The receiver representing investors in the Ponzi scheme run by convicted money manager Keenan Hauke has sued Hauke's former accounting firm, charging that its negligence contributed to millions of dollars in investor losses.
Carmel attorney William Wendling Jr. filed suit in Marion Superior Court on Monday against Indianapolis-based DeWitt & Shrader PC and executives David DeWitt and Matthew Hickey.
The lawsuit claims the firm violated the Indiana Securities Act and committed negligence and fraud, as well as breach of contract, by failing to monitor Hauke’s bank accounts.
DeWitt & Shrader had served as the accounting firm for Hauke’s Fishers-based hedge fund, Samex Capital Partners LLC, from January 2006 until April 2011.
Wendling charges in the complaint that DeWitt & Shrader failed to monitor Samex’s bank accounts, enabling Hauke to pilfer investor funds for his personal use.
“As Samex’s accountants, defendants either knew or should have known that Hauke was not following generally accepted accounting practices and compliance procedures, and either knew or should have known that Hauke was stealing from Samex and was operating a Ponzi scheme,” Wendling said in the suit.
DeWitt said the complaint is without merit and that he plans to vigorously defend himself, the firm and Hickey.
“We are disappointed and surprised by the complaint filed by the receiver,” DeWitt said in an e-mail to IBJ. “We have cooperated fully with the investigative authorities and, in fact, the criminal investigators concluded that Keenan Hauke concealed his misconduct from us as well as his investors. We too fell victim to Keenan's schemes, as a portion of our 401(k) plan was invested with Hauke.”
Hauke pleaded guilty to fraud in December and was sentenced to 10 years in prison in March. He also was ordered to make restitution of $7.1 million, the amount the court determined he swindled from 67 investors.
In the suit, though, Wendling estimates the losses at $10 million. He is seeking to recover all investor losses attributed to DeWitt & Shrader’s negligence, according to the suit.
The complaint against DeWitt & Shrader follows a separate suit Wendling filed in April on behalf of investors.
He sued Larcher Investments LP and one of its managers, David Larcher, in federal court in Indianapolis. Larcher is executive vice president of Vestar Development, a Phoenix-based real estate developer.
The lawsuit claims Larcher deposited about $2 million into Samex through a series of payments and reinvested profits in 2002, 2004 and 2005.
Then, in 2008, Hauke wired Larcher nearly $2.6 million, describing the extra money as a gain on Larcher’s investments. Wendling claims the money Larcher received actually came out of the pockets of other investors.
The case is pending in federal court.
Before his guilty plea, Hauke was a high-profile wealth manager who made regular appearances on CNBC, Fox Business Network, Bloomberg Television and Bloomberg Radio. He also wrote an investing column for IBJ.