Camelot Group Founder Charged With Stealing $9 Million

Feb 10, 2014 6:18 pm ET

(Updates with SEC claims in 10th paragraph.)

Feb. 10 (Bloomberg) -- The manager of a private-equity fund was indicted on charges that he stole more than $9 million from investors, as New York regulators and prosecutors intensify enforcement efforts in the financial industry.

Lawrence E. Penn III, 44, of New York, managing director and founder of Camelot Group, pleaded not guilty today before state Supreme Court Justice Laura Ward in Manhattan to charges of grand larceny, money laundering and falsifying business records, according to District Attorney Cyrus Vance’s office.

A longtime friend, Altura St. Michael Ewers, 44, of San Francisco, was indicted on the same charges and arrested over the weekend in California, Vance’s office said.

Penn raised about $120 million starting in 2010 from investors, including a Kentucky state pension fund, and transferred assets to a shell company the two men controlled called Ssecurion, under the premise the money was payment to Ewers for due-diligence services, prosecutors said.

The two men allegedly used the account to launder money through entities and accounts they controlled, with Penn using them for expenses including credit-card payments, withdrawals of cash and a car, prosecutors said. The men made false statements and provided auditors with fake invoices, the U.S. said.

The indictment comes less than a week after three former WJB Capital Group Inc. executives were charged by Vance’s office with defrauding investors of more than $11 million in an effort to prop up the now-defunct broker-dealer.

Enforcement Efforts

Regulators and prosecutors have increased enforcement efforts since the economic crisis. Vance in 2010 formed a major economic crimes bureau, which participated in the WJB investigation and the probe of Penn and Ewers.

Penn and Ewers were sued last month by the U.S. Securities and Exchange Commission in Manhattan for misappropriating the same amount. The SEC said Penn used the money for overhead expenses such as salary and rent for luxury office space and personal expenses such as dry-cleaning and groceries, while keeping investors from redeeming their interests.

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.”

The Camelot Group is the parent of CASO Management, the investment adviser to the fund Camelot Acquisitions Secondary Opportunities LP, according to the SEC’s lawsuit.

CASO Management

Penn started CASO Management in 2007 after working at several “well-known” investment banking firms, and assets under its management peaked at about $145 million last year, according to the SEC’s lawsuit.

The charges against Penn don’t affect the fund’s assets held in custody, and Penn intends to address the allegations through counsel “in a responsible and timely manner,” his attorney, Benjamin Brafman, said in an e-mailed statement.

Ewers didn’t respond to a voice-mail message asking for comment on the accusations left with Big House Studios, a film location company that he founded.

The civil case is SEC v. Penn, 14-05811, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Mary Romano, Andrew Dunn