This is an archived article that was published on sltrib.com in 2015, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
A federal judge has appointed a receiver to take over a company owned by a Utah man after regulators said he was trying to pay a fine for fraudulent activities with monies from clients of his hedge funds.
Jacob Keith Cooper, of the southern Utah town of Washington and owner of Total Wealth Management Inc., also is alleged to have charge inflated fees to client accounts without telling them in order to pay legal and other expenses.
Cooper could not be reached for comment Friday, and the case in federal court in San Diego, where Total Wealth is located, does not list any attorneys who represent him or the company. A phone once listed for the family home in Washington was disconnected.
Total Wealth's and its pooled-investment funds that carry the name Altus had about $108 million under management in 773 client accounts at the end of last year, the agency said in its complaint.
The Securities and Exchange Commission sued Total Wealth Management and Cooper earlier this month, alleging he was committing fraud on clients by trying to use $150,000 of their funds to pay a fine levied against him in a SEC administrative action last year.
That action in April of last year named Cooper, company President Nathan McNamee of Hurricane and a California resident, David Shoemaker of San Diego, and accused them of violating federal laws though their use of unregistered investment funds, by not engaging independent auditors and failing to conduct due diligence before investing clients' monies.
It also alleged the three did not disclose conflicts of interest created by fee-sharing agreements with funds in which most of their clients' money was placed.
Under a proposed settlement, Cooper agreed to put $150,000 in escrow while the commission considered whether to approve the agreement. But he then admitted to the SEC that the $150,000 had come from a loan from one of the Wealth Management funds, according to the complaint.
That breached his financial duty to his clients and showed there were inadequate financial controls to protect clients, the agency said.
In asking a federal judge to appoint a receiver to take over the company, the agency also alleged that Total Wealth was charging inflated "administrative fees" of $3,500 to $7,500 per account without telling investors beforehand.
In an email to those investors after the fees were taken from accounts, Total Wealth said that, among other things, the fees were funding the cost of defending it from a class action lawsuit pending in California state court, according to the SEC complaint.
"Cooper has an inherent conflict of interest since he is using investors' money to defend himself in a lawsuit brought against him by his investors," the SEC complaint says.
A related company, Metropolitan Coffee and Concession Co. LLC, which operated four Peet's Coffee & Tea outlets in Bay Area Rapid Transit stations in the San Francisco area, filed for bankruptcy reorganization in October. It listed assets of $423,000 and liabilities of $10.7 million.
Cooper solicited clients for Total Wealth on a weekly radio show called "Minding Your Own Business," where he discussed investments, including in his own companies.
He told listeners that Total Wealth's investments were safe even in an economic downturn and that returns had been up to 18 percent, according to the SEC.