The Securities and Exchange Commission has charged three more advisors in connection with their participation in a decades-long Ponzi scheme that raised more than $110 million from over 400 investors.
In a complaint filed on June 10 in the U.S. District Court for the Northern District of Georgia Atlanta Division, the SEC charged Michael Mooney, Britt Wright and Penny Flippen, three former investment advisor representatives of Southport Capital, with helping fuel the scheme concocted by the firm’s owner and manager, John J. Woods. (Southport’s corporate name is Livingston Group Asset Management Company.)
Woods, of Marietta, Ga., also controlled an investment fund called Horizon Private Equity III LLC. In August 2021, the SEC charged him and Southport with multiple counts of securities fraud for operating Horizon as a Ponzi scheme.
At that time, a federal judge issued a temporary restraining order and froze his assets in response to an emergency action filed by the SEC, which had sought civil fraud charges against Woods and his entities. The judge granted a request for a receivership to be appointed to gather, preserve and protect any existing assets.
According to the complaint, between 2008 and 2021, the three Southport advisors, Mooney, Wright and Flippen, recommended that their clients invest or maintain at least $62 million in Horizon III, promising the clients that they would receive returns of 6% to 8% interest, guaranteed for two to three years, for non-specific investments in a Horizon III fund. The investors were told that Horizon III would earn a return by investing client money in the likes of government bonds, stocks or small real estate projects. They also were told that it would pay a guaranteed rate of return, and that they could get their principal back without penalty.
What they weren’t told is that their money would be used to pay returns to earlier investors, the SEC said. Many of the clients were elderly and inexperienced and had specified that they wanted an investment with little to no risk. They were assured that their money was safe in Horizon III and advised to put a significant portion of their assets into it.
The SEC complaint said Horizon III has earned very little profit from investments and that its proceeds were primarily used to make principal and interest payments to earlier Horizon III investors and to fund Woods’ personal projects, including the purchase of the Chattanooga Lookouts, a minor league baseball team.
Mooney, age 52, resides in Sarasota, Fla., while Wright, 49, lives in Pfafftown, N.C., and Flippen, 59, lives in Mount Airy, N.C. The three each received undisclosed compensation from Horizon III, “and when recommending and advising clients on Horizon III, defendants relied entirely on Woods’ unsubstantiated claims about the fund’s investment objectives, source of returns and operations,” the SEC said.
The complaint noted that Mooney, a minority owner of Southport and a cousin of Woods, knew that the facts conflicted with Woods’ representations about the operations of Horizon III but chose to ignore “all signs and red flags that something was awry with the fund.” Wright and Flippen, it said, had limited experience with offering private investments to their clients, and “lacked even a basic understanding of the purported investment that they were offering to their clients, and ignored multiple red flags indicative of a Ponzi scheme and the risks associated with investing in Horizon III.”
“As a registered investment advisor, Southport and its individual employees, including the defendants, owed their clients a fiduciary duty to act in their clients’ best interest and to disclose any conflicts of interest to their clients. This included the defendants’ receipt of compensation paid by Horizon III,” the complaint said.