Four Beacon Hill Fund Managers Sued

U.S. securities regulators sued four Beacon Hill Asset Management hedge fund managers Wednesday, accusing them of defrauding investors by wrongly calculating the value of the funds to conceal more than $300 million in losses.

An addendum filed to the SEC’s original lawsuit accused John D. Barry, 43; Thomas P. Daniels, 46; John M. Irwin, 44; and Mark Miszkiewicz, 40, of civil fraud in connection with losses suffered by Beacon Hill investors in 2002. It also named their wives as relief defendants, suggesting that the commission may seek to obtain allegedly ill-gotten assets from them.

The SEC claims the Beacon Hill managers misrepresented to investors how they calculated the net asset value of the funds, claiming to use independent third-party pricing services when they did not. The SEC alleges that the managers reported inflated prices to investors to lure additional clients and hide their losses.

“The manipulation of the prices in the portfolio resulted in a substantial and increasing disparity between Beacon Hill’s marks and those of independent pricing sources,” the SEC’s complaint said.

The fund managers stood to gain about $26 million in financial incentives from Asset Alliance Corp., which owned a 50% stake in Summit, N.J.-based Beacon Hill, provided the funds’ performance and growth met expectations. Failure to perform would have cost them about $7 million, according to their agreement with Asset Alliance, the SEC said.

The company and the defendants named will contest the allegations, their lawyers said.

Beacon Hill admitted to investors in an Oct. 17, 2002, announcement that its valuations had overstated the funds’ assets and reported losses of 54% from the previous report in August 2002, according to the SEC.