A Los Angeles investment adviser was charged this week by the Securities and Exchange Commission (SEC) with defrauding a high-profile professional athlete and the athlete’s wife by deceiving them about the investment advisory fees they were paying.
According to the SEC, Jeremy Joseph Drake, formerly of Los Angeles-based HCR Wealth Advisors, went to “elaborate lengths” to conceal his fraud, including creating and sending false documents, and masquerading as another person to corroborate his lies. HCR terminated Drake in July 2016 for misconduct concerning the clients’ accounts.
The complaint filed in the U.S. District Court for the Central District of California alleges that Drake repeatedly lied to the clients (who are listed as “Mr. and Ms. A”) and their representatives, and sent false and misleading emails, deceptive fee reports and other fabricated documents. The fabricated documents included falsified account statements of the brokerage firm where the clients’ securities were held and a falsified investment advisory agreement from HCR.
“As an investment adviser, Drake owed his clients a fiduciary duty and was prohibited from making untrue statements of material fact or from omitting to state material facts necessary to make his statements not misleading. Drake violated these obligations by committing the acts alleged in this Complaint,” the SEC says.
Drake apparently deceived the clients for more than three years, leading them to believe they paid a special “VIP” annual rate of 0.15 to 0.20% of their assets under management when they actually paid 1%, according to the allegations.
Because of this, the clients paid $1.2 million more in management fees than what was represented by Drake, who received approximately $900,000 of incentive-based compensation based on the fees paid by the clients, the SEC noted.
The story gets even more bizarre when the SEC’s complaint describes how in June 2016, as one of the clients demanded an explanation about the fees, Drake supposedly created the persona of “Ron Stenson” to corroborate his story. The complaint further describes how Drake confessed to the wife that he had been lying and sending false information, and warned her that reporting his misconduct could result in bad publicity for her husband.
The SEC is seeking a permanent injunction and return of allegedly ill-gotten gains, plus interest and penalties.
