Litigation Release No. 24511 / June 24, 2019
Securities and Exchange Commission v. Donald S. LaGuardia, Jr., No. 19-cv-05895 (S.D.N.Y. filed June 24, 2019)
The Securities and Exchange Commission today charged a founder and managing principal of a New York-based investment adviser for misappropriating approximately $2.6 million from investors and then concealing part of the misappropriation through fraudulent accounting devices.
The SEC’s complaint alleges that beginning in at least 2013, Donald S. LaGuardia, Jr., a resident of Lavallette, New Jersey, who controlled the investment adviser, L-R Managers, LLC, misappropriated investor money from private funds advised by L-R Managers and from subscriptions intended to be invested in one of the funds. LaGuardia then allegedly concealed part of this misappropriation through a sham receivable and promissory note. According to the complaint, LaGuardia used the money to pay for personal and L-R Managers expenses, including home renovations, salaries, and rent. The complaint also alleges that LaGuardia and L-R Managers used other accounting devices to inflate the capital account balances and returns reported to investors and made material misrepresentations about fund audits, expenses and performance. L-R Managers filed for bankruptcy in June 2017.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges LaGuardia with violating the antifraud provisions 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), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also charges LaGuardia with control person liability under Exchange Act Section 20(a) for L-R Managers’ antifraud violations of the Exchange Act. The SEC is seeking permanent injunctions and financial penalties against LaGuardia, and the return of allegedly ill-gotten gains with prejudgment interest.
The SEC’s investigation has been conducted by Alison Conn, Kerri Palen and Judith Weinstock of the New York Office. The SEC’s litigation against LaGuardia will be led by Christopher Dunnigan, Ms. Conn and Ms. Weinstock. The case is being supervised by Sanjay Wadhwa.