The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Columbus, Ohio-based investment advisory firm and its president for repeatedly hiding a shortfall of more than $700,000 in client assets.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Ohio, a shortfall in a money market fund account managed by Professional Investment Management (PIM) was discovered when the SEC conducted an examination of the firm to verify the existence of client assets. PIM reported in account statements sent to clients that the firm held a total of approximately $7.7 million in a particular money market fund when in fact the account reflecting these investments held less than $7 million.
The SEC further alleges that Douglas Cowgill, who is the chief compliance officer as well as president of the firm, attempted to disguise this shortfall from SEC examiners by entering a fake trade in PIM’s account records. The purported trade was later reversed. Cowgill allegedly provided additional falsified reports to SEC staff, and he later transferred funds from a cash account at another financial institution to eliminate the shortfall in the money market fund account. However, that cash account also was held for the benefit of clients, thus Cowgill merely moved the shortfall from one asset holding to another in an effort to avoid detection. Said Robert J. Burson, associate director of the SEC’s Chicago Regional Office:
Our complaint alleges that Cowgill went to extraordinary lengths to hide a significant shortfall in client assets, even providing manufactured documents to SEC staff. Fortunately our examiners and investigators diligently tested Cowgill’s false statements and confirmed the existence of the shortfall in an account holding the investments of many clients.
In response to the SEC’s request for emergency relief for investors, U.S. District Court Judge Algenon L. Marbley issued a temporary restraining order and imposed an asset freeze to protect client assets.
