SEC Charges Kurt HovanFor Defrauding Clients and Falsifying Documents During SEC Exam

Source- http://www.sec.gov/litigation/litreleases/2011/lr22107.htm

Washington, D.C., Sept. 28, 2011 – The Securities and Exchange Commission today charged a San Francisco-area investment adviser with fraud for lying to clients about how brokerage commission rebates were being used and producing phony documents to cover up the fraud during an SEC examination.

The SEC alleges that Kurt Hovan misappropriated more than $178,000 in “soft dollars” that he falsely claimed to be using to pay for legitimate investment research on his clients’ behalf. In reality, Hovan was secretly funneling the money for such undisclosed uses as office rent, computer hardware, and his brother’s salary. When SEC examination staff asked Hovan to provide documentation to back up his claims, he created phony research reports.

The SEC also charged his wife Lisa Hovan and his brother Edward Hovan for their roles in the fraudulent scheme at Hovan Capital Management (HCM).

Soft dollars are credits or rebates from brokerage firms on commissions paid by clients for trades executed in the client accounts of an investment adviser. If appropriately disclosed, an investment adviser may retain the soft dollar credits to pay for a limited category of brokerage and research services that benefit clients.

According to the SEC’s complaint filed in federal court in San Francisco, Kurt and Lisa Hovan falsely disclosed to clients that HCM would use soft dollars only for certain research services. Instead, they used $166,667 in soft dollars to pay Edward Hovan’s salary over a 10-month period in 2008 and 2009. To cover up these payments, the three Hovans created a shell company – “Bolton Research” – secretly controlled by Edward Hovan. Through this company, the Hovans invoiced HCM’s brokerage firms for research services that had never been rendered. Once Edward Hovan received the payments, he kicked back approximately 40 percent ($65,000) to Kurt and Lisa Hovan to pay the office rent. The SEC further alleges that Kurt and Lisa Hovan instructed a research provider paid with soft dollars to pad its invoices by $12,000 and kick back this amount to help HCM pay for a new computer server.

During a January 2010 examination of HCM, the SEC staff asked HCM to provide copies of the research reports prepared by Bolton Research in exchange for the soft dollar payments. In response, Kurt Hovan quickly drafted numerous research reports and doctored materials to make them appear as if they had been prepared by Bolton. Hovan provided these phony documents to SEC examiners.

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SEC Charges Corey Ribotsky and his firm The NIR Group LLC with Fraud Involving PIPE Transactions

Source- http://www.sec.gov/news/press/2011/2011-194.htm

The SEC alleges that Corey Ribotsky and his firm The NIR Group LLC repeatedly lied to investors to hide the truth that his PIPE investment and trading strategy was failing during the financial crisis. For example, Ribotsky falsely told investors that despite the adverse market conditions he could liquidate all of the PIPE investments in 36 to 48 months — a practical impossibility given the size of the investments. Meanwhile, Ribotsky misused investor money by writing checks to pay for personal services and such luxury items as a Lexus, Mercedes, and Rolex watch.

“In a classic betrayal of trust, Ribotsky stole from his investors and falsely assured them that his struggling hedge funds were thriving,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This enforcement action reflects our continuing commitment to bring to justice individuals and companies that committed fraud during the credit crisis.”

A “PIPE” transaction involves “private investment in public equity.” Microcap public companies often engage in PIPE transactions to raise capital. According to the SEC’s complaint filed in federal district court in Brooklyn, N.Y., NIR’s family of AJW Funds provided cash financing to distressed, emerging growth, and start-up microcap companies quoted on the Over-the-Counter Bulletin Board or the Pink Sheets. The AJW Funds were typically invested in 120 to 130 different companies at any given time.

The SEC alleges that beginning in July 2004, Ribotsky began siphoning assets from one of the AJW Funds he was managing through NIR. Ribotsky typically wrote checks to himself or to “cash” and then instructed NIR office employees to cash the checks at a nearby bank. They would then give Ribotsky the money. Although Ribotsky was warned by NIR’s head accountant that he could not lawfully take this money for himself, Ribotsky continued to do so anyway for the next five years.

According to the SEC’s complaint, NIR’s strategy of investing in distressed and start-up companies began to show signs of failure by mid-to-late 2007. Many of the distressed companies to which the AJW Funds had made loans were by then essentially defunct or on the verge of filing for bankruptcy. The SEC alleges that Ribotsky made false and misleading statements to investors while his hedge funds were struggling to create the illusion of success. For instance, an NIR employee — who also is charged in the SEC’s complaint — prepared an investor chart accurately showing that NIR had invested a total of $31.4 million in 57 deals for the relevant period. When Ribotsky reviewed the chart, he told the employee that “investors can’t see this” and instructed him to “change the number to something near $60 million” before sending it to investors so they would falsely see an average investment of at least $1 million per deal. Ribotsky continued to make false and misleading statements to investors even after the AJW Funds’ outside auditor had calculated that it would take decades — if possible at all — to liquidate all of the AJW Funds’ PIPE investments under NIR’s stated investment and trading strategy.

The SEC further alleges that Ribotsky used money from one group of investors to pay another group of investors in 2007 without adequately disclosing this to any of the investors. Ribotsky’s misconduct also included his failure to conduct any meaningful due diligence before selling a third party $43.2 million of AJW Funds assets in November and December 2008 — a transaction that allowed Ribotsky to book a purported “realized” gain at a critical time without his funds actually receiving any money. NIR’s offering materials and investor communications touted that NIR engages in extensive due diligence reviews before making investment decisions on behalf of the AJW Funds. The third-party purchaser soon defaulted on his payment obligations and has never paid for any of the assets.

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SEC Charges RBC Capital Markets in Sale of Unsuitable CDO Investments to Wisconsin School Districts

Source- http://www.sec.gov/news/press/2011/2011-191.htm

According to the SEC’s order instituting administrative proceedings, RBC Capital marketed and sold to trusts created by the school districts $200 million of credit-linked notes that were tied to the performance of synthetic collateralized debt obligations (CDOs). The school districts contributed $37.3 million of district funds to the investments with the remainder of the investment coming from funds borrowed by the trusts. The sales took place despite significant concerns within RBC Capital about the suitability of the product for municipalities like the school districts. Additionally, RBC Capital’s marketing materials failed to adequately explain the risks associated with the investments.

RBC Capital agreed to settle the SEC’s charges by paying a total of $30.4 million that will be distributed in varying amounts to the school districts through a Fair Fund.

Last month, the SEC separately charged St. Louis-based brokerage firm Stifel, Nicolaus & Co. and a former senior executive with fraudulent misconduct in connection with the same sale of the CDO investments to the school districts.

“RBC failed Securities 101 when it sold complex derivatives that were unsuitable to five school districts without fully informing them of the risks,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Kenneth R. Lench, Chief of the SEC Division of Enforcement’s Structured and New Products Unit, added, “RBC Capital did not provide these school districts with full and accurate information regarding the risks of these complex structured products. We are pleased that today’s settlement will result in a significant recovery by the school districts.”

According to the SEC’s order, the five school districts are Kenosha Unified School District No. 1, Kimberly Area School District, School District of Waukesha, West Allis-West Milwaukee School District, and School District of Whitefish Bay. The board members and business managers for the school districts had no prior experience investing in CDOs or instruments tied to CDOs. Compared to the typical buyers of instruments tied to CDOs, the school districts were not sophisticated investors. The SEC’s order finds that the school districts lacked sufficient knowledge and sophistication to appreciate the nature of such investments.

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SEC Charges Quant Manager Barr M. Rosenberg with Fraud

Source- http://www.sec.gov/news/press/2011/2011-189.htm

Washington, D.C., Sept. 22, 2011 — The Securities and Exchange Commission today charged the co-founder of institutional money manager AXA Rosenberg with securities fraud for concealing a significant error in the computer code of the quantitative investment model that he developed and provided to the firm's entities for use in managing client assets.

According to the SEC's order instituting administrative proceedings against Barr M. Rosenberg, he learned of the error in June 2009 but directed others to keep quiet about it and not fix it immediately. Rosenberg denied the existence of any significant errors in the model during an October 2009 board meeting discussion about its performance. AXA Rosenberg disclosed the error to SEC examination staff in late March 2010 after being informed of an impending SEC examination. The error was not disclosed to clients until April 2010, causing them $217 million in losses.

Rosenberg has agreed to settle the SEC's charges by paying a $2.5 million penalty and consenting to a lifetime securities industry bar. The SECpreviously charged AXA Rosenberg and its affiliated investment advisers, and they agreed to pay $217 million to harmed clients plus a $25 million penalty.

"Rosenberg chose concealment over candor, and in doing so selfishly served his interests over those of his clients," said Robert Khuzami, Director of the SEC's Division of Enforcement.

Bruce Karpati, Co-Chief of the Asset Management Unit in the SEC's Division of Enforcement, added, "Investors in quant funds trust their advisers to develop, maintain and operate the quant models that drive a fund's performance. Rosenberg betrayed investors when he failed to disclose the material coding error."

According to the SEC's order, Rosenberg created the model, oversaw research projects to improve and enhance it, and exercised significant authority throughout the AXA Rosenberg organization. The material error in the model's computer code disabled one of its key components for managing risk and affected the model's ability to perform as expected. Clients raised concerns about this underperformance, and Rosenberg knew about and discussed these concerns with others at AXA Rosenberg. But instead of disclosing and correcting the error immediately, Rosenberg directed others to conceal the error and declined to fix the error.

The SEC's order found that due to Rosenberg's misconduct, AXA Rosenberg and its affiliated investment advisers misrepresented to clients that the model's underperformance was attributable to factors other than the error, and inaccurately stated that the model was controlling risk correctly. Rosenberg's instructions to delay fixing the error caused additional client losses.

In its order, the SEC found that Rosenberg willfully violated anti-fraud provisions of the Investment Advisers Act of 1940, Sections 206(1) and 206(2). Without admitting or denying the SEC's findings, Rosenberg consented to the entry of an SEC order that requires him to cease and desist from committing or causing any violations and any future violations of these provisions; orders him to pay the $2.5 million penalty; and bars him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and prohibits him from serving as an officer, director or employee of a mutual fund.

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Former NBA Player and CEO of The George Group Charged in Ponzi Scheme

Source- http://www.fbi.gov/newark/press-releases/2011/former-nba-player-and-ceo-of-the-george-group-charged-in-ponzi-scheme?utm_campaign=email-Immediate&utm_medium=email&utm_source=newark-press-releases&utm_content=33403

NEWARK, NJ—C. Tate George, former NBA basketball player and the chief executive officer (CEO) of purported real estate development firm The George Group, surrendered this morning to federal authorities for allegedly orchestrating a more than $2 million investment fraud scheme, U.S. Attorney Paul J. Fishman announced.

George, 43, of Newark, surrendered in Newark to special agents of the FBI and postal inspectors of the U.S. Postal Inspection Service (USPIS) on a criminal complaint charging him with one count of wire fraud. He is scheduled to appear this afternoon before U.S. Magistrate Judge Patty Shwartz in Newark federal court.

According to the criminal complaint unsealed today:

George, who once played for the New Jersey Nets and Milwaukee Bucks, held himself out as the CEO of The George Group, claiming to have more than $500 million in assets under management. George pitched prospective investors, including several former professional athletes, to invest with the firm. George represented to these prospective investors that their money would be used to fund The George Group’s purchase and development of real estate development projects, including projects in Florida, Illinois, Connecticut, and New Jersey. George represented to some prospective investors that their funds would be held in an attorney escrow account and personally guaranteed the return of their investments, with interest.

Based on George’s representations, investors invested more than $2 million in The George Group between 2005 and March 2011, which he deposited in both the firm’s and his personal bank account. Instead of using investments to fund real estate development projects as promised, George used the money from new investors to pay existing investors in Ponzi scheme fashion. He also used some of the money for home improvement projects, meals at restaurants, clothing and gas. In reality, The George Group had virtually no income generating operations.

If convicted, George faces a maximum potential penalty of 20 years in prison and a $250,000 fine.

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Richard T. Brunsman Jr. Sentenced to 12 Years in Prison for $50 Million Fraud

Source- http://www.fbi.gov/cincinnati/press-releases/2011/owner-of-brunsman-companies-sentenced-to-12-years-in-prison-for-50-million-fraud?utm_campaign=email-Immediate&utm_medium=email&utm_source=cincinnati-press-releases&utm_content=33423

CINCINNATI—Richard T. Brunsman Jr., 45, of Cincinnati was sentenced in United States District Court to 144 months in prison for fraudulently obtaining more than $62 million in loans from 18 different federally insured banks for his companies. Brunsman was ordered to repay the banks $49,742,343.16 in restitution, which represents the amount they lost.

Carter M. Stewart, United States Attorney for the Southern District of Ohio, and Edward J. Hanko, Special Agent in Charge, Federal Bureau of Investigation, Cincinnati (FBI), announced the sentence imposed today by Chief U.S. District Judge Susan Dlott.

Brunsman applied for the loans between 2004 and 2010 claiming the money would be used for one or more of the approximately 20 solely owned businesses he had. He created numerous false documents including false financial statements and other documents for his companies in order to obtain the loans.

Analysis of his bank records during the investigation found that he used the money he fraudulently obtained to live an expensive lifestyle that included a large house in Cincinnati, a waterfront condo in Florida, and a large yacht. He took numerous trips, including trips to California and Las Vegas, and enjoyed entertaining.

Brunsman became engaged in so many businesses, real estate purchases, and other investments that he lost significant funds in these ventures. When banks expressed concern about signs of fraud in the loans, Brunsman responded by fraudulently obtaining more loans from other lenders to pay off the loans at the banks that were asking questions.

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Euirang “Chris” Hwang Sentenced for Operating $8.5 Million Ponzi Scheme that Targeted Korean American Community

Source- http://www.fbi.gov/losangeles/press-releases/2011/irvine-businessman-sentenced-for-operating-8.5-million-ponzi-scheme-that-targeted-korean-american-community?utm_campaign=email-Immediate&utm_medium=email&utm_source=los-angeles-press-releases&utm_content=32722

A man who operated a Ponzi scheme that targeted members of the Korean American community was sentenced Monday to 78 months in prison, announced André Birotte Jr., the United States Attorney for the Central District of California, and Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office.

Euirang “Chris” Hwang, 38, received the sentence from United States District Judge James Selna. On December 7, 2010, Hwang pleaded guilty to federal wire fraud charges relative to his role in the investment scheme in which approximately $8.5 million was collected from 65 victims throughout California. In addition, Judge Selna ordered Hwang to pay $7,003,654.00 in restitution.

On March 9, 2010, Hwang, a naturalized United States citizen, and co-defendant, Sang Yi, were arrested by the FBI at a home in Corona. The couple was charged with four counts of wire fraud in an indictment returned in U.S. District Court in Santa Ana on February 3, 2010. Hwang was the founder and chairman of Irvine-based investment firm, Pinupito. Hwang and Yi have been incarcerated since their arrest.

Hwang and Yi promised investors annual returns of up to 45 percent with false representations that Pinupito generated income by buying and developing smaller companies in Korea, then selling them for a large profit. Investors were falsely told that Hwang was a billionaire and that his profitable company had extensive holdings in Korean businesses and real estate. The money collected from investors was not used to finance Pinupito’s operations, but rather was used to pay for, among other things, luxury car leases, personal expenses and returns to existing investors. The defendants marketed Pinupito to members of the Korean-American community, soliciting some investors during meetings held at Korean-language churches.

During the sentencing hearing, victims addressed the court to relate how the scheme has adversely affected their lives and financial situations.

Yi, a South Korean citizen, was the president and secretary of Pinupito, and exercised control over Pinupito’s finances and bank accounts. Yi pleaded guilty in January 2011 to federal wire fraud charges and is scheduled to be sentenced in 2011.

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Moises Pacheco Sentenced to Prison for Operating a Ponzi Scheme and Mortgage Loan Fraud that Lost More Than $9 Million

Source- http://www.fbi.gov/sandiego/press-releases/2011/investment-adviser-sentenced-to-prison-for-operating-a-ponzi-scheme-and-mortgage-loan-fraud-that-lost-more-than-9-million?utm_campaign=email-Immediate&utm_medium=email&utm_source=san-diego-press-releases&utm_content=32470

United States Attorney Laura E. Duffy announced today that Moises Pacheco, formerly the owner and operator of several investment businesses in Chula Vista, California, was sentenced to 51 months in prison for his role in a wide-ranging investment and mortgage fraud enterprise that victimized over 150 individuals and financial institutions between 2005 and 2008. Pacheco had pled guilty in March 2010 to conspiring to commit mail fraud, wire fraud, and bank fraud and received his sentence today from United States District Judge Jeffrey T. Miller. Judge Miller ordered Pacheco to return to court on November 18, 2011, when a final restitution figure will be set and Pacheco will be taken into custody.

According to court documents, prior to 2005, Pacheco worked with his high-school friend Matthew “Beau” La Madrid in various investment businesses that solicited individual investors and brokered mortgage loans. Pacheco left La Madrid’s businesses in approximately 2005 and opened an office on Bonita Road in Chula Vista that encouraged people in the community to invest in his stock trading program and use his mortgage brokerage services. Between 2005 and 2008, Pacheco raised more than $14.7 million from over 150 investors in his “AP Premium Value” family of funds by promising to use investor money to purchase stocks and generate income from the sale of “covered call” stock options. Although Pacheco did not earn enough money to make the promised payments, he continued to make periodic payments to investors and obtain new clients. Instead of notifying his clients that the funds were not performing well, Pacheco paid prior investors’s returns with new investors’ funds—effectively converting his family of funds into a Ponzi scheme. In September 2007, with losses mounting at the AP Premium Value funds, Pacheco fraudulently diverted $3 million of client money to a risky investment promoted by La Madrid, all of which was lost. During much of the time, Pacheco sent his clients false and misleading account statements that did not account for how their money was being spent or disclose the stagging losses he was suffering.

Additionally, as set forth in court filings, Pacheco was a principal in the Real Estate Investment Group (REIG) that was used to fraudulently obtain millions of dollars from investors by falsely promising to secure real estate investments with promissory notes and recorded deeds of trust. In reality, the deeds of trusts were either not recorded or improperly recorded, causing victims to lose their investments when the properties purportedly securing the notes were sold or foreclosed upon.

According to sentencing documents, Pacheco oftentimes funded his Ponzi scheme and real estate fraud by fraudulently securing mortgage loans. Among other things, the fraudulent loan applications listed false employers and incomes, as well as false and inflated assets, and misrepresented that borrowers would occupy the residences when they actually were intended as investment properties. Based on these misrepresentations and others, lenders funded the loans and eventually lost vast sums when the properties went into foreclosure. In total, Pacheco cheated more than 190 victims out of more than $9 million. Many of his clients funded their investments by refinancing their houses and taking money from their retirement savings. When Pacheco’s scheme unraveled, scores of victims lost their homes and their financial futures. Several of those victims spoke during the sentencing hearing and tearfully explained how Pacheco’s fraud had ruined them financially and emotionally.

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Daren Palmer formerly of Idaho Falls, Sentenced in $29 Million Loss Ponzi Scheme

Source- http://www.fbi.gov/saltlakecity/press-releases/2011/idaho-falls-man-sentenced-in-29-million-loss-ponzi-scheme?utm_campaign=email-Immediate&utm_medium=email&utm_source=salt-lake-city-press-releases&utm_content=32814

POCATELLO—Daren Palmer, 42, formerly of Idaho Falls, was sentenced in federal court today to eight years in prison for his role in a Ponzi investment scheme in which investors lost over $29 million, U.S. Attorney Wendy J. Olson announced. U.S. District Judge Edward J. Lodge ordered Palmer to pay $29,842,731 in restitution. Following his release from prison, Palmer must serve three years on supervised release and perform 200 hours of community service. Palmer entered a guilty plea to charges of wire fraud and money laundering in May 2011.

The information to which Palmer pled guilty alleged that from 2002 through December 2008, Palmer owned and operated Trigon Group LLC in Idaho Falls, and solicited clients to invest money in the Trigon Group. In the plea agreement, Palmer admitted that in September 2008 he solicited a client to invest $500,000 with Trigon, promising the client a favorable rate of return and a safe investment. Palmer did not tell the client that he would use the invested funds to pay other investors or that Trigon was already in financial trouble. The plea agreement further states that between 2002 and December 2008, Palmer received approximately $75.8 million from 68 investors, who then lost more than $20 million.

In the plea agreement, Palmer also acknowledged that he laundered money by using funds from the Trigon bank account to make a personal purchase of $110,550 from a jewelry store.

 “Today’s sentence is a fair and just punishment for the irreparable and lasting harm Daren Palmer caused to his investors,” said Olson. “While Mr. Palmer will spend eight years in a federal prison, his defrauded investors will spend the rest of their lives trying to recover financially. I commend the thorough and painstaking investigation by the federal agencies involved and by Pocatello branch chief Jack Haycock.”

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Fourth Defendant Charged in Insider Trading Scheme Involving Former Citigroup Investment Banker

Source- http://www.fbi.gov/sanfrancisco/press-releases/2011/fourth-defendant-charged-in-insider-trading-scheme-involving-former-citigroup-investment-banker?utm_campaign=email-Immediate&utm_medium=email&utm_source=san-francisco-press-releases&utm_content=32606

SAN FRANCISCO—A federal grand jury in San Francisco charged Bassam Yacoub Salman, 52, of Orland Park, Ill., with conspiracy and securities fraud relating to an insider trading scheme in which he made profits in excess of $1.1 million, United States Attorney Melinda Haag announced.

The indictment, which was unsealed today, stems from the insider trading scheme first charged in 2009 against Maher Fayez Kara, of San Carlos, Calif., a former investment banker at Citigroup Global Markets Inc. in New York; Maher Kara’s brother, Mounir Fayez Kara, also known as Michael F. Kara, of Walnut Creek, Calif.; and Emile Youssef Jilwan, of Pleasanton, Calif.

According to the indictment, Maher Kara misappropriated material, non-public information about confidential corporate acquisitions, financings and other transactions in New York, in violation of his fiduciary duty and duty of trust and confidence to Citigroup and its clients. He then tipped his brother, Mounir Kara, about the confidential transactions. Mounir Kara then tipped Salman, who is charged with trading on the material, non-public information in the securities four publicly traded biotechnology companies from 2005 through 2007.

Citigroup was one of the victims of the charged criminal conduct and has cooperated in the investigation conducted by the United States Attorney’s Office and the Federal Bureau of Investigation.

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Leawood, Kan., Attorney and a Real Estate Speculator Plead Guilty to $52 Million Ponzi Scheme

Source- http://www.fbi.gov/stlouis/press-releases/2011/kansas-attorney-british-real-estate-speculator-plead-guilty-to-52-million-ponzi-scheme?utm_campaign=email-Immediate&utm_medium=email&utm_source=st-louis-press-releases&utm_content=32516

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that a Leawood, Kan., attorney and a real estate speculator in the United Kingdom pleaded guilty in federal today to their roles in a fraud conspiracy that stole more than $52 million from their victims.

James Scott Brown, 66, of Leawood, and Derek J. Smith, 67, of Oxfordshire in the United Kingdom, pleaded guilty in separate appearances in the U.S. District Court in St. Louis, Mo., before U.S. Chief District Judge Linda R. Reade, Northern District of Iowa, to the charges contained in an April 28, 2011, federal indictment.

Brown and Smith each pleaded guilty to participating in a conspiracy to commit wire and mail fraud. During a 10-year period from 2000 to 2010, investors in the United States loaned a total of $52.5 million to Smith and co-conspirators through a Ponzi scheme that was known as the British Lending Program (BLP). Victims believed they were loaning money for legitimate real estate development projects, but in reality, most of their money was kept by co-conspirators (or used to pay interest and principal to other lenders).

Brown, an attorney, practiced law in England for several years prior to 2000. Brown also participated in the UMKC program at Oxford University. Between 2000 and 2010, Brown did not actively practice law; instead, Brown’s primary occupation was the BLP, from which he took substantial fees. Brown did business as British American Group and as J. Scott Brown and Associates.

Smith was a structural engineer and a business and real estate speculator/developer who resided near London, England. Smith did business as Princess Hotels Management and as Distinctive Properties. Smith was previously successful, but during the 1990s he acquired distressed hotel properties which were not profitable due to a recession in the English real estate market. By the end of the 1990s, Smith was in need of capital to maintain his ownership of several small hotels which were not trading profitably and to support his retention of several options to purchase land.

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Janamjot Singh Sodhi Arrested for $2.4 Million Investment Fraud Scheme

Source- http://www.fbi.gov/sacramento/press-releases/2011/former-california-businessman-arrested-for-2.4-million-investment-fraud-scheme?utm_campaign=email-Immediate&utm_medium=email&utm_source=sacramento-press-releases&utm_content=32254

FRESNO, CA—Janamjot Singh Sodhi, aka Jimmy Singh, was arrested yesterday on an outstanding warrant issued on Sept. 13, 2011, for an investment fraud scheme, announced U.S. Attorney Benjamin B. Wagner. Sodhi, 35, of Fresno and Clovis, Calif., is scheduled to make his initial appearance in federal court today before U.S. Magistrate Judge Gary S. Austin at 1:30 p.m.

According to the complaint, beginning in April 2010 and continuing until his arrest, Sodhi, former owner of Elite Financial Inc., enticed investors into giving him money for investment opportunities, but used the monies to pay off previous investors and for his own personal use. Since 2005, Sodhi’s license to sell investments had been revoked, and in January 2009, the state of California issued a cease and desist order against him and Elite Financial from selling securities to investors. It is alleged that Sodhi defrauded investors of $2.4 million.

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Manosha Karunatilaka Sentenced in Manhattan Federal Court to 18 Months in Prison for Conspiring to Engage in Insider Trading

Source- http://www.fbi.gov/newyork/press-releases/2011/former-technology-company-account-manager-sentenced-in-manhattan-federal-court-to-18-months-in-prison-for-conspiring-to-engage-in-insider-trading?utm_campaign=email-Immediate&utm_medium=email&utm_source=new-york-press-releases&utm_content=32258

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that MANOSHA KARUNATILAKA was sentenced yesterday in Manhattan federal court to 18 months in prison for conspiring to participate in an insider trading scheme in which he defrauded a public company to obtain material, non-public information (“Inside Information”) and provided that information to members of the investment community for the purpose of executing securities transactions.

KARUNATILAKA participated in the insider trading conspiracy while working as an account manager for Taiwan Semiconductor Manufacturing Company, Ltd. (“TSMC”). He pled guilty to one count of conspiracy to commit securities fraud and wire fraud on May 11, 2011. U.S. District Judge JED S. RAKOFF imposed yesterday’s sentence.

According to the information, a complaint previously filed in this case, and statements made during the guilty plea proceeding:

Between 2008 and 2010, KARUNATILAKA and his co-conspirators participated in a conspiracy to obtain Inside Information, including TSMC product sales and shipping information. They used an “expert networking” firm (the “Firm”) for the purpose of facilitating “consultation calls,” during which KARUNATILAKA provided the Inside Information to Firm clients. Between January 2008 and June 2010, the Firm paid KARUNATILAKA more than $35,000 for his consultation calls.

On October 8, 2009, for example, KARUNATILAKA had a telephone conversation with a technology analyst at a financial institution in New York, New York, during which he provided material non-public information about TSMC and TSMC’s customers, in violation of his fiduciary and other duties of trust and confidence to TSMC.

In his plea agreement, KARUNATILAKA admitted that, based on his participation in the conspiracy, the Inside Information he provided to others resulted in trading gains of more than $1 million.

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Manhattan U.S. Attorney Charges Scott Allen and John Bennet, with Insider Trading Scheme That Reaped More Than $2.6 Million in Illegal Profits

Source- http://www.fbi.gov/newyork/press-releases/2011/manhattan-u.s.-attorney-charges-former-consultant-and-former-investment-professional-with-insider-trading-scheme-that-reaped-more-than-2.6-million-in-illegal-profits?utm_campaign=email-Immediate&utm_medium=email&utm_source=new-york-press-releases&utm_content=31956

PREET BHARARA, the United States Attorney for the Southern District of New York, and JANICE K. FEDARCYK, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of charges against SCOTT ALLEN, a former consultant at a global human resources consulting firm (the “Consulting Firm”), and JOHN BENNETT, an independent film producer and former investment professional, for engaging in an insider trading scheme that reaped more than $2.6 million in illegal profits.

Manhattan U.S. Attorney PREET BHARARA stated: “As alleged in today’s complaint, Scott Allen and John Bennett were old friends who chose to profit from that friendship by breaking the law. Illegal insider trading has become all too commonplace in all too many quarters, and we will continue our efforts to prosecute and punish those who flout the securities laws.”

FBI Assistant Director in Charge JANICE K. FEDARCYK stated: “Today’s charges mark yet another instance of shameless profit-driven peddling of insider information. The lengths to which they went to conceal the cash-for-information exchange is the clearest indication these defendants knew what they were doing was criminal. The FBI will continue to scrutinize conduct—and root out misconduct—in securities transactions.”

According to the complaint unsealed today in Manhattan federal court:

In his role as a principal of the Consulting Firm, ALLEN learned material, non-public information (the “Inside Information”) concerning the April 2008 acquisition of Millennium Pharmaceuticals, Inc. (“Millenium”), by Takeda Pharmaceutical Company Limited, and the September 2009 acquisition of Sepracor, Inc. (“Sepracor”), by Dainippon Sumitomo Pharma Co., Ltd. Prior to the public announcements of those acquisitions, ALLEN disclosed the Inside Information to BENNETT, a longtime friend, and BENNETT, in turn, reaped over $1.1 million in illegal profits from securities transactions he executed based on the Inside Information.

For example, between February 29, 2008, and April 2, 2008, BENNETT purchased approximately 1,090 Millennium call options at a total cost of approximately $17,000. Following the public announcement of the Millennium acquisition on April 10, 2008, Millennium’s stock price rose approximately 50 percent, and BENNETT sold all of his call options for approximately $619,000. Additionally, between May 27, 2009, and July 22, 2009, BENNETT purchased approximately 1,700 Sepracor call options at a total cost of approximately $227,000. Following the public announcement of the Sepracor acquisition on September 3, 2009, Sepracor’s stock price rose approximately 26 percent, and BENNETT sold all 1,100 of his unexpired call options for approximately $682,000.

BENNETT also disclosed the Inside Information he had learned from ALLEN to a co-conspirator (“CC-1”) who executed securities transactions in Millennium and Sepracor securities in advance of the public announcement of their respective acquisitions. The combined illegal profits from the trading of BENNETT and CC-1 in Millennium and Sepracor securities exceeded $2.6 million.

In exchange for providing the Inside Information, ALLEN received more than $100,000 in cash payments from BENNETT. These cash payments were delivered in person, on more than 20 occasions between April 21, 2008, and August 16, 2010.

Moreover, in addition, ALLEN and BENNETT undertook efforts to conceal the insider trading scheme from authorities and to avoid detection. For example, in October 2010, when interviewed at his home by FBI agents, ALLEN falsely claimed that he had not spoken to BENNETT in three or four years when, in fact, he had met with and spoken to BENNETT repeatedly through at least July 2010. Rather than use his cell phone or another phone that was traceable to him, ALLEN repeatedly communicated with BENNETT in person and contacted him by using a public phone at LaGuardia Airport.

ALLEN, 45, of Atlanta, Georgia, and BENNETT, 48, of Norwalk, Connecticut, both surrendered to authorities earlier this morning. ALLEN is expected to appear later today in Magistrate Court in the Northern District of Georgia, and BENNETT is expected to appear later today in Magistrate Court in the Southern District of New York.

ALLEN and BENNETT are each charged with one count of conspiracy to commit securities fraud and two counts of securities fraud. They each face a maximum penalty of five years in prison on the conspiracy charge and 20 years in prison on each of the securities fraud charges. In addition, with respect to the conspiracy charge, they face a maximum fine of $250,000 or twice the gross gain or loss derived from the crimes. For each of the securities fraud charges, the defendants face a maximum fine of $5 million or twice the gross gain or loss derived from the crime.

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Joseph Seto and Zisen Yu Plead Guilty in Federal Court in San Francisco to Insider Trading Scheme

Source- http://www.fbi.gov/sanfrancisco/press-releases/2011/two-bay-area-men-plead-guilty-to-insider-trading-scheme?utm_campaign=email-Immediate&utm_medium=email&utm_source=san-francisco-press-releases&utm_content=30863

SAN FRANCISCO—Joseph Seto and Zisen Yu pleaded guilty in federal court in San Francisco yesterday to conspiracy to commit insider trading, United States Attorney Melinda Haag announced.

In pleading guilty, Seto and Yu admitted that in early 2008 they received material, non-public information from Chen Tang, who at that time was the CFO of a private equity fund. Through his position, Tang had learned that Tempur-Pedic International, Inc., was going to pre-announce earnings news and that Tang’s employer planned to purchase a large stake in Tempur-Pedic. Tang disclosed that information to Seto and Yu, who then invested based on Tang’s unauthorized disclosures. Seto and Yu made approximately $2 million as a result of their trading on the insider information. In April 2010, Tang pleaded guilty to one count of conspiracy and one count of insider trading based on his role in this scheme.

“This case addresses investment professionals misappropriating insider information to gain an unfair advantage in the market,” United States Attorney Melinda Haag said. “My office takes these crimes seriously and works hard to protect the markets from fraud.”

Seto, 41, of San Francisco, and Yu, 43, of Fremont, Calif., were charged in an information with one count of conspiracy to commit insider trading in violation of Title 18, United States Code, Section 371. Pursuant to their plea agreements, Seto and Yu pleaded guilty to that charge.

Seto and Yu remain out of custody on bail. A sentencing date has not been set. The next court date is scheduled for Sept. 15, 2011, before Judge Jeffrey S. White in San Francisco. The maximum statutory penalty for conspiracy is five years of imprisonment and a $250,000 fine. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

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Drew Savitch Levin Pleads Guilty in Multi-Million-Dollar Stock Fraud and Scheme to Bilk Investor

Source- http://www.fbi.gov/losangeles/press-releases/2011/entertainment-executive-pleads-guilty-in-multi-million-dollar-stock-fraud-and-scheme-to-bilk-investor?utm_campaign=email-Immediate&utm_medium=email&utm_source=los-angeles-press-releases&utm_content=30548

LOS ANGELES—A Hollywood producer who founded and ran various television production and distribution companies pleaded guilty today to federal charges in two cases—one involving stock fraud and another stemming from a scam that bilked an investor in one of the companies.

Drew Savitch Levin, 57, of Pacific Palisades, pleaded guilty this afternoon in the first case to conspiring to inflate the revenue and stock price of Team Communications Group, Inc., a West Los Angeles-based company that Levin founded and for which he served as CEO until early 2001.

After being forced out of Team, Levin went on to run other TV production companies. In the second case, Levin pleaded guilty this afternoon to wire fraud and admitted he bilked a French investor who put 80,000 Euros into a Levin-run company in 2008. When Levin failed to repay the money, the investor commenced legal proceedings, which prompted Levin to e-mail the victim bogus bank documentation that falsely suggested Levin had repaid the money.

Levin entered into a plea agreement with the government to resolve the two cases against him. United States District Judge Dean D. Pregerson allowed Levin to plead guilty today, but Judge Pregerson has discretion to accept or reject the plea agreement that mandates a seven-year prison term. The plea agreement also calls for Levin to pay more than $2 million in restitution that will go to Levin’s victims in the United States, France, Austria, England, and Switzerland.

Judge Pregerson scheduled a sentencing hearing for November 18.

Levin was charged in the Team case in 2008 (see:http://www.justice.gov/usao/cac/pressroom/pr2008/029.html). Levin was free on bond until September 2010, when he was arrested for violating the terms of his release and committing the new fraud against the French investor. Levin was re-released on bond in October 2010, but he was arrested again in March 2011 for again violating the conditions of his bond. He has been in custody since that time.

According to court documents, Team, whose shares were traded on the NASDAQ stock exchange, was in the business of producing and distributing television programming, including made-for-television movies. As part of its distribution business, Team licensed its programming to other companies for distribution fees. Levin perpetrated a scheme to falsely overstate Team’s revenues to make the company appear to be profitable, when in fact it was operating at a substantial loss. By pleading guilty, Levin admitted that he was part of a conspiracy that caused Team to book revenue in violation of the accounting rules applicable to television producers and distributors. For example, when Team licensed television programming for inflated distribution fees and the customers were unable to pay the fees, Levin had Team send them millions of dollars of Team’s own money, which the customers then used to make payments to Team. These “circular payments” were disguised by routing them through third parties and by ostensibly using them to buy television programming.

Levin personally profited from the revenue-inflation scheme in several ways, including by taking a $335,000 bonus based on Team’s reportedly profitable 1999 performance, and by pledging more than 500,000 shares of Team as collateral for a loan to buy a $1.5 million ranch in Big Sky, Montana.

In 2001, Team restated its 1999 fiscal results, going from a profit of nearly $1.8 million to a loss of $4.25 million. For 2000, Team reported a loss of more than $42 million. Team filed for bankruptcy protection in 2002.

A former managing director of Team’s subsidiary in the United Kingdom previously pleaded guilty to one count of conspiracy for assisting Levin in the fraud scheme. Noel Desmond Cronin, 63, of Herts, England, has cooperated with the government’s investigation and is scheduled to be sentenced by Judge Pregerson on December 5.

In the second case, according to the plea agreement, Levin solicited money from the French investor in November 2008, when he was on bond in the Team case. The investor sent 80,000 Euros, and Levin promised that he would repay 100,000 Euros by June 2009. When the deadline arrived and Levin did not repay the money, the investor filed a lawsuit in Ireland, where Levin’s company was incorporated, to liquidate the company and try to recover his money. To stall the liquidation proceeding, Levin sent the investor bogus bank documents to make him believe that the money was on its way. The investor temporarily adjourned the liquidation proceeding, but the money never arrived.

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