SEC Charges Atlanta Fund Adviser and Its Principal for Fraudulently Overvaluing Assets
The Securities and Exchange Commission has charged Paul Alar of Atlanta, Georgia, and his investment adviser firm, West Mountain LLC, for fraudulently overvaluing assets in two funds they managed, allowing them to collect significantly inflated fees.
The Securities and Exchange Commission has charged Paul Alar of Atlanta, Georgia, and his investment adviser firm, West Mountain LLC, for fraudulently overvaluing assets in two funds they managed, allowing them to collect significantly inflated fees.
The SEC’s complaint alleges that, beginning in late 2016, West Mountain and Alar directed two funds that they managed to invest in subsidiaries of two privately held companies.
According to the complaint, at the time of the investments, both companies had minimal revenues, very limited operations, and minimal numbers of employees. However, Alar and West Mountain recorded in the financial records for their two funds a collective unrealized gain of $18.6 million based on those investments, thereby allowing them to collect approximately $900,000 of additional fees.
The SEC alleges that, in valuing the unrealized gains, West Mountain and Alar falsely represented to investors that independent valuations by a third party supported their valuations, even though they knew that the third-party expressly stated it “should not be regarded as an independent valuation.”
In addition, West Mountain’s auditors had advised that the valuation methodology used to calculate the unrealized gains was unreasonable and inappropriate. The SEC also alleges that, in 2017, West Mountain and Alar misrepresented that one of the companies was actively negotiating an anticipated agreement that would result in massive gains for investors. According to the complaint, however, these “active negotiations” never existed.
The SEC’s complaint, filed in federal district court in Atlanta, Georgia, charges defendants with violating the antifraud provisions of federal securities laws. The SEC seeks permanent injunctions and monetary relief.
