The federal Securities and Exchange Commission is accusing a West Linn investment adviser of bilking investors of more than $13 million and spending much of the money on himself - on luxury cars, home improvements, furs and on his hobby of purchasing and restoring classic cars.
The SEC on Thursday obtained a court order halting what the commission charges was the fraudulent scheme of investment adviser C. Wesley Rhodes, Jr.
The accusations against Rhodes, 55, come in a complaint the SEC filed in the United States District Court in Portland on Thursday.
That complaint charges that since the mid-1990s, Rhodes has raised $16.2 million from about 50 individual investors, including several elderly investors, by saying he would invest their money in stock and bond funds or directly in stocks and bonds.
But, the complaint charges, since January of 2004, Rhodes invested only about $3.9 million in securities. At the same time, the complaint charges, he 'misappropriated and misused at least $13.3 million of investor funds' by:
- withdrawing almost $1 million in cash
- spending more than $4.2 million on his own business and personal expenses, including on luxury cars, jewelry and almost $1.7 million on the classic cars.
- transferring more than $1.6 million to bank and credit card accounts either in his name or to his benefit.
- using more than $6.3 million to pay other investors their principal and 'purported profits.'
The SEC complaint says that Rhodes perpetrated his alleged scheme through three companies he controls -- Rhodes Econometrics, Inc., The Rhodes Company, and Resource Transactions, Inc.
A phone message left for Rhodes at The Rhodes Company, which has a Lake Oswego address, was not returned Friday afternoon.
According to SEC officials, the court order obtained Thursday freezes Rhodes assets and appoints a 'temporary receiver' over the three companies and any other entities that Rhodes controls. The order also prohibits Rhodes from destroying any documents.