Former Manager of Hedge Funds Sentenced

May 4, 2010 - SAN FRANCISCO—Alexander James Trabulse was sentenced today to 97 months in prison and ordered to pay restitution for committing mail fraud in connection with investment funds he operated from 1998 to 2007, United States Attorney Joseph P. Russoniello announced.

In his guilty plea on Nov. 3, 2009, Trabulse, who managed San Francisco-based hedge funds known as the Fahey Hedge Fund and Fahey Financial Group, Inc., admitted to engaging in fraudulent conduct which caused investors to lose approximately $8.3 million. Specifically, in or about 1998 through 2007, Trabulse deceived investors by mailing fraudulent periodic account statements which made materially false representations about the true disposition of their funds, and materially overstated the investors’ returns and account balances. By in or about 2006, approximately 165 investors had invested a total principal amount of approximately $17.6 million. Trabulse misled these investors into believing that their investments in the Fahey Funds were worth a total of approximately $50 million, when in truth their investments were worth tens of millions of dollars less than that amount.

Trabulse, 62, of Colma, California was originally charged in a complaint on Jan. 2, 2009, with one count of mail fraud, in violation of 18 United States Code Section 1341. Subsequently, Trabulse waived indictment and was charged in an Information on April 3, 2009 with the same offense. After his arrest in January, 2009, Trabulse posted bond and has been out of custody, subject to certain terms and conditions of release.

The sentence was handed down by U.S. District Court Judge William H. Alsup, who also sentenced the defendant to a three year period of supervised release, to pay approximately $8.5 million in restitution to victims, to perform 200 hours community service in a soup kitchen, and to give a speech or speeches to a total of 200 people in which Trabulse must describe his conduct and its consequences. The defendant will begin serving the sentence on or before Aug. 3, 2010.

Jonathan Schmidt and Thomas E. Stevens are the Assistant U.S. Attorneys who are prosecuting the case, with the assistance of Ponly Tu. The prosecution is the result of an investigation by the Federal Bureau of Investigation. The U.S. Attorney’s Office acknowledges the valuable assistance of the San Francisco Regional Office of the Securities and Exchange Commission in this matter.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.