Financial expert breaks down the Jumar Management securities case: It's about the money
KALAMAZOO, Mich. — The civil lawsuit against the financial firm owned by Kalamazoo native Robert "Bo" Parfet seeks an unspecified amount of penalties for restitution and damages on behalf of the investors who lost money after Jumar Management reinvested with what federal officials said was a nationwide Ponzi scheme.
Finance and commercial law Assistant Professor Justin Pace, who reviewed the suit, said it is no surprise that the Colorado Attorney General's Office filed suit against Parfet's firm.
"They [Jumar] were one of the largest investors in the Ponzi scheme," said Pace, who teaches at Western Michigan University. "That's why the Colorado commissioner may be focused on the Jumar funds ... recovering those performance fees to make those investors whole."
Pace is a former bankruptcy and commercial litigation attorney with an expertise in securities regulation, and during an interview with Newschannel 3 he weighed in on Jumar Management LLC, the investment firm owned and operated by Parfet, and the civil lawsuit filed Nov. 1, 2019, in a Colorado District Court.
In that lawsuit, the Colorado Attorney General’s Office accuses Jumar Management LLC of selling more than $100 million in unregistered securities to hundreds of investors, including several in West Michigan. The suit states that Jumar re-invested in that larger, $390 million Ponzi scheme after selling more than $100 million in unregistered securities to hundreds of investors. Kevin B. Merrill, 54, and Jay Ledford, 55, who operated that larger fund out of Maryland were both sentenced to federal prison for their roles in the scheme.
Parfet’s attorney, Jim Kopecky, said Jumar, its funds and the Parfets are victims of a complex fraud that ensnared a number of sophisticated investors.
The civil lawsuit filed against Jumar also states that over a period of four years, Jumar charged its investors performance fees totaling at least $21 million.
“It’s bad to get sued, and it’s bad to get exposed that they were duped in a Ponzi scheme,” Pace said, after reading the lawsuit.
"The $21 million is not an insignificant sum," Pace said. "It could affect the ability for those funds to operate going forward."
Only the investment firm, Jumar Management, and its related funds, which federal prosecutors refer to as the Boulder Group, are named in the suit, not the managers individually.
"If I'm Bo Parfet, I'd rather have my companies be sued for unregistered securities than being sued for defrauding investors," Pace said.
Federal investigators said from 2014 to 2018, Jumar invested $116 million into companies operated by Merrill and Ledford known as Global Credit Recovery LLC, Deville Asset Management LLC and Centurion Capital Corp. Those investigators also said that Jumar recovered $92.8 million of its investment after the scheme was discovered.
Pace said he believes the Colorado Attorney General’s Office pursued civil litigation against Jumar for selling unregistered securities once investigators discovered investors lost money in the scheme.
A spokesman with the Colorado Attorney General's Office declined to comment on why the suit was filed.
In the lawsuit, the attorney general's office claims that Jumar lured investors into Jumar Funds by representing returns ranging from as low as 21.3% in 2015 for a fund called Longs Peak to as high as 63.4% in 2016 for a fund called Mt. Elbert. However, the vast majority of those funds were reinvested into the Ponzi scheme. The investigators said said Jumar operated multiple funds to create an appearance of diversification.
Pace said the diversification complaint is troubling.
"You wouldn’t invest so many funds in effectively the same investments," Pace said. "It was made to look like it was more diversified than it was because there was multiple funds in the perpetrators of the Ponzi scheme.”
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