Three executives of a bankrupt Connecticut-based hedge fund have been charged with defrauding investors of millions of dollars by secretly changing the structure of the fund to please the biggest investor and keep management fees flowing in as the fund encountered trouble.
A federal grand jury in New Haven returned a 19-count indictment on Tuesday charging David Bryson, 44, of Ridgefield; Bart Gutekunst, 61, of Weston, and Richard Pereira, 40, of Ridgefield, with conspiracy, securities fraud and wire fraud, said David B. Fein, the United States Attorney for Connecticut, and Kimberly K. Mertz, special agent in charge of the New Haven F.B.I. office. The conspiracy charges could bring up to five years in prison and the fraud charges up to 10 years on each count upon conviction.
Bryson and Gutekunst were managing partners and principals in New Stream Capital LLC, and Pereira was the chief financial officer when the fund ran into trouble during the financial crisis late in the last decade. News reports estimated it controlled as much as $750 million at its height. It filed for bankruptcy in 2011.
“Fearing the loss of their fund’s largest investor, these defendants orchestrated a scheme to deceive investors in order to obtain and maintain investments,” Fein said.
The largest investor, Gottex Fund Management, had some $300 million invested, the Securities and Exchange Commission has alleged in a separate complaint against the three defendants and Tara Bryson, who is David Bryson’s sister and led New Stream’s marketing department. Unknown to other investors, Gottex was given favorable treatment as the fund managers tried to juggle accounts in Bermuda and the Cayman Islands, prosecutors and the S.E.C. have alleged. (The S.E.C. settled a complaint against Tara Bryson.)
Gottex Fund Management, based in Switzerland, has offices in several countries, including the United States. It has not been accused of wrongdoing. The Wall Street Journal reported that lawyers for David Bryson and Gutekunst professed their clients’ innocence and look forward to vindication. Lawyers for Pereira and New Stream did not immediately respond to requests for comment, the Journal said.
“It goes without saying that investing carries certain risks,” Mertz of the F.B.I. said. “Those risks, however, should not include any chance that hedge fund managers or other investment professionals are lying to or deceiving their investors about the current state of investments. Investors have a right to full disclosure.”