U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

Litigation Release No. 16843 / December 27, 2000

SEC CHARGES FORMER EAST HAMPTON INVESTMENT ADVISER AND FUND MANAGER WITH MULTIMILLION DOLLAR FRAUD

Securities and Exchange Commission v. Evelyn Litwok and Dalia Eilat, Civil Action No. 00 Civ. 7626 (United States District Court for the Eastern District of New York)

The Commission announced today that it charged Evelyn Litwok ("Litwok"), a former East Hampton investment adviser, with committing securities fraud in connection with the offer and sale of securities in three private investment funds, and with misappropriating more than $3 million of investor funds for her personal benefit. Between 1994 and 1997, Litwok raised more than $8 million from approximately 35 individuals from the sale of limited partnership interests in Kohn Investment LP-1

("LP-1"), Kohn Capital LP-33 ("LP-33"), and a third private investment fund. Litwok misappropriated approximately $3 million, of which approximately $1.3 million went to her personal friend, Dalia Eilat ("Eilat"), who is named in the Complaint as a relief defendant. Litwok lost the remainder of investor funds through speculative trading in options. Moreover, in selling the investments Litwok made material misrepresentations and omissions concerning, among other things, her prior history as a broker and investment adviser. For example, Litwok failed to disclose substantial judgments entered against her for prior misconduct, including her misappropriation of investor funds. As a result of Litwok's misconduct, numerous investors have lost collectively several million dollars while Litwok enriched herself.

The defendant and relief defendant are as follows:

Litwok, age 49, currently resides in Freehold, New Jersey, and is currently working as an independent insurance sales agent. From 1994 to 1998, the period of the conduct at issue, Litwok resided in East Hampton, New York. Litwok was the principal of several corporations through which she conducted her investment advisory business, including Kohn Investment Management, Inc. (the general partner of LP-1), Kohn Capital Management, Inc.-33 (the general partner of LP-33), and Kohn Investment Management II, Inc. (a general partner of Kohn Investment Associates II, an entity that was never formed). From 1984 to 1994, Litwok was associated with various broker-dealers as a registered representative and held Series 7, Series 63 and Series 15 licenses.

Eilat, age 45, is an architect currently residing in New York, New York. Eilat was the president and sole shareholder of Kohn Capital Management, Inc.-33, the general partner of LP-33. During most of 1995 and 1996, Eilat lived in Litwok's house in East Hampton, New York. Eilat received at least $1.19 million from LP-1 and at least $150,000 from LP-33.

The Complaint alleges as follows:

From June 1994 to June 1995, Litwok raised approximately $5 million from approximately 20 investors from the sale of limited partnership interests in LP-1, a private investment fund. Litwok lost most of the money in LP-1 through speculative options trading and misappropriated the rest. Litwok misappropriated approximately $2.3 million of LP-1's funds for her personal benefit, including approximately $1.19 million which went to Eilat and businesses controlled by Eilat. Nevertheless, Litwok continued to solicit new investors for LP-1 by falsely blaming LP-1's losses on the fund's broker, and obtained another $525,000 from two investors in January 1997.

From June 1996 to April 1997, Litwok raised approximately $2.7 million from approximately 15 investors from the sale of limited partnership interests in a second private investment fund, LP-33. In offering and selling the investments in LP-33, Litwok made material misrepresentations and omissions of material fact about her prior history as a broker and an investment adviser. In particular, Litwok told investors that she was a very successful broker and investment adviser, but failed to disclose judgments and arbitration awards entered against her for prior misconduct, including her misappropriation of investor funds from LP-1. Litwok lost all of the funds in LP-33 through speculative options trading, but not before she misappropriated approximately $600,000 of the funds for her personal benefit, of which approximately $150,000 went to Eilat's benefit.

Finally, in October 1997, Litwok obtained $300,000 from another investor by materially misrepresenting that she would invest the money and that Litwok and the investor would "share in the profits." Again, Litwok misrepresented her history as a broker and an investment adviser. Litwok misappropriated $72,000 of the investor's money and lost the remainder through speculative trading.

The Commission alleges that as a result of the foregoing Litwok violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10-b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Commission seeks a final judgment: (a) permanently enjoining Litwok from future violations of the federal securities laws; (b) ordering Litwok to disgorge ill-gotten gains, plus prejudgment interest; (c) imposing civil penalties against Litwok; (d) ordering Eilat to disgorge funds equal to the amount by which she was unjustly enriched, plus prejudgment interest; and (e) ordering Litwok and Eilat to provide verified written accountings.

The litigation is pending in the United States District Court for the Eastern District of New York.

http://www.sec.gov/litigation/litreleases/lr16843.htm