ILNews

Hauke accounting firm to pay $1.8M in fraud settlement

Jeff Newman
July 23, 2014
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DeWitt & Shrader PC, an Indianapolis-based accounting firm that worked for convicted Ponzi schemer Keenan Hauke, has agreed to pay $1.8 million to settle a state lawsuit, Indiana Secretary of State Connie Lawson announced Tuesday.

Hauke, a prominent money manager from Fishers who led hedge fund Samex Capital Partners LLC, was sentenced to 10 years in prison in December 2011 for securities fraud.

DeWitt & Shrader served as the accounting firm for Samex from January 2006 until April 2011.

The lawsuit claims the accounting firm violated the Indiana Securities Act and committed negligence and fraud, as well as breach of contract, by failing to monitor Hauke’s bank accounts.

“While Hauke was the perpetrator of this scheme, DeWitt & Shrader gave his scam credibility,” Lawson said in a prepared statement. “As the fund’s accountants, they had a responsibility to the investors to check Hauke’s work before issuing client account and tax statements.”

David M. DeWitt, principal of DeWitt & Shrader, did not immediately respond to messages seeking comment.

When the suit was filed against his firm in 2012, DeWitt told IBJ he thought the complaint was without merit and he planned to fight it. He eventually agreed to settle.

“Accountants or other licensed professionals who also hold securities licenses cannot afford to turn a blind eye if they see or suspect securities fraud,” Indiana Securities Commissioner Carol Mihalik said in a prepared statement. “They have an obligation to take action and in this case, they did nothing.”

Hauke admitted to masking huge losses in the hedge fund he operated that resulted in dozens of investors losing millions of dollars. He was 41 when he was sentenced to prison and ordered to pay $7.1 million in restitution.

A state-appointed receiver, William E. Wendling Jr., has since estimated the losses at more than $9 million and the number of victims at close to 100.

“The funds secured from this settlement will go toward repaying Hauke’s victims,” Lawson said. “Helping Hoosier victims is always our No. 1 priority and we will continue to work to maximize their restitution.”

Lawson said the state has returned more than $1 million to 97 investors so far. The funds were recovered through asset freezes, liquidation of Hauke’s accounts, and clawback litigation against Samex investors who made false profits from Hauke’s scheme.

The receiver also plans to sell a condo in Barbados worth about $360,000 that Hauke purchased with investor money.

Lawson said four Hauke victims also received $42,000 from the state’s Securities Restitution Fund.

Before his guilty plea, Hauke was a high-profile wealth manager who made regular appearances on CNBC, Fox Business Network, Bloomberg Television and Bloomberg Radio. He also wrote an investing column for IBJ.

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  1. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  2. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  3. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

  4. Here's an idea...how about we MORE heavily regulate the law schools to reduce the surplus of graduates, driving starting salaries up for those new grads, so that we can all pay our insane amount of student loans off in a reasonable amount of time and then be able to afford to do pro bono & low-fee work? I've got friends in other industries, radiology for example, and their schools accept a very limited number of students so there will never be a glut of new grads and everyone's pay stays high. For example, my radiologist friend's school accepted just six new students per year.

  5. I totally agree with John Smith.

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