Phoenix-Based Investment Adviser Charged with Fraud, SEC Alleges Undisclosed
Conflicts of Interest
Last week, the SEC filed charges against Phoenix-based investment advisor
Walter J. Clarke for allegedly recommending investments to his clients
without disclosing important
conflicts of interest. In particular, the SEC alleges that Clarke recommended investments in
two businesses that he co-owned without advising his clients of his personal
stake in the companies. The businesses subsequently failed, causing investors
to suffer hundreds of thousands of dollars in losses.
According to the SEC, in 2007 and 2008, Clarke convinced three Oxford Investment
Partners clients to invest a total of more than $300,000 in loans originated
by Cornerstone Funding Group, which Clarke co-owned. He also convinced
four clients to invest approximately $40,000 in a privately held company
called HotStix, which was owned by several co-owners of Oxford, including
Clarke. None of the seven clients was told of the ownership conflicts
of interest, and all lost their money shortly after investing in the companies.
Clarke also stands accused of fraudulently inflating the value of Oxford
Investment Partners LLC in order to oversell 7.5% of his personal stake
in the company by at least $112,000.
“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