The SEC, alleging a portfolio manager stole approximately $5.8. million from the funds he managed, has sued the manager who has already spent seven months in jail on related charges.
The SEC has sued Robert J. Strauss of Dallas, Ga. for allegedly taking assets he managed for State Mutual Insurance Company, a small Georgia insurance company in Rome, Ga., and using them to buy securities for his own accounts. The theft was part of approximately $16 million that Strauss allegedly misappropriated from State Mutual accounts, according to the SEC.
The SEC filed the case in U.S. District Court in Atlanta on Nov. 16. On that day, Strauss, without admitting or denying the allegations, agreed to be permanently barred from serving as a director or officer of any publicly-held company and agreed not to violate the securities laws. The SEC announced its actions Nov. 18.
In April, U.S. District Court Judge Harold Murphy in Atlanta sentenced Strauss to four years in prison for his role in the State Mutual Insurance Company case. The sentence came after Strauss pleaded guilty to wire fraud and money laundering charges, according to court records of the criminal case. Strauss also agreed to pay restitution of nearly $10 million as part of the plea, according to court records.
Strauss's attorney did not return a call seeking comment. State Mutual Insurance officials could not be reached for comment. State Mutual Insurance has approximately $265 million in assets, according to A.M. Best Co., an insurance rating firm in Oldwick, N.J.
Strauss was managing State Mutual Insurance's own funds, and not those owned by any mutual funds or variable annuity sub-accounts, said Richard P. Murphy, assistant district administrator in the SEC's Atlanta office. The investigation into matters involving Strauss is continuing, Murphy said.
Strauss misappropriated more than $16 million from April 1995 to August 1997, according to the SEC. Strauss used about $11 million of that total to purchase securities for State Mutual Insurance, the SEC said. Those securities were virtually worthless, the SEC alleged.
Strauss made the investments without the knowledge of State Mutual Insurance and the purchases violated the company's investment restrictions, the SEC alleged.
Strauss subsequently received approximately $3.2 million in kickbacks from individuals affiliated with the companies who issued the worthless securities, the SEC alleged. In addition, Strauss used approximately $5.8 million of State Mutual Insurance assets to acquire securities or cash in State Mutual Insurance securities for his own accounts.
Murphy declined to say how the SEC learned about Strauss's alleged conduct.