ATLANTA (CN) - North Carolina-based Stanley Kowalewski stole more than $10 million from the $65 million he raised for alleged hedge funds, the SEC says. Many of his victims were pension funds, school endowments, hospitals and nonprofits, according to the federal complaint.
The SEC sued Kowalewski, of Greensboro, and his wholly owned company, SJK Investment Management, in what it calls "an ongoing offering and investment advisory fraud."
Since the summer of 2009, "Kowalkeski and SJK marketed two 'hedge fund of funds' (collectively 'the Absolute Return Funds') to various investors, many of whom are pension funds, school endowments, hospitals and nonprofit foundations," according to the complaint.
After listing Kowalkeski's alleged misrepresentations, including that he "would receive no more than a 1% annual asset management fee and a 10% profits incentive fee," the SEC adds that Kowalkeski and SJK began diverting investors' money "almost immediately ... to pay their personal and business overhead expenses under the pretense that such expenses were 'start-up' expenses for the Absolute Return Funds."
But actually, the SEC says, Kowalkeski used investors' money to buy his personal home for $2.8 million, "almost $1 million more than its 2006 purchase price;" to buy himself a $3.9 million vacation home; to pay $1 million in personal and business expenses; to "pay SJK and unfounded $4 million 'administration' fee, which Kowalkeski then paid himself as a 'salary draw'"; and, the SEC adds, "Kowalkeski has further stated his intention to have SJK pay him $2 million as 'salary' from the Special Opportunities Fund."
It claims Kowalkeski sent fraudulent monthly statements to his suckers, showing "substantial, positive, but illusory investment returns."
The SEC wants the money back, and penalties. And it wants the court to tell him not to do it again.
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