The U.S. Securities and Exchange Commission alleges the CEO of Fishers-based Positron Corp. defrauded investors of a hedge fund he operates by secretly investing their money into financially struggling Positron.

Patrick G. Rooney, who also is founder and managing partner of Oakbrook, Ill.-based Solaris Management, investment advisers to Solaris Opportunity Fund, “used the fund as Positron’s piggy bank and caused the fund to finance Positron when it had no other sources of funding,” the SEC alleges in a Nov. 18 complaint filed in U.S. District Court for the Northern District of Illinois.

Positron has about 15 employees and made headlines earlier this year with plans to build a $55 million cyclotron facility in Noblesville. A cyclotron is a bus-sized device that uses magnetic fields to accelerate particles at high speeds to create isotopes for medical uses.

In return for the potential of 85 new jobs, the city of Noblesville approved $6.7 million in incentives for the project. Meanwhile, the Indiana Finance Authority approved $38 million in Midwest Disaster Area Bonds on behalf of Positron. The incentives were predicated on the company reaching certain milestones.

The nearly 30-year-old company moved from Houston to Fishers in 2008 after buying Indiana based medical device firm Dose Shield.

IBJ reported in September that Positron lost $10.9 million last year and at year-end had an accumulated deficit of $102.3 million. Earlier this year, Positron’s accounting firm issued a going-concern warning about the company.

The SEC in its lawsuit against Rooney and Solaris Management describes Positron as a “financially troubled microcap company” led by Rooney since mid-2004.

The SEC alleges Rooney and Solaris between 2005 and 2008 invested more than $3.6 million of the fund's money in Positron through both private transactions and market purchases of Positron’s common stock.

The fund now owns over 1.1 billion shares of Positron, or more than 60 percent of the company.

Rooney and Solaris Management “misled investors into believing that they were invested in a diversified hedge fund which protected them from market movements,” the SEC said.

Further, investors were led to believe “that the funds’ money was being invested by a disinterested investment adviser acting in their best interests.”

Rooney “hid” the Positron investment and his affiliation with the Fishers company until March 2009. At that time “he lied in telling them that he became chairman to safeguard the Solaris Funds’ investment,” according to the SEC’s lawsuit.

The Positron investment “radically” changed the fund's non-directional investment strategy, the government alleges, and saddled it with a “concentrated, undiversified and illiquid position in a cash poor company with a lengthy track record of losses.”

Rooney formed the Solaris Fund in 2003 and a related fund in 2005. As of December 2008, the last date at which the fund issued financial statements, Solaris had 30 investors and assets of $16.3 million, according to the filing.

Rooney could not be immediately reached for comment about the SEC complaint.

The SEC alleges Rooney and Solaris committed numerous violations of securities laws and seeks an order requiring them to disgorge all profits or proceeds received as a result.

The SEC also wants Rooney and Solaris pay an unspecified civil penalty and for Rooney to be barred from serving as an officer or director of a public company.

As IBJ reported previously, Rooney in 2000 was among 11 individuals sued by the SEC as part of an insider trading investigation. The case involved trading in shares of U.S. Shoe Corp. and Luxottica SPA before the March 1995 public announcement that Luxottica was launching a hostile tender offer for U.S. Shoe.

The commission alleged that Rooney’s father tipped him and his younger brother off before the announcement. The SEC alleged Rooney ultimately reaped $102,950 in illegal profits.

Rooney told IBJ the matter was resolved in 2004, with the SEC dismissing the complaint without prejudice.