SEC v. Estate of Vincent James Saviano and Palmetto Investments- The Complaint

In a complaint filed October 9, 2014 (the “Complaint”), the Securities and Exchange Commission announced an enforcement action against the estate of Vincent James Saviano and his firm, Palmetto Investments LLC.  The Complaint alleged that “Saviano defrauded advisory clients who invested in a private fund that purportedly executed a day trading program.” According to the Complaint, Saviano and Palmetto Investments allegedly violated Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.

The Complaint made the following assertions:

Saviano marketed and operated an investment program called the Palmetto Investment Portfolio (the “PIP”), which allegedly made money through “extreme” day trading of stocks. Saviano attracted more than one hundred clients to invest by representing the PIP as an unqualified success. He informed prospective investors, both orally and in a written prospectus, that the PIP had experienced monthly gains ranging from “five to ten percent per month” and that these gains were continuing.  Based on these representations, Saviano was able to raise at least $2 million for the PIP. 

According to the Complaint, the PIP was actually a failure. Saviano’s day trading regularly lost money instead of producing the “consistent monthly gains that he advertised.” Saviano concealed his trading losses by reporting consistent gains in performance statements and informing investors that their principal was intact. From January 2011 to September 30, 2014, Saviano lost approximately 81% of the funds invested with him. Additionally, prior to his death, Saviano admitted to a group of PIP investors that he “misappropriated an unidentified portion of investor funds to feed his gambling habit.”

Based on these allegations, the SEC is pursuing this enforcement action against Saviano’s estate and Palmetto Investments. The purpose of the action is to secure investor funds that remain in defendants’ names as a result of securities fraud. The SEC is seeking disgorgement of these funds so that any remaining amounts can be returned to investors who were victims of Saviano’s scheme.

The Complaint seeks final relief in the form of a “permanent injunction against Palmetto Investments”, as well as “disgorgement and prejudgment interest from both the Saviano estate and Palmetto Investments.” 

The primary materials for the post are available on the DU Corporate Governance Website.