[JURIST] US Attorney Patrick Meehan [official profile] filed an indictment [PDF text, press release] Thursday against stockbrokers Anthony Postiglione, Jr. and William Lennon, co-founders of Foutainhead Fund LP, alleging that they defrauded investors out of almost $2 million. Both men are charged with eighteen counts of mail fraud and one court of securities fraud, and Postiglione is also charged with one count of obstruction of justice. Postiglione and Lennon worked as stockbrokers and financial consultants and operated a hedge fund out of Wayne, Pennsylvania beginning in 2001 that included 17 investors and raised $5.2 million. While the hedge fund operated at a loss every quarter except one, Postiglione and Lennon withdrew weekly cash payouts and charged excessive personal expenses to the fund's assets, costing investors about $2 million. If convicted, Postiglione faces a maximum sentence of 385 years in prison and a $4,760,000 fine while Lennon faces 365 years and a $4,510,000 fine.

The Securities and Exchange Commission [official website; JURIST news archive] filed a complaint [PDF text] against Postiglione, Lennon and Fountainhead in 2004 which prompted a federal judge to freeze the hedge fund's assets [JURIST report]. Postiglione and Lennon reached a settlement with the SEC, and while neither admitted wrongdoing, Postiglione was banned from associating with any investment advisor and Lennon agreed to a five year ban from the industry. Dow Jones has more.