* Mortgage pioneer's firm used unregistered broker
* No admission of wrongdoing
By Jonathan Stempel and Emily Flitter
March 11 A private equity firm founded by mortgage bond pioneer Lewis Ranieri has agreed to pay $375,000 to settle U.S. Securities and Exchange Commission charges that it employed an unregistered broker to help solicit roughly $569 million of investments.
The settlement with Ranieri Partners LLC and two Illinois residents resolves allegations over the activities of William Stephens, a consultant who was paid $2.42 million for helping bring in investments for its Selene funds between February 2008 and March 2011.
According to the SEC, Stephens offered strategy analyses and key documentation to prospective clients, going "far beyond" what should have been his limited role in acting as a "finder" who would make initial introductions.
The SEC said Donald Phillips, a Ranieri senior managing director who oversaw capital raising for the New York-based firm prior to his December 2012 resignation, aided the violations by providing materials to Stephens and ignoring "red flags" about his longtime friend's improper conduct.
"Stephens acted outside the boundaries of the law, and Phillips and the firm ignored the essence of his activities," Merri Jo Gillette, director of the SEC regional office in Chicago, said in a statement.
Phillips, 63, who lives in Barrington, Illinois, agreed to pay a $75,000 penalty. Stephens, a 60-year-old resident of Hinsdale, Illinois, agreed to a securities industry ban.
None of the defendants admitted or denied wrongdoing, but the SEC said Ranieri Partners has modified its policies to help prevent a recurrence.
A lawyer for Ranieri and Phillips did not immediately respond to a request for a comment.
Stephens could not immediately be reached. The SEC waived his responsibility to repay the $2.42 million plus $410,000 of interest, citing his financial condition.
Lewis Ranieri was a former head of the mortgage department at Salomon Brothers, and was a central figure in Michael Lewis' 1989 book "Liar's Poker." Michael Lewis credited Ranieri and Salomon with almost single-handedly creating the mortgage bond market.
Founded in 2007, Ranieri Partners invests in financial companies and real estate. Among its other top executives is Thomas O'Neill, a founding principal of investment banking firm Sandler O'Neill & Partners. Neither Lewis Ranieri nor O'Neill was charged with or accused of wrongdoing in the SEC case.
The cases are In re: Ranieri Partners LLC et al, SEC Administrative Proceeding, No. 3-15234; and In re: Stephens, SEC Administrative Proceeding, No. 3-15233.