NEW ORLEANS (AP) — The Archdiocese of New Orleans is exploring its legal options after a Florida investment firm was accused in federal court documents of defrauding the archdiocese and other investors of a combined total of $550 million.
The Securities and Exchange Commission alleges that Naples, Fla.-based Founding Partners Capital Management Co. and its owner, William L. Gunlicks, told the archdiocese and other investors its mutual fund and three hedge funds were lending money to Florida companies investing in highly liquid and fully secured receivables.
Papers filed in federal court in Florida said the firm is accused of defrauding investors of a total of $550 million, about $5 million of which was money invested by the archdiocese.
In the court documents, the SEC said that Founding Partners — without telling investors — was allowing the collateral to get much riskier and harder to collect.
Court papers say the cornerstone of Founding Partners’ presentation was that the loans were secured by health care receivables that are “the payment obligations of federal and state agencies, certain U.S. insurance companies rated by various firms.”
The archdiocese said it learned of the SEC’s lawsuit against Founding Partners on April 23 and is exploring its legal options.
“The investment made with Founding Partners will have no effect on the archdiocese’s operating budget nor will it affect any planned construction projects,” the archdiocese said in a statement Tuesday.
“We are not sure how long the funds will remain frozen, but this will not have any adverse effect on the archdiocese or any of its entities,” it added.
The SEC said the company misrepresented its finances to the archdiocese when the church invested $5 million in January.
The government said the investment adviser also failed to tell clients it had been cited for an SEC violation in 2007.
The U.S. District Court of the Middle District of Florida granted the SEC’s request to appoint a receiver to sort out the money given to Founding Partners.
