5:51 am October 20, 2010, by Henry Unger
The Securities and Exchange Commission has charged two metro Atlanta hedge fund managers, their company and the fund with defrauding investors in 2005 by overvaluing investments to hide losses while diverting millions for their own use, AJC staffer Scott Trubey reports.
An attorney for Paul T. Mannion Jr. and Andrew S. Reckles denied the charges and said investors were not harmed.
Mannion, 48, of Norcross, and Reckles, 40, of Milton, ran PEF Advisors, whose main fund was Palisades Master Fund LP. They are accused of putting the stock of a now-defunct Pennsylvania company into a so-called “side pocket,” a place for hedge funds to stow devalued, low volume stocks to help avoid heavy losses, Trubey reports.
Side pockets are legal, but the SEC alleges Mannion and Reckles overvalued the stock in order to charge excessive fees, Trubey writes. They also improperly borrowed $2 million from the Palisades fund to finance personal investments, and stole and exercised stock warrants from the fund valued at $1.6 million, according to the complaint.
Stavroula E. Lambrakopoulos, a Washington, D.C., attorney for the defendants, denied the charges, Trubey reports.
“No Palisades investors lost any money or were otherwise damaged as a result of any of the alleged conduct by our clients,” she said in a statement.
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