Financial advisor responds to allegations

CHARLESTON - A prominent Charleston financial advisor has responded to allegations that he facilitated a misappropriation scheme.

Knox Fuqua and his attorney, Eric Snyder of Bailey and Glasser, denied the Securities and Exchange Commission's charges that were filed in federal court for the Southern District of West Virginia and state that he misappropriated $1.5 million.

The lawsuit alleges that Fuqua, from Jan. 2003-late 2005, took the money to pay for jewelry, groceries and other business expenses.

"The Securities and Exchange Commission lacks jurisdiction over Defendant Fuqua," the response says. "Wherefore (he) respectfully requests that the complaint of Plaintiff... be dismissed and that Plaintiff take no relief, including compensatory damages, punitive damages, interest, costs or attorneys fees from Defendant Fuqua."

Fuqua created Kanawha Investment & Trust Co. and Appalachian Asset Management and manages the AAM Equity Fund

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. The organization claims he ignored those clients' requests and put the funds in his own vehicles.

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

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