A judge has ruled in favor of the SEC in a fraud case against the Illinois owner of defunct RIA who allegedly misappropriated more than $4 million in client assets.
Magistrate Judge Jeffrey T. Gilbert of the U.S. District Court for the Northern District of Illinois entered a final order in the case on Nov. 12 and ordered Randall Goulding, owner and managing member of The Nutmeg Group LLC, to pay $1.8 million in disgorgement, prejudgment interest and civil penalty, according to the SEC. The SEC originally filed civil charges against Goulding in 2009.
Following a two-week trial last month, the court found that Goulding commingled investor funds with his personal assets, implemented flawed internal systems and methods for valuing and reporting assets under management, and transferred millions of dollars out of the investment pools to himself and companies controlled by family members, the SEC said in a press release.
The court also found that Goulding, of Deerfield, Ill., used Nutmeg as his "personal piggybank" to pay his personal expenses, including personal credit cards, buy a car, and purchase an entrance fee to a poker tournament, the SEC said.
Goulding was convicted in 1992 of a felony in connection with a tax evasion and money-laundering scheme, serving six months in prison, received five years of probation, and was suspended from the practice of law for four years, the SEC said.
The SEC in March 2009 had obtained emergency relief against The Nutmeg Group and its principals, Randall and his son, David Goulding. The SEC alleged that Nutmeg Group, which controlled and provided investment advice to 13 investment funds, and advised two additional investment funds, failed to comply with its custodial obligations and failed to keep required books and records.
According to the complaint, Goulding, also an attorney, and his team, which included other family members, misappropriated more than $4 million in client assets by transferring them to third parties. The complaint further alleged that Nutmeg did not fully document the funds' investments, improperly commingled fund assets, and could not value the funds' holdings. As a result, net asset and other investment values have been incorrectly reported to investors, the SEC said.