The Securities and Exchange Commission charged two hedge fund portfolio managers and their investment advisory businesses with defrauding investors by overvaluing illiquid fund assets they placed in a "side pocket."

The SEC alleges that the hedge fund managers put the investors’ money in a separate account that only held hard-to-value and move funds, aka, the side pocket. The hedge fund managers are based in Georgia and ran the Palisades Master Fund, L.P.

The SEC also stole said the managers stole investor money to pay for their own personal investments and made material misrepresentations in connection with a private securities transaction.

Charged were Paul T. Mannion, Jr., of Norcross, Ga., and Andrews S. Reckles of Milton, Ga.

The SEC said the pair placed the Palisades hedge fund's investments in an entity called World Health Alternatives Inc. were placed in the side pocket and were valued at a price “contrary to an undisclosed internal assessment.”

Investors can be charged higher fees on inflated values.

Mannion and Reckles could not be reached for comment.

The SEC said Mannion and Reckles stole more than approximately $1.6 million worth of warrants belonging to the fund.

The SEC alleges that the pair improperly used investors' cash on at least two occasions to make personal investments, and they deceived a securities issuer by making false representations about their trading positions in order to participate in a private offering by the issuer.

"Mannion and Reckles put their own selfish interests ahead of Palisades' investors, treating the fund like their own personal bank account by stealing and improperly borrowing millions of dollars in fund assets," said Scott W. Friestad, Associate Director of the SEC's Division of Enforcement.

According to the SEC's complaint filed in the U.S. District Court for the Northern District of Georgia, Mannion and Reckles defrauded investors for at least a three-month period in 2005 through PEF Advisors LLC and PEF Advisors Ltd., two investment adviser entities they controlled.