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Tuesday, June 18, 2024 | Back issues
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Adviser Just Can’t Do Right, SEC Says

WASHINGTON (CN) - Arizona-based Clean Energy Capital, an investment adviser, and its founder-president misappropriated more than $3 million while committing a laundry list of securities violations - and there's a lot of dirty laundry, the SEC claims in court.

One can do no better than quote the SEC summary of the lawsuit against Clean Energy Capital and its boss, Scott A. Brittenham, of Tucson - other than adding, as the SEC did, that "in 2005, Brittenham consented to the entry of an order that prohibited him from participating in the conduct of the affairs of any mortgage broker in Washington for 10 years and ordered restitution to 11 consumers."

The SEC says in the 12-page cease-and-desist order: "This proceeding involves misconduct by Clean Energy Capital, LLC ('CEC'), a registered investment adviser, and its founder, president, and main portfolio manager, Scott A. Brittenham ('Brittenham') with respect to 20 private equity funds sold and managed by CEC, primarily under the name Ethanol Capital Partnership, L.P. (the 'ECP Funds')."

Then comes the laundry list: "From 2008 to the present, CEC and Brittenham have committed a number of violations with respect to the ECP Funds. First, CEC and Brittenham misappropriated more than $3 million from the funds by improperly allocating CEC's expenses to the funds without adequate disclosure to investors. Second, to enable the funds to pay for these inappropriate expenses, CEC and Brittenham secretly caused the funds to borrow money from CEC at unfavorable rates, pledging the funds' own assets as collateral. Third, beginning in August 2011, CEC changed the calculation of dividend distributions for certain of the funds, adversely affecting the dividends received by investors in Series A, B and C. This was also done without disclosure to investors. Fourth, in 2009, CEC and Brittenham falsely induced one of the previous investors to invest in a new ECP Fund, by

knowingly misrepresenting the amounts of the investments by Brittenham and another cofounder ('Co-Founder') in the new fund. Fifth, CEC violated the custody rule by failing to use a qualified custodian and failing to segregate fund assets. Sixth, and relatedly, CEC's compliance policy was inadequate because it incorrectly described the custody rule, resulting in the above violation. Seventh, for the funds offered in late 2008-2010 - Funds R, T and V - CEC concealed Co-Founder's SEC disciplinary history in the offering documents for the funds."

Brittenham was given 20 days to respond.

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