Saturday January 15, 2011
By Liz Skinner
SEC hits Long Island investment adviser with fraud charges
Money manager Warren Nadel and two firms he owned — an investment advisory firm called Registered Investment Advisers LLC and an eponymous broker-dealer in Glen Cove, N.Y. — bilked investors out of $8 million in commissions and fees through a fraudulent investment management program, federal regulators claim.
The Securities and Exchange Commission alleged that Mr. Nadel told institutional investors from early 2007 through 2009 that they were putting their money into a “liquid cash management strategy” that included market transactions.Mr. Nadel deliberately overstated the value of holdings by withholding details about the strategy in his communications with clients — including monthly statements he provided, the SEC said.
Mr. Nadel claimed he was investing in preferred utility securities that were held for short periods of time in order to generate capital appreciation or dividends, according to the SEC complaint, filed in U.S. District Court for the Eastern District of New York.
But Mr. Nadel and his firms knew by 2007 that the market wasn't liquid enough to allow for frequent purchases at attractive prices, the complaint said.
He told clients he was making “open-market transactions,” but the “vast majority of transactions” were really an exchange of securities between clients, often at inflated prices that Mr. Nadel set, the SEC said.
Of 11,250 trades, 90% of them were fraudulent, however, according to the complaint.
A lawyer for Mr. Nadel and his two firms disputed the allegations and said they will litigate the case.
"Our client made money for his clients," said Sam Lieberman, an attorney with Sadis & Goldberg LLP. "We reject claims that he duped investors."
The SEC, however, alleged that while creating the false impression of a liquid market, Mr. Nadel collected $6 million in commissions and $2.4 million in advisory fees over the three years.
The only time he told clients about the illiquidity of the investments was if a client tried to redeem assets. At that point, Mr. Nadel would tell them it would take “an extended period of time” to reach the prices that he had been reporting, the compliant said.Mr. Nadel deprived his clients of “the opportunity to make meaningful investment decisions with their money,” said George S. Canellos, director of the SEC's New York regional office.
Mr. Nadel also said his firm managed $400 million in assets, when it was really less than one-third of that, according to the commission.
The SEC is seeking a return of ill-gotten gains, interest and penalties from Mr. Nadel — who is 59 years old and a resident of Upper Brookville, N.Y. — and his firms.
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More on Warren Nadel
Source: wrapmanager.com
Company Information
Name: Warren D. Nadel & Co.
Address
7 Walnut Road
Glen Cove, NY 11542
Phone: 516-656-3636
Investment Products
Tax Advantage Cash Alternative
Preferred Stock Dividend Capture Strategy
Web Site: www.wdnco.com
Education: New York University - Leonard N. Stern School of Business, Carnegie Mellon University
