The SEC charged San-Diego-based Western Pacific Capital Management LLC and its president, Kevin James O’Rourke, with investment fraud in connection to the non-public offering of stock by Ameranth Inc.
According to the SEC, during 2005 and 2006, Western Pacific and O’Rourke advised their clients to purchase Ameranth stock, for which Western Pacific and O’Rourke would be paid a 10 percent "success fee." The SEC alleges that neither Western Pacific nor O’Rourke disclosed the conflict of interest to their clients. (Western Pacific’s commission from Ameranth totaled $482,745.)
"Investment advisers have a fiduciary duty to act in the best interests of their clients and be forthcoming with them," said Marshall S. Sprung, Assistant Director in the SEC Enforcement Division’s Asset Management Unit. "Western Pacific and O’Rourke fraudulently breached that duty by failing to disclose the commissions they would receive for the recommended investments."
The SEC has also charged Western Pacific Capital Management LLC and O’Rourke with failure to provide written disclosures to clients, making material misstatements and omissions to clients about Ameranth’s liquidity, and failure to register as a broker.
For more information, you can find the SEC Order here.