U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23423 / December 8, 2015
In re Covenant Partners, L.P., Bankruptcy No. 14-17568 (December 2, 2015) (Eastern District of Pennsylvania)
The United States Bankruptcy Court for the Eastern District of Pennsylvania issued an order last week approving of the terms of a proposed settlement between the SEC and Covenant Partners, L.P., a Philadelphia-area private equity fund.
Previously, Covenant Partners, L.P., along with William B. Fretz, Jr. and John “Jack” P. Freeman, and their unregistered investment adviser, Covenant Capital Management Partners, L.P. consented to the institution of administrative proceedings by the Commission. According to the SEC’s order instituting proceedings, Fretz and Freeman orchestrated a fraud through their unregistered adviser, Covenant Capital Management Partners, L.P. and the private equity fund they managed, Covenant Partners, L.P. Fretz and Freeman sold partnership interests in the fund to family and friends but rather than investing the money as promised, they used it to benefit themselves and a failing business. Fretz and Freeman funneled more than $1 million to Keystone Equities Group L.P., a failing broker-dealer that they operated and controlled, paid themselves nearly $600,000 in performance fees they had not earned, and used fund assets to repay personal obligations. Covenant filed for bankruptcy in September 2014.
Under the now approved settlement, the fund, jointly and severally with the other respondents, owes approximately $5.8 million to the SEC. The SEC intends to distribute collected money to harmed investors.
See also Administrative Proceeding File No. 3-16829 (September 23, 2015).