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Compliance July 1, 2010
WV Investment Adviser Admits to Embezzling 401(k) Money
A former investment adviser from Charleston, West Virginia, has admitted in federal court that he embezzled $600,000 from a 401(k) plan under his supervision.
Reported by PLANSPONSOR staff
The Charleston Gazette reports that Knox Harwell Fuqua pleaded guilty to misappropriating funds from the 401(k) plan of Community Health Systems Inc. in 2005. Fuqua said that in June 2005, he liquidated $500,000 of the plan’s assets then transferred $600,000 to a bank account opened by him in the company’s name.
He then used the money to buy two $300,000 certificates of deposit in the name of “Fixed Income Funds, Knox Fuqua-President,” and using the certificates of deposit as collateral, opened a $600,000 line of credit under the name “Fixed Income Fund LLC,” according to the news report. Fuqua admitted that he transferred the $600,000 to the account of another client that wanted to cash out its own investment with Fuqua.
Fuqua’s sentencing is September 28, and he faces up to five years in prison and possible restitution of up to $600,000.
In 2006, the Securities and Exchange Commission filed a civil lawsuit against Fuqua, alleging that he funneled clients’ funds into an account that he controlled, then siphoned the money to pay for business and personal expenses. Fuqua reportedly used clients’ assets to pay his supermarket, pharmacy and jewelry store bills, and to buy a rental property, purportedly as an investment for his clients, the news report said.
In 2007, a federal judge issued a consent order barring Fuqua and his company from serving Employee Retirement Income Security Act plans (see West Virginia Adviser Barred from ERISA Work).