The Securities and Exchange Commission has fined the principals of an unregistered private equity firm $1 million for allegedly making conflicting transactions using fund assets and failing to tell investors.
Augustine Capital Management principals John Porter and Thomas Duszynski used proceeds from its Augustine Fund to invest in and loan money to two companies in which they had an interest. Duszynski was also loaned money from the fund for a personal business venture with other Augustine owners, a loan he eventually defaulted on.
The regulator also alleged that Duszynski and Porter used $950,000 of LP money to pay almost all the firm’s overhead expenses, despite agreeing with investors in fund documentation that Augustine Capital would bear those costs.
In addition, the SEC found that the firm provided investors with account statements showing inaccurate values of some of the fund’s underlying investments, with Duszynski and Porter having concluded that one of them “had been rendered worthless” according to the SEC case documents.
The principals were ordered to pay a $1 million in disgorgement, interest and civil penalty payments, and were barred from the investment advisory industry for three years. Duszynski was also barred from practicing as an accountant.