The U.S. Securities and Exchange Commission has charged David Hepworth, a former Ketchum investment adviser, with fraud for allegedly using $650,000 in investors' funds to pay for a variety of personal and unauthorized business expenses.
The charges were announced Monday for Hepworth's actions between 2007 and 2009, while he was chief compliance officer for the investment firm Interfund Capital Corp. in Ketchum.
"The chief compliance officer plays a crucial role in ensuring that a securities firm is serving the interests of its clients," said Marc Fagel, director of the SEC's San Francisco regional office. "It is particularly disturbing when someone in this position of trust instead uses investor funds for his own personal benefit."
The SEC said Hepworth agreed to be barred from the industry. Hepworth could not be reached for comment. However, the SEC said, Hepworth neither admitted nor denied the charges.
Hepworth was terminated in July 2009 after the fraud was discovered and has, since then, paid investors for nearly all of their losses, according to the SEC.
Michael Dicke, the SEC's associate director of San Francisco's regional office, said the SEC didn't seek to impose a fine on Hepworth.
"He doesn't have any money," Dicke said.
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To fine Hepworth, Dicke said he'd have to be criminally charged by the U.S. Attorneys' Office. But, he said, criminal charges aren't being sought. Dicke said the process has come to an end.
"A lifetime bar is what we wanted to get, and we got it," Dicke said.
Hepworth formed and managed Interfund with his wife starting in 1992. Interfund closed in August 2009, and Hepworth now lives in Swampscott, Mass.
The SEC said Hepworth was able to carry out his fraud without discovery because Interfund failed to provide account statements to investors. And its financial statements weren't being audited.
"Instead of admitting to investors that the fund was performing poorly, Hepworth caused the fund to pay certain investors more than their accounts were actually worth when they redeemed their fund shares," the SEC stated.
The SEC also said Hepworth instructed Interfund's bookkeeper to secretly deduct the overpayments from accounts of his family members who were also investors in the fund.
Trevon Milliard: tmilliard@mtexpress.com
