Investors Sue Wife Of Late Fund Manager Over Alleged Fraud

When investment fund manager George Swan of Ridgewood died in a car crash in November, he left behind a huge financial mystery now pitting his wife against dozens of investors in a Bergen County court battle.

To Kathy Swan, her husband's death was a tragic accident that left her and the couple's four children to grieve. To dozens of investors who fear they've lost millions in what they call a "sham" hedge fund set up by George Swan, his death occurred in a mysterious crash about the same time their funds vanished.

Police haven't been able to determine what caused the crash. Swan was driving his wife's 2011 Lexus in rural upstate New York when it plowed at high speed into the back of a parked tractor-trailer. He was pronounced dead at the scene.

Even more suspicious, investors say, is that the 53-year-old Swan, who lived in a $1.4 million home and managed millions of investors' dollars, left an estate his wife says is worth only $25,000. Meanwhile, Kathy Swan, who was a managing member in George Swan'sTheory Capital Group, stands to collect more than $13 million from his life insurance.

Armed with a high-powered national law firm, the investors are now taking Kathy Swan to state court in Hackensack, alleging she was a principal in a massive fraud orchestrated by her late husband.

"This fraudulent enterprise has carefully and systematically created this sham fund, deceived over 30 investors and diverted over $6 million," James Valvano, an attorney representing several of the investors, said in a court filing.

Kathy Swan is fighting back, saying she was nothing more than a clueless figurehead in her husband's company and knew nothing about his business dealings. One of her attorneys depicts George's business as a "sloppy" one that presents a "mess" to be worked through.

Kathy Swan also said she didn't realize she was a managing member until after his death. At the request of the investors, Superior Court Judge Robert Wilson in Bergen County recently ordered a freeze on insurance proceeds, save for an allowance of $18,000 a month for Kathy Swan's living expenses as the bitter litigation unfolds.

George Swan had a long history in the financial industry and had been registered as a broker in New York since the early 1980s.

"He was regarded by those who knew him as having a talent for making good returns," said Robert Ammarell, who invested more than $1.2 million in Swan's fund and is now suing his estate.

Ammarell, 69, and a longtime Wyckoff resident who now lives in retirement in Florida, is himself a Wall Street veteran. Unbeknownst to Ammarell and the other investors was that Swan had been twice sanctioned by regulators in 1997, for failing to provide audited financial statements and for executing securities transactions without the knowledge of customers, according to the Financial Industry Regulatory Authority.

The records show Swan was fined more than $170,000 and barred from associating with securities dealers.

After receiving several offers from Swan, whom he met five years ago, Ammarell said he invested money in Theory Capital Group in 2010. Swan gave him monthly statements showing that his investments were doing well in 2011, he said. Things were not as good in 2012, he said, but Swan gave him access to records so he could track trading.

Then on Nov. 25, Swan crashed into the tractor-trailer. Craig DuMond, undersheriff at the Delaware County (N.Y.) Sheriff's Department, said Swan "was not intoxicated or impaired.

"We can suspect that he fell asleep," he said.

Ammarell said he and the other investors are not optimistic they will get cooperation from Kathy Swan. His next step, he said, is to pursue the claim on the legal front.

Kibret Markos: [email protected]