August 23, 2013
By Bob Coleman
Editor, Coleman Report
Mark Feathers’ Small Business Capital ran a three-year, $42 million Ponzi scheme that defrauded investors while paying the firm’s manager substantial bonuses, a federal judge ruled this week.
The summary judgment is a major blow to Feathers’ in his attempt to gain control of his non-bank SBA niche lending operation.
The judge wrote, “Essentially, the SEC has shown that Feathers was not using fund profits to pay out returns, but rather other member investments – contrary to the representations of the Funds’ offering documents – as ‘Ponzi-like payments.’ Feathers had instructed his employees to maintain monthly payments to investors in IPF [Investors Prime Fund] and SPF [SB Capital Portfolio Fund] at a return of 7.5 percent per annum and 9-10 percent per annum, respectively, without taking into consideration the funds’ net income or actual profitability.”
“The SEC has presented abundant evidence demonstrating that Feathers acted intentionally or recklessly in carrying out the misrepresentations and misstatements presented in the preceding section.
Feathers emailed me saying, “Bob the court ruled for SEC in the summary judgment request. I guess that I’m too dumb to take things lying down. Here’s the letter that will go out to fund members over the weekend.”
The first paragraph of Mark’s letter.
“SEC’s motion for summary judgment was approved by the Court, mine was not. I will appeal the judgment on the grounds that the Judge came to incorrect factual findings, acted in excess of his jurisdiction, failed to consider evidence, and that SEC coerced the fund’s CPA and outside consultant. My appeal will not be meant to slow down the process of allowing investors, who are caught in the middle of this, to regain their capital investments. The Judge makes no reference to those issues you expect to see in securities lawsuits, i.e., investor money for private jets, oil paintings, jewelry, or similar self- enrichment schemes. I live in the same one hundred year old house that my wife and I purchased a decade ago, which still has most of its original wiring, and my kids don’t go to private school, and we don’t belong to any country clubs.”