Suburban Investment Advisor Charged with Securities Fraud for Engaging in Fraudulent Allocation Scheme
CHICAGO — A suburban investment advisor has been indicted on federal fraud charges for allegedly allocating profitable trades to his personal accounts while assigning unprofitable trades to his clients.
CHARLES J. DUSHEK, the president of Lisle-based Capital Management Associates Inc., placed more than $400 million in securities trades without designating in advance whether he was trading personal funds or client funds, according to the indictment. He then waited up to five days to allocate the trades so that he could select the profitable ones for his personal accounts and assign the losing trades to the accounts of unsuspecting clients, the indictment states. From July 2008 to August 2012, Dushek withdrew from his personal accounts more than $1 million in gains realized from the scheme, according to the indictment.
The ten-count indictment was returned Wednesday in U.S. District Court in Chicago. It charges Dushek, 72, of Warrenville, with nine counts of securities fraud and one count of employing a scheme to defraud a client. Arraignment has been scheduled for Dec. 20, 2016, at 9:30 a.m., before U.S. District Judge Virginia M. Kendall.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Michael J. Anderson, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission, which previously filed a civil enforcement lawsuit against Dushek, provided valuable assistance.
According to the indictment, Dushek made more than 16,000 purchases of publicly traded securities valued at more than $400 million at the time of purchase. The purchases included shares in Walgreens, Avon Products, British Petroleum, Caterpillar and PepsiCo. Dushek maintained spreadsheets that identified whether particular trades should be allocated to client accounts or his personal account, knowing that he had manipulated the allocations by waiting one to five days after the trades were complete before allocating them, the indictment states. The delay fraudulently ensured that profitable trades were allocated to Dushek’s personal accounts while unprofitable trades were assigned to client accounts, the indictment states.
The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Each count of securities fraud is punishable by up to 25 years in prison. Employing a scheme to defraud a client carries a maximum sentence of five years. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.
The government is represented by Assistant U.S. Attorneys Rick Young and Kruti Trivedi.