Father, Son Charged By SEC In Chicago Over $2 Million "Cherry-Picking" Scheme

Eliane Chavagnon Reporter 20 May 2013

Father, Son Charged By SEC In Chicago Over $2 Million

A father and son and their Lisle, IL-based investment advisory firm Capital Management Associates have been charged by the Securities and Exchange Commission in Chicago, IL, for defrauding clients in a “cherry-picking” scheme between 2008 and 2012.

Charles Dushek and his son Charles S Dushek allegedly placed “millions of dollars” in securities trades without clarifying in advance if they were trading personal funds or client funds.

The Dusheks delayed allocating the trades so they could cherry pick winning ones for their personal accounts, netting $2 million overall in illicit profits. Meanwhile, they dumped losing trades on the accounts of “unwitting clients” at the firm, the SEC said.

The pair typically waited to allocate the trades for at least one trading day (and often several days), by which time they knew whether the trades were profitable. They kept most of the winning trades - spending the money on luxury homes, vehicles and vacations - and assigned most of the losses to clients, the authority said.

Between 2008 and 2011, one of Charles Dushek’s personal accounts increased in value by almost 25,000 per cent, while many of his clients’ accounts decreased in value.

The SEC’s complaint, filed in federal court in Chicago, charges the Dusheks and Capital Management Associates with fraud. It seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.

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