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. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  2. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  3. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  4. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

  5. "No one is safe when the Legislature is in session."

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