The SEC today filed civil fraud charges against Onyx Capital Advisors, accusing the Detroit-based private equity firm of bilking three public pension funds out of more than $23 million. Also charged was Onyx founder Roy Dixon and his pal Mike Farr, a local auto dealer who once played wide receiver for the Detroit Lions.
The prosecutorial narrative goes like this:
Roy Dixon founded Onyx Capital in 2006, to invest expansion capital into small and mid-cap companies based in the Midwestern U.S. He began soliciting limited partner commitments, ultimately securing a total of $25 million from three Detroit-area pension systems.
The firm then called down virtually all of its capital between June 2007 and June 2009. Around 80% of that total went to three entities controlled by Farr, despite initial assurances that Onyx would not invest more than 20% of its capital in any one company (the SEC alleges that Onyx invested more in each Farr property than it had told LPs).
More concerning, Onyx also is accused of making capital calls that Dixon misappropriated for personal use, including the construction of a multi-million dollar home in Atlanta and mortage properties for 40 other properties in Michigan. Farr is alleged to have aided in the money transfers.
The SEC also accuses Dixon of regularly overcharging LPs for management fees, and for telling each of the three pension systems different stories about call amounts from the other two. Finally, Dixon allegedly lied to one of the pension systems about the day-to-day involvement of another friend, who the SEC claims had another fulltime job.
I’ve left a message for Dixon, and will update this post if I hear back. In the meantime, the SEC complaint can be viewed below: