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Executives Said to Misappropriate Funds

Two top executives at Sunpoint Securities, a broker/dealer of Longview, Texas, allegedly diverted up to $25 million from as many as 9,000 clients during a nearly two-year period, the SEC alleged in a lawsuit filed Nov. 19.

Van R. Lewis, III, Sunpoint's founder and CEO, and Mary Ellen Wilder, the chief financial officer at the firm until her resignation Nov. 16, allegedly misappropriated approximately $25 million from a money market fund to satisfy Sunpoint's net capital requirements and pay personal expenses, the SEC alleged. The complaint was filed in U.S. District Court in Tyler, Texas.

Wilder used some of the misappropriated funds to pay legal fees as recently as this month, the SEC alleged. SEC officials could not recall a recent incident in which executives misappropriated assets from a money market fund.

"We don't often see a money market fund looted," said Spencer Barasch, associate district administrator for the SEC's Fort Worth, Texas office. "It's a pretty egregious scheme."

Sunpoint ceased doing business Nov. 18, according to the SEC. Calls to the firm were not answered. Neither Lewis nor Wilder returned calls seeking comment.

The misappropriations from the money market account began around December 1997, according to the SEC. At that time, Sunpoint's auditors discovered that the firm was operating with insufficient capital to satisfy regulatory requirements.

Lewis then allegedly diverted approximately $1.4 million earmarked for Sunpoint's money market fund investors and transferred the proceeds to Sunpoint, the SEC alleged. Wilder subsequently diverted other money market fund assets to bank accounts Sunpoint or Lewis controlled, according to the SEC.

The SEC discovered the alleged fraud after an examination of Sunpoint this month, Barasch said.