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News Release: 00-03
GRAY DAVIS, Governor
Date: 03/03/00
WILLIAM KENEFICK, Acting Commissioner
State Takes Over Los Angeles County Investment Adviser
"Commingled" Fund Accounts Show Client Losses of 60 Percent
Los Angeles, March 3, 2000 — The Department of Corporations today announced that it has taken over Schultz Investment Advisory, a Simi Valley investment adviser in Los Angeles County, charging its principal, Eric Vonn Schultz, with commingling and pooling customer funds with his own and the company’s funds into an illegal investment fund that has lost 60% of its value since December 1, 1999.
Schultz is believed to have about 240 customers, that entrusted approximately $9 million to him under investment advisory agreements, which gave him custody of customer funds and securities, and full discretionary power of attorney for all client transactions. Schultz failed to segregate customer funds and securities as required by law, and is charged with commingling the funds with the general operating funds of the investment firm and with his personal accounts, creating, in effect, an illegal mutual fund. Between November 30, 1999, and December 31, 1999, the value of the fund decreased from approximately $8.9 million to $3.6 million.
The department’s administrative action charges Schultz with:
- Failing to keep accurate books and records;
- Commingling investor funds with company funds and personal funds;
- Failing to maintain separate records and accounts for each client;
- Failing to invest client funds as provided for in the client agreements;
- Misrepresenting his investment strategies;
- Making excess disbursements to certain clients, and
- Fraud in connection with the offer and sale of securities.
Attorney David Ray of Westwood, California was appointed by the department as conservator to "take possession of the property, business and assets" of the firm for the protection of the investment adviser, the customers, its creditors, and the public. By order of theActing Commissioner of Corporations, the conservator is vested with the power to perform "all acts as are necessary or expedient to collect, conserve and protect the [company’s] property, business and assets." Clients of Schultz Investment Advisory can contact the conservator, David Ray, at (310) 444-6459.
The Department of Corporations is California's Investment and Financing Authority, reporting to the Business, Transportation and Housing Agency and the Governor. The Department is responsible for the regulation, enforcement and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending and residential mortgage lending. For further information or to obtain a complaint form, see the Department's Web site at www.corp.ca.gov.
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