S.E.C. Says Asset Firm Manipulated Trades to Enrich Some Clients Just a few years ago, sitting in his 19th-floor office with panoramic views of the Pacific Ocean, 3,000 miles from Wall Street, Peter J. Eichler Jr., had reached the top of the money management world. His firm, Aletheia Research and Management, based in Santa Monica, Calif., controlled more than $10 billion. Mr. Eichler's stellar investment performance attracted the likes of Goldman Sachs and Morgan Stanley, which entrusted him with millions of dollars of their clients' money. Late Friday, federal regulators accused Mr. Eichler of cheating some of his clients, the latest in a spate of legal troubles facing the 55-year old investor. In a civil action filed in Federal District Court in Los Angeles, the Securities and Exchange Commission said that Mr. Eichler had perpetrated a "cherry-picking" scheme, steering profitable trades into his personal accounts while allocating money-losing investments into hedge funds that he managed. Mr. Eichler's scheme, the government said, allowed his accounts and those of favored clients to earn $4.1 million in illegal profits, while he saddled the hedge funds with trading losses of about $4.4 million. "Aletheia and Eichler had an obligation to treat all clients with equal fairness, but instead they cherry-picked winners and losers and unfairly disadvantaged investors in two hedge funds to profit themselves," said Michele Wein Layne, the head of the S.E.C.'s Los Angeles office. In a statement issued through his lawyers, Mr. Eichler said he was cooperating with the S.E.C. and that his firm "did not intentionally or otherwise harm any of its investment products or its clients." Named after the Greek word for "truth and disclosure," Aletheia was started in 1997 by Mr. Eichler, a former Bear Stearns executive. An inspired salesman, Mr. Eichler promoted a buy-and-hold investment style. In meetings, he liked to compare himself to the celebrated stock pickers Warren E. Buffett and Peter Lynch. For years, Aletheia trumpeted its track record in a splashy full-page ad in Barron's, the financial weekly. Mr. Eichler lived like a Hollywood mogul. Until recently, a driver chauffeured him around Los Angeles in a Maybach sedan, shuttling him between Aletheia's headquarters and his multimillion-dollar homes in Pacific Palisades and Malibu. Aletheia's outsize returns attracted marquee clients like the pension fund of Royal Dutch Shell and state pensions in Louisiana and Oklahoma. A number of brokerage houses, including Goldman and Morgan Stanley, anointed him a "preferred manager" and placed clients' money with him. But the government says that since 2009, Mr. Eichler favored certain clients while shortchanging others. Mr. Eichler executed options trades - speculative, leveraged bets on stocks that magnify profits and losses - but waited about an hour to allocate them. He then placed winning trades in his own accounts and those of certain special clients, the commission said; losing trades were diverted to a pair of hedge funds that he managed. Trades assigned to Mr. Eichler's personal accounts were profitable about 98 percent of the time, while only 32 percent of the trades allocated to the Aletheia hedge funds made money, according to the S.E.C. The government's complaint added to Mr. Eichler's growing legal problems. Last month, his firm sought bankruptcy protection. The state of California has said it is owned more than $2 million in unpaid taxes and fines and has suspended Aletheia's corporate status. Mr. Eichler is also the defendant in two lawsuits that accuse him and his firm of improper conduct. A wrongful-termination complaint filed in 2010 by Roger Peikin, a co-founder of Aletheia, said that Mr. Eichler had "successfully rid himself of all internal controls, allowing him free rein to operate Aletheia as his personal fiefdom." And Proctor Investment Managers, a New York firm, sued Mr. Eichler over the terms of a deal in which Proctor had taken a 10 percent stake in Aletheia. Had it known about Mr. Eichler's "penchant for dishonesty," Proctor said, it would not have partnered with him. Both lawsuits accuse Mr. Eichler of treating the company as his personal piggy bank, including flying private jets for personal use. As part of the S.E.C. complaint, regulators said that Mr. Eichler had also violated the law by failing to inform its investors this year that his firm was in precarious financial condition. The firm still has $1.4 billion in assets under management, according to a recent securities filing, though bankruptcy court documents suggest the number has dropped to as low as $250 million. Goldman and Morgan Stanley have cut their ties to Aletheia. The criminal authorities have also taken an interest in Mr. Eichler and his firm. Last month, prosecutors in the tax division of the United States attorney's office in Los Angeles asked the court to notify it of all pleadings made in the Aletheia bankruptcy case.