The SEC has charged a West Virginia financial advisor with defrauding his clients pf more than $1 million, and using that money for his personal expenses.

Knox Fuqua worked for Kanawha Investment & Trust Company, where he advised clients, and ran the registered investment advisory firm KHF Advisors. Both firms were based in Charleston, W.Va. The Commission alleges he ignored his clients’ instructions and invested their money into two funds that he used for his own expenses.

All of his clients had told Fuqua they were risk-averse. That client list included the retirement plan of Retina Consultants, as well as 401(k) plans run by Dr. Mark Hatfield, his wife Monica Hatfield, and Community Health Systems. Another client, Barbara Leonard, was a widowed mother-of-two, whose husband had died in a coal mining accident. Leonard was actually under a court order to invest her deceased husband’s estate conservatively on behalf of her children.

But he blatantly ignored their instructions and invested the money into two investment vehicles, the Fixed Income Fund and Appalachian Asset Management Investments between January 2003 and late 2005.

The Fixed Income Fund was an investment vehicle that Fuqua created and controlled. He used it to funnel money into AAM Investments—a holding company that he created and controlled.

Among the personal expenses were hundreds of thousands of dollars used for jewelry, groceries and other business expenses. The defendant also borrowed the money from AAM Investments to buy resort rental property on Kiawah, S.C., the complaint says. The complaint goes on to add that he used the property, along with his family, for seven months a year and used rental income that should have gone back to AAM’s shareholders to pay his family’s resort expenses.

In order to keep his clients in the dark about what was really going on with their assets, Fuqua falsely inflated the share prices and account balances on his clients’ account statements.

The SEC claims that Fuqua misappropriated $300,000 from Monica Hatfield, $600,000 from Retina Consultants and another $600,000 from Community Health Systems.

Hatfield’s money went to help replace assets Fuqua used in the Kanawha client funds. He told Hatfield that he needed the money to satisfy an SEC requirement for starting a mutual fund. This was not true. He continued to lie to her and said he would put the money in a money market account. It also wound up with AAM Investments.

In June 2005, Monica Hatfield and Retina Consultants demanded that Fuqua redeem their interests in the Fixed Income Fund. According to these investors’ false account statements, their shares in were worth approximately $900,000. In reality, the Fixed Income Fund had only $311,000, which was merely a third of what Fuqua had told the clients, through their account statements, their shares were worth. The brokerage firms that prepared the client statements did not know that the share values Fuqua gave them were false.

The Commission is seeking permanent injunctions against Fuqua and KHF. The regulator also issued an order directing Fuqua to disgorge all ill-gotten gains and pay civil money penalties.

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