The Securities and Exchange Commission charged a small Seattle area hedge fund firm with inflating fees from his investors by nearly $900 million. Chief executive officer Chris Yoo and his Bellevue, Wash.-based firm Summit Asset Strategies Investment Management agreed to settle civil fraud charges for allegedly inflating the values of certain investments in the portfolio to boost the management fees from their fund, Summit Stable Value Fund. The SEC also charged the fund’s outside auditors, Raymon Holmdahl and Kanako Matsumoto, with performing a deficient audit, which the regulator asserts paved the way for the hedge fund firm to send “misleading financial statements to investors.” The SEC states in its announcement that as part of the illegal scheme, Yoo claimed the fund owned a bank asset that had appreciated to about $2 million in value when it fact it was worth less than $200,000. This resulted in the fund overstating its investment values in its 2013 financial statements. Yoo and Summit agreed to pay more than $1 million to settle the fraud charges while he and another of his advisory firms, Summit Asset Strategies Wealth Management, agreed to pay over $180,000 to settle fraud charges for failing to inform clients that that unit received significant fees when referring them to invest in the fund. Yoo also agreed to be barred from the securities industry. Holmdahl and Matsumoto settled without admitting or denying the findings. They agreed to be suspended for three years from practicing as accountants on behalf of a publicly-traded company.
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Ethan Allen Interiors is the latest activist target to announce some sort of short-term gratification at the possible expense of long-term viability. The furniture retailer, under assault from Thomas Sandell’s Sandell Asset Management, announced plans Friday to borrow up to $250 million. It plans to use the proceeds, in part, to issue a special dividend and buy back stock. This is usually the formula for quelling activist angst. Sandell, who initially publicly disclosed his Ethan Allen stake at the CNBC/Institutional Investor Delivering Alpha conference, recently warned that his firm is prepared to nominate a slate of director candidates for election at its upcoming annual meeting.
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The carnage worsens for big name activists. Pershing Square Holdings lost 3.2 percent on Tuesday, September 1, alone, expanding its loss for the year to 3.3 percent.
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Larry Robbins’ Glenview Capital Management boosted its stake in Hertz Global Holdings to over 35 percent, or more than 23.7 million shares, 5.2 percent of the total outstanding. The New York firm’s stake in the car rental giant is passive. The stock dropped nearly 2 percent on Friday, to $17.61, down about 20 percent from its recent high in May. The largest shareholder of Hertz is New York-based Jana Partners, while other top-10 holders include Fir Tree and York Capital Management Global Advisors, both based in New York.
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Francisco Alfaro’s Miura Global Management boosted its stake in Plano, Texas-based Zoe’s Kitchen, Inc., a Mediterranean casual dining restaurant operator, to more than one million shares, or 5.51 percent of the total outstanding. The New York-based fund is a Tiger Seed.
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New York-based Exosome Diagnostics, which develops and commercializes blood-based cancer molecular diagnostics, announced that Julian Robertson Jr.’s Tiger Management participated in its new, $17.6 million round of financing, which is an extension of its Series B financing. This brings the total raised in the Series B financing to $44.7 million.
