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South Carolina Hedgie Indicted for Defrauding Investors and Obstructing SEC

Handcuffed HandsNew York (HedgeCo.Net) – A former hedge fund manager has been arrested in South Carolina after being indicted by a federal grand jury in Atlanta for defrauding his investors of around $8 million and then obstructing the SEC’s investigation.

“Stanley J. Kowalewski is charged with stealing from the investors who trusted him and then repeatedly lying to them and the SEC about his self-dealing,” Attorney Sally Quillian Yates, said. “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.”

According to U.S. Attorney Yates, the charges, and other information presented in court, Kowalewski was the sole owner and chief executive officer of SJK Investment Management LLC in Greensboro, North Carolina. Beginning in 2009, Kowalewski 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. Almost immediately after receiving the first investor money, Kowalewski began diverting the proceeds to pay for personal and business overhead expenses.

The FBI said, “In December 2009, Kowalewski formed a new SJK fund called the Special Opportunities Fund, which he did not disclose to investors. He diverted millions from the Absolute Return Funds to the Special Opportunities Fund without disclosing the transfers 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. 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.”

“Also as part of the scheme, Kowalewski overvalued the assets held by the Special Opportunities Fund and used those fraudulent valuations to calculate the returns for investors in the Absolute Return Funds. As a result, the monthly statements distributed to SJK investors showed fraudulently inflated returns. Investors lost over $8 million as a result of Kowalewski’s fraudulent scheme. 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.”

He has been charged with 22 counts of wire fraud, one count of conspiracy, and one count of obstructing the SEC proceeding. The SEC Atlanta Division previously brought a civil action against Kowalewski. In that case, Kowalewski was ordered to pay over $16 million in disgorgement and civil penalties.

Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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One Response to South Carolina Hedgie Indicted for Defrauding Investors and Obstructing SEC

  1. Sharon Hewitt says:

    Reminds me of similar fraudsters… David Firestone, Principal at Shorebreak Energy Developers who committed SEC fraud and was found liable in 2010 under his former company, M.A.G. Capital.
    http://www.sec.gov/litigation/admin/2009/ia-2849.pdf

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