The SEC during the Obama Years

  NEW ORLEANS, LA - 07/19/2017 (PRESS RELEASE JET)

The SEC During the Obama Years After the well-publicized Bernie Madoff Ponzi scheme $50 billion discovered in 2008 and failure of the SEC post audit in 2005 to uncover the scheme, the SEC had to restore its image. The passing of the draconian Dodd-Frank bill in 2010 gave the SEC more power, and the White House issued a press release in 2011, whereby President Obama stated that he wanted “more SEC convictions.” Oddly enough, even though he was a Constitutional Law Professor at Harvard Law School, President Obama did not know that the SEC violated rights granted to the people under our Constitution. In its current form, the SEC is immune to “due process” which is a clear violation of the Article 1 and Amendments IV and XIV of the U.S. Constitution. Even the IRS is not immune from this clause. If a case is sent from audit to the enforcement, an individual is thoroughly investigated by the SEC including, without limitation, depositions and subpoenas. If an individual is charged, one either settles or appears before an Administrative Judge in Washington D.C., where charges are made. In its present form, the SEC Administrative Judges have a 95% conviction rate. In civil and criminal cases, one has the right to go to a trial by a jury of one’s peers. Through the normal judicial process, there is a much higher chance of acquittal. After speaking with an Assistant District attorney from the office of the Eastern District of the United States in Louisiana on Wednesday, June 28, 2017, I feel compelled to issue this press release due to that hour-long conversation. In a nutshell, he rightly asked who I was. After giving my name, he said I have heard of you in some publication “You are Sean Cooper, the hedge fund guy who bought a Porsche.” New Orleans truly is a small town. It turns out that we both attended Sam Barthe School which has a very strong Alumni base. “Life is about Regret” In 2011, Medlock Harbison worked at Westend Capital Management LLC (“WCM”), a company I founded. Mr. Harbison is my cousin and he was hired as a favor to his family. In 2010, I heard the grapevine through relatives that he made a small fortune selling bullets on the Internet during the Financial Crisis of 2008-2009. He attended Tulane Law School and had not passed the Louisiana Bar on either of the two times after graduating from law school. After a three-month review, I hired him and paid him a handsome salary of $80,000 per year. In addition, he stayed at my house rent-free for approximately four month. He then resided on my fully furnished boat with heat, A/C, etc. He paid me monthly rent of $600, a good deal for sure. I subsequently learned of his complaint that I was making him pay rent on daily basis. It became obvious to me Harbison did not want to move to San Francisco on a permanent basis. Harbison called me in January of 2012 stating that he was going to apply to the bar exam to become a lawyer in Louisiana, but he would not be able take it, if his work history indicated he had been fired. He is my cousin and I did not want to be the one who prevented him from being a lawyer. I agreed, and Harbison finally passed the bar in June 2012. After he passed, he went on a suing binge. on November 13, 2012, Medlock Harbison, Jr. filed a civil action in Civil District court for the Parish of Orleans, State of Louisiana (No. 12-10570) against WestEnd and myself, alleging claims of libel and other torts. It appeared to be a frivolous law suit. Nevertheless, I settled for $1,000. WCM no longer employed Harbison as of November 15, 2011. I had the task of firing him. I expected that he might react badly to being fired, so I hired Tectus security to be in the office with me. I also told WCM employees not to be there when this happened. It turned out that my insight was correct. He lost his temper and had to be escorted from Place St. Charles. Harbison then called every member of WCM to try to keep his job. I thought this was extremely strange as WCM’s other member Gus Ozag lived in Chile full time and only came to the office about four times a year. So, his endgame was change the outcome to return to work at WCM. In this instance, that would mean him working in the office with me. I guess he did not figure that there was no way he was going to work in the same office with me. What was he going do? Work with Mr. Ozag in his apartment in Chile. Illogical in its purest form. At end of 2011, Fidelity “FIDO” was our “Prime Broker” and had been since 2004. In November, I received an email them asking about the trading in security Perfumania. Harbison was the trader who purchased it for George Bolton, who has been a member of WCM since 2004. Harbison would always ask me about Perfumania as he was the one who executed the trades at Bolton’s discretion. He would ask me every day “Why is Bolton buying the stock and driving up the price.” In December of 2011, I received a call saying that FIDO wanted to have a conference call about our purchases of Perfumania. It was at that point I suspected that Harbison had contacted Fidelity, as it had been about of month after his expulsion. We had a conference call with three Fidelity officers one of which was the compliance officer who said his software picked up on the trading of Perfumania. I was in shock to say the least, but thought nothing would come about as Bolton had driven up the stock price and never sold a share. I was wrong. Sometime in late 2011, I received a call from our representative saying that Fidelity no longer wanted to do business with WCM and we had sixty days to move the WCM account and any WCM client who did not to move an individual account could keep their Fidelity account. The result is that we had to quickly find another Prime Broker. Thankfully, WCM was able to join Charles Schwab. WCM lost about $25,000,000 due to this forced removal. My intuition was that Harbison’s complaint to Fidelity was the trigger of an audit by the SEC. I never thought that this would cause my eventual removal from the firm I founded, the SEC’s imposition of a large fine, $175,000, disgorgement of ill-gotten gains of $220,000, $103,000 in attorney fees, being barred from the industry, and found negligent. No fraud was found as stated in the not too famous SEC press release. The SEC specifically stated that the ill-gotten gains were specifically taken to “purchase a Porsche, and remodel our lavish home in Ross.” These facts are not correct. The purchase of the Porsche and the remodel are not directly correlated to any funds taken from the HF. And I was merely recovering the fees not withdrawn in 2008 and 2009. We purchased that home for $4,000,000 in 2007 with a $3,000,000 mortgage. The home required maintenance when it was purchased. In 2009, we began this work with upgrades, and it took 2.5 years to save for these costs which totaled no more than $300,000. The home was purchased in January of 2011. I withdrew over $1,500,000 from our personal brokerage account in 2011. The hedge fund, Westend Partners LP, “HF”, was solely managed by myself. That fact is about the only truthful assertion in the SEC news release. It could have and should have pursuant to the HF’s offering document. I was managing the WCM and the HF for a six month during the fiscal crisis. The management fees must have been overlooked as I was more concerned about the survival of the firm. Fortunately, Robert B Beck, Jr. at Jones Walker represented me and knocked down the terms of the SEC settlement. The SEC wanted $1,000,000. We had a meeting at Mr. Beck, Jr.’s office after he read all the SEC’s documents. The main points were “your performance in the hedge fund is phenomenal.” My response was “the SEC does not care.” He then said, “Sheila O’Callaghan at the SEC, said We don’t like Mr. Cooper at all.” This message was also conveyed to me on August 2012 by G. Bolton when he ejected me from WCM. Bolton then said to me that the SEC “wants you removed.” This was said by Karah To who is employed by the SEC Audit division. This was over two years before the official SEC made its public release on November 17, 2014. If a U.S. District Court district attorney, made the same statement as his opening oral argument in court, the case would be dismissed by any federal judge, and the U.S. District Attorney would be fired. There is legal precedent for this. The SEC’s litigation against Cooper was led by enforcement Sheila O’Callaghan and Eric Brooks and began in 11/17/14. The SEC examination that led to the investigation was conducted by Ed Haddad, John Chee, Karah To, and Arturo Hurtado of the San Francisco office’s investment adviser/investment examination program. We were notified of an audit in early 2012, and told that the SEC wanted to perform an inspection and weeklong audit within thirty days. Eric Roper, attorney for WCM at the time pushed it out to begin in late April 2012. WCM hired Constellation Consulting insuring that our records, were proper. This cost the firm $150,000 and I informed all the other WCM members of this fee. The first day, John Chee, Karah To, and Arturo Hurtado arrived promptly Monday morning at the San Francisco office, 86 Graham St. They announced “We will start with George Bolton.” It took two hours and it was entirely about his purchases of Perfumania. I looked G. Farrington and C. Hardy, saying “Well I guess we know why they are here.” I was next and the entire hour-long interview was solely regarding Perfumania. I had purchased 15,000 shares of the security in 2006 in the Hedge fund and still held all of it 2012. In May of 2012, the SEC made a one hour “exit interview” via telephone of myself. I did not hear from the SEC again until late 2013, when I was summoned to appear for deposition at Federal building in New Orleans by Eric Brooks and Shelia O’ Callahan a month later via telephone. Eric Brooks called Kearney Loughlin, our attorney November 17, 2014, and said “we are going to issue a press release in the Sean Cooper matter.” That is all. Almost three years after it all started.