(CN) - A Phoenix area investment adviser has been charged by the Securities and Exchange Commission with withholding information about his stake in investments he recommended to his clients.
According to the Securities and Exchange Commission's complaint, Oxford Investment Partners LLC principal Walther J. Clark advised his clients to invest in two businesses without divulging that he owned one of the businesses and had financial ties to the other. Oxford's website describes the company as a "boutique wealth-management firm that offers financial, retirement, tax and investment planning."
"In late 2007, Clarke faced severe financial problems and decided to obtain money to address his difficulties by exploiting an Oxford client," the complaint states. "Specifically, in March 2008, Clarke sold 7.5% of his ownership interest in Oxford to a client at a fraudulently inflated price ($750,000). Indeed, in connection with this transaction, Clarke employed several devices to artificially inflate the value of Oxford by at least $1.5 million, thereby causing the client to overpay for the 7.5% interest in the firm by at least $112,000."
Clark also recommended his own company, Cornerstone Lending Group, to several of his clients without informing them that he was the owner. The clients funded loans for Cornerstone which were later defaulted on causing investors to lose more than $300,000.
Later that year, according to the commission, "Clarke convinced four clients to invest approximately $10,000 each in a privately-held company called HotStix, without first disclosing that the owners of HotStix had ownership interests in Oxford and were paid consultants to Oxford," the complaint states.
Not long after the investments were made, HotStix failed and filed for bankruptcy, once again leaving Clark's clients high and dry.
According to the complaint, Clark was paying the mortgage on two houses, one of which is valued at $3.5 million. He was also paying for private schools for his children, professional private tennis lessons and interior designers. In addition, he was dealing with a financial strain caused by a $400,000 settlement he was paying to this former employer, Wachovia, and the financial burden his business was creating because his partner was facing severe health issues.
"Investment advisers have a fiduciary duty to be forthcoming with their clients and act in their best interests," said Marshall S. Sprung, Deputy Chief of the SEC Enforcement Division's Asset Management Unit. "Clarke breached that duty by deliberately overvaluing the firm and staying mum on his personal ties to the recommended investments."