U.S. Securities and Exchange Commission
LITIGATION RELEASE NO. 18681/ APRIL 26, 2004
SECURITIES EXCHANGE COMMISSION v. IAN L. RENERT ET AL., United States District Court for the District of Connecticut 301-CV-1027 (PCD) (June 6, 2001).
SEC OBTAINS FINAL JUDGMENT AGAINST CONNECTICUT MAN IN CONNECTION WITH $22 MILLION FRAUD INVOLVING OFFSHORE MUTUAL FUNDS
The Commission announced today that on April 14, 2004, the United States District Court for the District of Connecticut entered final judgment by default against Ian L. Renert, formerly of Wilton, Connecticut and against Hawthorne Sterling & Co., an unregistered investment adviser controlled by Renert. The judgment was entered in a civil enforcement action the Commission filed in June 2001 alleging 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 alleged in its complaint 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. According to the complaint, Renert and Hawthorne misrepresented via the Internet, offshore seminars and a network of sales agents that the funds would invest in bank debentures, which in this case, were fictitious prime bank instruments. The Commission also alleged that the Renert and Hawthorne 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.
The judgment against Renert and Hawthorne permanently enjoins both from violating the anti-fraud provisions of the securities laws, Section 17(a) of the Securities Act of 1933 ("Securities Act"); 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. The judgment also enjoins both Renert and Hawthorne from violating Sections 5(a) and 5(c) of the Securities Act and Section 7(d) of the Investment Company Act of 1940, which prohibit unregistered offerings.
The Court also held Renert and Hawthorne jointly and severally liable to pay $717,276 (representing profits gained as a result of conduct alleged in the complaint) plus prejudgment interest of $117,264, for a total disgorgement of $834,540. The Court also ordered Renert to pay $250,000 in civil penalties and Hawthorne to pay $500,000 in civil penalties.
For further information, please see Litigation Release No. 17031 (June 7, 2001).