Anthony P. Postiglione, Jr., et al.

Securities and Exchange Commission v. Anthony P. Postiglione, Jr., et al., Civil Action No. 04-CV-3604 (E.D. Pa.)

The Securities and Exchange Commission ("Commission") announced that on August 9, 2004, the Honorable Legrome D. Davis, U.S. District Court Judge for the Eastern District of Pennsylvania, issued a preliminary injunction against Anthony P. Postiglione, Jr. ("Postiglione"), of Malvern, PA, William J. Lennon ("Lennon"), of Media, PA, and two companies they owned and controlled, namely, Fountainhead Fund, LP ("the Fund"), a hedge fund located in Wayne, PA, and its general partner Fountainhead Asset Management, LLC ("FAM"). The Court's Order, which was entered upon the defendants' consent, preliminarily enjoins them from violating the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940, and continues an asset freeze, appointment of a receiver, and other relief imposed by the Judge in the temporary restraining order issued July 30, 2004.

In its Complaint, originally filed July 30, 2004, the Commission alleges that, from November 2001 through the present, Postiglione and Lennon raised approximately $5 million for the Fund from at least 18 private investors. Through a series of fraudulent acts, defendants Postiglione and Lennon, acting through FAM, obtained assets fraudulently, lulled investors into keeping their assets in the Fund, and misused investor funds. The Complaint alleges that, from the inception of the Fund through the present, Postiglione and Lennon have sent false quarterly statements and newsletters to investors, consistently overstating the Fund's value and performance. In addition, they have overstated the amount of Postiglione's personal investment in the Fund and the Fund's performance in order to lure new investments. Further, in violation of their fiduciary duties to their clients, Postiglione and Lennon excessively traded several Fund securities accounts for the sole purpose of generating soft dollar credits, which they then withdrew as cash and used for, among other things, their own personal living expenses. The Complaint alleges that, during the course of this fraud, Postiglione and Lennon also misappropriated several hundred thousand dollars of Fund assets for their personal use. As of the date of filing, investor funds in the Fund totaled approximately $1.7 million.

The Complaint alleges that defendants Postiglione, Lennon, FAM, and the Fund have violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and that Postiglione, Lennon, and FAM have violated Sections 206(1) and 206(2) of the Advisers Act. The Complaint seeks permanent injunctions, disgorgement together with prejudgment interest, and civil penalties.