Dorsey of the District of Connecticut issued an emergency order freezing assets against Ian Laurence Renert of Wilton, Connecticut, and Hawthorne Sterling & Co., an unregistered investment adviser in Wilton, Connecticut. Judge Dorsey also required Renert and Hawthorne to prepare an accounting and ordered expedited discovery.
The Judge's order was based on the Commission's motion and a complaint filed today against Renert and Hawthorne. The Commission's complaint alleges that Renert, the owner and control person of Hawthorne, was the architect of a $22 million fraudulent offering of interests in unregistered offshore mutual funds. The Commission alleges that from at least June 1997 through June 2000, Renert and Hawthorne induced more than 700 investors in 49 states and more than 100 investors overseas to purchase interests in 30 entities known as the Hawthorne Sterling Family of Funds. Through the Internet, offshore seminars and a network of sales agents, Renert and Hawthorne misrepresented that the Funds would invest in bank debentures, which in this case, were fictitious prime bank instruments. The Commission also alleges that the Defendants failed to disclose that Renert used Fund assets to engage in day trading in Internet stocks, losing at least $2.2 million, and to fund a mortgage on one of Renert's homes. In addition, the complaint alleges that Renert and Hawthorne misrepresented their qualifications and overstated the performance of the Funds. The Commission further alleges that the Defendants misrepresented that an investment in the Funds was low risk.
The Commission's complaint charges that Renert and Hawthorne violated the antifraud provisions of the Securities Act of 1933 (Section 17(a)), the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5 thereunder) and the Investment Advisers Act of 1940 (Section 206). The complaint also alleges that the defendants violated the registration provisions of the Securities Act (Section 5) and the Investment Company Act of 1940 (Section 7(d)) by failing to register their securities offering and the Funds with the Commission. In addition to the relief already granted, the Commission seeks an injunction prohibiting future violations of the securities laws, disgorgement and civil penalties.
Separately, the Commission announced that it reached a settlement with Donna L. Wood, the administrator of the Funds during the relevant period. Without admitting or denying the Commission's allegations, Wood consented to the entry of a permanent injunction against future violations of the antifraud provisions of the Securities Act, the Exchange Act and the Investment Advisers Act. In addition, Wood agreed to pay disgorgement of $100,000, with $90,000 waived due to a demonstrated inability to pay. Civil penalties were not assessed based on Wood's demonstrated inability to pay. In a related administrative proceeding to be instituted, Wood consented to a bar from association with an investment adviser with the right to reapply in three years.