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Justice News

Department of Justice
U.S. Attorney’s Office
District of Columbia

FOR IMMEDIATE RELEASE
Monday, February 1, 2016

Investment Fund Manager Pleads Guilty to Obstructing Justice In SEC Investigation of His Business Activities

Business Partner Earlier Pled Guilty in Case

            WASHINGTON – Vineet Kalucha, 51, an investment fund manager from Washington, D.C., pled guilty today to obstructing justice in an investigation into his business activities that was being conducted by the U.S. Securities and Exchange Commission, announced U.S. Attorney Channing D. Phillips and Paul M. Abbate, Assistant Director in Charge of the FBI’s Washington Field Office.

            Kalucha pled guilty in the U.S. District Court for the District of Columbia. The Honorable Rosemary M. Collyer scheduled sentencing for June 6, 2016. The charge carries a statutory maximum of five years in prison and potential financial penalties. Under the sentencing guidelines, the parties have agreed that he faces a likely range of 10 to 16 months in prison and a potential fine of $3,000 to $30,000.

            A business partner, George Palathinkal, 54, of Singapore, pled guilty in March 2015 to a federal charge of perjury. He is awaiting sentencing before Judge Collyer.

            According to the government’s evidence, Kalucha formed Aphelion Fund Management LLC (“Aphelion Management”) in 2012 and was its majority owner, partner and chief investment officer. Palathinkal was the general partner and chief financial officer. The company served as the investment adviser and general partner for two unregistered hedge funds (known as “the Aphelion Funds”).

            In 2013, according to the government’s evidence, Kalucha, Palathinkal, and Aphelion Management began soliciting new investors for the Aphelion Funds. Kalucha subsequently provided potential investors with marketing materials for Aphelion Management, using inaccurate performance statistics. Among other things, he altered a report prepared by an accounting firm hired by Aphelion Management to review prior investment performance and caused this report to be sent to prospective investors.

            The accounting firm became aware of the misrepresentations and demanded that Kalucha cease distributing the altered report and that he provide notice to those who received it. He incorrectly reported back to the firm that only one copy of the altered report had been distributed.

            The U.S. Securities and Exchange Commission began an investigation of Aphelion Management in January 2014, including an investigation into the propriety and reasonableness of payments from Aphelion Management to Kalucha.  Kalucha provided investigative testimony before the SEC on Feb. 25, 2014. Among other things, he testified that he had entered into a written promissory note for “about $350,000” with Aphelion Management. Kalucha later told Palathinkal that he had testified before the SEC that there were written promissory notes covering loans that the two of them had purportedly taken from Aphelion Management.

            Knowing that these notes did not exist, Kalucha told Palathinkal that he would have Aphelion Management’s outside counsel prepare such written loan documents. Kalucha and Palathinkal later signed two such documents, both said to be promissory notes. One purportedly showed a loan of up to $350,000 for Kalucha and the other was for a loan of up to $200,000 for Palathinkal.  Although these documents were actually signed in early March 2014, they were dated January 1, 2013.  Kalucha and Palathinkal provided these documents to the SEC.

            In announcing the plea, U.S. Attorney Phillips and Assistant Director in Charge Abbate commended the work of those who investigated the case for the FBI’s Washington Field Office. They also expressed appreciation for the assistance provided by the SEC. They acknowledged the efforts of those who handled the case for the U.S. Attorney’s Office, including Document Management Analyst John Lowell and former Assistant U.S. Attorney Bryan Seeley. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Peter C. Lallas, who investigated and prosecuted the case.

16-009
Topic: 
Financial Fraud
Updated February 2, 2016