New York (HedgeCo.net) – The SEC has sued two Georgia hedge fund managers, Bloomberg reports, alleging that Paul Mannion and Andrew Reckles overvalued their illiquid assets, hiding losses while collecting fees.
The SEC claims Mannion and Reckles stole up to $1.6 million by inflating the value of a stake in the hedge fund World Health Alternatives Inc. To keep clients from redeeming their investments, the managers moved the holdings into a side pocket*, the SEC said, according to Bloomberg. 
“Side pockets are not supposed to be a dumping ground for hedge-fund managers to conceal overvalued assets,” Robert Kaplan, co-head of the SEC unit that polices asset managers, said, according to the paper.
The two hedge fund managers “strongly deny” the allegations.
*The holdings in a side pocket have to be sold before redemption.
Alex Akesson
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