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U.S. Securities and Exchange Commission


Litigation Release No. 18107 / April 25, 2003

U.S. v. Richard D. McMullin, Civil Action No. 03-382 (C.D. Cal.)


The U.S. Attorney for the Central District of California announced today that Richard D. McMullin was charged with conspiracy to obstruct justice during an SEC enforcement investigation of Reed E. Slatkin, making false statements to FBI and IRS agents, and making false statements under oath to the bankruptcy trustee for the Slatkin estate. From approximately 1986 until May 2001, Slatkin operated a massive Ponzi scheme in which he solicited more than $593 million from approximately 800 investors. McMullin, 38, of Santa Barbara, has agreed to plead guilty to the charges when he is arraigned in May.

In his plea agreement, McMullin admitted that when the SEC began a formal investigation of Slatkin's activities in 1999, McMullin and Slatkin conspired to obstruct the SEC's investigation. McMullin and Slatkin, among other things, lied to the SEC by minimizing McMullin's role in, and knowledge of, Slatkin's bogus investment activities. McMullin also lied to FBI and IRS agents by minimizing his own actions and knowledge of Slatkin's Ponzi scheme. Moreover, McMullin lied during sworn testimony to the attorney for the court-appointed bankruptcy trustee for Slatkin's estate. McMullin did not disclose to any of the federal investigators the huge disparity between what Slatkin told investors and his actual investment portfolio. Between 1986 and August 1999, McMullin received nearly $2 million in salary and bonuses from Slatkin, and he netted approximately $952,000 from his personal investment account with Slatkin. McMullin has agreed to pay over $1.5 million in restitution to Slatkin's victims.

On May 11, 2001, the SEC obtained a temporary restraining order and asset freeze against Slatkin in federal district court in Los Angeles. The Commission alleged that Slatkin defrauded hundreds of clients through his unregistered investment advisory business located in Santa Barbara, California.

On June 7, 2001, the U.S. District Court for the Central District of California entered a Judgment of Permanent Injunction against Reed E. Slatkin. The judgment enjoins Slatkin from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and the investment adviser registration provisions of Section 203(a) of the Advisers Act. Slatkin, without admitting or denying the allegations in the complaint, consented to the entry of the injunction. Slatkin has also been barred by the Commission from associating with any investment adviser.

The U.S. Attorney's Office for the Central District of California charged Slatkin with 15 felony charges, including mail and wire fraud, money laundering and conspiracy to obstruct justice during an SEC enforcement investigation. Slatkin pleaded guilty and is scheduled to be sentenced on June 9, 2003.

Additional information can be found in Litigation Release No. 16988 (May 15, 2001), No. 17033 (June 12, 2001), No. 17796 (October 22, 2002) and Advisers Act Release No. 2006 (January 2, 2002).




Modified: 04/28/2003