Sweeney is the sole owner and president of SCM, a California corporation registered with the Commission as an investment adviser from March 1993 until July 1997. Gorski is SCM's vice-president and a portfolio manager.
Soft dollars are assets of the adviser's clients.
Without informing their clients, Defendants arranged to have the brokerage firms use the soft dollar credits to pay for a variety of Defendants' business and personal expenses, including client gifts, telephone bills, marketing expenses, accounting and legal bills, postage and shipping, furniture, art work, business licenses, rent, parking, office supplies, and taxes. The defrauded clients included both individuals and a hedge fund whose assets SCM managed. Without these soft dollar payments, SCM would have been insolvent during this period. In addition to SCM's fraudulent misappropriation of soft dollars, the complaint alleges that SCM, Sweeney, and Gorski engaged in other fraudulent soft dollar practices. At various times between April 1994 and May 1995, SCM, Sweeney, and Gorski submitted false invoices to soft dollar brokers for consulting work that was never provided to SCM in order to pay for, among other things, Gorski's salary, SCM's rent, and personal loans made to Sweeney.