Hedge Fund Run by Ex-Car Salesman Is Scam, SEC Says

Date: Thursday, January 22, 2009
Author: David Scheer, Bloomberg.com

U.S. regulators sued a used-car salesman from West Texas for touting a $45 million hedge fund that they said was actually a Ponzi scheme.

Rod Cameron Stringer misappropriated millions of dollars from investors since 2001, the Securities and Exchange Commission said in a federal lawsuit filed in Lubbock, Texas. The resident of Lamesa, 60 miles south of Lubbock, said he generated annual profits as high as 61 percent, according to the suit.

“Stringer’s claims regarding the hedge fund and the high rates of return are completely bogus,” the regulator said in the suit. Besides running the fund, the agency said the 43-year-old worked as a bail bondsman, a tow-truck driver and a crop-dusting pilot.

Bernard Madoff’s alleged $50 billion Ponzi fraud and declines on global markets are leading regulators to question money managers who claim to deliver consistent profits. The SEC today also sued Florida hedge-fund adviser Arthur Nadel, 76, claiming he overstated investments by $300 million. Less than $1 million in assets remain after Nadel went missing last week, the SEC said in a federal lawsuit filed in Tampa, Florida.

Dan Hurley, a lawyer representing Stringer at Hurley & Guinn in Lubbock, declined to comment. A judge froze Stringer’s assets and appointed a receiver to recover investor funds, according to the SEC.

Elderly Investors

Stringer, doing business as RCS Hedge Fund, managed money from 31 investors, many elderly, according to the SEC’s complaint. The location of the remaining investor money “is presently unknown,” the agency said. Some was spent for a pool at his office, a horse-racing partnership, a boat, and mortgages for at least two houses, it said.

Stringer and his fund weren’t registered with the SEC and he has never held a securities license, the agency said.

In a Ponzi scheme, investors are typically paid returns from cash received from later participants. Of the money raised since 2007, Stringer has distributed at least $2.4 million as purported investment gains, the SEC said.

Madoff, 70, was charged with securities fraud Dec. 11 at federal court in Manhattan after allegedly telling his sons his New York-based investment advisory business had been “one big lie” and that he was “finished.” After filing suit against him last month, the SEC admitted it had failed to detect his alleged fraud, even after receiving “credible and specific” complaints about the New York money manager for years.

To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.