SEC Accuses Local Investment Adviser of Fraud

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A U.S. District Court judge last week froze the assets of a small Culver City investment adviser after allegations that the firm deliberately misled investors and secretly funneled proceeds to risky ventures.

In a complaint filed Nov. 12 in Los Angeles federal court, the Securities and Exchange Commission alleges that Heath Biddlecome raised nearly $10 million from mostly elderly investors for his investment fund, Homestead Properties, to invest in mobile home parks. Without informing investors, however, Biddlecome used $4.5 million of that money to engage in risky investments, the SEC claims, including options trading and short selling.

“Not surprisingly,” the SEC said in its complaint, “the account has performed erratically, alternating between six figure trading losses and profits in various months.”

Also in the complaint, the SEC alleges that Biddlecome failed to have his books audited as promised and he used some of the funds to pay personal credit card bills.

Speaking briefly by telephone from his office last week, Biddlecome called the SEC’s allegations “completely false” and said his “clients have not lost one penny in this fund.”

Biddlecome’s attorney could not be reached for further comment.

The agency contends that Biddlecome, through his fund, violated federal securities laws, and the SEC is seeking injunctions and financial penalties.

In approving an asset freeze last week, Judge Cormac Carney appointed Robb Evans & Associates LLC as the temporary receiver over the fund. In a hearing scheduled for this week, the judge will consider whether to appoint a permanent receiver.

Tax Benefits

FirstFed Financial Corp. got a much-needed lift this month.

On Nov. 6, President Obama signed into law the Worker, Homeownership and Business Assistance Act of 2008, which allows businesses to use recent losses to offset taxable profits from the past five years.

The beleaguered L.A. savings and loan, currently operating under a cease-and-desist order, has recorded more than a half-billion dollars in losses since the beginning of 2008. With the new law, the thrift expects to qualify for a tax break in the fourth quarter and a refund in 2010.

It is too early to know exactly how the new legislation will affect FirstFed’s finances. In a release, the thrift said it would have saved more than $76 million through the first three quarters of 2009 if the law had already been in effect.

Earlier this year, FirstFed’s total risk-based capital level fell below 10 percent, the level considered “well-capitalized” under regulatory guidelines. Regulators ordered the thrift to raise new capital by Sept. 30 or potentially face closure. It was unable to do so but remains in operation. FirstFed CEO Babette Heimbuch believes the new law would give the thrift more time to try to raise capital.

Boutique Moves

With many large investment banks still regaining their footing after the financial crisis, a number of boutiques are taking advantage of the market dislocation to gobble up competitors and expand their footprints.

A pair of local firms, Houlihan Lokey Howard & Zukin Inc. and Imperial Capital LLC, each announced substantial acquisitions this month, while an outside firm, D.A. Davidson & Co., said it will be expanding into Los Angeles.

Houlihan Lokey acquired Libra Securities, an L.A. debt financing firm focused on the gaming industry. Libra, founded in 1991 by former Drexel Burnham Lambert trader Jess Ravich, has been involved in more than $12 billion in financing for clients such as Bally’s Park Place and Boyd Gaming.

Imperial Capital, a Century City firm that recently filed a prospectus to go public, said it has acquired Petrobridge Investment Management, an advisory firm focused on the energy industry. In addition to an office in Houston, Imperial added six professionals through the transactions.

Terms of the deals were not disclosed.

D.A. Davidson, based in Great Falls, Mont., announced plans to open an L.A. office specializing in middle market financing. The office will be headed by Thomas Turpin, who plans to add additional hires over the next year.

C-Suite News

First California Financial Group Inc., the Westlake Village holding company for First California Bank, announced that it has appointed Sung Won Sohn, a respected local economist and the former chief executive of Hanmi Bank, to its board. … Regal Capital Advisors, headquartered in Westwood, has hired Sung Chun as a managing director and Michelle Cutler as an associate. … City National Corp., the downtown L.A. parent of City National Bank, has named Nick Kazanjian vice president and financial sales adviser at the bank’s Sherman Oaks office.

Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.

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