Whitefish man is ordered to pay feds $5 million
By RICHARD HANNERS — Whitefish Pilot
A Whitefish man was ordered to pay about $5 million in restitution and fines based on civil charges brought by the Commodity Futures Trading Commission.
U.S. District Court Judge Phyllis Hamilton entered a consent order of permanent injunction on Aug. 27 against Robert Beasley, who in 2005 lived on North Shooting Star Circle, in the Iron Horse subdivision, and against his company, Longboat Global Funds Management.
Total restitution is $13.8 million, of which Beasley is responsible for $4.5 million. Beasley is also ordered to pay a $500,000 civil monetary penalty, and Longboat must pay a $1 million penalty.
Beasley was the founder, president and CEO of Longboat, which operated six funds, including Piranha Capital LP, the commodity pool at the core of the federal charges.
The Commodity Futures Trading Commission charged Beasley and Longboat of committing fraud by misrepresenting the condition and status of certain investments held by Piranha and failing to disclose Beasley's personal financial interest in those investments.
The commission alleged Beasley "made material misrepresentations to individuals invested in the commodity pool," "did not act in good faith" and "employed a device, scheme or artifice to defraud pool participants and prospective pool participants."
According to a 2001 memorandum privately-placed by Piranha and cited by the commission in its complaint, Piranha "is designed for private investors with a high net worth, as a means to diversify their portfolios with highly liquid portfolio securities with high return potential."
In 2001 and 2002, according to the commission, Piranha loaned about $12 million to seven entities purportedly used to finance real estate projects in the United States and Nicaragua. But as of Nov. 3, 2004, none of Piranha's promissory notes were recorded or secured by real estate holdings, the commission alleged.
Of Piranha's $12 million in promissory notes, Beasley issued $3.8 million "on behalf of other entities that he controlled" that were not secured by real estate "and indicate that they are personally guaranteed by Beasley," the commission claimed.
Specifically, the commission claimed, Beasley issued a $2 million promissory note to Longboat, which was "owned and operated by Beasley," an $800,000 note to Lewis and Clark Capital, which was "wholly owned by Beasley," and a $1.2 million note to Diamond B Quarter Horse Ranch, which was 80 percent owned by Beasley.
Furthermore, "despite the fact that Beasley's companies failed to make timely interest payments on their promissory notes, Longboat continued to 'earn' incentive fees based on the accrued interest Beasley's companies were not paying," the commission claimed. In 2003, Longboat collected $500,476 in management fees and $1.16 million in incentive fees, the commission claimed.
"While Beasley disregarded his duties to Piranha's participants by failing to collect interest payments due on promissory notes, Beasley benefited greatly by using the accrued unpaid interest amounts to calculate his management and incentive fees," the commission said in its complaint.