Already a Bloomberg.com user?
Sign in with the same account.
The U.S. Securities and Exchange Commission sued Resources Planning Group, a Chicago-based investment adviser, and one of its owners, over claims they raised money for a failing private-equity fund to pay off existing clients.
Joseph Hennessy collected more than $1.3 million from 2007 to 2010 on false claims that a fund he helped run was viable, the SEC said in a lawsuit filed today at U.S. District Court in Illinois. Hennessy used at least $641,000 to make partial payments to customers holding promissory notes that he had personally guaranteed, the SEC said.
James Kopecky, a lawyer for RPG, said in an interview that the firm will fight the SEC’s claims.
“Resources Planning Group is a clean shop with no disciplinary history, and they cater to investors who know what they’re doing,” Kopecky said.
The SEC has stepped up its scrutiny of the private-equity business following the 2008 financial market turmoil which forced firms to write down the value of their holdings. After the 2010 Dodd-Frank Act authorized greater oversight of money managers, the agency initiated a broad review of practices at private-equity and hedge funds, including how assets are valued and claims of unusually high performance.
“Private equity fund investors expect their money to be invested in viable assets that will generate positive returns,” Marshall Sprung, deputy chief of the SEC’s asset management enforcement unit, said in a statement. “Hennessy made these promises, but betrayed his clients and others by using their money to save himself from financial ruin.”
Kevin Flynn, an attorney for Hennessy, didn’t immediately return a phone call seeking comment on the allegations.
To contact the reporters on this story: Joshua Gallu in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Maura Reynolds at email@example.com