On Thursday, December 8, 2011, the U.S. Attorney for the Central District of California announced that it had indicted the David Tamman, outside counsel for New Point Financial Services, of conspiring with the company’s investment fund manager, who was also indicted, to obstruct an SEC investigation. The indictment alleges that that the two conspired to alter and backdate various documents, remove incriminating documents from investor files before they were produced, and provide false testimony to the SEC. Mr. Tamman joins the growing list of attorneys (such as the one discussed here) who are alleged to have taken elaborate efforts to conceal illegal activity, but end up being named as defendants in criminal cases nonetheless.
According to the Indictment, John Farahi, the investment fund manager, sold more than $20 million worth of investment instruments through New Point, by falsely telling investors that the funds were invested in low-risk investments like certificates of deposit, TARP-backed corporate bonds, and deeds of trust backed by substantial amounts of borrower equity. The Government asserts that "he instead used investor money for a variety of personal purposes, including to support his family’s lavish lifestyle, to make Ponzi payments to early clients of New Point … and to trade in high-risk and speculative future options trading."
The Government alleges that when, in April 2009, the SEC opened an investigation into New Point, Mr. Farahi and Mr. Tamman, New Point’s longtime securities counsel, covered up and concealed the scheme from the SEC. The Press Release from the U.S. Attorney describes their efforts:
The indictment alleges that Farahi and Tamman engaged in a conspiracy to obstruct justice that involved, among other things, altering and backdating various documents to make it appear that New Point Financial Services investors were given full disclosures about the nature and risks of their investments, removing incriminating documents from investor files before they were produced to the SEC, and lying to the SEC in sworn testimony.
The SEC previously commenced an administrative proceeding against Mr. Tamman, alleging that he added language to New Point’s Private Placement Memoranda "to make it appear that it was disclosed to investors that much of the money raised by New Point would be loaned to Farahi." That matter, filed in January 2011, is still pending. The SEC also previously sued Mr. Farahi, New Point and others for conducting an unregistered offering fraud and obtained an emergency court order to freeze their assets and preserve remaining funds that were collected from investors.
In the criminal case, Mr. Tamman is charged with one count of conspiracy to obstruct justice, three counts of obstruction of justice, five counts of alteration of records, and one count of being an accessory after the fact to the charged mail fraud and securities violations and faces a maximum sentence of 190 years in prison. Mr. Farahi is charged with 16 counts of mail fraud, one count of wire fraud, five counts of offering for sale unregistered securities, four counts of loan fraud, one count of aggravated identity theft, one count of conspiring to obstruct justice, four counts of obstruction of justice, five counts of alteration of documents, one count of suborning perjury, one count of concealing a material fact, and one count of witness tampering.
An article by Sara Randazzo in the AmLaw Daily has an interesting look Mr. Tamman’s relationship with his then-law firm. The lawyer claims in an October 2011 lawsuit filed in California state court that the firm made him a scapegoat in the New Point matter.
