The Securities and Exchange Commission has barred from the investment industry a former executive at a hedge fund firm connected with jailed Minnesota businessman Tom Petters.
Michelle Palm was barred from “association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent” in an order issued last week by the SEC
Read the SEC order HERE (PDF). The order reiterates the following allegations against Michelle Palm and James Fry:
• Falsely assured investors that the inventory financing transactions in which the funds invested were structured in such a way that after the retailers received their merchandise from vendors, they would send their payments for the merchandise directly into the funds’ collateral accounts to pay off the notes held by the funds. In reality, money for the repayment of notes held by the funds always came directly from Petters and never came from any retailers.
• Failed to disclose to investors and potential investors the facts that Petters was having difficulties making payments on certain of the notes held by the funds and that they engaged in a series of note extensions with Petters, beginning around February 2008, in order to hide that fact.
• Distributed pitch books to investors and potential investors that falsely represented that independent accountants were conducting quarterly examinations of the funds’ transaction procedures. In reality, no such examinations were conducted.