Lawrence E. Penn III, the managing director and founder of Camelot Group, pleaded not guilty Monday before New York State Supreme Court Justice Laura Ward in Manhattan to charges of grand larceny, money laundering and falsifying business records, Manhattan District Attorney Cyrus Vance Jr. said in a statement.
Altura St. Michael Ewers, a longtime friend of Mr. Penn, was indicted on the same charges of stealing $9 million from investors and arrested over the weekend in California, Mr. Vance's office said.
Mr. Penn raised about $120 million starting in 2010 from investors including the $15 billion Kentucky Retirement Systems, Frankfort, and transferred assets to a shell company the two men controlled called Ssecurion, under the premise the money was payment to Mr. Ewers for due diligence services, prosecutors said.
The defendants allegedly used the account to launder money through entities and accounts they controlled, with Mr. Penn using the funds for personal expenses including credit card payments, cash withdrawals and a car, prosecutors said. The two men made false statements and produced false invoices to auditors, prosecutors said.
Messrs. Penn and Ewers were sued last month by the Securities and Exchange Commission in federal court in Manhattan for misappropriating the same amount. The SEC said Mr. Penn used the money for overhead expenses such as salary and rent, and personal expenses such as dry cleaning and groceries.
Benjamin Brafman, an attorney representing Mr. Penn, didn't immediately return a telephone message left with his office seeking comment.
Camelot Group describes itself on its website as an investment and advisory firm that “provides independent advice and private equity asset management capabilities to institutions.”