SEC Charges Oracle Corporation With FCPA Violations Related to Secret Side Funds in India

Source- http://www.sec.gov/news/press/2012/2012-158.htm

Washington, D.C., Aug. 16, 2012 — The Securities and Exchange Commission today charged Oracle Corporation with violating the Foreign Corrupt Practices Act (FCPA) by failing to prevent a subsidiary from secretly setting aside money off the company's books that was eventually used to make unauthorized payments to phony vendors in India.

The SEC alleges that certain employees of the India subsidiary of the Redwood Shores, Calif.-based enterprise systems firm structured transactions with India's government on more than a dozen occasions in a way that enabled Oracle India's distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds. Those Oracle India employees then directed the distributors to make payments out of these side funds to purported local vendors, several of which were merely storefronts that did not provide any services to Oracle. Oracle's subsidiary documented certain payments with fake invoices.

Oracle agreed to pay a $2 million penalty to settle the SEC's charges.

"Through its subsidiary's use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "It is important for U.S. companies to proactively establish policies and procedures to minimize the potential for payments to foreign officials or other unauthorized uses of company funds."

According to the SEC's complaint filed in U.S. District Court for the Northern District of California, the misconduct at Oracle's India subsidiary - Oracle India Private Limited - occurred from 2005 to 2007. Oracle India sold software licenses and services to India's government through local distributors, and then had the distributors "park" excess funds from the sales outside Oracle India's books and records.

For example, according to the SEC's complaint, Oracle India secured a $3.9 million deal with India's Ministry of Information Technology and Communications in May 2006. As instructed by Oracle India's then-sales director, only $2.1 million was sent to Oracle to record as revenue on the transaction, and the distributor kept $151,000 for services rendered. Certain other Oracle India employees further instructed the distributor to park the remaining $1.7 million for "marketing development purposes." Two months later, one of those same Oracle India employees created and provided to the distributor eight invoices for payments to purported third-party vendors ranging from $110,000 to $396,000. In fact, none of these storefront-only third parties provided any services or were included on Oracle's approved vendor list. The third-party payments created the risk that the funds could be used for illicit purposes such as bribery or embezzlement.

The SEC's complaint alleges that Oracle violated the FCPA's books and records provisions and internal controls provisions by failing to accurately record the side funds that Oracle India maintained with its distributors. Oracle failed to devise and maintain a system of effective internal controls that would have prevented the improper use of company funds.

Without admitting or denying the SEC's allegations, Oracle consented to the entry of a final judgment ordering the company to pay the $2 million penalty and permanently enjoining it from future violations of these provisions. The settlement takes into account Oracle's voluntary disclosure of the conduct in India and its cooperation with the SEC's investigation, as well as remedial measures taken by the company, including firing the employees involved in the misconduct and making significant enhancements to its FCPA compliance program.

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SEC Charges Jim Donnan a College Football Hall of Fame Coach in $80 Million Ponzi Scheme

Source- http://www.sec.gov/news/press/2012/2012-157.htm

Washington, D.C., Aug. 16, 2012 – The Securities and Exchange Commission today announced fraud charges against a former college football coach who teamed with an Ohio man to conduct an $80 million Ponzi scheme that included other college coaches and former players among its victims.

The SEC alleges that Jim Donnan, a College Football Hall of Fame inductee who guided teams at Marshall University and the University of Georgia and later became a television commentator, conducted the fraud with his business partner Gregory Crabtree through a West Virginia-based company called GLC Limited. Donnan and Crabtree told investors that GLC was in the wholesale liquidation business and earning substantial profits by buying leftover merchandise from major retailers and reselling those discontinued, damaged, or returned products to discount retailers. They promised investors exorbitant rates of return ranging from 50 to 380 percent. However, only about $12 million of the $80 million raised from nearly 100 investors was actually used to purchase leftover merchandise, and the remaining funds were used to pay fake returns to earlier investors or stolen for other uses by Donnan and Crabtree.

“Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office. “But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out.”

According to the SEC’s complaint filed in federal court in Atlanta, the scheme began in August 2007 and collapsed in October 2010. Donnan recruited the majority of investors by approaching contacts he made as a sports commentator and as a coach. For instance, he capitalized on his influence over one former player by telling him, “Your Daddy is going to take care of you” … “if you weren’t my son, I wouldn’t be doing this for you.” The player later invested $800,000.

The SEC’s complaint alleges that Donnan touted GLC’s success and profitability and told investors that the company could enter into even more merchandise deals with more capital. Donnan and Crabtree offered and sold investments that were short-term (2 to 12 months) and purportedly high-yield, with returns paid to investors in monthly or quarterly installments or in a one-time payment. Donnan told investors their money was being used to purchase specific items of merchandise that was often presold, so there was little to no risk to investing in any deal. However, much of the merchandise that GLC actually purchased was merely left unsold and abandoned in warehouses in West Virginia and Ohio.

The SEC alleges that Donnan typically assured investors that he was investing along with them in any merchandise deal that he offered. He touted that he and other prominent college football coaches had successfully and profitably invested in GLC. But by the time the scheme collapsed, Donnan had actually siphoned more than $7 million away from GLC, and Crabtree misappropriated approximately $1.08 million in investor funds.

The SEC’s complaint charges Donnan, who lives in Athens, Ga., and Crabtree, who resides in Proctorville, Ohio, with violations of the antifraud and registration provisions of the federal securities laws. The complaint also names two of Donnan’s children and his son-in-law as relief defendants for the purpose of recovering illicit funds that Donnan steered to them.

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SEC Halts Denver-Based Ponzi Scheme

Source- http://www.sec.gov/news/press/2012/2012-156.htm

Washington, D.C., Aug. 15, 2012 – The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against a Denver-based company and two Colorado residents carrying out a $15.7 million Ponzi scheme harming more than 120 investors nationwide.

The SEC alleges that Michael J. Turnock of Denver and William P. Sullivan II of Highlands Ranch, Colo., sold promissory notes to investors through Bridge Premium Finance LLC, which purports to be in the business of insurance premium financing. They promised investors annual returns of up to 12 percent, and represented that investor funds would be used to make short-term loans to small businesses to enable them to pay their up-front commercial insurance premiums. Turnock and Sullivan assured investors that Bridge Premium’s business was performing well and that investor funds were “100% Protected” through various forms of collateral on the underlying loans.

However, according to the SEC’s complaint filed yesterday in federal court in Denver, Bridge Premium has been paying investor returns with funds from other investors since 2002. Bridge Premium’s business has been unprofitable and its obligations to noteholders have far exceeded its total assets. Because most funds were diverted for Ponzi payments, any collateral available on Bridge Premium’s underlying loan portfolio will only protect a small fraction of its promissory note investors. Furthermore, Bridge Premium’s offering was not registered with the SEC as required under the federal securities laws.

The court granted the SEC’s request for a temporary restraining order to freeze the assets that Bridge Premium, Turnock, and Sullivan derived from the scheme.

“Turnock and Sullivan raised millions from investors by claiming they could pay high interest rates through Bridge Premium's safe and unique business model,” said Julie Lutz, Associate Director of the SEC’s Denver Regional Office. “They hid the fact that Bridge Premium’s purported business lost money every year for more than a decade and had devolved into a Ponzi scheme long ago.”

The SEC alleges that in numerous in-person meetings and telephone conversations throughout the promissory note offering process, Turnock consistently told investors contemplating additional investments that Bridge Premium was performing well. In meetings with investors as recently as May 2012, Turnock said that the company was “doing great” and that it “had more business than cash.” Turnock also claimed that Bridge Premium could pay the promised annual interest rates as high as 12 percent because it received annual interest rates exceeding 30 percent from its insurance premium borrowers. Sullivan similarly told investors that Bridge Premium was “doing well” and that if the company “had more money, it could make more loans.”

According to the SEC’s complaint, in stark contrast to the continually positive portrayal of Bridge Premium’s financial condition, the company was actually not profitable, had negative cash flow from operations, and its liabilities to existing noteholders far exceeded its total assets. Turnock and Sullivan specifically withheld from investors that Bridge Premium has not been profitable in any year since at least 1998, and has lost more than $3 million during the past five years. In May 2012 after more than a decade of Ponzi payments and operational losses, Bridge Premium owed investors more than $6.2 million, yet its insurance premium loan portfolio totaled less than $250,000 and its assets totaled less than $500,000.

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SEC Charges Wells Fargo for Selling Complex Investments Without Disclosing Risks

Source- http://www.sec.gov/news/press/2012/2012-155.htm

Washington, D.C., Aug. 14, 2012 – The Securities and Exchange Commission today charged Wells Fargo’s brokerage firm and a former vice president for selling investments tied to mortgage-backed securities without fully understanding their complexity or disclosing the risks to investors.

The SEC found that Wells Fargo improperly sold asset-backed commercial paper (ABCP) structured with high-risk mortgage-backed securities and collateralized debt obligations (CDOs) to municipalities, non-profit institutions, and other customers. Wells Fargo did not obtain sufficient information about these investment vehicles and relied almost exclusively upon their credit ratings. The firm’s representatives failed to understand the true nature, risks, and volatility behind these products before recommending them to investors with generally conservative investment objectives.

Wells Fargo agreed to pay more than $6.5 million to settle the SEC’s charges. The money will be placed into a Fair Fund for the benefit of harmed investors.

“Broker-dealers must do their homework before recommending complex investments to their customers,” said Elaine C. Greenberg, Chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit. “Municipalities and other non-profit institutions were harmed because Wells Fargo abdicated its fundamental responsibility as a broker to have a reasonable basis for its investment recommendations to customers.”

According to the SEC’s order instituting settled administrative proceedings against Minneapolis-based Wells Fargo Brokerage Services (now Wells Fargo Securities), the improper sales occurred from January 2007 to August 2007. Registered representatives in Wells Fargo’s Institutional Brokerage and Sales Division made recommendations to institutional customers to purchase ABCP issued by limited purpose companies called structured investment vehicles (SIVs) and SIV-Lites backed largely by mortgage-backed securities and CDOs. Wells Fargo and its registered representatives did not review the private placement memoranda (PPMs) for the investments and the extensive risk disclosures in those documents. Instead, they relied almost exclusively on the credit ratings of these products despite various warnings against such over-reliance in the PPM and elsewhere. Wells Fargo also failed to establish any procedures to ensure that its personnel adequately reviewed and understood the nature and risks of these commercial paper programs.

The SEC’s order finds that Wells Fargo and its registered representatives failed to have a reasonable basis for their recommendations. They also failed to disclose to their customers the risks associated with the complex SIV-issued ABCP investments, including the nature and volatility of the underlying assets. A number of customers purchased SIV-issued ABCP as a result of Wells Fargo’s recommendations, and many of them ultimately suffered substantial losses after three SIV-issued ABCP programs defaulted in 2007.

The SEC charged former vice president Shawn McMurtry for his improper sale of SIV issued ABCP. McMurtry exercised discretionary authority in violation of Wells Fargo’s internal policy and selected the particular issuer of ABCP for one longstanding municipal customer. McMurtry did not obtain sufficient information about the investment and relied almost entirely upon its credit rating.

Wells Fargo and McMurtry were, at a minimum, negligent in recommending the relevant ABCP programs without obtaining adequate information about them to form a reasonable basis for recommending these products and without disclosing the material risks of these products. As a result, they violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.

The SEC’s order finds that Wells Fargo has taken a number of remedial measures since 2007 to ensure that its registered representatives have adequate information about the nature and risk of the securities they recommend to customers, and that relevant information about those securities will be fully disclosed to customers.

Wells Fargo and McMurtry consented to the SEC’s order without admitting or denying the findings. Wells Fargo agreed to pay a $6.5 million penalty, $65,000 in disgorgement, and $16,571.96 in prejudgment interest. McMurtry agreed to be suspended from the securities industry for six months and pay a $25,000 penalty.

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SEC Charges Mutual Fund Adviser With Failing to Turn Over Records to SEC Examiners

Source- http://www.sec.gov/news/press/2012/2012-154.htm

Washington, D.C., Aug. 10, 2012 – The Securities and Exchange Commission today charged a Florida-based investment manager and his firm for failing to provide SEC examiners with records of a mutual fund advisory business that invested in NASCAR-related stocks.

The SEC examiners sought records from David W. Dube and Peak Wealth Opportunities LLC while examining a mutual fund they advised called the Stock Car Stock Index Fund. Despite repeated requests, Dube and Peak Wealth failed to furnish certain records to the SEC.

“After promising multiple times to provide the requested records, Dube failed to live up to his regulatory obligations and turn over the records,” said Bruce Karpati, Chief of the Enforcement Division’s Asset Management Unit. “When financial professionals fail to cooperate with SEC exams, they force the agency to expend greater resources to pursue investigations.”

According to an SEC order initiating administrative proceedings, Peak Wealth was the adviser to the Stock Car Stock Index fund from 2008 to June 2010. SEC examination staff requested records from Peak Wealth and Dube in 2010 while examining Peak Wealth’s advisory business and the operations of the fund.

The SEC further alleges that Dube and Peak Wealth:

Failed to make and keep certain required financial records.

Failed to withdraw Peak Wealth’s registration with the SEC and make other required filings.

Failed to provide the fund’s board of directors with information reasonably necessary to assess Peak Wealth’s advisory fees.

Simultaneously with the SEC’s examination in 2010, the fund’s board requested information from Peak Wealth and Dube as part of the fund’s required annual evaluation of its advisory agreements. The annual evaluations are required under Section 15(c) of the Investment Company Act of 1940, which also requires advisers to provide their boards with information reasonably necessary to conduct those evaluations. Despite requesting additional time to respond to the board, Peak Wealth and Dube failed to provide any of the requested documents. The board subsequently terminated Peak Wealth’s advisory agreement and liquidated the fund by returning the money to investors.

“A fully-informed board is crucial to the advisory fee setting process, yet Dube failed to provide the board with the most basic of information,” said Chad Alan Earnst, an Assistant Regional Director in the Enforcement Division’s Asset Management Unit.

Under the relevant rules, the SEC could seek to permanently bar Dube from association with an SEC registered investment adviser or broker dealer. The SEC alleges that Peak Wealth willfully violated Sections 203A and 204 of the Advisers Act of 1940 and Rules 203A-1(b)(2), 204-1(a)(1), 204-2(a)(1), (2), (4), (5), and (6) thereunder, and Section 15(c) of the Investment Company Act. The SEC charged Dube with willfully aiding and abetting and causing Peak Wealth’s violations.

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Pfizer H.C.P. Corp. Agrees to Pay $15 Million Penalty to Resolve Foreign Bribery Investigation

Source- http://www.fbi.gov/washingtondc/press-releases/2012/pfizer-h.c.p.-corp.-agrees-to-pay-15-million-penalty-to-resolve-foreign-bribery-investigation

WASHINGTON—Pfizer H.C.P. Corporation, an indirect wholly owned subsidiary of Pfizer Inc., has agreed to pay a $15 million penalty to resolve an investigation of Foreign Corrupt Practices Act (FCPA) violations, Principal Deputy Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, and Assistant Director James W. McJunkin in charge of the FBI’s Washington Field Office announced today. In a related matter, Pfizer Inc. and Wyeth LLC reached settlements today with the Securities and Exchange Commission (SEC) under which Pfizer Inc. agreed to pay more than $26.3 million in disgorgement of profits, including pre-judgment interest, to resolve concerns involving the conduct of its subsidiaries. Wyeth, which had been acquired by Pfizer Inc. in 2009, agreed to pay $18.8 million in disgorgement of profits, including pre-judgment interest, to resolve concerns involving the conduct of Wyeth subsidiaries.

As part of the resolution, the department today filed a two-count criminal information charging Pfizer H.C.P. with conspiracy and violations of the FCPA in connection with improper payments made to government officials, including publicly employed regulators and health care professionals in Bulgaria, Croatia, Kazakhstan, and Russia. The department and Pfizer H.C.P. agreed to resolve the investigation by entering into a deferred prosecution agreement. Both the information and the deferred prosecution agreement were filed today in the U.S. District Court in the District of Columbia.

Pfizer H.C.P. is incorporated under the laws of the state of New York, and its parent company, Pfizer Inc., is a global pharmaceutical, animal health, and consumer product company headquartered in New York City.

“Pfizer took short cuts to boost its business in several Eurasian countries, bribing government officials in Bulgaria, Croatia, Kazakhstan, and Russia to the tune of millions of dollars,” said Principal Deputy Assistant Attorney General Raman. “The Department of Justice recognizes the significant efforts the company made to eliminate such improper practices, not only by implementing compliance reforms, but also by assisting U.S. authorities in our ongoing FCPA investigations of other companies and individuals.”

“Corrupt pay-offs to foreign officials in order to secure lucrative contracts creates an inherently uneven marketplace and puts honest companies at a disadvantage,” said Assistant Director McJunkin. “Those that attempt to make these illegal backroom deals to influence contract procurement can expect to be investigated by the FBI and appropriately held responsible for their actions.”

According to court documents, Pfizer H.C.P. made a broad range of improper payments to numerous government officials in Bulgaria, Croatia, Kazakhstan, and Russia—including hospital administrators, members of regulatory and purchasing committees, and other health care professionals—and sought to improperly influence government decisions in these countries regarding the approval and registration of Pfizer Inc. products, the award of pharmaceutical tenders, and the level of sales of Pfizer Inc. products. According to court documents, Pfizer H.C.P. used numerous mechanisms to improperly influence government officials, including sham consulting contracts, an exclusive distributorship, and improper travel and cash payments.

Pfizer H.C.P. admitted that between 1997 and 2006, it paid more than $2 million of bribes to government officials in Bulgaria, Croatia, Kazakhstan, and Russia. Pfizer H.C.P. also admitted that it made more than $7 million in profits as a result of the bribes.

The agreement recognizes the timely voluntary disclosure by Pfizer H.C.P.’s parent company, Pfizer Inc.; the thorough and wide-reaching self-investigation of the underlying and related conduct; the significant cooperation provided by the company to the department and the SEC; and the early and extensive remedial efforts and the substantial and continuing improvements Pfizer Inc. has made to its global anti-corruption compliance procedures.

Pfizer H.C.P. received a reduction in its penalty as a result of Pfizer Inc.’s cooperation in the ongoing investigation of other companies and individuals. In addition to the $15 million penalty, the agreement requires Pfizer Inc. to continue to implement rigorous internal controls and to cooperate fully with the department.

Due to Pfizer Inc.’s extensive remediation and improvement of its compliance systems and internal controls, as well as the enhanced compliance undertakings included in the agreement, Pfizer H.C.P. is not required to retain a corporate monitor, but Pfizer Inc. must periodically report to the department on implementation of its remediation and enhanced compliance efforts for the duration of the agreement.

In the 18 months following its acquisition of Wyeth, Pfizer Inc., in consultation with the department, conducted a due diligence and investigative review of the Wyeth business operations and integrated Pfizer Inc.’s internal controls system into the former Wyeth business entities. The department considered these extensive efforts and the SEC resolution in its determination not to pursue a criminal resolution for the pre-acquisition improper conduct of Wyeth subsidiaries.

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Carmelo Provenzano and Daniel Dragan Plead Guilty in Connection with $3.5 Million Fraud Through Foreign Currency Investment Ponzi Scheme

Source- http://www.fbi.gov/newark/press-releases/2012/two-new-jersey-men-plead-guilty-in-connection-with-3.5-million-fraud-through-foreign-currency-investment-ponzi-scheme

CAMDEN, NJ—Two men claiming to run New Jersey-based hedge funds using a secret computer program to invest in foreign currency today admitted to defrauding victims out of more than $3.5 million, U.S. Attorney Paul J. Fishman announced.

Carmelo Provenzano, 29, of Garfield, New Jersey; and Daniel Dragan, 41, of Lebanon, New Jersey, pleaded guilty to separate informations charging them with wire fraud conspiracy before U.S. District Judge Jerome B. Simandle in Camden. A third co-conspirator, George Sepero, has been indicted by a grand jury in connection with the scheme and is awaiting trial.

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

Beginning in 2009, Dragan and Provenzano claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading. The defendants made numerous misrepresentations and omissions to induce their victims to invest in “Caxton Capital Management” and “CCP Pro Consulting Inc.” Dragan and Provenzano claimed they and their conspirators owned and controlled a proprietary computer algorithm for trading foreign currencies; that they had used the algorithm to achieve returns of more than 170 percent in the prior two years; and that any investment funds would be highly liquid and could be withdrawn on a few days’ notice.

Relying on these and other misrepresentations, investors sent the defendants a total of more than $3.5 million. Dragan and Provenzano invested little or no money in foreign currency or any other investment vehicle, instead diverting the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures.

Dragan and Provenzano spent investor money on credit card bills averaging approximately $25,000 per month; bar tabs of $18,241—including a $4,000 tip—and $14,034 on separate nights at Drai’s Hollywood nightclub in Los Angeles; and flights to Paris and elsewhere. Provenzano bought a luxury Range Rover Sport SUV costing more than $71,000, with a down payment of more than $65,000.

The defendants furthered the scheme by e-mailing victims fake statements showing their principal had been invested in the foreign currency markets and was achieving substantial results. Many of these e-mails were purportedly sent by an individual named “Mel Tannenbaum,” a fictional character of Provenzano’s invention.

The defendants also e-mailed to several investors “screen shots” of a computer-based trading program, which they claimed represented the investors’ funds being traded in the currency markets. In reality, the shots reflected trading in fictional accounts set up by the conspirators to dupe investors.

The wire fraud conspiracy count to which Dragan and Provenzano pleaded guilty carries a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gain or loss from the offense. Provenzano’s sentencing is scheduled for November 16, 2012, and Dragan’s sentencing is scheduled for November 20, 2012.

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SEC Charges Pfizer with FCPA Violations

Source- http://www.sec.gov/news/press/2012/2012-152.htm

Washington, D.C., Aug. 7, 2012 – The Securities and Exchange Commission today charged Pfizer Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries bribed doctors and other health care professionals employed by foreign governments in order to win business.

The SEC alleges that employees and agents of Pfizer’s subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products. They tried to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising.

Additional Materials
SEC Complaint Against Pfizer
SEC Complaint Against Wyeth
More SEC FCPA Cases

The SEC separately charged another pharmaceutical company that Pfizer acquired a few years ago – Wyeth LLC – with its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay more than $45 million combined to settle their respective charges. In a parallel action, the Department of Justice announced that Pfizer H.C.P. Corporation agreed to pay a $15 million penalty to resolve its investigation of FCPA violations.

“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations.”

According to the SEC’s complaint against Pfizer filed in U.S. District Court for the District of Columbia, the misconduct dates back as far as 2001. Employees of Pfizer’s subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products. In China, for example, Pfizer employees invited “high-prescribing doctors” in the Chinese government to club-like meetings that included extensive recreational and entertainment activities to reward doctors’ past product sales or prescriptions. Pfizer China also created various “point programs” under which government doctors could accumulate points based on the number of Pfizer prescriptions they wrote. The points were redeemed for various gifts ranging from medical books to cell phones, tea sets, and reading glasses. In Croatia, Pfizer employees created a “bonus program” for Croatian doctors who were employed in senior positions in Croatian government health care institutions. Once a doctor agreed to use Pfizer products, a percentage of the value purchased by a doctor’s institution would be funneled back to the doctor in the form of cash, international travel, or free products.

According to the SEC’s complaint, Pfizer made an initial voluntary disclosure of misconduct by its subsidiaries to the SEC and Department of Justice in October 2004, and fully cooperated with SEC investigators. Pfizer took such extensive remedial actions as undertaking a comprehensive worldwide review of its compliance program.

The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations primarily before but also after the company’s acquisition by Pfizer in late 2009. Starting at least in 2005, subsidiaries marketing Wyeth nutritional products in China, Indonesia, and Pakistan bribed government doctors to recommend their products to patients by making cash payments or in some cases providing BlackBerrys and cell phones or travel incentives. They often used fictitious invoices to conceal the true nature of the payments. In Saudi Arabia, Wyeth’s subsidiary made an improper cash payment to a customs official to secure the release of a shipment of promotional items used for marketing purposes. The promotional items were held in port because Wyeth Saudi Arabia had failed to secure a required Saudi Arabian Standards Organization Certificate of Conformity.

Following Pfizer’s acquisition of Wyeth, Pfizer undertook a risk-based FCPA due diligence review of Wyeth’s global operations and voluntarily reported the findings to the SEC staff. Pfizer diligently and promptly integrated Wyeth’s legacy operations into its compliance program and cooperated fully with SEC investigators.

In settling the SEC’s charges, Wyeth neither admitted nor denied the allegations. Pfizer consented to the entry of a final judgment ordering it to pay disgorgement of $16,032,676 in net profits and prejudgment interest of $10,307,268 for a total of $26,339,944. Wyeth also is required to report to the SEC on the status of its remediation and implementation of compliance measures over a two-year period, and is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Wyeth consented to the entry of a final judgment ordering it to pay disgorgement of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth’s remediation and implementation of compliance measures will be subsumed in Pfizer’s two-year self-reporting period. Wyeth also is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The settlements are subject to court approval.

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The Former Chairman of the Board of Home Diagnostics Inc., George Holley, Pleads Guilty to Insider Trading Scheme

Source- http://www.fbi.gov/newark/press-releases/2012/former-chairman-of-the-board-of-publicly-traded-company-pleads-guilty-to-insider-trading-scheme

TRENTON, NJ—The former chairman of the board of Home Diagnostics Inc., a health products company that previously traded on the NASDAQ stock exchange, admitted today to insider trading, U.S. Attorney Paul J. Fishman announced.

George Holley, 72, of Norwalk, Connecticut, pleaded guilty mid-trial to two counts of an indictment charging him with securities fraud. The government rested its case yesterday, and the defendant entered his plea this morning before U.S. District Judge Joel A. Pisano in Trenton federal court.

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

Holley was the founder of Home Diagnostics Inc., a Florida-based company that sold diabetes management products, such as blood glucose monitoring systems. In February 2010, Home Diagnostics was purchased by Nipro Corp. a Japanese Company, for a purchase price of $11.50 a share, approximately 90 percent more than Home Diagnostics’ then-share price. Holley, who at the time served as Home Diagnostics’ chairman of the board, admitted that in the weeks before the public announcement of the sale to Nipro, he disclosed inside information concerning the sale to his cousin and friend and told them to buy Home Diagnostics stock just three weeks before the merger was publically announced. News of the merger caused Home Diagnostics stock to nearly double in price.

Holley, who was released on bond, faces a maximum prison term of 20 years and a maximum fine of $5,000,000 on each count. Sentencing before Judge Pisano is scheduled for December 4, 2012.

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James Scott Brownn Sentenced for $52 Million Ponzi Scheme

Source- http://www.fbi.gov/kansascity/press-releases/2012/kansas-attorney-sentenced-for-52-million-ponzi-scheme

ANSAS CITY, MO—David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced that a Leawood, Kansas attorney was sentenced in federal court today for his role in a fraud conspiracy that stole more than $52 million from its victims.

James Scott Brown, 67, of Leawood, was sentenced in the U.S. District Court in St. Louis, Missouri, before U.S. Chief District Judge Linda R. Reade, Northern District of Iowa, to three years in federal prison without parole. The court also ordered Brown to pay more than $34 million in restitution.

Co-defendant Martin T. Sigillito, 63, of Webster Groves, was convicted at trial of leading the conspiracy and awaits sentencing. Co-defendant Derek J. Smith, 68, of Oxfordshire in the United Kingdom, pleaded guilty to his role in the conspiracy and awaits sentencing.

On September 16, 2011, Brown 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 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 in England, but, in reality, most of their money was kept by Sigillito and Brown (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.

Sigillito is an attorney and an ordained priest and bishop in the church of the American Anglican Convocation. Sigillito, doing business as Martin T. Sigillito and Associates Ltd., maintained an office in Clayton, Missouri. The business claimed to provide international business consulting services but did not have any actual associates or law partners and employed only a single clerical assistant. Sigillito portrayed himself as an expert in international law and finance and an experienced international businessman and attorney.

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 that 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.

The British Lending Program

The British Lending Program (BLP) operated as a Ponzi scheme and served as a fee-generating machine for the benefit of co-conspirators. Sigillito and Brown marketed the BLP to lenders based upon a number of false, fraudulent, and deceptive material representations.

Rather than sending the funds to England for use in real estate projects as promised to investors, Sigillito pooled lender’s funds in his attorney trust account in the United States. Rarely would funds from this account ever be sent to Smith. Rather, the funds were used to pay fees to Sigillito and Brown for initiating the loans. In cases where lenders requested payments of interest on their loan or sought to withdraw their funds from the program, the funds used to pay them came not from any profitable business of Smith’s but instead from funds that had been contributed.

Smith received the benefit of a total of approximately $6.1 million during the time in which approximately $52.5 million in loan funds were received in the BLP. In contrast, during the same period, Sigillito took “fees” totaling more than $6 million, Brown took “fees” totaling approximately $1.4 million, and approximately $27 million was used to pay interest and principal to lenders. All BLP funds were dissipated, and as of June 2010, the BLP had no funds.

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Robin Bruhjell Brass Who Ran $2 Million Ponzi Scheme Sentenced to Eight Years in Federal Prison for Investor Fraud

Source- http://www.fbi.gov/newhaven/press-releases/2012/washington-depot-woman-who-ran-2-million-ponzi-scheme-sentenced-to-eight-years-in-federal-prison-for-investor-fraud

David B. Fein, United States Attorney for the District of Connecticut, announced that Robin Bruhjell Brass, 55, of Washington Depot, was sentenced today by United States District Judge Robert N. Chatigny in Hartford to 96 months of imprisonment (an upward departure over the advisory Sentencing Guidelines range), followed by three years of supervised release, for operating a long-running Ponzi scheme that defrauded investors of approximately $2 million. Brass has been detained since her arrest on November 15, 2011.

“This defendant preyed upon the elderly and other vulnerable people, deceived them into believing their investments with her were safe, and insured and guaranteed and then stole almost two million dollars of their hard-earned savings,” stated U.S. Attorney Fein. “Hopefully, this lengthy sentence will serve as a warning to all would-be fraudsters and a reminder to the investing public to be vigilant before entrusting their life savings to so-called investment advisors. You should research your investment advisors and verify the information you are provided. I commend Connecticut’s Department of Banking for initiating this investigation and the U.S. Postal Inspection Service, SIGTARP, and FBI for pursuing it thoroughly to secure justice. I applaud the victims who appeared in court today and told the court about the fraud and the painful ways in which it has affected their lives.”

According to court documents and statements made in court, Brass represented herself as a successful investment advisor and solicited funds from investors, including investors who were elderly and in a vulnerable physical condition. Brass told some potential investors that their money would be safe if invested with her because she had a formula for investing that ensured against loss and guaranteed a good return on investment. She also told some investors that her investment funds were federally insured and that she would personally guarantee investments in the fund with her own substantial personal assets. As part of the scheme, Brass reassured some of her investors by sending fraudulent account statements to them purporting to represent their account balances and that their investments were performing well. Brass told some investors that she could not repay them because the state of Connecticut had “frozen” her accounts. These statements were false.

Brass failed to invest all of the funds entrusted with her and used some of the money to pay personal expenses for herself and her family—such as credit card bills, college tuition bills, home furnishings, and clothing—and to make “lulling” payments to previous investors. Brass also used investors’ money to make loan payments to a bank that received funds though the Troubled Asset Relief Program (TARP).

The investigation revealed that Brass operated this Ponzi scheme and defrauded individuals, many of them elderly, of at least $1.9 million over seven years. At sentencing today, the court found that Brass abused her victims’ trust and that Brass obstructed justice by trying to silence her victims by telling them that their funds were “frozen” and that if they came forward they might never see their money.

Six victims spoke at today’s sentencing. One victim told the court that she was recovering from a near-catastrophic car accident when Brass approached her about investing her insurance settlement money with her. Brass took the insurance proceeds from the victim on the day they were received and diverted them to her own use. As a result, the victim, who is battling cancer, told the court that she has been forced to forego physical therapy and other recommended medical treatments that she now cannot afford. Another victim, now 92-years-old, told the court that Brass stole more than $600,000 of her money over the course of seven years, some of it taken when Brass already knew that she was the subject of state and federal investigations.

A hearing to determine restitution will be scheduled.

On April 25, 2012, Brass pleaded guilty to one count of mail fraud.

This matter was investigated by the U.S. Postal Inspection Service, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Federal Bureau of Investigation, and the State of Connecticut Department of Banking. The case was prosecuted by Assistant U.S. Attorney Susan L. Wines.

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Pennsylvania Investment Advisor Robert G. Bard Indicted For Three Million Dollar Fraud Scheme

Source- http://www.justice.gov/usao/pam/news/2012/Bard_07_19_2012.htm

The United States Attorney's Office for the Middle District of Pennsylvania announced that an indictment charging Robert G. Bard, of Warfordsburg, Fulton County, Pennsylvania, was unsealed today following his arrest.

Bard was indicted by the federal grand jury in Harrisburg, on Wednesday, in a 21-count Indictment charging one count of securities fraud, 14 counts of wire fraud, three counts of mail fraud, one count of bank fraud, one count of investment advisor fraud, and one count of making false statements to the FBI.

Bard was arrested today and before a federal magistrate judge in Harrisburg for his initial appearance in court. Bard faces up to 20 years' imprisonment on the securities fraud charge, up to 20 years' imprisonment on the wire and mail fraud charges, up to 30 years' imprisonment on the bank fraud charge, and up to five years' imprisonment on the investment advisor fraud and false statements charge, as well as substantial fines and penalties if convicted.

According to U.S. Attorney Peter J. Smith, Bard allegedly operated Vision Specialist Group (VSG), a registered investment advisor in Pennsylvania and West Virginia, between December 2004 and August 2009. On July 30, 2009, the Securities and Exchange Commission (SEC) filed a civil complaint against Bard and VSG, and the U.S. District Court for the Middle District of Pennsylvania issued a preliminary injunction against Bard and VSG on August 11, 2009.

In November 2011, the U.S. District Court determined that Bard and VSG violated securities laws and issued a permanent injunction. In February 2012, the Court determined that Bard was liable for a civil penalty of $2.5 million, as well as disgorgement of $450,000 in profits which resulted from his fraud.

The Indictment alleges that Bard, through VSG, defrauded at least 43 investors of over $3 million by materially misrepresenting and failing to fully disclose the types of investments he made for them and fabricating the performance of their accounts. Bard allegedly created false account statements to conceal millions of dollars in losses his clients sustained as a result of risky and speculative investments he made in penny stocks and other volatile securities.

Bard also allegedly failed to advise his clients that he was terminated from his prior employment as a stock broker for forging customer signatures, or that he filed for bankruptcy in July 2005. Rather, he allegedly told clients that he was a deeply religious man who had 18 years of financial success and that they could trust him with their life savings.

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SEC Charges Bristol-Myers Squibb Executive With Insider Trading in Stock Options of Potential Acquisition Targets

Source-  http://www.sec.gov/news/press/2012/2012-148.htm

Washington, D.C., Aug. 2, 2012 – The Securities and Exchange Commission today charged an executive at Bristol-Myers Squibb with insider trading on confidential information about companies being targeted for potential acquisitions. His illegal trading took place as recently as just weeks ago.

The SEC alleges that Robert D. Ramnarine, who lives in East Brunswick, N.J., made more than $300,000 in illegal profits by misusing nonpublic information he obtained while helping Bristol-Myers Squibb evaluate whether to acquire three other pharmaceutical companies. He used multiple personal brokerage accounts to illegally trade in stock options of these potential target companies. Prior to some trading, Ramnarine conducted Internet research from his Bristol computer to determine whether he could be detected by regulators. He searched for such phrases as “can stock option be traced to purchaser” and “illegal insider trading options trace” and viewed such articles as “Ways to Avoid Insider Trading.” Ramnarine even viewed a press release on the SEC’s website announcing an enforcement action arising from illegal trading in call options in advance of an acquisition announcement.

“Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly ill-motivated individuals who paid a heavy price for their illegal trading,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Executives at pharmaceutical companies or in any industry should know better than to abuse confidential, market-moving information, and our charges against Ramnarine should serve notice that when you violate insider trading laws, no matter how you scheme, you will be caught.”

The SEC is seeking a court order to freeze Ramnarine’s brokerage account assets. In a parallel criminal action, the U.S. Attorney’s Office for the District of New Jersey announced the arrest of Ramnarine today.

According to the SEC’s complaint filed in federal court in New Jersey, Ramnarine is an executive in the treasury department at Bristol-Myers Squibb. He conducted his insider trading schemes from August 2010 to July 2012, illegally trading in stock options of Pharmasset Inc., Amylin Pharmaceuticals Inc., and ZymoGenetics Inc. in advance of announcements that those companies would be acquired.

The SEC alleges that just as Bristol was finalizing its agreement with ZymoGenetics in late August 2010, Ramnarine started to buy out-of-the-money call options. A call option is a security that derives its value from the underlying common stock of the issuer and gives the purchaser the right to buy the underlying stock at a specific price within a specified period of time. Typically, investors will purchase call options when they believe the stock of the underlying securities is going up. Ramnarine made $30,551 in illegal profits by trading ZymoGenetics call options in advance of a Sept. 7, 2010 public announcement that Bristol-Myers Squibb was acquiring ZymoGenetics.

The SEC further alleges that in advance of a Nov. 21, 2011 announcement that Pharmasset would be acquired by Gilead Sciences Inc., Ramnarine bought Pharmasset call options based on material, nonpublic information that he obtained from participating in Bristol-Myers Squibb’s evaluation of a possible acquisition of Pharmasset. This was part of an auction process conducted by Pharmasset and its investment bankers during the weeks before the Gilead-Pharmasset announcement. Ramnarine made $225,026 in illegal profits when he sold the calls immediately after the public announcement of Pharmasset’s sale.

According to the SEC’s complaint, Ramnarine very recently sold or “wrote” put options and purchased call options in advance of a June 29, 2012 announcement by Bristol-Myers Squibb that it would acquire Amylin. A put option is a security that derives its value from the underlying common stock. When investors sell or “write” puts, they obligate themselves to sell the underlying security at a certain price before the expiration date. Investors usually write puts when they believe the price of the underlying stock price is moving up. Ramnarine’s trades were based on material nonpublic information that he obtained by working on financing and capital structure matters as part of Bristol’s due diligence process leading up to the acquisition announcement. Ramnarine made $55,784 in illegal profits by trading Amylin put and call options in advance of the public announcement.

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SEC Charges N.Y.-Based Fund Manager Peter Siris and Others With Securities Law Violations Related to Chinese Reverse Merger Company

Source- http://www.sec.gov/news/press/2012/2012-146.htm

Washington, D.C., July 30, 2012 – The Securities and Exchange Commission today charged New York-based investment manager Peter Siris and two of his firms with a host of securities law violations mostly related to his activities with a Chinese reverse merger company, China Yingxia International Inc.

The SEC alleges that Siris, an active investor in Chinese companies and former newspaper money columnist, misled investors in his two hedge funds through which he invested $1.5 million in China Yingxia. Siris understated his involvement with the company particularly after it went out of business, and used his insider status to make illegal trades based on nonpublic information as he received it. In an attempt to circumvent the registration provisions of the securities laws, Siris also received shares from the China Yingxia CEO’s father and improperly sold them without any registration statement in effect. Siris further engaged in insider trading ahead of 10 confidentially solicited offerings for other Chinese issuers.

Siris and his firms agreed to pay more than $1.1 million to settle the SEC’s charges. The SEC also separately charged five individuals and one firm for securities law violations related to China Yingxia.

“Siris operated by his own set of rules in his dealings with China Yingxia and other Chinese issuers,” said Andrew M. Calamari, Acting Director of the SEC’s New York Regional Office. “He was the go-to person when Chinese reverse merger companies wanted to raise capital or needed advice about operations, but he used his prominence and reputation in this area to illegally game the system to his advantage.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Siris and his firms Guerrilla Capital Management LLC and Hua Mei 21st Century LLC became involved with China Yingxia in 2007 and their misconduct continued until 2010. Along with being one of three “consultants” that improperly raised money for China Yingxia, Siris and Hua Mei acted as advisers to the purported nutritional foods company.

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Joseph Mazella the Founder and President of the Great Atlantic Group Inc., Pleads Guilty of Operating Multi-Million-Dollar Ponzi Scheme

Source-  http://www.fbi.gov/newyork/press-releases/2012/jury-finds-staten-island-new-york-real-estate-developer-guilty-of-operating-multi-million-dollar-ponzi-scheme 

BROOKLYN, NY—Following two weeks of trial, a federal jury in Brooklyn, N.Y., today returned guilty verdicts against Joseph Mazella, the founder and president of the Great Atlantic Group Inc., a Staten-Island based real estate and financial consulting company, on charges of securities fraud, wire fraud, and money laundering. These charges arose out of the defendant’s operation of a Ponzi scheme that led to more than $14 million in losses. When sentenced by U.S. District Judge Carol B. Amon, the defendant faces a maximum sentence of 25 years in prison on the most serious charge.

The verdicts were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York.

The evidence at trial proved that Mazella solicited money from prospective investors by telling them that he would invest their money in real estate projects, including projects in Trenton, N.J., a warehouse in Utica, N.Y., and a golf course in Greene County, N.Y. Mazella told his victims that their money would be safe and that he would pay them a fixed rate of return. Mazella encouraged several investors, typically senior citizens, to apply for reverse mortgages on their residences and to invest the proceeds with him. From approximately January 2007 until approximately December 2010, investors gave Mazella more than $14 million. By January 2007, though, the evidence showed that Mazella was operating Great Atlantic as a Ponzi scheme in which he paid returns to investors from existing investors’ deposits or money paid by new investors. Mazella also used investors’ money to pay his personal expenses, including payments for a Porsche, a mortgage on his personal residence and family expenses.

“The evidence at trial showed that the defendant callously and systematically defrauded his victims of their lives’ savings. Mazella’s victims, many of whom are senior citizens on a fixed income, turned to him to ensure their security in their golden years. Instead, their security was raided to fund his fraud, and they will feel the impact of Mazella’s crimes for the rest of their lives,” said U.S. Attorney Lynch.

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