An 85-year-old Alpharetta man who was barred from the investment industry 45 years ago for fraud was back at it again with the help of his 55-year-old son, according to federal investigators.
The U.S. Securities and Exchange Commission said Thomas D. Conrad Jr. and his son, Stuart P. Conrad, also of Alpharetta, defrauded investors in a group of hedge funds they managed that held $10.7 million.
Conrad suspended payouts to investors for more than four years starting in 2008, according to the SEC’s complaint.
But he continued to pay out cash to himself, his son, other relatives and certain favored investors from the investment fund, the agency said in a civil complaint filed last week in the U.S. District Court in Atlanta.
Conrad’s funds also ran into trouble when one large investment turned out to be a Ponzi scheme run by another money manager, the SEC said.
Conrad’s fund had to repay $2.3 million of “false profits” that the fund had received from the Ponzi scheme, Valhalla Investment Partners, the SEC said in its complaint.
But while dozens of investors clamored for their money, Conrad paid out roughly roughly $2 million in redemptions and other payments to himself and his wife, including their annual salaries totaling $252,000, and $124,000 for down payments on aircraft, the SEC said.
His son Stuart Conrad got about $444,000 in redemptions from the fund, the SEC said. Another son, acting as a fund administrator, wrote himself a $26,500 check from one of the funds to buy a truck, the SEC said. He later repaid it without interest, but didn’t disclose the transaction to investors.
Meanwhile, a daughter-in-law got an $18,000 loan from one fund to cover credit card bills. The loan was later bought by another fund run by Conrad, and never disclosed, the SEC said.
The SEC said the elder Conrad also violated federal securities law by failing to disclose to investors that he had been barred from the investment industry in a disciplinary action in 1971.
The agency said Conrad also acted improperly by having the hedge fund pay extra fees to himself as a sub-manager of some of the investments, without disclosing the conflict of interest.
Conrad’s son, Stuart Conrad, “aided and abetted these violations,” said the SEC. The agency asked the court to impose civil penalties and to require the Conrads to repay money taken from investors.
Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.
Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.