A Florida couple has sued the advisory firm that they say failed to supervise their now-deceased friend and former advisor Stephen Romney Swensen, who ran a decades-long, $29 million Ponzi scheme, causing them to lose $850,000.
Mark Fox, 61, and Barbara Fox, 59, of Cocoa Beach, in a suit filed on Tuesday with the American Arbitration Association, claimed Centerville, Utah-based Wealth Navigation Advisors (WNA), which conducts its advisory business under the name Oak Lane Advisors, lacked supervisory policies and procedures and failed to follow the policies and procedures it had in place to prevent the scheme.
The lawsuit, on behalf of the Foxes, filed by New Orleans-based law firm, Peiffer Wolf Carr Kane Conway & Wise (Peiffer Wolf), also accused WNA of failing “to reasonably follow up on red flags relating to Swensen’s ongoing fraudulent conduct.” Such failure, it said, is in direct violation of the trust and fiduciary duties owed to the claimants.
The suit claims the firm’s negligence in supervising Swensen has directly caused the Foxes to suffer substantial financial and emotional losses. “Barbara now is forced to delay her retirement plans and [is] receiving psychiatric treatment to cope with these major life changes resulting from the fraudulent scheme. But not for WNA’s negligent failure to supervise Swensen and detect his fraudulent scheme, Mark and Barbara would not have suffered devastating investment losses,” the lawsuit says.
According to the complaint, from 2011 to 2022, Swensen, 50, formerly of Kaysville, Utah, operated Crew Capital Group, a fraudulent investment offering that raised more than $29 million from more than 50 investors, including $850,000 invested by the Foxes in 2019 while Swensen was registered with WNA. Three years later in June, as the scheme was collapsing, Swensen committed suicide, the complaint said. That same day, WNA had fired Swensen for failing to disclose outside activity.
In October, the Securities and Exchange Commission filed civil charges against the estate and business of Swensen.
Wealth Navigation Advisors could not be reached for comment by press time.
The complaint said Mark Fox learned of Swensen’s death shortly after it happened, but it was not until the next month that he learned about Swensen’s misconduct and the extent of the Crew Capital fraud. “Mark would later learn like the rest of the investing public of Swensen’s decade-long scheme when reading the Securities and Exchange Commission’s Complaint filed against Crew Capital and Swensen’s estate in October 2022,” the lawsuit said.
“My family and I are still reeling from shock. It turned out that our own trusted investment advisor, who I considered a friend, had been ripping us off for years. It really makes us question who we can trust, and how we are going to make ends meet as we get older,” Mark Fox said in a statement. He and Swensen, both pilots, met 25 years ago.
The complaint alleged that starting in 2011, Swensen started offering and selling investment interests in Crew Capital Group, a limited liability company the SEC said he created in 2010 that had no actual business operations other than Swensen’s efforts to raise investments for the entity. He fraudulently induced investors to invest in Crew Capital, telling them that it was a safe investment fund that guaranteed a minimum of 5% annually, and up to 10% depending on the performance of the S&P 500 index, according to the complaint. Investors were told that Crew Capital could provide their retirement income and that it a “Bucket 1” investment, the safest investment in their portfolios, the complaint said.
The complaint also noted that the SEC alleged that Swensen provided false documents to some investors that described Crew Capital as an “actively managed portfolio” that invested both in senior secured floating rate loans and options on the S&P 500 index. “Documents also falsely showed that Pacific Investment Management Company, LLC was the subadvisor to Crew Capital, just as was the case with Mark and Barbara,” the complaint said, further noting SEC’s claims that Swensen provided investors with bogus PIMCO documents to make it appear that PIMCO and Crew Capital together managed a “Senior Floating Rate Fund,” when in fact, PIMCO never had any relationship with either Swensen or Crew Capital.
Swensen’s representations to the Foxes about Crew Capital were completely fabricated, the complaint said. Swensen, the SEC said, used some of the money to make Ponzi-like payments of returns to investors and spent a large portion on personal expenses, including living expenses for his family and at least two mistresses and to pay for private airplanes, homes and vehicles. He also used the funds to pay the operating expenses on other businesses that he owned, including Swensen Capital LLC and Wingman LLC.
The lawsuit seeks to recoup all losses of principal suffered by the Foxes including interest, commissions and fees paid; loss of income that would have been received had their accounts “been managed properly” as well as other losses, foreseeable or not, that they have suffered, including non-pecuniary losses; emotional distress damages for Barbara Fox; attorneys’ fees, costs and other expenses; interest, both pre-judgment and post-judgment interests; and punitive damages.
“Swensen left behind a wake of destruction, and we are working to put the pieces together so his victims can salvage some part of their life savings.” Jason Kane, partner at Peiffer Wolf said.