For Release: March 14, 2007
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that Judge Kimba Wood of the Southern District of New York entered a consent order of permanent injunction against Friedlander Capital Management Corporation (FCMC) and its sole owner and operator, Burton Friedlander, both of Greenwich, Connecticut, for operating a fraudulent commodities and securities pool.
The order was entered on February 20, 2007, and stems from a CFTC complaint filed October 21, 2003 (see CFTC News Release 4859-03, October 24, 2003), alleging that from 1998 through 2001, FCMC and Friedlander solicited customers to invest in a commodity pool. Instead of placing all the pool money in trading accounts, FCMC and Friedlander used customer investor funds to pay for personal and business expenses, including boats, automobiles, country club dues, and legal expenses.
In the consent order, Friedlander and FCMC admit to soliciting approximately eight pool participants between 1998 and 2001 to invest approximately $2 million in the FCMC pool managed by Friedlander. In doing so, Friedlander and FCMC falsely represented that the FCMC pool traded, among other things, commodity futures and that it was generating significant profits. However, Friedlander failed to deposit new investments from FCMC pool participants into commodity and security trading accounts for the FCMC pool. Rather, Friedlander used these funds and other FCMC pool money to pay for his personal expenses, including, but not limited to, boat payments and expenses, car payments, country club dues, personal legal expenses, and personal credit cards.
Friedlander and FCMC further admit that to conceal the losses from pool participants, they forwarded to participants fraudulent annual “compilation reports” from 1998 through 2000. These compilation reports falsely overstated the value of pool participants’ assets and returns. For example, in the compilation reports forwarded to pool participants for the year ended December 31, 2000, Friedlander and FCMC represented total pool assets to be over $5.7 million; however, actual FCMC pool assets as of that date were less than $227,000. Moreover, the compilation reports were prepared on forged letterhead from the accounting firm KPMG and fraudulently signed “KPMG Peat Marwick LLP.”
The order requires Friedlander and FCMC to make restitution to defrauded customers totaling $2,032,674, subject to Friedlander’s restitution payments in connection with his May 25, 2005, guilty plea and subsequent plea agreement in United States v. Friedlander in the Southern District of New York. Friedlander’s criminal conviction (for which he was sentenced to 30 months in prison, two years of supervised release, and a $50,000 fine) was based on the same conduct he admitted in the CFTC’s action.
In addition to restitution, Friedlander and FCMC are permanently prohibited from, among other things, acting as a commodity pool operator and are permanently banned from trading for others on any commodity market subject to CFTC jurisdiction. They also agreed never to apply for registration, claim exemption from registration, or engage in any activity requiring registration or exemption from registration.
The CFTC would like to thank the Securities and Exchange Commission, the United States Attorney’s Office for the Southern District of New York, and the Internal Revenue Service for their assistance in this matter.
The following Division of Enforcement staff is responsible for this case: Richard Glaser.
Last Updated: July 25, 2007