The Securities and Exchange Commission ("Commission") announced that on November 10, 2003, the Honorable Charles R. Breyer, United States District Judge for the Northern District of California, entered a final judgment against Fred Albert Schluep, based upon Schluep's consent to the judgment entered in the action.
The judgment, to which Schluep consented without admitting or denying the Commission's allegations, finds Schluep liable for disgorgement of $1,597,115, plus prejudgment interest of $236,993 as a result of conduct alleged in the Commission's complaint. In addition, the judgment orders Schluep to pay a $120,000 civil penalty.
The Commission's complaint, filed in September 2002, alleges that Schluep fraudulently misappropriated millions of dollars from 26 clients by forging their signatures, or lying to them, to obtain their investment funds. The Commission's complaint alleged that Schluep thereby committed fraud and breached his fiduciary duty as an investment adviser, in violation of Sections 206(1) and 206(2) of the Investment Company Act of 1940, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On October 9, 2002, the Court entered a permanent injunction, by consent, against Schluep, prohibiting him from violating those provisions.
The Commission's complaint alleges that Schluep used the misappropriated client funds for several purposes, including maintenance and acquisition of real properties and an automotive brake business, and for Schluep's own personal expenses. The complaint further alleges that Schluep funneled some of the funds to relief defendant Howard Sylvester. Also on November 10, 2003, the Court entered an order dismissing relief defendant Howard Sylvester (who is in Chapter 7 bankruptcy), at the request of the Commission.
For more information, see Litigation Release Nos. 17946 (January 22, 2003) and 17771 (September 4, 2002).