The SEC on Thursday charged Lawrence E. Penn III, managing director at The Camelot Group, with stealing $9 million from investors in Camelot Acquisitions Secondary Opportunities, a venture capital fund, according to a news release from the Securities and Exchange Commission.
The complaint charges Mr. Penn, his longtime acquaintance Altura S. Ewers and two Camelot entities with violating the anti-fraud, books and records, and registration application provisions of federal securities law. The SEC obtained an emergency court order to freeze the assets of Mr. Penn and Camelot Acquisitions Secondary Opportunities Management.
The SEC claims Messrs. Penn and Ewers created a due diligence scam where Mr. Penn used assets from the venture capital fund to pay fake fees to a front company controlled by Mr. Ewers, who then kicked the money back to companies and accounts controlled by Mr. Penn without any actual due diligence performed.
“Penn held himself out as an ultra-sophisticated and well-connected investor in the private equity world,” said Andrew M. Calamari, director of the SEC's New York regional office, in the news release. “Behind the scenes, Penn disregarded his obligations to the fund's investors and treated their assets as his own personal and professional slush fund.”
Mr. Penn secured $120 million in commitments for the fund in question, including a $26 million commitment from the $15 billion Kentucky Retirement Systems, Frankfort, in May 2009. Executive Director William Thielen could not be reached for comment. KRS reported a market value of $28 million in the Camelot fund as of June 30, according to its most recent annual report.
According to the SEC, the scam began to unravel last year when Camelot's auditors became more skeptical about the fees. Messrs. Penn and Ewers are also accused of lying to the auditors and forging documents as recently as July 2013.
The complaint seeks Messrs. Penn and Ewers to “disgorge ill-gotten gains with interest, pay financial penalties, and be barred from future violations of the anti-fraud provisions of the securities laws.”
Mr. Penn could not be reached for comment.