The Securities and Exchange Commission closed the door on an investigation
into Apollo Global Management LLC that the company misled investors about
fund fees and a loan agreement. Apollo agreed to pay $52.7 million to
settle the charges leveled against the firm by U.S. regulators.
Apollo settled with the SEC without admitting or denying the allegations,
which included failing to supervise a senior partner who tacked on personal
expenses to that of a fund. According to the SEC, the primary violations
are that Apollo accelerated the payment of future monitoring fees to advisers
on new IPOs or sales of companies included in the fund, and failed to
disclose benefits generated by their actions. Regulators claim the scheme
caused businesses to lose value before their sale or IPO, and in turn
resulted in decreased returns to fund investors.
While the name of the senior partner was not disclosed, a company spokesman
stated, "Apollo seeks to act appropriately and in the best interest
of the funds it manages at all times." The statement went on to say
that the company had already begun improving compliance and oversight
before the investigation. However, the SEC stated that the partner had
attempted to conceal his activity but was discovered only after his assistant
exposed discrepancies to the expense manager.
The SEC’s investigation found that while Apollo did verbally reprimand
the partner after first discovering his inappropriate actions, an internal
review of expenses showed that the partner was continuing his illegal
activity well into 2013. The partner agreed to reimburse the company for
all expenses, and in 2014, the firm and partner went their separate ways.
The investigation also uncovered information about Apollo advisers misleading
investors by failing to disclose interest payments made on a $19 million
loan intended to defer taxes for a general partner and other Apollo funds.
The SEC said that the violations occurred between 2008 and 2013 when the
firm failed to notify investors of the expenses incurred by the fund.
As a result of the alleged violations, Apollo agreed to pay a $12 million
penalty, $37.5 million in disgorgement, and $2.7 million in interest to
be passed back to fund investors.
This investigation is a prime example of the importance of establishing
strong oversight controls within an organization to supervise personnel,
including senior executives. Financial firms also need to recognize the
benefit third-party auditors play in helping to expose small details of
impropriety before they become intractable problems that may initiate
Contact Geraci Law Firm at (949) 298-8050 today, or contact
Anthony Geraci directly
for more information.