Sunday, November 24, 2013
A federal grand jury in Atlanta has issued indictments against a Pawleys Island man, charging him with swindling investors of hedge funds of up to $8 million.
Stanley J. Kowalewski, 41, is charged with “stealing from the investors who trusted him and then repeatedly lying to them” and the Securities and Exchange Commission, said United States Attorney Sally Quillian Yates.
Officially Kowalewski is charged with 22 counts of wire fraud, one count of conspiracy, and one count of obstructing the SEC proceeding, Yates states. Each wire fraud count carries a maximum sentence of 20 years in prison. The conspiracy and obstruction charges each carry a maximum sentence of five years in prison.
The Georgetown Times sought comment from Kowalewski’s wife, but the calls were not returned.
“The victims of his greed include pension funds, schools, hospitals, and other non-profits who lost over $8 million in hard-earned money, which Kowalewski diverted to his own personal use,” Yates wrote.
Yates said Kowalewski was the sole owner and chief executive officer of SJK Investment Management LLC in Greensboro, NC where, starting in 2009, “he solicited investment money from pension funds, school endowments, hospitals, non-profit foundations, and other investors that he placed in two SJK ‘hedge fund of funds,’ an onshore fund and an offshore fund called the Absolute Return Funds.”
From the start, Kowalewski “began diverting the proceeds to pay for personal and business overhead expenses,” Yates states.
She said Kowalewski diverted millions of dollars from Absolute Return Funds to Special Opportunities Fund, which he allegedly created in December, 2009. Yates said he did not disclose the creation of that fund to investors.
“After he secretly transferred the funds, Kowalewski diverted millions from the Special Opportunities Fund to himself through various self-dealing transactions, including having the Special Opportunities Fund buy three homes that Kowalewski owned and in which his family, his parents, and his brother-in-law’s family lived,” Yates wrote. “Kowalewski also bought a multi-million-dollar beach house and directed that the Special Opportunities Fund pay him $4 million as a fee to which he was not entitled. Kowalewski created and altered documents in an effort to make these transactions appear legitimate.”
The investigation into Kowalewski by the SEC began in March, 2010.
Yates said Kowalewski used “fraudulent valuations to calculate the returns for investors in the Absolute Return Funds.”
She said the monthly statements distributed to SJK investors showed fraudulently inflated returns.
During the investigation, Kowalewski testified under oath that after the Special Opportunities Fund purchased his three homes, the fund leased the homes to him and his relatives.
He also testified that Michael J. Fulcher, the chief financial officer of SJK, had drafted and Kowalewski had signed the leases at or near the time of the homes’ sales.
“According to the indictment, however, Kowalewski and his relatives had never leased the homes back from the Special Opportunities Fund. Prior to Kowalewski’s sworn testimony, Kowalewski and Fulcher conspired to obstruct the SEC proceeding by creating the leases and backdating them, in an effort to document the claimed lease relationships and to conceal the self-dealing transactions by Kowalewski,” Yates wrote. “The leases were not created and signed at the time of the homes’ sales but in November 2010, a few weeks before Kowalewski testified.”
Kowalewski, Yates said, provided the fraudulent leases to the SEC as part of the investigation and then testified falsely about them to conceal his actions and obstruct the SEC’s investigation.
“The indictment also alleges Kowalewski lied in his sworn testimony when he testified that he had disclosed the Special Opportunities Fund to investors and that attorneys and other professionals had approved of his self-dealing transactions,” wrote Yates.
Earlier this year, Fulcher pleaded guilty to one count of conspiring with Kowalewski to obstruct the SEC proceeding, which charge carries a maximum sentence of five years in prison. Fulcher’s sentencing date has not yet been scheduled.
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