June 15, 2019/US SEC
The Securities and Exchange Commission today filed fraud charges in a multi-million dollar healthcare investment scheme impacting dozens of investors.
The SEC alleges that, between May 2014 and January 2017, unregistered investment adviser David Wagner of Greenwich, Rhode Island, Mark Lawrence of Watercolor, Florida, Downing Partners, Downing Investment Partners, and Downing Digital Healthcare Group raised over $8 million from at least 30 investors in certain healthcare funds. According to the SEC’s complaint, the Defendants purported to acquire, manage, and resell companies that provided healthcare services and related technologies for the funds’ investment portfolios. Wagner controlled the healthcare funds and their bank accounts and with Lawrence, solicited investors on behalf of the funds. To entice new investors, Wagner and Lawrence falsely inflated the available cash reserves of the funds, which included Downing Investment Partners and Downing Digital Healthcare Group, and revenue from the funds’ portfolio companies. The SEC further alleges that Wagner secretly negotiated an agreement requiring Downing Digital Healthcare Group to pay management fees to himself and an entity that he controlled, thereby resulting in the fund paying over $540,000 in undisclosed management fees.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges the Defendants with primary and aiding and abetting violations of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and charges Wagner with control person liability for violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder by Downing Partners, Downing Investment Partners, and Downing Digital Healthcare Group. The complaint also charges Wagner and Downing Partners with primary violations of the antifraud provisions of Sections 206(1), (2), and (4) of the Investment Advisers Act and Rule 206(4)-8 thereunder and charges Lawrence with aiding and abetting those violations.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Wagner and Lawrence. The SEC’s investigation was conducted by Jorge G. Tenreiro, Christopher J. Dunnigan, Neil Hendelman, and Sandeep Satwalekar. The case is being supervised by Lara Shalov Mehraban. The litigation will be handled by Mr. Tenreiro and Mr. Dunnigan. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.