Who is Lee D. Weiss? On Financial Adviser Misconduct

On Behalf of | July 14, 2015 | 401(k) Mismanagement, Investment Fraud

Not everyone will recognize the name Lee D. Weiss, but many might know or have heard of people just like him, who have engaged in a similar type of misconduct. So who is this man and what did he do?

Lee D. Weiss was the primary owner and served as the managing partner of Family Endowment Partners, LP (“FEP”).  FEP was a SEC registered investment adviser between June 2009 and November 2015. Many high net worth investors entrusted Lee D. Weiss and FEP with their hard-earned savings with an understanding that he would advise them on constructing a durable portfolio with suitable stocks, bonds, and mutual funds that were in their best interest.

However, instead of maintaining an open and supportive relationship with his clients, Weiss and FEP engaged in actions clouded in deceit. Based on allegations in an enforcement action initiated by the SEC, Weiss and FEP advised clients to invest in subsidiaries of companies without disclosing conflicts of interest in the investments that resulted in monies being funneled to Weiss and/or entities he controlled.

Weiss and FEP advised its clients to invest over $40 million in securities issued by the subsidiaries of a French company in which Weiss had a financial interest. In addition, shortly after the investments were made, the French company paid Weiss more than $600,000.  The complaint also alleges that in 2011, Weiss and FEP recommended one client to invest $2.5 million in a subsidiary without disclosing that the money would be used to pay interest that the company owed to other FEP clients Weiss recommended to another client that he invest $5 million in a consumer loan portfolio as part of a rigged transaction that diverted $300,000 to a company controlled by Weiss. Furthermore, from 2012 to 2014, Weiss and FEP encouraged FEP clients to invest about $8.25 million in notes or shares of companies owned by Weiss himself, hiding the fact that the money would be used to pay off FEP’s own debts.

Lee D. Weiss took advantage of the relationships that he had with his clients and advised them to make investments that served his own self-interest. In doing so, Weiss broke the trust that forms the basis of the relationship between an investment adviser and his client.  The SEC permanently barred Weiss from the industry and ordered Weiss and FEP to pay a civil penalty of $1,000,000 and $500,000 respectively, and ordered Weiss and FEP to pay disgorgement totaling $8,436,766, plus applicable interest.

There are many other “Lee D Weiss’s” in the world. To protect yourself, remain vigilant, do your due diligence, and ask lots of questions of your investment adviser. If you think you are have been a victim of securities fraud or financial misconduct, please give Sanford Heisler, LLP a call, and our experienced financial litigation advisers can help you evaluate your case.