A financial advisor accused of running a multi-million dollar Ponzi scheme has recently come under scrutiny for several suspicious yard sales that have prompted the court-appointed Receiver to take action to ensure that assets were not being depleted to the detriment of defrauded investors. Stan Kowalewski recently held several weekend "estate" sales in which bargain hunters were invited to shop among two garages full of furniture. However, the court-appointed receiver, S. Gregory Hays, became involved when it was learned that Kowalewski had cancelled his home insurance, and neighbors reported that items other than furniture, such as fixtures and doors, were also being sold in an effort to avoid an asset freeze on the house previously obtained by the SEC. A private investigator hired by Hays determined that at least one outside fixture had been removed, resulting in exposed wiring and a hole in the ceiling. Hays has demanded a complete accounting from Kowalewski's attorney.
Kowalewski was accused by the SEC in January 2011 of operating a Ponzi scheme through his investment advisory business, SJK Investment Management LLC, that bilked investors out of at least $16.5 million. According to the SEC, Kowalewski operated the SJK Absolure Return Fund and the SJK Special Opportunities Fund, which ultimately solicited $65 million from investors that included school endowments, pension funds, hospitals, and non-profit foundations. During his tenure at SJK, Kowalewski represented to investors that he would entrust their funds with other investment entities, promising that each fund picked by Kowalewski would not exceed 15% of the total amount of investor funds. Investors were provided with fictitious account statements showing artificially inflated valuations of underlying assets.
Kowalewski settled the SEC lawsuit in late June without admitting or denying wrongdoing. The SEC is asking a federal judge to impose disgorgement of at least $8.6 million along with civil monetary penalties that could range from several hundred thousand dollars to $67 million.
A Copy of the SEC's Complaint is here.