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Showing posts with label REASONABLE DUE DILIGENCE. Show all posts
Showing posts with label REASONABLE DUE DILIGENCE. Show all posts

Sunday, October 20, 2013

FINAL JUDGEMENT ENTERED IN SEC CASE INVOLVING ALLEGED SECURITIES AND ACCOUNTING FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Court Enters Final Judgment by Consent Against Defendant Ronald Baldwin, Jr.

The Commission announced today that a Massachusetts federal court entered a final judgment by consent on October 16, 2013 against Ronald Baldwin, Jr. ("Baldwin"), the only remaining defendant in a fraud action filed by the Commission in 2012. The Commission alleged in its complaint that JBI, Inc. ("JBI"), its CEO, John Bordynuik ("Bordynuik"), and its former CFO, Baldwin, engaged in a scheme to commit securities and accounting fraud in 2009. In the consent judgment, the Court ordered Baldwin to pay $25,000 in civil monetary penalties. The final judgment against Baldwin successfully concludes this litigation, as the Court has previously entered final judgments against JBI and Bordynuik.

The Commission filed its action on January 4, 2012, alleging that during two reporting periods in 2009 and in contravention of Generally Accepted Accounting Principles ("GAAP"), JBI stated materially false and inaccurate financial information on its financial statements. The Complaint alleged that the defendants misrepresented and overstated the actual value of certain assets, known as media credits, by almost 1,000%, in an effort to bolster JBI's balance sheet. JBI then used the overvalued financial statements in two private capital raising efforts (Private Investment in Public Equity or PIPES) that raised over $8.4 million from unwitting investors just before the company issued a public statement indicating its financial statements could no longer be relied upon, in part, due to the erroneous valuation of the media credits and other assets on the balance sheet. According to the Complaint, despite being aware of the issues regarding the valuation of the media credits, and of the significance of the value of the media credits for JBI's balance sheets and other financials, Baldwin failed to conduct any reasonable due diligence on the appropriate accounting for the media credits when he certified the financial statements contained in JBI's Form 10-K for the year ended 2009. In addition, the Complaint alleged that Baldwin misrepresented JBI's financial position during a presentation to shareholders after JBI filed the Form 10-K.

Without admitting or denying the allegations in the Commission's complaint, Baldwin consented to a final judgment entered by the Court. The final judgment permanently enjoins Baldwin from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and 13a-14 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, and orders Baldwin to pay a civil penalty of $25,000. Baldwin is also barred for five years from acting as an officer or director of a public company.

The Commission considered Baldwin's financial condition as part of its agreement to accept a $25,000 civil penalty.

The Court previously entered final judgments by consent against JBI (on March 20, 2013) and Bordynuik (on June 26, 2013). JBI was ordered to pay a civil monetary penalty of $150,000 and Bordynuik was ordered to pay a penalty of $110,000. Bordynuik was also barred for five years from acting as an officer or director of a public company.