Dennis Gibb, a long-time investment advisor in Redmond, pleaded guilty to defrauding 15 investors of more than $3 million.
Gibb, 72, admitted to wire fraud and falsification of records, with intent to obstruct a matter within the jurisdiction of the Securities and Exchange Commission (SEC). The plea was entered in U.S. District Court in Seattle on March 28.
The defendant is the president and owner of Sweetwater Investments Inc, an Eastside-based business. At the time of his plea, Gibb and Sweetwater entered into a consent decree with the SEC liquidating the Sweetwater Income Flood Limited Partnership Fund and barring Gibb from further investment activity.
“Sadly, this defendant sold his investors a dream of a safe retirement, representing that he would use a sophisticated investment strategy, including investing in government bonds, to produce stable returns,” said U.S. attorney Brian T. Moran, in a news release.
Instead, Moran continued, these funds were used to cover business expenses for Sweetwater Investments, located in Redmond on 154th Avenue Northeast. He also used investor funds to pay for a mortgage, car payments and other living expenses.
“Dennis accepts full responsibility for what happened and he’s deeply apologetic for what he did,” Gibb’s attorney Mike McKay said. He added that Gibb is cooperating fully with the U.S. Attorney’s Office and the SEC.
“He is liquidating his assets so as much as possible can be paid back to the investor victims,” McKay said.
According to court documents, Gibb created a private fund — Sweetwater Income Flood LP — in 2008. And as early as 2007, he began soliciting investors who wanted a steady retirement income in the near future.
From about 2007-18, about $7.3 million was put into the fund by 20 investors. However, Gibb is accused of secretly moving more than $3.1 million from the fund for his own expenses and to hide this theft, he created fake quarterly account statements.
“Gibb induced investors to put their money into Income Flood by telling them in conversation that it was a stable investment,” the SEC order states. “He told the investors that they could trust him because he had a fiduciary obligation to them. At the time that he made these statements to certain investors, he knew that he was stealing from Income Flood.”
At one point, Gibb allegedly told investors there was $7.8 million in the fund when in reality there was less than $2 million.
In order to gain trust and prove legitimacy, Gibb represented to potential investors, in a Sweetwater PowerPoint presentation, that he was required to and did invest in Income Flood too, when in fact he never had. He also made misrepresentations about employees to investors. In a PowerPoint shown to investors, Gibb’s assistant was listed as chief operating officer and another person, not employed by Sweetwater, listed as the company’s fixed income portfolio manager.
In May 2018, when the SEC initially began their examination of Sweetwater Investments, Gibb provided false records indicating the fund had already been liquidated.
As part of the plea agreement, Gibb agreed to forfeit a money judgment of $3.19 million and will owe full restitution for the money he stole. The government will recommend that any money collected from the defendant go toward his restitution obligation. Gibb is required to liquidate the remaining Income Flood funds of an estimated $1.8 million and provide it to the SEC for disbursement to victims.
Wire fraud is punishable by up to 20 years in prison and falsification of records punishable by up to three years. Prosecutors plan to recommend no more than 78 months in prison. However, the court is not bound to this recommendation. Sentencing in the criminal case is scheduled for June 28.