Fraud Alleged at Connecticut Hedge Fund
Connecticut regulators charged a Greenwich hedge fund with lying to customers and taking investments from people who aren't allowed to invest in the largely unregulated and sometimes risky partnerships.
Connecticut Department of Banking Commissioner John Burke last week announced plans to revoke the licenses and investment adviser registrations of Eddie Papic and Wilder Douglas Carnes, the operators of Criterion Investment Capital, an apparently defunct hedge fund that moved its offices to at least three different locations in Fairfield County between 2001 and the time the complaint was filed. The firm also faces a $130,000 fine.
According to a notice posted on the agency's Web site, Papic and Carnes took in about $1.8 million from a total of 15 investors who did not meet state or federal requirements for placing money in hedge funds. They also lied about their investment strategy, the fund's performance and their past records of bankruptcy, the complaint alleges.
Because many hedge funds use strategies that could result in the loss of all or a substantial portion of their investments,
Securities and Exchange Commission
requirements state that investors must have an annual income of $200,000 a year and a net worth of $1 million. Connecticut requires hedge funds to take minimum $500,000 investments only from accredited investors.
The complaint said that Criterion engaged in short-term options trading, with an average investment period of 19 days, despite telling shareholders it was seeking long-term capital accumulation through more stable investments. Carnes and Papic were cited for acting as unregistered investment agents in connection with their hedge fund business, and Papic was cited for failing to disclose a 1998 bankruptcy.
Carnes, an agent and investment adviser agent of
Quick & Reilly
in Southbury, did not return repeated calls for comment at his office or his home in Newtown. Papic, a resident of Darien, did not return calls seeking comment.
According to the
Stamford Advocate
, which first reported the state action, neither Criterion nor its representatives have asked the state for a hearing on the cease and desist orders. A hearing on the fine is scheduled for May 4.
Although the compliant locates Criterion in Greenwich between January 2001 and January 2002, the time when the alleged violations took place, the firm has apparently since led a wandering existence through affluent suburbia. A telephone listing for a Fairfield location is no longer in service, and calls to another listing in nearby Southport went unanswered.