Adviser Charged with Defrauding NFL Players with Brain Injuries

A Florida investment adviser and lawyer has been charged with defrauding investors, most of whom were former professional football players suffering from brain injuries due to concussions received during their playing careers.

The SEC charged Cambridge Capital Group Advisors and its president, Phillip Timothy Howard, with defrauding 20 investors in two proprietary hedge funds operating out of his law offices. Also named as a defendant in the complaint is Don Warner Reinhard, a former registered investment adviser previously barred by the SEC.

The victims were mostly former NFL players who Howard had previously represented in a class-action lawsuit against the NFL over brain injuries caused from concussions received while playing football. Howard and Reinhard allegedly raised $4 million from the retired NFL players, approximately half of whom rolled over their NFL 401(k) accounts to the hedge funds.

“We allege that Cambridge, Howard and Reinhard defrauded these particularly vulnerable investors, many of whom invested their retirement savings,” Eric Bustillo, director of the SEC’s Miami Regional Office, said in a statement. “Instead of investing all of the funds’ assets as promised, Howard and Reinhard used a significant portion of investor money to line their own pockets.”

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The SEC’s complaint quoted Howard as having said that the retired NFL players’

“brain function is not there, their body has been beat up from the NFL, they don’t have employment capacity, they don’t have credit, and they don’t have capital anymore.”

The complaint, however, says the opposite. To attract investors, Howard allegedly knowingly or recklessly misrepresented the funds’ investment focus, how they would use investor money, and Reinhard’s background and experience in the securities industry. Specifically, the investors were told the funds were invested in a diverse range of securities with a secondary focus on litigation settlement advances.

“This was false and misleading,” said the complaint. “In truth, the funds primarily paid settlement advances to former NFL players – including 18 of the 20 investors – in connection with the NFL concussion lawsuit.”

The SEC said Howard and Reinhard misappropriated more than 20% of investor funds, or about $973,000, to pay themselves fees and to cover costs associated with Howard’s personal residential mortgages.

Additionally, the firm is accused of misrepresenting Reinhard as an “extremely successful investment manager” without mentioning that he had served time in jail for bankruptcy and tax fraud, and had been barred by the SEC from working for any investment adviser firm.

The SEC also alleges that Howard defrauded investors by borrowing over $600,000 in undisclosed personal mortgage loans from the funds, which he never repaid, and that Howard and Reinhard used investor funds to pay themselves fabricated “broker fees” on settlement advance loans to Howard’s legal clients.

The complaint doesn’t mention who the former NFL players are by name, only by their initials. But one victim, referred to only as C.F., is almost certainly Corey Fuller, a former NFL defensive back who sued Howard last year for the same reasons he is being charged by the SEC.

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Tags: Cambridge Capital Group Advisors, Fraud, NFL, Phillip Timothy Howard, SEC

Swedish pension fund AP2’s investment portfolio returned 10.7% after costs during the first half of 2019, raising the fund’s total asset value to SEK367.4 billion ($37.7 billion).

Although the strong performance easily surpassed the fund’s long-term assumed rate of return of 4.5% a year, it was 0.4% below that of its benchmark index, excluding alternative investments and costs.

“The beginning of 2019 saw a strong recovery in the world markets after the major downturn at the end of 2018, however, this was followed by growing concern that global real economic growth may lose momentum,”AP2 CEO Eva Halvarsson said in statement.

“This concern was amplified by uncertainties regarding Brexit and, in May and June, the escalating trade conflict between USA and China,” she added. “This political uncertainty seems to have played a part in a declining investment climate the world over.”

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The fund’s average annual real return rate over the past 10 years has been 8.1%, according to the H1 report.

The total return of the fund’s Swedish and foreign equity portfolios for the half-year was 19.8% and 21.5% respectively. Emerging-market equities increased in value by 13.9%, while Swedish fixed-income securities returned 1.1%. Emerging-market bonds , foreign credits, green bonds, and foreign government bonds returned 13.6%, 13.5%, 10.5%, and 9.9%, respectively.

Meanwhile, the fund’s alternative investments, which are made up of Chinese domestic market equities, non-listed real estate, private equity funds, alternative risk premiums, and alternative credits, returned 7.7%.

In the first half of the year the fund adjusted its listed portfolio to increase its holdings of real estate and private equity funds while reducing its allocation to Swedish and foreign equities, and Swedish bonds. It also increased its capital allocated to emerging-market bonds issued in US dollars. The fund’s board also decided that the fund will no longer invest in tobacco companies, or companies that are involved in the maintenance and modernization of nuclear weapons systems.

AP2 also completed a reorganization in the spring and the fund’s sustainability analysts are now part of the asset management’s strategy, as it looked to integrate sustainability issues into the fund’s management. During the first half of the year it voted at 74 general meetings for Swedish listed companies, and at 742 foreign general meetings, the plan said.

The asset allocation of the portfolio as of the end of June was 28.4% in alternative investments, 20.4% in developed markets equities, 10.5% in fixed-income, foreign credits; 10.4% in emerging markets equities; 9.1% in Swedish equities; 8.7% in 7.5% in fixed-income, emerging markets; 4.0% in fixed-income, foreign government bonds; and 1% in fixed-income, global green bonds.

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Tags: AP2, H1 Returns, Pension, Returns, Sweden