Distressed-asset specialist Blackstreet Capital has agreed to pay $3.1 million to settle a litany of alleged fee- and contract-related violations, the US Securities and Exchange Commission (SEC) announced Wednesday.
The private equity firm acted as an unlicensed broker-dealer and charged limited partners fees, the SEC’s order alleged. Blackstreet took in at least $1.9 million for the unlicensed servicing.
“Blackstreet clearly acted as a broker without fulfilling its registration obligations,” said Andrew Ceresney, the SEC’s enforcement chief.
An agency examination of the small Maryland-based private equity shop sparked the investigation.
Beyond dalliances into broker-dealing, Blackstreet allegedly charged to its funds entertainment costs, political contributions, and charitable donations. These were said to include a luxury suite at the Verizon Center stadium in Washington DC and $12,000 to a local politician’s campaigns.
Blackstreet “neither sought nor obtained appropriate consent for these expenditures,” the SEC’s order stated.
Murry Gunty, firm founder and managing partner since 2002, allegedly caused the violations.
He and his company neither confirmed nor denied the various charges in agreeing to the payout, which includes returning $500,000 to clients and a $500,000 penalty.
Blackstreet “focuses on control buyouts of under-performing corporate orphans with $25 million to $150 million of revenue,” according to Gunty’s LinkedIn profile. Over the last 14 years, the firm invested in 30 companies employing more than 8,000 people.
The SEC censured Blackstreet over the charges, but has not banned the firm or Gunty from continued operation.
Related: SEC Director Hails ‘Real Change’ on Private Equity Fees