Friday, May 16, 2014

Retirement Plan Managers - Be Warned - How Will Your Investments Look If They Lose Money

When you are acting as a retirement plan administrator, you take on a fiduciary responsibility to manage the funds placed in your care in a reasonable and prudent manner. You need to be careful about this, because when there are losses, someone is going to look at where you invested, and if they, with hindsight, decide that the investments were in appropriate, you could find yourself on the wrong side of a bunch of SEC charges.

A Utah-based retirement plan administrator is being accursed of defrauding investors in self-directed individual retirement accounts (IRAs), causing them to lose millions of dollars of savings.

The SEC alleges that American Pension Services Inc. (APS) and its founder, president and CEO Curtis L. DeYoung squandered more than $22 million of investor funds on high-risk investments. DeYoung hid the losses by issuing inflated account statements, allowing him to continue collecting fees and further victimizing his customers.

"This misconduct jeopardized retirement security for thousands of APS customers," said Karen L. Martinez, director of the SEC's Salt Lake Regional Office.

According to the SEC's complaint unsealed yesterday in federal court in Salt Lake City, DeYoung's scheme dates back to at least 2005 and targeted customers with retirement accounts holding non-traditional assets typically not available through traditional 401(k) retirement plans or other IRA custodians. Although APS has no authority to direct customer trades, DeYoung allegedly used forged letters and signatures to invest on behalf of customers, including in promissory notes issued by a friend whose businesses never turned a profit. DeYoung continued to recommend that APS customers invest in the notes, and he sent customer funds to the friend until at least April 2013 without disclosing to investors that the friend had defaulted on the notes in 2010 and DeYoung had forgiven the debt.

The SEC further alleges that investments in other bankrupt ventures, including an office building in Wichita, Kan., caused APS customers to lose more money. APS concealed those losses and issued account statements that inflated the value of customer holdings, allowing APS to levy fees based on the full value of the holdings even when they were worthless.

According to the SEC's complaint, when DeYoung was questioned by the SEC about a $22 million gap between actual holdings and those showing on account statements, he invoked his Fifth Amendment privilege against self-incrimination and refused to answer.

The Honorable Robert J. Shelby granted the SEC's request for a temporary restraining order to freeze the assets of APS and DeYoung. The court appointed Diane Thompson of Ballard Spahr LLP as the receiver in this case to recover investor assets. The receiver can be reached at and has created a website for more information:

SEC Charges Utah-Based Retirement Plan Administrator With Defrauding Investors

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