Debra Wong Yang
United States Attorney
Central District of California
United States Courthouse
312 North Spring Street
Los Angeles, California 90012
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April 28, 2006
Thom Mrozek (213) 894-6947
Los Angeles, CA - The founder of an investment firm that operated a hedge fund called the GLT Venture Fund has agreed to plead guilty to federal charges, admitting that he lied to investors about the fraudulent operation that stole at least $2.5 million from investors.
Keith Gilabert, 35, a Valencia, California man who operated a company called Capital Management Group (CMG), has agreed to plead guilty to conspiracy to commit mail fraud, wire fraud and securities fraud. A plea agreement, in which Gilabert agreed to cooperate with investigators in an ongoing criminal probe, was filed this morning in United States District Court in Los Angeles.
In a related action, both CMG, which was based in Valencia, and Gilabert were named in a federal lawsuit filed today by the United States Securities and Exchange Commission.
In the plea agreement, Gilabert acknowledged that he operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund. Specifically, Gilabert admitted that from September 2000 through January 2005, CMG purported to offer investments in GLT and collected more than $7 million from more than 40 investor-clients. Even though he claimed average annual returns of 27 percent, since at least 2002, Gilabert concealed the fact that he had lost most of the investors' funds and that he had misappropriated investors' funds throughout most of GLT's operation. Gilabert also admitted that he conspired with an account manager at a major brokerage firm to mislead CMG investors with regard to, among other things, the performance history of the GLT fund, the risk associated with investing in CMG, and the oversight of CMG by the major brokerage firm.
Gilabert also admitted that he paid off the insider at the brokerage firm in exchange for his assistance in the fraudulent scheme.
Once he enters his guilty plea to the conspiracy charge, Gilabert will face a statutory maximum sentence of five years in federal prison. Gilabert has been summoned to appear for an arraignment in United States District Court in Los Angeles on May 22.
This case is the product of an investigation by the Federal Bureau of Investigation.
Release No. 06-049
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