SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16894 \ February 8, 2001
SECURITIES AND EXCHANGE COMMISSION v. ALEXIS A. ARLETT, et al. (United States District Court, D.N.J., Civil Action No. 01-621) (AET)
The Securities and Exchange Commission ("Commission") announced the filing, on February 8, 2001, of a Complaint in the United States District Court for the District of New Jersey, alleging that defendants Arlett and Associates, Inc. ("Arlett and Associates"), an investment adviser registered in New Jersey, and Alexis A. Arlett ("Arlett"), of Skillman, New Jersey, its president and owner, misappropriated approximately $4.1 million from their advisory clients. The Complaint also names as a relief defendant Michael H. Kochmann ("Kochmann"), Arlett's husband, alleging that Arlett deposited a portion of the stolen funds into a bank account jointly owned by Arlett and Kochmann.
The Commission's Complaint alleges that, between September 1995 and November 2000, Arlett, through Arlett and Associates, misappropriated approximately $4.1 million in client funds from accounts maintained at a broker-dealer, falsely claiming that these funds represented fees owed by clients. Arlett's clients had signed agreements allowing her to obtain the funds directly from the broker-dealer upon presentation of a request for fees. The defendants took approximately $2.5 million of this total from the accounts of one family. During this period, the total value of assets under management by Arlett and Arlett and Associates never exceeded $6.04 million. The Complaint alleges that, in order to perpetrate and conceal the fraud, Arlett created and distributed false account statements to clients, and made misrepresentations and omissions of material fact in correspondence, e-mails and oral statements to investors. Arlett transferred the stolen funds to several bank accounts and used these funds for lavish personal living expenses, including more than $1.3 million spent on jewelry, and hundreds of thousands of dollars on artwork.
The Complaint seeks permanent injunctions, disgorgement and civil penalties from Arlett and Associates and Arlett; and disgorgement from Kochmann. Kochmann is not charged with violating any of the provisions of the federal securities laws. Without admitting or denying the Commission's allegations, Arlett and Associates and Arlett consented to the entry of an Order of Permanent Injunction (Reserving the Issues of Disgorgement and Civil Penalties) permanently enjoining them from violating Section 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In addition, Arlett and Associates, Arlett and Kochmann consented to the entry of an order freezing their assets and granting other relief.
The Commission acknowledges the assistance of the New Jersey Bureau of Securities in the investigation of this matter.
http://www.sec.gov/litigation/litreleases/lr16894.htm
