SECURITIES AND EXCHANGE COMMISSION
On May 11, 2001, the Securities and Exchange Commission ("Commission")
obtained a temporary restraining order and asset freeze against Reed E.
Slatkin, a co-founder, former director and substantial shareholder of
Earthlink, Inc., in federal district court in Los Angeles. The Commission
alleges that Slatkin defrauded as many as 500 clients through his
unregistered investment advisory business located in Santa Barbara,
California.
From 1985 to April 2001, Slatkin managed at least $230 million for about
500 clients through purported securities trading accounts in Switzerland.
The Commission's complaint alleges that in February 2001, Slatkin
misappropriated $10 million in client funds that he had received
purportedly to invest in a money market fund and misused the client's
funds by using $6.975 million to pay other clients and using over $24,000
to pay personal expenses, including credit card bills, telephone and other
utility bills, fees at two country clubs, and pool maintenance fees. The
Commission further alleges that the Swiss trading accounts do not exist
and that Slatkin was merely operating a fraudulent securities scheme.
The Commission's complaint alleges that Slatkin violated and is continuing
to violate the antifraud provisions of Section 17(a) of the Securities Act
of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment
Advisers Act of 1940 and the investment adviser registration provisions of
Section 203(a) of the Investment Advisers Act. In addition to the
temporary restraining order and asset freeze, the court ordered Slatkin to
not destroy documents and to produce an accounting. The Commission is also
seeking a preliminary injunction, a permanent injunction, disgorgement,
and civil penalties.
http://www.sec.gov/litigation/litreleases/lr16998.htm
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Litigation Release No. 16998 / May 11, 2001
SECURITIES AND EXCHANGE COMMISSION v. REED E. SLATKIN, Civil Action No.
01-04823 (C.D. Cal.)
Modified:05/14/2001
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