Past Capital Consultants executives Barclay Grayson and Jeffrey Grayson are barred from the money management business
By Jeff Manning and James Long of The Oregonian staff
Thursday, May 10, 2001
The U.S. Securities and Exchange Commission has obtained a permanent injunction against former Capital Consultants executives Jeffrey and Barclay Grayson, the first step toward barring Jeffrey Grayson for life from the money management business.
Nick Morgan, an SEC lawyer in Los Angeles who has led the commission's legal fight against Capital Consultants, said the injunctions will allow the SEC to proceed with steps to permanently bar Jeffrey Grayson. Grayson is former chief executive officer of Capital Consultants, the Portland money management firm that has reportedly lost more than $200 million of client money.
The SEC intends to bar Barclay Grayson, Jeffrey Grayson's son and Capital Consultants' former president, from the money management business for five years, Morgan said.
As part of the agreement, the Graysons neither admitted nor denied guilt in the massive fraud alleged by the SEC and the U.S. Department of Labor. However, under terms of the agreement, both men are prohibited from making "any public statement denying . . . any allegation in the complaint or creating the impression that the complaint is without factual basis."
In suits filed last September, the two federal agencies claimed that the Graysons engineered a complex Ponzi-like scheme to disguise the fact that $160 million in loans to the former Wilshire Credit Corp. had actually failed.
Between early 1999 and September 2000, the SEC alleges, the Graysons used new client money to pay monthly interest payments owed by Wilshire Credit or successor companies.
Most of the losses came from union workers' retirement plans.
The Department of Labor continues an effort to recover money from Capital Consultants and the Graysons to defray the union trust funds' losses. The SEC is not seeking money damages against the Graysons, although the SEC's Morgan said the commission reserved the right to enforce a financial penalty against them.
Wilson Muhlheim, the Eugene attorney representing Jeffrey Grayson, said his client has agreed to a "stipulated decree" holding that "Jeff cannot serve as an investment adviser." Similarly, Steven Ungar, Barclay Grayson's attorney, said via e-mail that "Barclay is barred from associating with any Investment Advisor for a period of five years."
Separately, Barclay Grayson pleaded guilty in March to one felony count of mail fraud. Jeffrey Grayson is still under criminal investigation, and Barclay Grayson's plea bargain for an 18-month prison sentence is contingent on his continued cooperation with investigators. Officials said it is routine for civil proceedings to contain language in which potential criminal defendants neither confirm nor deny guilt.
Muhlheim said the SEC has notified his client that it will seek the permanent ban. Muhlheim added that his client would be free to work in other parts of the financial industry, as a stockbroker, for instance.
Muhlheim said he didn't know whether Jeffrey Grayson intends to re-enter the industry. "I don't know what his intent is. We're focused on the civil charges."
Likewise, Steven Ungar, the Portland attorney representing Barclay Grayson, said his client's future professional plans are uncertain.
"Barclay Grayson is relieved to have reached a settlement with the SEC without the necessity of further litigation. This settlement is consistent with Barclay's intention to fully cooperate with governmental officials and assist, to the extent possible, in the recovery of funds invested in Capital Consultants," Ungar said.
Dozens of union trust fund clients have sued the Graysons and others in connection with Capital Consultants' meltdown. Those suits are scheduled to go into confidential mediation where the various camps will attempt to reach a settlement May 29.
Jeff Manning can be reached at 503-294-7606 or by e-mail at firstname.lastname@example.org.
James Long can be reached at 503-221-4351 or by e-mail at email@example.com