U.S. Securities and Exchange Commission
Litigation Release No. 18005 / February 27, 2003
SECURITIES AND EXCHANGE COMMISSION v. KENNETH B. MACQUEEN et al., U.S. District Court for the Northern District of Illinois Docket No. 03C 1423(N.D. IL. Feb. 26, 2003)
On February 26, 2003, the Securities and Exchange Commission filed a Complaint in the United States District Court for the Northern District of Illinois, to halt a Ponzi scheme operated by Kenneth B. MacQueen ("MacQueen"), a resident of Orland Park Illinois, through MacQueen Capital Management and the Dividend Reinsvestment Fund, L.L.C. (the "Fund"). The Complaint alleges that the defendants, MacQueen, MacQueen Capital Management and the Fund, raised over $1.35 million from at least five investors. On the same day, Judge Matthew F. Kennelly of the Northern District of Illinois issued an asset freeze against the defendants.
The Complaint alleges that MacQueen sold investors interests in the Fund that purported to purchase discounted stock through dividend reinvestment programs and to simultaneously sell the stock short to lock in a profit. MacQueen claimed that the Fund generated annual returns of between 22% and 30% net of expenses. MacQueen also claimed that he would only take a fee from the profits and that he currently manages $16 million. The Complaint alleges that, contrary to these claims, the Fund did not earn significant sums in the last year, that MacQueen used money that he raised to buy a vacation home and that he used the remaining money that he raised to pay existing investors who wanted to liquidate their interests in the Fund. At the time the payments were made, the Complaint alleges that the Fund was almost insolvent.
The Complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint also alleges that MacQueen Capital Management violated Section 206(1) and (2) of the Investment Advisers Act of 1940 and that MacQueen aided and abetted such violations. The Court ordered a hearing for March 4, 2003 on the Commission's Motion for a Preliminary Injunction.
In a related case, MacQueen was arrested on February 26. The Commission thanks the Illinois Securities Department, the U.S. Attorney's Office for the Northern District of Illinois and the U.S. Postal Inspection Service for their assistance in this matter.