ATLANTA, GA (WMBF) – A Pawleys Island man has been sentenced to 18 years in federal prison for defrauding investors in his former hedge funds, losing them over $11 million, and then obstructing an investigation by the U.S. Securities and Exchange Commission into his activities. Federal authorities allege he used investors funds to purchase a multi-million-dollar Pawleys Island beach house for himself.
In 2009, 44-year-old Stanley J. Kowalewski, as the sole owner and Chief Executive Officer of SJK Investment Management, LLC, began soliciting investment money from pension funds, school endowments, hospitals, non-profit foundations, and other investors, according to a news release from the U.S. Department of Justice. Almost immediately, he began diverting investor money to pay for personal and business expenses.
Kowalewski secretly transferred over $16 million to a "Special Opportunities Fund" without disclosing these transfers to his investors, then diverted millions from that fund to himself through various self-dealing transactions, the USDOJ release states. He used the Special Opportunities fund to buy three homes for his family, his parents, and his brother-in-law's family, and bought a multi-million-dollar beach house in Pawleys Island. He also had the fund pay him a $4 million fee to which he was not entitled, and altered documents in an effort to make these transactions appear legitimate.
According to the Department of Justice, Kowalewski overvalued the assets in the Special Opportunities fund, used these fraudulent valuations to calculate the returns for investors, and as a result, investors lost over $11 million.
In 2010, the SEC began a proceeding to determine if Kowalewski had violated federal securities laws, the release states. During his sworn testimony, Kowalewski testified that the homes he purchased were leased to him and his relatives, each for a yearly rental payment. He even created and backdated fraudulent leases for the SEC.
According to the release, while on bond awaiting trial in this case, Kowalewski again defrauded investors in another company, named Global Remediation Solutions. DOJ officials said that as before, he diverted investors' money for his own personal use, while living in Pawleys Island. After this new fraud came to light, his bond was revoked, and he has been in custody since September 25, 2015.
"Investors trusted Kowalewski to invest their money as promised," said U.S. Attorney John A. Horn. "Instead, he stole their hard-earned savings and repeatedly lied to them and the SEC about his investments and self-dealing. Incredibly, while on bond awaiting trial in the case, Kowalewski continued to defraud investors based on false promises relating to a new investment business that turned out to be just another scam."
Kowalewski was sentenced to 18 years in prison, with credit for time served, followed by three years of supervised release. He was ordered to pay restitution in the amount of $9,436,236.23. He was convicted of 22 counts of wire fraud, one count of conspiracy, and one count of obstructing the SEC.
Michael J. Fulcher, the Chief Financial Officer of SJK, , pleaded guilty to one count of conspiring with Kowalewski to obstruct the SEC proceeding. His sentencing date has not yet been scheduled.