Securities and Exchange Commission v. Caplitz et al

Filing 24

Judge Mark L. Wolf: ORDER entered. Therefore, it is hereby ORDERED that: 1. Counsel for the parties shall confer forthwith and, by March 22, 2013, at 12:00 noon, inform the court of whether defendants agree to an extension of the TRO. If so, the parties shall propose a schedule to complete the briefing concerning the Motion and state their respective positions as to whether it will be necessary or appropriate for the court to hear testimony from any particular witness(es). 2. If the defe ndants do not consent to an extension of the TRO: a) The defendants shall, by March 26, 2013, respond to the Motion and identify any potential witness(es) that they propose testify at the hearing on it. b) The SEC shall, by March 28, 2013, file any reply, and identify any potential witness(es) that it proposes testify at the hearing on the Motion. c) A hearing on the Motion shall be held on April 1, 2013, at 11: 00 a.m. Unless otherwise ordered, each potential witness identified by a party s hall be present to testify, if necessary, at the hearing. 3. By March 26, 2013, Julie M. Riewe, Deputy Chief of the SEC's Enforcement Division's Asset Management Unit, shall file an affidavit and supporting memorandum seeking to demonstr ate why the court should not find that the statement attributed to her in the attached March 18, 2013 press release and March 19, 2012 Boston Globe article violates Rule 83.2A of the Local Rules of the United States District Court for the District of Massachusetts, which prohibits certain extrajudicial statements. C.f. United States v. Flemmi, 223 F. Supp. 2d 113 (D. Mass. 2000). Her affidavit should, among other things, address whether she was aware when she made her statement that Gregg D. Caplitz is also a defendant in a pending criminal case in the District of Massachusetts, United States v. Caplitz, Cr. No. 12-10015-WGY, and whether she or the SEC have communicated or cooperated with government agents and/or attorneys with regard to the investigation and/or prosecution of that criminal case.(Hohler, Daniel)

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

v.

C.A. No. 1:13-cv-l0612

GREGG D. CAPLITZ and INSIGHT
ONSITE STRATEGIC MANAGEMENT,
LLC,
Defendants,
and
ROSALIND D. HERMAN, BRAD
HERMAN, BRIAN HERMAN, CHARLENE
HERMAN, and THE KNEW FINANCE
EXPERTS, INC.,
Relief Defendants.
ORDER
March 21, 2013

WOLF, D.J.

The Temporary Restraining Order, issued ex parte on March 17,
2013

(the

"TRO"),

will expire on April

1,

2013,

unless

extended by agreement

shown.

See Mar. 17, 2013 Temporary Restraining Order,

Civ.

P.

65 (b) (2) .

Exchange Commission

of the parties

On March 20,
(the

"SEC")

Inj unction Order Freezing Assets
Relief

(the

"Motion").

If

2013,
filed

or

at
for

5: 00

p.m.,

good cause
~9;

Fed. R.

plaintiff Securities and
a Motion for

Preliminary

and Order for Other Equitable

necessary,

hearing on the Motion on April 1, 2013.

the

court

will

conduct

a

However, as a preliminary

injunction would remain in effect for the duration of the case, it
is foreseeable that the defendants may want more time to prepare to

address the Motion.
1.
March

Therefore, it is hereby ORDERED that:

Counsel for the parties shall confer forthwith and, by
22,

2013,

at

12:00

noon,

inform

the

defendants agree to an extension of the TRO.

court

of

whether

If so, the parties

shall propose a schedule to complete the briefing concerning the
Motion and state their respective positions as to whether it will
be necessary or appropriate for the court to hear testimony from
any particular witness(es).
2.

If the defendants do not consent to an extension of the

TRO:
a)

The defendants shall, by March 26, 2013, respond to

the Motion and identify any potential witness(es) that they propose
testify at the hearing on it.
b)

The SEC shall, by March 28,

2013,

file any reply,

and identify any potential witness(es) that it proposes testify at
the hearing on the Motion.
c)
2013,

at

wi tness

11: 00

A hearing on the Motion shall be held on April 1,
a .m.

Unless

identified by a

otherwise ordered,

party shall be present

each potential
to

testify,

if

necessary, at the hearing.
3.

By March 26, 2013,

Julie M. Riewe,

Deputy Chief of the

SEC's Enforcement Division's Asset Management Unit, shall file an
affidavit and supporting memorandum seeking to demonstrate why the
court should not find that the statement attributed to her in the

2

attached March 18,

2013 press release and March 19,

2012 Boston

Globe article violates Rule 83.2A of the Local Rules of the United
States District Court

for

the District of Massachusetts,

which

prohibits certain extrajudicial statements. C.f. United States v.
Flemmi, 223 F. Supp. 2d 113 (D. Mass. 2000).

Her affidavit should,

among other things, address whether she was aware when she made her
statement that Gregg D. Caplitz is also a defendant in a pending
criminal case in the District of Massachusetts, United States v.
Caplitz,

Cr.

No.

12-10015-WGY,

and whether she or the SEC have

communicated or cooperated with government agents and/or attorneys
with

regard

to

the

investigation

criminal case.

3

and/or

prosecution

of

that

SEC Obtains AssetFreeze Against Massachusetts-Based Inves1ment ...

http://www.sec.gov/news/pressI2013/2013-43.htm

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U.S. Securities ana Exchange Cornrnissio

SEC Obtains Asset Freeze Against Massachusetts-Based
Investment Adviser Stealing Money from Clients
FOR IMMEDIATE RELEASE

2013-43
Washington, D.C., March 18, 2013 - The Securities and Exchange
Commission today announced an asset freeze against a
Massachusetts-based investment adviser charged with stealing money from
clients who were given the false impression they were investing in a hedge
fund.

Additional Materials

>

SEC Complaint

In a complaint unsealed today in federal court in Boston, the SEC alleges
that Gregg D. Caplitz and Insight Onsite Strategic Management in
Wilmington, Mass., raised at least $1.1 million from clients that was used
for purposes other than investing in the hedge fund they purported to
manage. Investor money was merely transferred to the firm's chief
investment officer and other members of her family who spent it on
personal expenses. The firm reported in SEC filings that it has $100 million
in assets under management, however the purported hedge fund actually
has no assets.
U.S. District Judge Mark L. Wolf granted the SEC's request for an
emergency court order to freeze the assets of Caplitz and his firm as well
as others who received investor money and have been named as relief
defendants for the purposes of recovering investor funds in their
possession.
"Caplitz and his firm conjured up a hedge fund to lure longtime clients into
investing substantial amounts of money that became nothing more than a
slush fund to pay bills for others," said Julie M. Riewe, Deputy Chief of the
SEC Enforcement Division's Asset Management Unit.
According to the SEC's complaint, Caplitz's scheme began around 2009.
While soliciting funds, Caplitz convinced one client and his wife to invest
$275,000 in the hedge fund that Caplitz claimed would generate them
about $1,000 per month in returns. Caplitz also solicited a 20-year client
who after considering his sales pitch decided not to invest in the hedge
fund because she considered it too risky of an investment for someone her
age. But Caplitz apparently took action to obtain funds from the client's IRA
account and wire thousands of dollars to an Insight Onsite Strategic
Management bank account. The client was not aware of the transfers and
did not authorize them.
The SEC alleges that instead of using investor funds to purchase shares in

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3121/2013 12:02PM

SEC Obtains Asset Freeze AgainstMassachusetts-Based Investment ...

http://www.sec.gov/news/press/2013/2013-43.htm

a hedge fund or to manage or develop a hedge fund, Caplitz transferred
control of client money to Rosalind Herman, his friend who works at the
firm. Investor funds also were transferred to her sons Brad and Brian
Herman, daughter-in-law Charlene Herman, and a company called The
Knew Finance Experts. The Hermans, who all live in Las Vegas, own that
company. The Hermans used investor money to pay legal bills and other
personal expenses at gas stations, drugstores, and restaurants.
The SEC alleges that as part of his scheme, Caplitz obtained funds from a
real estate investment trust (REIT) by falsely representing that a hedge
fund he operated was interested in making an investment in that trust. The
public, non-traded REIT gave $135,000 to Caplitz so he could conduct due
diligence on the REIT as a precursor to making a $5 million investment that
never materialized.
The SEC alleges that Caplitz and Insight Onsite Strategic Management
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5, Section 17(a) of the Securities Act of 1933, and Sections 206(1)
and 206(2) of the Investment Advisers Act of 1940. The complaint seeks a
permanent injunction plus disgorgement, prejudgment interest, and a
penalty against Caplitz and his firm. The complaint also names the four
Hermans and The Knew Finance Experts as relief defendants and seeks
disgorgement plus prejudgment interest.
The SEC's investigation was conducted in the Boston Regional Office by
Mayeti Gametchu and Kevin Kelcourse of the Asset Management Unit and
Susan Cooke Anderson. The litigation will be led by Kathy Shields and Ms.
Gametchu.
###

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3/21/2013 12:02 PM

Gmail - Fw: Boston Globe: SEC freezes assets of adviser accused of...

https://rnail.google.com/maiUull/?ui=2&ik=30445b7b74&yiew=pt&...

Copyright 2013 Globe Newspaper Company
The Boston Globe
March 19, 2013 Tuesday
LENGTH: 287 words
HEADLINE: SEC freezes assets of adviser accused of theft
BYLINE: By Beth Healy
Federal securities regulators have frozen the assets of a Massachusetts man
who is accused of stealing $1.1 million from investors by convincing them
he ran a hedge fund.
Investment adviser Gregg D. Caplitz and his Insight Onsite Strategic
Management in Wilmington transferred money from clients to another
executive at the firm, whose family spent the funds at restaurants and gas
stations and on legal bills, according to a complaint unsealed Monday in US
District Court in Boston.
The company reported in filings with the Securities and Exchange Commission
that it had $100 million in assets under management. But it in fact has no
assets, the SEC said.
"Caplitz and his firm conjured up a hedge fund to lure longtime clients
into investing substantial amounts of money that became nothing more than a
slush fund to pay bills for others," said Julie M. Riewe, deputy chief of
the SEC Enforcement Division's Asset Management Unit.
A lawyer for Caplitz said he had just received the case and was not
prepared to comment.
According to the SEC, the alleged scheme began around 2009. Caplitz
convinced one client and his wife to invest $275,000 in the hedge fund that
he claimed would generate about $1,000 per month in returns, regulators
said. Caplitz also allegedly obtained funds from the retirement account of
a 20-year client.
The SEC alleged that instead of investing the clients' funds, Caplitz
transferred their money to Rosalind Herman of Las Vegas, a friend who works
at the firm. Investor funds also were transferred to her sons and another
company.
The complaint seeks a permanent injunction against Caplitz and his
associates, a return of the investors' money, and a fine.

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3/19/2013 10:30 AM