The Utah 529 plan has settled SEC charges that it failed to properly disclose plan flaws after it investigated former directors taking of $85,000 of fund assets.
SEC officials said
the plan officials publicly mischaracterized the misappropriated funds as "administrative" and falsely claimed that investors had not been harmed. The Utah Educational Savings Plan
(UESP) also provided inadequate disclosure about the flaws in its operations and accounting practices.
"The USEP discovered its system for recording and accounting for investor transactions was flawed, but failed to disclose some of those defects and the risks posed to investors," said Kenneth D. Israel, Jr.
, district administrator of SEC's Salt Lake District Office. "The Commission's action ensures the return of investor funds, that UESP will fix its system, and that material facts related to investor transactions and earnings will be disclosed."
The investigation followed the discovery that Dale C. Hatch
, then the director of the UESP, had attempted to divert plan funds to his personal bank accounts. The SEC filed separate charges against Hatch.
Hatch diverted $505,976 of the plans assets into accounts he personally controlled when he served as UESP's director, according to the SEC. He then moved $85,000 of those assets to his personal accounts. UESP staff caught Hatch attempting to move another $200,000 in plan assets to his personal accounts and stopped him, according to the SEC.
The UESP board then fired Hatch in July 2004 based on the results of an internal investigation. He agreed to plead guilty to a second degree felony charge and to serve 30 days in jail.
The board announced Hatch's firing in a press statement that said he had misappropriated "administrative" funds and that investors had not been harmed.
The SEC filed a complaint against the plan stating that the statement's claim was false, that the plan had failed to disclose flaws in its operations and accounting practices that had caused investment gains to not be properly allocated to participant accounts.
The UESP plan assets are managed by Vanguard Group.
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