SEC: Manager Spent Clients’ Money Lavishly

Hedge fund manager Kirk Wright bought an Aston Martin, a Jaguar, a Bentley and other luxury items apparently with money that belonged to hundreds of clients who trusted him to invest their millions, court documents indicate.

The federal government and investors, who include professional football players and many of Atlanta’s top African American doctors and businessmen, have already filed lawsuits accusing Wright of fraud.

A receiver, who has spent three weeks weeding through the deserted Atlanta office of Wright’s International Management Associates, seems to have found that Wright siphoned off close to $7 million out of the $115 million to $185 million that he allegedly managed, according to court records.

“It appears that Wright removed substantial assets from the funds and purchased, among other things, various parcels of real estate in his own name and in the name of third parties,” Securities and Exchange Commission lawyers wrote in a document filed in U.S. District Court in Georgia on Friday.

They also said Wright appeared to have invested about $6 million in several real estate development ventures, purchased at least five expensive automobiles and bought art and jewelry worth about $600,000.

The receiver will take possession of the items, the lawyers wrote.

But the receiver has much more work ahead to find the rest of the money, the lawyers wrote, noting that the mystery has deepened largely because Wright has been missing for weeks.

“Defendant Wright is a fugitive and has successfully eluded arrest on a warrant issued by the Superior Court,” the lawyers wrote in the document.

Jacob Frenkel, a former SEC lawyer who is now helping to represent Wright, did not return calls for comment.

Wright, who earned a graduate degree from Harvard University and has been managing money since 1997, seems to have been a big hit with hundreds of affluent investors who believed, for a time, his promises of 20% returns.

But as the investors began to ask for their money back, his empire collapsed. Looking closer, the SEC found that Wright provided “blatantly false information regarding the value of assets in the funds.”

Wright joins a small group of hedge fund managers who have gone into hiding as federal and state regulators knock on their doors and media scrutiny intensifies.

Bayou Group executives Samuel Israel III and Daniel Marino hid out last year before pleading guilty to having set up a fake accounting firm and lying about gains.

Also last year, Wood River Partners’ founder John Whittier could not be found for a while after his San Francisco and Ketchum, Idaho-based firm stopped operating.

This case is slightly different, however, because Wright invested money for hundreds of people, including seven current and former National Football League players, such as Denver Broncos Terrell Davis, Steve Atwater and Rod Smith and former Tennessee Titan Blaine Bishop.

Hedge funds, which manage about $1.1 trillion, serve far fewer clients than mutual funds, which manage about $8.4 trillion.

International Management Associates’ troubles coincide with the SEC’s increased effort to stamp out fraud.

Since February, most U.S. fund managers must register with the SEC and permit its auditors to come for periodic checkups, which analysts say may help dissuade managers from cheating.