Michael J. Spak Pleads Guilty to Multi-Million-Dollar Investment Fraud

Source-  http://www.fbi.gov/newark/press-releases/2012/hedge-fund-ceo-pleads-guilty-to-multi-million-dollar-investment-fraud 

CAMDEN, NJ—The former CEO of the hedge fund management company Osiris Partners LLC admitted today to conspiring with others to defraud investors of more than $4 million, U.S. Attorney Paul J. Fishman announced.

Michael J. Spak, 44, of Chesterfield, New Jersey, pleaded guilty before U.S. District Judge Joseph H. Rodriguez in Camden federal court to an information charging him with conspiracy to commit wire fraud.

According to documents filed in this case and statements made in court:

Spak and his co-conspirators solicited investors to invest in the Osiris Fund, which they pitched to prospective investors as a hedge fund for the “little guys” and “moms and pops.” Over time, more than 75 people invested $12 million in the Osiris Fund. Beginning in January 2010, however, Spak and his co-conspirators at the Osiris Fund began improperly diverting investors’ funds for their own use. In January and February 2010, Spak and his co-conspirators spent $300,000 of investors’ money to purchase a luxury sport-fishing boat called the “Fintastic.” In total, in 2010 and 2011, Spak and his co-conspirators fraudulently diverted more than $4 million. Spak failed to disclose these diverted payments to the Osiris Fund investors, and in the financial statements that they sent to investors, Spak and his co-conspirators continued to characterize these diverted funds as “assets” of the fund.

In April and May 2010, the Osiris Fund incurred trading losses of approximately $4.5 million, about half the value of the fund. Spak and his co-conspirators never disclosed these losses to investors. They instead created false financial statements, which included a fictitious $5 million “asset,” and sent them to investors. Even though this fictitious asset never existed, Spak and his co-conspirators charged investors a three percent management fee to manage it and fraudulently overcharged investors millions of dollars in management fees.

The charge of conspiracy to commit wire fraud is punishable by a maximum potential penalty of 20 years in jail and a $250,00 fine. Sentencing is scheduled for January 9, 2013.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

Jon Horvath Pleads Guilty in New York Federal Court to Insider Trading Charges

Source-  http://www.fbi.gov/newyork/press-releases/2012/former-hedge-fund-research-analyst-pleads-guilty-in-new-york-federal-court-to-insider-trading-charges 

NEW YORK—Jon Horvath, 42, of San Francisco, a former research analyst at a hedge fund in New York, pleaded guilty today in New York City federal court to charges arising from his involvement in a $61.8 million insider trading scheme, announced Preet Bharara, the U.S. Attorney for the Southern District of New York. The alleged scheme involved multiple analysts and portfolio managers at different hedge funds and investment firms who allegedly exchanged material, non-public information (inside information) about publicly traded technology companies, including Dell Inc. and NVIDIA Corp. Horvath was arrested and charged by complaint in January 2012 and was further charged in a superseding indictment in August 2012. He pleaded guilty before U.S. District Judge Richard J. Sullivan.

According to the superseding indictment to which Horvath pleaded guilty, statements made during the plea proceeding, and other court documents:

Horvath was part of a circle of research analysts at different investment firms who obtained inside information from 2007 to 2009, both directly and indirectly, from employees who worked at public companies. The analysts, including Horvath, then shared the inside information with each other and with the hedge fund portfolio managers for whom they worked. For example, Horvath admitted receiving inside information concerning Dell and NVIDIA from other members of this circle of analysts, knowing that it came from employees at public companies, in breach of their duties of loyalty to their companies. Horvath then provided the inside information to the portfolio manager for whom he worked. Horvath caused trades in Dell and NVIDIA to be executed based on the inside information he received from the circle of analysts. In exchange, Horvath provided the circle of analysts with inside information concerning other technology stocks that he obtained directly from public company employees.

Horvath pleaded guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross pecuniary gain or loss derived from the offense. As part of his plea agreement, Horvath agreed to forfeit his share of the proceeds obtained as a result of the offenses. He is scheduled to be sentenced by Judge Sullivan on March 31, 2013.

Horvath was originally charged in January 2012 with three co-conspirators—Danny Kuo, Todd Newman, and Anthony Chiasson. Kuo pleaded guilty in April 2012 to one count of conspiracy to commit securities fraud and two counts of securities fraud. He is scheduled to be sentenced by Judge Sullivan at a later date. Newman and Chiasson are scheduled for trial before Judge Sullivan on October 29, 2012, and the charges against them are merely accusations. They are presumed innocent unless and until proven guilty.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

Rajiv Goel was Sentenced in Manhattan Federal Court for Insider Trading

Source-  http://www.fbi.gov/newyork/press-releases/2012/former-intel-executive-rajiv-goel-sentenced-in-manhattan-federal-court-for-insider-trading 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Rajiv Goel, a former executive at Intel Corporation (Intel), was sentenced today to two years of probation for his participation in an insider trading scheme in which Goel provided material, non-public information (“inside information”) about Intel to Raj Rajaratnam, the head of Galleon Group (Galleon). Rajaratnam then traded based, in part, on the inside information. Goel pled guilty in February 2010 to one count of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the government. He was sentenced in Manhattan federal court by U.S. District Judge Barbara S. Jones.

According to the information, statements made during Goel’s guilty plea proceeding, and Goel’s testimony during the criminal trial of Rajaratnam:

In April 2007, Goel provided inside information to Rajaratnam relating to Intel’s quarterly earnings before Intel publicly announced its very positive results. Upon receipt of the inside information from Goel, Rajaratnam executed, and caused others to execute, securities trades. When Intel disclosed its quarterly earnings, Rajaratnam sold his stock and illegally earned over $2.4 million. Subsequently, on multiple occasions in 2008, Goel provided Rajaratnam with inside information about Intel’s investment in Clearwire Corporation. Upon receipt of the inside information from Goel, Rajaratnam executed, and caused others to execute, securities trades. Based on Goel’s information, Rajaratnam illegally earned over $850,000.

In addition to his prison term, Goel, 54, was ordered to pay forfeiture in the amount of $266,649, a $10,000 fine, and a $200 special assessment fee.

Rajaratnam was convicted in a jury trial on May 11, 2011, of 14 counts of conspiracy and securities fraud. He was sentenced on October 13, 2011, to 11 years in prison and was ordered to pay forfeiture in the amount of $53,816,434 and a $10 million fine.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Goldman Sachs and Former Vice President in Pay-to-Play Probe Involving Contributions to Former Massachusetts State Treasurer

Source-  http://www.sec.gov/news/press/2012/2012-199.htm 

Washington, D.C., Sept. 27, 2012 – The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its former investment bankers with “pay-to-play” violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.

Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business. This marks the first SEC enforcement action for pay-to-play violations involving “in-kind” non-cash contributions to a political campaign.

According to the SEC’s order against Goldman Sachs, Neil M.M. Morrison was a vice president in the firm’s Boston office and solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008. Morrison also was substantially engaged in working on Cahill’s political campaigns from November 2008 to October 2010. Morrison at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail. Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions. Nevertheless, Goldman Sachs subsequently participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.

While the SEC’s case against Morrison continues, Goldman Sachs agreed to settle the charges by paying $7,558,942 in disgorgement, $670,033 in prejudgment interest, and a $3.75 million penalty, which is the largest ever imposed by the SEC for Municipal Securities Rulemaking Board (MSRB) pay-to-play violations. The SEC coordinated this enforcement action with a related action filed by the Massachusetts Attorney General against Goldman Sachs.

“The pay-to-play rules are clear: municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Elaine C. Greenberg, Chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit, added, “Fighting efforts to improperly influence the underwriting selection process is one of the unit’s top priorities. These practices result in undisclosed conflicts of interest and undermine public confidence in the integrity of the municipal securities market.”

According to the SEC’s orders against Morrison and Goldman Sachs, among the campaign activities that Morrison engaged in for Cahill were fundraising, drafting speeches, communicating with reporters, approving personnel decisions, and interviewing at least one possible running mate. Morrison at times referenced his campaign work while soliciting underwriting business in an apparent attempt to curry favor during the selection process. Morrison sent e-mails to a deputy treasurer in Cahill’s office making the following statements while discussing the selection of underwriters:

“The boss [Cahill] mentioned to me this morning that he spoke to [the Assistant Treasurer] and that it is looking good for us [Goldman Sachs] on the build America bond deal.”

“From my standpoint as an advisor/consultant/friend I am saying, PLEASE don’t give these [underwriter] slots away willy-nilly. You are in the fight of your lives and need to reward loyalty and encourage friendship. If people aren’t willing to be creative with their support then they shouldn’t expect business. This has to be a political decision.”

“We have discussed the Build American Bond transaction and how important it is to me. You have been great keeping me up to speed. This is my number 1 priority and most important ask. Having Goldman as the lead and getting 50% of the economics would be such a home run for me.”

According to the SEC’s orders, in addition to his direct campaign work for Cahill, Morrison made an indirect cash contribution to Cahill by giving cash to a friend who then wrote a check to the Cahill campaign. Morrison’s campaign work and his indirect financial contribution created a conflict of interest that was not disclosed by Goldman Sachs in the relevant municipal securities offerings in violation of pay-to-play rules. Morrison himself acknowledged the existence of this conflict in an e-mail to a campaign official, saying, “I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business.”

According to the SEC’s orders against Goldman Sachs and Morrison, Goldman Sachs terminated Morrison in December 2010.

The SEC’s order against Goldman Sachs found that the firm violated Section 15B(c)(1) of the Exchange Act and MSRB Rule G-37(b), which prohibits firms from underwriting offerings for municipal issuers within two years after any contribution to an official of such issuer. The SEC’s order found that Goldman Sachs did not disclose any of the contributions on MSRB Forms G-37, and did not make or keep records of the contributions in violation of MSRB Rules G-37(e), G-8 and G-9. The order found that Goldman Sachs did not take steps to ensure that the attributed contributions or campaign work or the conflicts of interest raised by them were disclosed in the bond offering documents, in violation of MSRB Rule G-17, which requires broker-dealers to deal fairly and not engage in any deceptive, dishonest, or unfair practice. The order found that Goldman Sachs failed to effectively supervise Morrison in violation of MSRB Rule G-27.

Goldman Sachs consented to the SEC’s order without admitting or denying the findings. In addition to paying disgorgement, prejudgment interest, and the penalty, Goldman Sachs agreed to be censured and to cease and desist from committing or causing any violations and any future violations of the provisions referenced in the order.

In its order against Morrison, the SEC’s Enforcement Division alleges that Morrison violated MSRB Rule G-37(d) by making a secret, undisclosed cash campaign contribution to Cahill, that he violated MSRB Rule G-37(c) by soliciting campaign contributions for Cahill, and that he violated MSRB Rule G-17 by failing to disclose conflicts of interest to the purchasers of municipal securities. The Division of Enforcement further alleges that Morrison caused Goldman Sachs to violate Rule G-8, Rule G-9, Rule G-37(b) and Rule G-37(e).

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Bank Executives in Nebraska With Understating Losses During Financial Crisis

Source-  http://www.sec.gov/news/press/2012/2012-198.htm 

Washington, D.C., Sept. 25, 2012 – The Securities and Exchange Commission today charged three former bank executives in Nebraska for participating in a scheme to understate millions of dollars in losses and mislead investors and federal regulators at the height of the financial crisis. One of the executives and his son also are charged with insider trading.

The SEC alleges that Gilbert G. Lundstrom, who was the CEO and chairman of the board at Lincoln, Neb.-based TierOne Bank, along with president and chief operating officer James A. Laphen and chief credit officer Don A. Langford played a role in TierOne understating its loan-related losses as well as losses on real estate repossessed by the bank. TierOne had expanded into riskier types of lending in Las Vegas and other high-growth geographic areas in Arizona and Florida, and the bank was experiencing a significant rise in high-risk problem loans. TierOne’s primary banking regulator, the Office of Thrift Supervision (OTS), directed TierOne to maintain higher capital ratios as a result of the bank’s increase in high-risk problem loans. To appear to comply with the heightened capital requirements, Lundstrom, Laphen, and Langford disregarded information showing that the collateral securing certain TierOne loans and real estate repossessed by the bank was overvalued due to the bank’s reliance on stale and inadequately discounted appraisals. The losses were understated by millions of dollars in multiple SEC filings.

Lundstrom and Laphen agreed to settle the SEC’s charges as did Lundstrom’s son Trevor A. Lundstrom, who is charged with illegally trading on nonpublic information from his father about an anticipated asset sale. The Lundstroms and Laphen agreed to collectively pay nearly $1.2 million in the settlements, which are subject to court approval. The SEC’s case continues against Langford.

“A fundamental test of management integrity is whether executives make full and honest disclosure in times of company stress, the exact point when shareholders have the greatest need for accurate information,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The SEC’s complaints allege that as Tier One’s financial condition worsened, these executives utterly failed that test by understating losses on the bank’s troubled loans and concealing the bank’s deterioration from shareholders and regulators alike.”

According to the SEC’s complaints filed in U.S. District Court for Nebraska, the truth about TierOne’s losses did not become publicly known until late 2009 after OTS required TierOne to obtain new appraisals for its impaired loans. TierOne, in turn, disclosed more than $130 million in loan losses. Had these loss provisions been booked in the proper quarters, the bank would have missed its required capital ratios as far back as the fourth quarter of 2008. Following the announcement of these loss provisions, TierOne’s stock price dropped more than 70 percent, and the bank filed for bankruptcy shortly after it was shut down by OTS in June 2010.

With regard to the insider trading charges against the Lundstroms, the SEC alleges that Gilbert Lundstrom tipped his son in 2009 with confidential details about a proposed asset sale between TierOne and Great Western Bank. Based on this material, nonpublic information, Trevor Lundstrom bought nearly 210,000 TierOne shares between June and September 2009 in anticipation of the asset sale. Following a September 4 public announcement about the transaction, Lundstrom sold his TierOne holdings for $225,921 in illicit profits.

The SEC’s complaints charge Gilbert Lundstrom, Laphen, and Langford with violations of the antifraud, deceit of auditors, reporting, recordkeeping, and internal controls provisions of the federal securities laws. In settling the SEC’s charges without admitting or denying the allegations, Gilbert Lundstrom, who lives in Lincoln, agreed to pay a $500,921 penalty and Laphen, who resides in Omaha, agreed to pay a $225,000 penalty. They also consented to permanent officer and director bars. Trevor Lundstrom, who lives in Birmingham, Ala., settled his insider trading charges without admitting or denying the SEC’s allegations. He agreed to pay disgorgement of $225,921 plus prejudgment interest and a $225,921 penalty. Langford, who lives in Gibsonia, Pa., has not settled the charges.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Tyco International Ltd. for Illicit Payments to Foreign Officials

Source-  http://www.sec.gov/news/press/2012/2012-197.htm 

Washington, D.C., Sept. 24, 2012 — The Securities and Exchange Commission today charged Tyco International Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when subsidiaries arranged illicit payments to foreign officials in more than a dozen countries.

The SEC alleges that subsidiaries of the Swiss-based global manufacturer perpetuated schemes that typically involved payments of fake “commissions” or the use of third-party agents to funnel money improperly to obtain lucrative contracts. Overall, Tyco reaped illicit benefits amounting to more than $10.5 million as a result of the paid to win business.

Tyco, whose securities are publicly traded in the U.S., agreed to pay more than $26 million to settle the SEC’s charges and resolve a criminal matter announced today by the U.S. Department of Justice.

“Tyco’s subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries, and the company illicitly reaped substantial financial benefits as a result,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement.

The SEC alleges that Tyco subsidiaries operated 12 different illicit payment schemes around the world starting before 2006 and continuing until 2009. The most profitable scheme occurred in Germany, where agents of a Tyco subsidiary paid third parties to secure contracts or avoid penalties or fines in several countries. These payments were falsely recorded as “commissions” in Tyco’s books and records when they were in fact bribes to pay off government customers. Tyco’s benefit as a result of these illicit payments was more than $4.6 million.

According to the SEC’s complaint, Tyco’s subsidiary in China signed a contract with the Chinese Ministry of Public Security for $770,000 but reportedly paid approximately $3,700 to the “site project team” of a state-owned corporation to be able to obtain the contract. This amount was improperly recorded as a commission. Tyco’s subsidiary in France recorded payments to individuals from 2005 to 2009 for “business introduction services.” However, one of the individuals receiving payments was a security officer at a government-owned mining company in Mauritania, and many of the earlier payments were deposited in the official’s personal bank account in France. In Thailand, Tyco’s subsidiary had a contract to install a CCTV system in the Thai Parliament House in 2006, and paid more than $50,000 to a Thai entity that acted as a consultant. The invoice for the payment refers to “renovation work,” but Tyco is unable to ascertain what, if any, work was actually done.

The SEC alleges that another scheme occurred in Turkey, where Tyco’s subsidiary retained a New York City-based sales agent who made illicit payments involving the sale of microwave equipment in September 2006 to an entity controlled by the Turkish government. Employees at Tyco’s subsidiary were well aware that the agent was paying foreign government customers to obtain orders. One internal e-mail stated, “Hell, everyone knows you have to bribe somebody to do business in Turkey. Nevertheless, I’ll play it dumb if [the sales agent] should call.” The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.

The SEC’s complaint alleges that Tyco’s books and records were misstated as a result of the misconduct, and Tyco failed to devise and maintain internal controls sufficient to detect the violations. The complaint also alleges that the payments by the sales agent to Turkish government officials violated the anti-bribery provisions of the FCPA.

In arriving at the settlement, the Commission considered Tyco’s extensive efforts to identify and remediate its wrongdoing. Tyco conducted a global review and internal investigation for potential FCPA violations and voluntarily disclosed its findings to the SEC while implementing significant, broad-spectrum remedial measures. Tyco consented to a proposed final judgment that orders the company to pay $10,564,992 in disgorgement and $2,566,517 in prejudgment interest. Tyco also agreed to be permanently enjoined from violating Section 13(b)(2)(A), Section 13(b)(2)(B), and Section 30A(a) of the Securities Exchange Act of 1934.

In the parallel criminal proceedings, the Justice Department entered into a Non-Prosecution Agreement with Tyco in which the company will pay a penalty of approximately $13.68 million.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Freezes Assets of Insider Trader in Burger King Stock

Source- http://www.sec.gov/news/press/2012/2012-195.htm

Washington, D.C., Sept. 20, 2012 – The Securities and Exchange Commission today obtained an emergency court order to freeze the assets of a stockbroker who used nonpublic information from a customer and engaged in insider trading ahead of Burger King’s announcement that it was being acquired by a New York private equity firm.

The SEC alleges that Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami, learned about the impending acquisition from a brokerage customer who invested at least $50 million in a fund managed by private equity firm 3G Capital Partners Ltd. and used to acquire Burger King in 2010. Prado misused the confidential information to illegally trade in Burger King stock for $175,000 in illicit profits, and he tipped others living in Brazil and elsewhere who also traded on the nonpublic information.

The SEC obtained the asset freeze in U.S. District Court for the Southern District of New York. The agency took the emergency action to prevent Prado from transferring his assets outside of U.S. jurisdiction. Prado recently abandoned his most current job at Morgan Stanley Smith Barney, put his Miami home up for sale, and began transferring all of his assets out of the country.

"Prado's emails and other communications may have been sent from Brazil and written in Portuguese, but our commitment to prosecute illegal insider trading on U.S. markets knows no geographic or language barrier," said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division's Market Abuse Unit and Associate Director of the New York Regional Office. "Prado may have fled the country to evade justice, but our action today ensures that he will have to appear in a U.S. court if he wants his assets unfrozen."

According to the SEC’s complaint, Prado’s insider trading in Burger King stock occurred from May 17 to Sept. 1, 2010. At the time, Prado was the representative on the account used by the customer to transfer his investment to 3G Capital. The customer had been with Prado for more than 10 years and often shared his confidential financial information with the understanding that it was to remain confidential. Prado had repeated contact with the customer by phone and e-mail as well as in person in Brazil during the time period that Prado traded Burger King securities.

The SEC alleges that Prado began his illegal trading while on a business trip to Brazil, during which he sent an e-mail to a friend that – translated from Portuguese – read, “I’m in Brazil with information that cannot be sent by email. You can’t miss it….” Prado later told his friend on a phone call that night that he heard 3G Capital was going to take Burger King private. The friend, a hedge fund manager in Miami, warned Prado that he should not trade on this information and should not encourage any of his customers to trade either.

According to the SEC’s complaint, Prado went on to tip at least four of his customers who eventually traded in Burger King stock based on nonpublic information about the impending acquisition. For example, just minutes after Prado sent the May 17 e-mail to his friend in Miami, he sent an e-mail to one of those customers which, again translated from Portuguese, read, “ … if you are around call me at the hotel … I have some info…You have to hear this.” A 10-minute phone conversation followed, and the customer purchased out-of-the-money Burger King call options during the next two days. In August 2010 Prado was on another business trip to Brazil, the same customer sent Prado an e-mail which translated to, “[i]s the sandwich deal going to happen?” Prado replied, “Vai sim,” which means, “Yes it’s going to happen.” He continued, “[e]verything is 100% under control. I was embarrassed to ask about timing. The last ‘vol’ got in the way.” Following these e-mails, the customer – identified as Tippee A in the SEC’s complaint – made additional purchases in Burger King call options. The customer’s total insider trading profits amounted to more than $1.68 million.

The SEC’s complaint against Prado seeks a permanent injunction from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, disgorgement with prejudgment interest and monetary penalties.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Three in North Carolina With Insider Trading

Source- http://www.sec.gov/news/press/2012/2012-193.htm

Washington, D.C., Sept. 20, 2012 – The Securities and Exchange Commission today charged a former member of the board of directors at a North Carolina-based insurance company with illegally tipping inside information about an impending merger.

The SEC alleges that H. Thomas Davis, Jr., who has a home in Wilmington N.C., breached his fiduciary duty to Mercer Insurance Group and its shareholders when he shared confidential details about the company’s negotiations to be acquired by United Fire. Davis tipped his friend and business associate Mark W. Baggett with the nonpublic information, and Baggett later tipped his golfing partner Kenneth F. Wrangell. Baggett and Wrangell, who both live in Wilmington, made more than $83,000 in illicit profits when they traded on that confidential information illegally.

When contacted by SEC investigators about his suspicious trading, Wrangell promptly offered significant cooperation. He provided truthful details acknowledging his own trading and entered into a cooperation agreement that resulted in direct evidence being quickly developed against Baggett and Davis. This cooperation enabled the SEC to swiftly reach settlements with all three individuals to recover ill-gotten monetary gains.

“By making the choice to cooperate with the SEC and voluntarily provide all of the necessary evidence at the outset of the investigation, Wrangell saved the SEC time and resources and himself a larger penalty,” said William P. Hicks, Associate Director in the SEC’s Atlanta Regional Office.

The SEC’s complaints against Davis and Wrangell were filed in U.S. District Court for the Eastern District of North Carolina, and the complaint against Baggett was filed in U.S. District Court for the Northern District of Georgia. According to the complaints, Davis was privy to Mercer’s negotiations in the latter part of 2010 to be acquired by United Fire. In October and November, Davis tipped Baggett with nonpublic information about the impending merger, enabling Baggett to stockpile 4,426 shares of Mercer as they moved toward the acquisition date. Baggett also tipped Wrangell with advance details about the merger, and Wrangell subsequently purchased 4,500 shares of Mercer stock. After the markets closed on November 30, Mercer and United Fire publicly announced their entry into the merger agreement. Shares for Mercer stock rose nearly 50 percent the next day, and Baggett and Wrangell immediately sold their holdings for illicit profits of $41,584.45 and $42,521.55 respectively.

The SEC’s complaints allege that Davis, Baggett, and Wrangell violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In settling the SEC’s charges, Davis agreed to be jointly and severally liable for disgorgement of Baggett’s insider trading profits of $41,584.45 plus prejudgment interest as well as to pay a penalty of $41,584.45. Davis also agreed to be barred from serving as an officer or director of a publicly-traded company. Baggett agreed to pay disgorgement and a penalty in amounts that will be determined by the court. Wrangell agreed to fully disgorge his ill-gotten gains of $42,521.55 plus prejudgment interest. Due to his extensive cooperation, the additional penalty that Wrangell is required to pay on top of that disgorgement amount has been reduced to $11,380.39. All three neither admit nor deny the allegations, and their settlements are subject to court approval.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Angelo A. Alleca with Operating Ponzi-Like Scheme Involving Private Investment Funds

Source- http://www.sec.gov/news/press/2012/2012-192.htm

Washington, D.C., Sept. 19, 2012 — The Securities and Exchange Commission today announced charges against a private fund manager and his Atlanta-based investment advisory firm for defrauding investors in a purported “fund-of-funds” and then trying to hide trading losses by creating new private funds to make money to pay back the original fund investors in Ponzi-like fashion.

The SEC is seeking an emergency court order to freeze the assets of Angelo A. Alleca and Summit Wealth Management Inc. and prevent further investor losses, which are estimated to be $17 million among approximately 200 clients.

“Alleca told Summit Wealth clients that he was investing their money in funds, but instead he was rolling the dice in the stock market without success,” said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. “Rather than fess up about his trading losses, Alleca tried a cover up by creating new funds. Instead of winning back the money, he just compounded his fraud by suffering further losses.”

After receiving a tip, the SEC initiated an examination of Summit Wealth. As SEC examiners noticed something was amiss at the firm, they immediately coordinated with SEC enforcement attorneys to gather and assess evidence.

“SEC examiners and attorneys acted swiftly after receiving a tip about possible wrongdoing at the firm, and have mounted an aggressive effort to put a stop to Alleca’s fraud before more investors are harmed,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office.

According to the SEC’s complaint filed late yesterday in federal court in Atlanta, Alleca and Summit Wealth Management offered and sold interests in Summit Fund, which they told their clients was operating as a fund-of-funds – meaning they were investing their money in other funds and investment products rather than directly in stocks and other securities. The fund-of-funds investment strategy is intended to diversify investor money and minimize exposure to risks. However, Alleca instead engaged in active securities trading with his clients’ money, and he incurred substantial losses. He concealed the Summit Fund trading losses from investors and provided them false account statements.

The SEC alleges that when it came time to meet redemption requests from Summit Fund investors, Alleca created at least two hedge funds to raise money from Summit Wealth clients – Private Credit Opportunities Fund LLC and Asset Class Diversification Fund LP. Alleca’s plan was to cover up the losses that he had incurred in Summit Fund by illegally transferring profits from the new funds in a Ponzi-like fashion in order to meet earlier redemption requests. However, Alleca’s plan backfired when those successive funds incurred further trading losses. Alleca continued to issue false account statements to investors in Summit Fund as well as the additional funds in order to hide the actual losses on their investments.

The SEC’s complaint charges Alleca, Summit Wealth Management, and the three funds with violations of the antifraud provisions of the federal securities laws.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Chicago-Based Investment Firm with Misleading Investors in Private Equity Offerings

Source- http://www.sec.gov/news/press/2012/2012-191.htm

Washington, D.C., Sept. 18, 2012 — The Securities and Exchange Commission today charged the co-founder of a Chicago-based investment firm with misleading investors in two private equity offerings, and charged the other co-founder with supervisory failures related to the offerings.

Advanced Equities Inc. — a broker-dealer and investment advisory firm - and co-founders Dwight O. Badger and Keith G. Daubenspeck were charged in connection with private offerings in 2009 and 2010 on behalf of an alternative energy company in Silicon Valley, Calif., which was not identified by name in the SEC's administrative proceeding. Badger led the sales effort for the offerings and made misstatements about the energy company's finances that Daubenspeck did not correct, thus failing to reasonably supervise Badger. Daubenspeck co-founded Advanced Equities with Badger and was the former chief executive of its parent company. Daubenspeck is the chairman of the parent company's board.

Badger, Daubenspeck, and their firm agreed to settle the SEC's charges.

According to the SEC's order, Badger said in the 2009 offering that the energy company had more than $2 billion of order backlogs when the backlog never exceeded $42 million. He also said it had a $1 billion order from a national grocery store chain even though the store only had placed a $2 million order and signed a non-binding letter of intent for future purchases. Badger said that the company had been granted a U.S. Department of Energy loan exceeding $250 million when it had applied for a $96.8 million loan, and he again misstated the information about the loan application during the follow-up offering in 2010.

"Dwight Badger misled investors by embellishing key facts about the energy company's sales orders and its loan application to the Department of Energy," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "The SEC will continue to be vigilant in uncovering fraud in private securities offerings and holding registered securities professionals accountable."

According to the SEC's order, Daubenspeck participated in at least two internal sales calls with Advanced Equities brokers during the 2009 offering and remained silent after he heard Badger make misstatements about the company's order backlog, grocery store order, and Department of Energy loan application. Despite the red flags raised by the misstatements and the obvious risk that false information would be repeated to investors, Daubenspeck did not take reasonable steps to correct the misstatements and thus failed reasonably to supervise Badger.

Advanced Equities agreed to pay a $1 million penalty, and agreed to be censured and to cease and desist from committing or causing any future violations of the securities laws it was found to have violated. The firm also agreed to numerous undertakings including hiring an independent consultant to review its sales policies and procedures. Badger agreed to pay a $100,000 penalty and be barred for one year from association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent. Daubenspeck agreed to pay a $50,000 penalty and a one-year supervisory suspension. Advanced Equities, Badger, and Daubenspeck consented to the entry of the cease-and-desist order without admitting or denying the SEC's charges.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

Feisal Sharif was Charged with Running Ponzi Scheme

Source- http://www.fbi.gov/newhaven/press-releases/2012/branford-resident-charged-with-running-ponzi-scheme

David B. Fein, United States Attorney for the District of Connecticut; Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation; and Robert Bethel, Inspector in Charge, U.S. Postal Inspection Service, Boston Division, today announced that FEISAL SHARIF, 42, of Branford, has been charged by criminal complaint with operating a scheme to defraud multiple investors of at least hundreds of thousands of dollars via a Ponzi scheme.

SHARIF was arrested yesterday at his Branford home. He appeared before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport and was released on $150,000 bond co-signed by family members. SHARIF also was ordered not to operate First Financial.

“We allege that this defendant operated a Ponzi scheme, using hundreds of thousands of dollars from victim-investors to pay other investors,” stated U.S. Attorney Fein. “I commend the FBI, U.S. Postal Inspection Service, CFTC, and Connecticut’s Department of Banking for their quick and expert work in shutting down this scheme. The investigation is ongoing, and I encourage any potential victims or anyone with information related to this scheme to contact law enforcement.”

Citizens with information that may be helpful to the investigation are encouraged to contact FBI Special Agent Mark Munster at (203) 777-6311.

As alleged in the criminal complaint, SHARIF ran an investment fraud scheme through First Financial, LLC, a firm he operated out of his Branford residence. SHARIF defrauded one victim after taking more than $400,000 of the victim’s funds to invest. As part of the scheme, SHARIF created and e-mailed bogus account statements to convince the victim that his $400,000 investment had appreciated to more than $2.2 million and that the funds were secure. A second victim who invested at least $225,000 with SHARIF received a bogus account statement stating an account balance of more than $1.8 million.

When SHARIF was unable to redeem all of the funds from the victim who had invested more than $400,000, SHARIF admitted to the victim that he had been running a Ponzi scheme, using new investor funds to pay out returns to other investors. The victim reported the fraud to the Federal Bureau of Investigation in July 2012.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

Federal Prosecutors Charge Glenn Lavon Gillman with Mail and Securities Fraud

Source- http://www.fbi.gov/birmingham/press-releases/2012/federal-prosecutors-charge-southside-man-with-mail-and-securities-fraud

BIRMINGHAM—Federal prosecutors today charged a Southside, Alabama man with running a fraudulent investment scheme through which he stole about $300,000 from investors, U.S. Attorney Joyce White Vance, FBI Acting Special Agent in Charge Robert E. Haley, III, U.S. Postal Inspector/Domicile Coordinator Frank Dyer, and Alabama Securities Commission Director Joseph P. Borg announced.

The U.S. Attorney’s Office charged Glenn Lavon Gillman, 75, with one count of mail fraud and one count of securities fraud in an information filed in U.S. District Court.

Count one charges Gillman with making false funding agreements and using the U.S. Postal Service to send those false investment statements to individuals who had invested their money with his business, G&G Financial Services. Count two charges Gillman with issuing false funding agreements as securities to various investors who were investing their personal funds with his business.

According to the charges against him, Gillman conducted his investment scheme as follows:

Between 2007 and 2010, Gillman operated a financial investment business known as G&G Financial Services. Individuals gave their money to Gillman with his representation that he would invest it with a third party who was familiar with the foreign exchange currency market. Gillman represented to the investors that they would receive substantial returns on their original investment within 60 to 90 days. In many instances, funding agreements and profit reports were mailed to investors and indicated that they had a security in these transactions and their accounts had profited.

When investors began asking to receive their profits or original investments, Gillman mailed them letters claiming their investments had been seized or stolen by other parties. A review of Gillman’s personal and business accounts determined that he never forwarded any investor money to a third party. Instead, Gillman used that money to pay other investors, purchase items for himself, or pay personal expenses. Through his fraudulent activities, Gillman stole nearly $300,000 from investors.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

David Romo Pleads Guilty To Defrauding Investors Of $6.9 Million

Source- http://www.justice.gov/usao/cae/news/docs/2012/09-2012/09-14-12Romo-.html

Sacramento developer David Romo, 42, of Folsom, pleaded guilty today to mail fraud, wire fraud, and money laundering related to a real estate investment scheme that defrauded investors of more than $6.9 million, United States Attorney Benjamin B. Wagner announced.

According to court documents, Romo, using his companies Sycamore Ventures LLC, Smarie Investments LLC, and Groupo Immobiliare LLC, solicited individuals to fund various real estate developments. Rather than using the monies for the intended purpose, Romo diverted funds to his own personal use and to pay unrelated prior business expenses. Romo told investors he had not suffered any adverse court actions, failing to disclose that he had been convicted of bank fraud in United States District Court in Sacramento in 2002. Court records indicate that Romo may have begun soliciting investors in the current scheme while he was on federal supervised release for his previous criminal conviction.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges New York Stock Exchange for Improper Distribution of Market Data

Source- http://www.sec.gov/news/press/2012/2012-189.htm

Washington, D.C., Sept. 14, 2012 — The Securities and Exchange Commission today brought first-of-its-kind charges against the New York Stock Exchange for compliance failures that gave certain customers an improper head start on trading information.

SEC Regulation NMS (National Market System) prohibits the practice of improperly sending market data to proprietary customers before sending that data to be included in what are known as consolidated feeds, which broadly distribute trade and quote data to the public. This ensures the public has fair access to current market information about the best displayed prices for stocks and trades that have occurred.

According to the SEC's order against NYSE, the exchange violated this rule over an extended period of time beginning in 2008 by sending data through two of its proprietary feeds before sending data to the consolidated feeds. NYSE's inadequate compliance efforts failed to monitor the speed of its proprietary feeds compared to its data transmission to the consolidated feeds.

NYSE and its parent company NYSE Euronext agreed to a $5 million penalty and significant undertakings to settle the SEC's charges. It marks the first-ever SEC financial penalty against an exchange.

"Improper early access to market data, even measured in milliseconds, can in today's markets be a real and substantial advantage that disproportionately disadvantages retail and long-term investors," said Robert Khuzami, Director of the SEC's Division of Enforcement. "That is why SEC rules mandate that exchanges give the public fair access to basic market data. Compliance with these rules is especially important given exchanges' for-profit business interests"

Daniel M. Hawke, Chief of the SEC Enforcement Division's Market Abuse Unit, added, "The violations at NYSE may have been technological, but they were not technical. Robust technology governance is just as important to preventing investor harm as any other compliance or supervisory function."

Robert W. Cook, Director of the SEC's Division of Trading and Markets, said, "Market data is the lifeblood of the national market system. Our rules require exchanges to distribute information on quotes and trades to the consolidated data processors on terms that are 'fair and reasonable' and 'not unreasonably discriminatory.'"

According to the SEC's order, NYSE violated Rule 603(a) of SEC Regulation NMS. The two NYSE proprietary data feeds at issue were Open Book Ultra — which sends real-time data about NYSE's entire order book — and PDP Quotes, which contains NYSE's quote for each security. The transmission disparities had several causes. An internal NYSE system architecture gave one of the data feeds a faster path to customers than the path used to send data to the consolidated feed. Also there was a software issue in the internal NYSE system that sent data to the consolidated feed. The disparities in data release times ranged from single-digit milliseconds to multiple seconds.

The SEC's order finds that NYSE's compliance department was not involved in important technology decisions, including the design, implementation, and operation of NYSE's market data systems. By not involving the compliance department at critical junctures, NYSE missed opportunities to avoid compliance failures. NYSE also failed to retain computer files that contained information about its transmission of market data, including the times that NYSE sent data to be included in the consolidated feed. These computer files related to NYSE's compliance with Rule 603(a), and NYSE's failure to retain them complicated its ability to determine when it experienced delays sending data and calculate the length of delays when they occurred.

The SEC's order finds that NYSE violated Rule 603(a) of Regulation NMS and the record retention provisions of Section 17(a)(1) of the Securities Exchange Act and Rule 17a-1, and NYSE Euronext, which supplied the personnel responsible for these systems and compliance, caused the violations. NYSE and NYSE Euronext agreed to a settlement without admitting or denying the Commission's findings. The order censures NYSE, imposes a $5 million penalty, and requires both NYSE and NYSE Euronext to cease and desist from committing or causing these violations. NYSE and NYSE Euronext are required to retain an independent consultant to conduct a comprehensive review of their market data delivery systems to ensure that they comply with Rule 603(a).

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Atlanta-Based Firm for Compliance Failures as Brokers Churned Customer Accounts

Source-  http://www.sec.gov/news/press/2012/2012-186.htm 

Washington, D.C., Sept. 10, 2012 – The Securities and Exchange Commission today charged three former brokers at an Atlanta-based brokerage firm for “churning” the accounts of customers with conservative investment objectives, causing severe investor losses while the brokers collected handsome fees.

The SEC also charged the head supervisor at JP Turner & Company, Michael Bresner, as well as the firm’s president William Mello and the firm itself for compliance failures. JP Turner and Mello agreed to settle the SEC’s charges, while an administrative proceeding will continue against the three brokers and the supervisor.

Churning is a fraudulent practice in which brokers disregard the customer’s investment objectives and engage in excessive trading for the purpose of generating commissions and other revenue for themselves or their firms. The SEC’s Enforcement Division alleges that brokers Ralph Calabro, Jason Konner, and Dimitrios Koutsoubos engaged in churning while they worked at JP Turner. They collectively generated commissions, fees, and margin interest totaling approximately $845,000 while the defrauded customers suffered aggregate losses of approximately $2.7 million.

“Broker-dealers’ supervisory systems must provide customers with reasonable protection from churning and similar abuses. JP Turner’s supervisory systems failed to do that,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office.

According to the SEC’s order instituting administrative proceedings against the three brokers and the supervisor, Calabro lives in Matawan, N.J. and Konner and Koutsoubos each live in Brooklyn, N.Y. They all work at different firms now. While at JP Turner, they collectively churned the accounts of seven customers with conservative investment objectives and low or moderate risk tolerances. The churning occurred between January 2008 and December 2009.

According to the SEC’s order, Bresner lives in Atlanta and is an executive vice president and the head of supervision at JP Turner. He is charged with failing to reasonably supervise Konner and Koutsoubos, who generated such high commissions for some of their churned customers that it triggered a requirement in the firm’s procedures requiring that Bresner personally review the underlying trading activity. However, Bresner failed to take appropriate action in response to the trading in these accounts despite several red flags.

Specifically, the SEC’s Enforcement Division alleges that Calabro, Konner, and Koutsoubos violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Bresner failed reasonably to supervise Konner and Koutsoubos with a view to preventing and detecting their violations.

The settled administrative order against JP Turner and Mello finds that they failed to implement adequate procedures to detect and prevent the fraudulent churning of customer accounts. Mello as president was ultimately responsible for establishing and implementing the firm’s supervisory policies and procedures designed to detect and prevent churning violations. Although JP Turner had a monitoring system to identify actively traded accounts, the system imposed few requirements and no meaningful guidance for supervisors to review these accounts and take meaningful action to investigate the trading activity.

In settling the SEC’s charges without admitting or denying the findings, JP Turner agreed to hire an independent consultant to review the firm’s supervisory procedures in order to prevent future violations. The SEC’s order censures JP Turner and requires payment of $200,000 in disgorgement (JP Turner’s approximate share of the commissions and fees generated by the fraudulent churning) plus $16,051 in prejudgment interest and a $200,000 penalty. The order suspends Mello from association in a supervisory capacity with a broker, dealer, or investment adviser for a period of five months and requires him to pay a $45,000 penalty.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net

SEC Charges Stephen B. Blankenship with Stealing Investor Funds to Pay Mortgage and Shopping Bills

Source-  http://www.sec.gov/news/press/2012/2012-188.htm 

Washington, D.C., Sept. 7, 2012 – The Securities and Exchange Commission today charged a broker and his company based in Danbury, Conn., with stealing at least $600,000 from customers who he persuaded to withdraw money from their brokerage accounts he managed at other firms and instead invest with him directly.

The SEC alleges that Stephen B. Blankenship lured about a dozen customers – including some retirees and others he met at church – into his scheme by assuring them they could obtain a greater rate of return on their money by transferring it to his firm, Deer Hill Financial Group. Blankenship claimed he was investing their money in established securities such as publicly-traded mutual funds. But in reality he made no investments and merely transferred customer money to his own bank account, and he misused it to pay his mortgage, travel, and grocery bills among other personal expenses. Blankenship also paid some business expenses and made Ponzi-like payments to other customers who requested a return of all or part of their investment.

In a parallel action, the U.S. Attorney's Office for the District of Connecticut today announced criminal charges against Blankenship.

"Blankenship took advantage of fellow churchgoers and senior citizens who relied on their savings for retirement and placed their trust in him," said David P. Bergers, Director of the SEC's Boston Regional Office. "He betrayed that trust by using their money to make personal credit card payments and home improvements."

According to the SEC's complaint filed in the U.S. District Court for the District of Connecticut, most of the investors deceived by Blankenship became his brokerage customers at Santa Monica-based Syndicated Capital and later at Melville, N.Y.-based Vanderbilt Securities. Some had been his customers for as long as two decades. Beginning in at least 2002, Blankenship took advantage of those longstanding relationships and began convincing customers to withdraw money from their brokerage accounts at those firms with promises that he could achieve a greater rate of return for them directly by investing their money through Deer Hill.

The SEC alleges that in order to conceal his scheme, Blankenship often created fake account statements that falsely represented that he had invested their money in a variety of investments. The purported account statements were printed on Deer Hill letterhead and provided to customers. In all instances, the investments described on the account statements did not exist.

The SEC's complaint alleges that Deer Hill and Blankenship violated the antifraud provisions of the federal securities laws and acted as unregistered brokers. The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, monetary penalties, and the entry of a permanent injunction against Deer Hill and Blankenship, who lives in New Fairfield, Conn.

Based on the same misconduct, the U.S. Attorney's Office for the District of Connecticut charged Blankenship with criminal violations. The Connecticut Department of Banking's Securities Division has obtained, by consent, a revocation of Blankenship's registration and has barred Blankenship and Deer Hill from operating in Connecticut. The SEC thanks the U.S. Attorney's Office for the District of Connecticut, the Connecticut Department of Banking's Securities Division, and the police department in Danbury, Conn., for their assistance in this matter.

************************************************************************

Report Securities Fraud by Calling 1-888-482-6825 or by visiting

www.reportsecuritiesfraud.net