CHARLESTON – A federal agency is suing a Charleston investment adviser, claiming he misappropriated funds to pay for his own personal expenses.
The Securities and Exchange Commission filed suit Aug. 28 in federal court for the Southern District of West Virginia against Knox Fuqua and his firm, KHF Advisors.
The lawsuit alleges that Fuqua, from Jan. 2003-late 2005, took hundreds of thousands of dollars to pay for jewelry, groceries and other business expenses.
The complaint says Fuqua used two investment vehicles to facilitate his scheme, the Fixed Income Fund and AAM Investments.
“Fuqua funneled his clients’ money through these investment vehicles and into banks accounts that he alone controlled, recording these transfers as purported loans,” the complaint says. “Fuqua then used the client funds transferred into these bank accounts to repay other clients wanting to redeem their investments, to pay business expenses and to siphon over $200,000 to pay a multitude of personal expenses.”
The SEC says Fuqua misappropriated $300,000 from Monica Hatfield, $600,000 from Retina Consultants, owned by Hatfield’s husband Mark, and another $600,000 from Community Health Systems.
Fuqua used funds from AAM Investments to buy resort rental property on Kiawah, S.C., the complaint says. It adds that he and his family used the property for seven months a year and used rental income that should have gone back to AAM’s shareholders to pay his family’s personal resort expenses.
Inside the house was a placard that said, “Welcome to the Fuquas.”
The SEC seeks judgment against Fuqua finding that he violated securities laws, ordering him to disgorge all ill-gotten gains and pay civil penalties.
David Williams is representing the SEC. Other federal lawsuits filed by the U.S. Department of Labor and a Virginia brokerage firm are pending against Fuqua.
Judge John Copenhaver has been assigned the case.
U.S. District Court case number 2:06-0666