US Securities and Exchange Commission - VALIC

Jury Rules in SEC’s Favor, Finds Brokerage Firm and Two of Its Executives Liable for Fraud

SEC brokerage firmWashington D.C., May 15, 2019 — Jurors in Manhattan federal court today returned a verdict in the Securities and Exchange Commission’s favor against a brokerage firm and two of its executives.

The SEC charged the brokerage firm, Portfolio Advisors Alliance Inc. (PAA), Howard J. Allen, the indirect owner of PAA, and Kerri L. Wasserman, PAA’s president, with fraud and related charges in connection with making material misrepresentations and omissions in American Growth Funding II LLC (AGF II)’s private placement offering. The SEC alleged that AGF II, which raised capital from investors to provide loans to businesses, and its owner, Ralph C. Johnson, promised investors 12 percent annual returns and falsely claimed in offering documents that its financial statements were being audited each year.  The SEC further alleged that PAA, Allen, and Wasserman knew the offering documents were inaccurate yet continued using them to solicit sales of AGF II securities.

Earlier this year, the SEC obtained a final consent judgment against AGF II and Johnson, who were charged with lying to investors who purchased AGF II’s high-yield securities.

Marc P. Berger, Regional Director of the SEC’s New York Regional Office
Marc P. Berger, Regional Director of the SEC’s New York Regional Office

“Brokerage firms have a duty to truthfully disclose all material information about an investment recommended to their customers,” said Marc P. Berger, Regional Director of the SEC’s New York Regional Office.  “Today’s jury verdict demonstrates that PAA and its principals, Allen and Wasserman, participated in this fraud to the detriment of their customers.”

The jury found PAA, Allen and Wasserman liable on all counts, finding that they violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The jury also found that Allen and Wasserman aided and abetted PAA’s violations of those antifraud provisions, and that Wasserman aided and abetted Allen’s violations of those antifraud provisions. In addition, the jury found Allen and Wasserman liable as control persons under Section 20(a) of the Exchange Act for PAA’s violations.

The SEC’s litigation is being conducted by Alexander M. Vasilescu, Richard Hong, Jorge G. Tenreiro, Karen M. Lee, and Raymond Chan.  The investigation that led to the SEC’s litigation was conducted by Gerald Gross and Ms. Lee, with assistance from Thomas Feretic, Lisa Knoop, and Doreen Rodriguez. The case is being supervised by Sanjay Wadhwa.