The following is an excerpt from the SEC web site:
“On May 13, 2011, the Securities and Exchange Commission filed a civil injunctive action charging Monticello, New York investment adviser Lloyd V. Barriger with fraud in connection with two upstate New York real estate funds he managed – the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). According to the complaint, the G&B Fund raised approximately $20 million from January 1998 until March 2008, and Campus raised approximately $12 million from October 2001 until July 2008. The Commission charged Barriger with defrauding the funds and their investors and prospective investors to whom he offered and sold interests in these funds.
The SEC’s complaint, filed in federal court in Manhattan, alleges that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition – which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.
The complaint also alleges that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purported accrued 8% per year Preferred Return.
Finally, the complaint alleges that Barriger defrauded Campus and its prospective investors by causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress, and by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund. The complaint also alleges that Barriger caused Campus to engage in other transactions that personally benefitted Barriger, none of which he disclosed to prospective Campus investors.
The complaint alleges that Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
In its complaint, the SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.
The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York.”
This is a photo of the National Register of Historic Places listing with reference number 7000063
Friday, May 20, 2011
SEC CHARGES FORMER BROOKE CORPORATION EXECUTIVES WITH FRAUD
Misrepresentation of financial records is a serious violation of the law. In the following excerpt from the SEC web site the SEC alleges that six executives at an insurance agency franchisor violated disclosure rules:
May 4, 2011
“The Securities and Exchange Commission today charged six former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses, with conducting an extensive financial and disclosure fraud. The Complaint alleges that in SEC filings and other public statements for year-end 2007 and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees and their financial health, the deterioration of Aleritas’ corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies.
According to the SEC’s Complaint filed in federal court in Kansas, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital’s financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas’ former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’ former management also concealed the rapid deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets.
The SEC’s Complaint charges the following former Brooke executives:
Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas
Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital
Michael S. Lowry, former chief executive officer and member of the board of Aleritas
Michael S. Hess, former chief executive officer and member of the board of Aleritas
Kyle L. Garst, former chief executive officer, president, and member of the board of Brooke Capital
Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital
As alleged in the Commission’s Complaint, each of the defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations by Brooke Corporation, Brooke Capital, and/or Aleritas of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Complaint also alleges that Robert Orr violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; Robert Orr, Leland Orr, Lowry, Hess, and Garst violated Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, Garst, and Vrbas violated Exchange Act Rule 13a-14 and aided and abetted violations by Brooke Corporation and Brooke Capital of Rule 13a-1; and Robert Orr and Hess aided and abetted violations by Aleritas of Exchange Act Rule 13a-11.
The Commission seeks permanent injunctions, civil penalties, and officers and director bars against each defendant, and disgorgement with prejudgment interest against Robert Orr, Leland Orr, and Lowry.
Robert Orr, Leland Orr, Lowry, Hess, and Vrbas agreed to settle the SEC’s charges without admitting or denying the allegations in the Complaint. These settlements are subject to approval by the Court. Each of the defendants consented to be permanently enjoined from violating or aiding and abetting all of the provisions that the Commission alleges they violated, and to officer and director bars. Lowry also consented to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91, Hess consented to pay a $250,000 civil penalty, and Vrbas consented to pay a $130,000 civil penalty. Robert Orr and Leland Orr consented to pay civil penalties and disgorgement in amounts to be determined by the Court.”
May 4, 2011
“The Securities and Exchange Commission today charged six former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses, with conducting an extensive financial and disclosure fraud. The Complaint alleges that in SEC filings and other public statements for year-end 2007 and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees and their financial health, the deterioration of Aleritas’ corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies.
According to the SEC’s Complaint filed in federal court in Kansas, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital’s financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas’ former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’ former management also concealed the rapid deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets.
The SEC’s Complaint charges the following former Brooke executives:
Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas
Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital
Michael S. Lowry, former chief executive officer and member of the board of Aleritas
Michael S. Hess, former chief executive officer and member of the board of Aleritas
Kyle L. Garst, former chief executive officer, president, and member of the board of Brooke Capital
Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital
As alleged in the Commission’s Complaint, each of the defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations by Brooke Corporation, Brooke Capital, and/or Aleritas of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Complaint also alleges that Robert Orr violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; Robert Orr, Leland Orr, Lowry, Hess, and Garst violated Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, Garst, and Vrbas violated Exchange Act Rule 13a-14 and aided and abetted violations by Brooke Corporation and Brooke Capital of Rule 13a-1; and Robert Orr and Hess aided and abetted violations by Aleritas of Exchange Act Rule 13a-11.
The Commission seeks permanent injunctions, civil penalties, and officers and director bars against each defendant, and disgorgement with prejudgment interest against Robert Orr, Leland Orr, and Lowry.
Robert Orr, Leland Orr, Lowry, Hess, and Vrbas agreed to settle the SEC’s charges without admitting or denying the allegations in the Complaint. These settlements are subject to approval by the Court. Each of the defendants consented to be permanently enjoined from violating or aiding and abetting all of the provisions that the Commission alleges they violated, and to officer and director bars. Lowry also consented to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91, Hess consented to pay a $250,000 civil penalty, and Vrbas consented to pay a $130,000 civil penalty. Robert Orr and Leland Orr consented to pay civil penalties and disgorgement in amounts to be determined by the Court.”
Thursday, May 19, 2011
SEC ALLEGES SECURITIES FRAUD INVOLVING AN IPO
Becoming very rich by getting investors to place their savings in investments that are mainly non-existent is the modern definition of entrepreneurialism. In the old days such behavior was known as fraud and was generally frowned upon by society. Today such individuals are said to be great capitalist who are willing to take chances. Of course the chances these so called capitalists take is that they may be discovered, pay heavy fines and/or, go to jail. In the following excerpt from the SEC web site the SEC alleges fraud in the matter of an Initial Public Offering:
“Washington, D.C., May 11, 2011 – The Securities and Exchange Commission today charged the co-founders of a New York-based beverage and food carrier company with orchestrating an $8 million securities fraud and spending at least half of investor money for their personal use.
The SEC alleges that Angelo Cuomo of Staten Island and George Garcy of Aventura, Fla., fraudulently obtained investments in E-Z Media Inc. while falsely telling investors that their company owned several patents for beverage and food carriers and had contracts to sell its carriers to such major companies as Heineken, Anheuser Busch, and Aramark Corporation. They also misrepresented their plans to conduct an initial public offering (IPO), their use of offering proceeds, and the projected share price. E-Z Media never actually had any contracts or other agreements to sell its carriers to any major company, including the brand-name companies that Cuomo and Garcy touted to investors. E-Z Media never took even the basic steps to prepare for a purported IPO.
“Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, Director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, E-Z Media designs carriers for use at concession stands at stadiums, arenas, movie theaters, and similar venues. E-Z Media is not registered nor does it file reports with the SEC.
The SEC alleges that Cuomo and Garcy (also known as Jorge Garcia) conducted their scheme from at least 2003 to 2009, making false statements and omissions about their company’s business prospects, assets, and liabilities. E-Z Media never disclosed that its claimed ownership of its main asset – certain patents for the carriers – was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.
The SEC further alleges that E-Z Media also had no reasonable basis for the post-IPO price projections that Garcy and Cuomo presented to investors, because the company had no significant assets or revenues and had substantial liabilities. They never told investors that the SEC sanctioned Garcy in 1997 for improperly offering and selling stock of another company to the public.
According to the SEC’s complaint, Garcy and Cuomo misappropriated and diverted at least $4 million of funds obtained from investors to make payments on personal loans, private school tuition, and rent and mortgages as well as other personal uses. The SEC’s complaint also names four relief defendants for the purposes of recovering fraudulently transferred assets: Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively.
The SEC’s complaint seeks a final judgment permanently enjoining Garcy and Cuomo from future violations of the federal securities laws, barring Garcy and Cuomo from acting as officers and directors of any public company, requiring Garcy and Cuomo to pay financial penalties, and requiring the defendants and relief defendants to disgorge all ill-gotten gains plus prejudgment interest, among other relief.
The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York and the Internal Revenue Service for their assistance in this matter.”
The SEC and other governmental agencies have been working very hard at uncovering cases of fraud however; many in Congress want to stop the SEC and others from doing their jobs by defunding the agencies.
“Washington, D.C., May 11, 2011 – The Securities and Exchange Commission today charged the co-founders of a New York-based beverage and food carrier company with orchestrating an $8 million securities fraud and spending at least half of investor money for their personal use.
The SEC alleges that Angelo Cuomo of Staten Island and George Garcy of Aventura, Fla., fraudulently obtained investments in E-Z Media Inc. while falsely telling investors that their company owned several patents for beverage and food carriers and had contracts to sell its carriers to such major companies as Heineken, Anheuser Busch, and Aramark Corporation. They also misrepresented their plans to conduct an initial public offering (IPO), their use of offering proceeds, and the projected share price. E-Z Media never actually had any contracts or other agreements to sell its carriers to any major company, including the brand-name companies that Cuomo and Garcy touted to investors. E-Z Media never took even the basic steps to prepare for a purported IPO.
“Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, Director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, E-Z Media designs carriers for use at concession stands at stadiums, arenas, movie theaters, and similar venues. E-Z Media is not registered nor does it file reports with the SEC.
The SEC alleges that Cuomo and Garcy (also known as Jorge Garcia) conducted their scheme from at least 2003 to 2009, making false statements and omissions about their company’s business prospects, assets, and liabilities. E-Z Media never disclosed that its claimed ownership of its main asset – certain patents for the carriers – was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.
The SEC further alleges that E-Z Media also had no reasonable basis for the post-IPO price projections that Garcy and Cuomo presented to investors, because the company had no significant assets or revenues and had substantial liabilities. They never told investors that the SEC sanctioned Garcy in 1997 for improperly offering and selling stock of another company to the public.
According to the SEC’s complaint, Garcy and Cuomo misappropriated and diverted at least $4 million of funds obtained from investors to make payments on personal loans, private school tuition, and rent and mortgages as well as other personal uses. The SEC’s complaint also names four relief defendants for the purposes of recovering fraudulently transferred assets: Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively.
The SEC’s complaint seeks a final judgment permanently enjoining Garcy and Cuomo from future violations of the federal securities laws, barring Garcy and Cuomo from acting as officers and directors of any public company, requiring Garcy and Cuomo to pay financial penalties, and requiring the defendants and relief defendants to disgorge all ill-gotten gains plus prejudgment interest, among other relief.
The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York and the Internal Revenue Service for their assistance in this matter.”
The SEC and other governmental agencies have been working very hard at uncovering cases of fraud however; many in Congress want to stop the SEC and others from doing their jobs by defunding the agencies.
Wednesday, May 18, 2011
INSIDER TRADING CASE INVOLVING ALBERTSON’S LLC
The following is an excerpt from the SEC web site:
‘Litigation Release No. 21950 / April 28, 2011
Securities and Exchange Commission v. Jonathan Hollander, Civil Action No. 11-CV-2885 (S.D.N.Y. April 28, 2011)
SEC CHARGES FORMER HEDGE FUND PROFESSIONAL WITH INSIDER TRADING
The Securities and Exchange Commission today charged Jonathan Hollander, a former hedge fund professional, with insider trading in Albertson’s, LLC based on material nonpublic information regarding an impending acquisition of ABS that Hollander received from a friend who was employed by the financial advisor retained by ABS in connection with impending acquisition. The Complaint alleges that Hollander traded ABS securities on the basis of the material nonpublic information and also tipped a family member and another friend (the tippees) who also traded ABS securities. As a result of their trading, Hollander and his tippees generated $95,807 in illegal profits.
The Complaint alleges that on January 12, 2006, Hollander purchased a total of 5,600 shares of ABS stock in his personal brokerage accounts. The Complaint further alleges that around the same time Hollander’s family member purchased 425 ABS call options. The Complaint also alleges that on January 17, 2006, the next business day after visiting with Hollander, Hollander’s friend purchased 25 ABS call options and on January 18, he purchased an additional 15 ABS call options.
On Monday, January 23, 2006, prior to the opening of trading, ABS announced it would be acquired by a consortium of buyers. Following the public announcement, Hollander’s tippees sold their ABS holdings. Hollander’s family member made a profit of $72,815 and his friend made a profit of $5,250. Hollander earned a profit of $17,742 in his own brokerage accounts.
Without admitting or denying the SEC’s allegations, Hollander agreed to settle the charges against him. The settlement is pending final approval by the court. Specifically, Hollander consented to the entry of a final judgment permanently enjoining him from violating Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, ordering him to pay disgorgement of $95,807 plus prejudgment interest of and imposing a civil penalty of $95,807. Hollander also consented to the entry of a Commission order, based upon the entry of a final judgment, barring him from association with a broker, dealer, investment adviser, municipal securities dealer or transfer agent with the right to reapply after three years.
The SEC acknowledges the assistance of the United States Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in connection with this matter.”
‘Litigation Release No. 21950 / April 28, 2011
Securities and Exchange Commission v. Jonathan Hollander, Civil Action No. 11-CV-2885 (S.D.N.Y. April 28, 2011)
SEC CHARGES FORMER HEDGE FUND PROFESSIONAL WITH INSIDER TRADING
The Securities and Exchange Commission today charged Jonathan Hollander, a former hedge fund professional, with insider trading in Albertson’s, LLC based on material nonpublic information regarding an impending acquisition of ABS that Hollander received from a friend who was employed by the financial advisor retained by ABS in connection with impending acquisition. The Complaint alleges that Hollander traded ABS securities on the basis of the material nonpublic information and also tipped a family member and another friend (the tippees) who also traded ABS securities. As a result of their trading, Hollander and his tippees generated $95,807 in illegal profits.
The Complaint alleges that on January 12, 2006, Hollander purchased a total of 5,600 shares of ABS stock in his personal brokerage accounts. The Complaint further alleges that around the same time Hollander’s family member purchased 425 ABS call options. The Complaint also alleges that on January 17, 2006, the next business day after visiting with Hollander, Hollander’s friend purchased 25 ABS call options and on January 18, he purchased an additional 15 ABS call options.
On Monday, January 23, 2006, prior to the opening of trading, ABS announced it would be acquired by a consortium of buyers. Following the public announcement, Hollander’s tippees sold their ABS holdings. Hollander’s family member made a profit of $72,815 and his friend made a profit of $5,250. Hollander earned a profit of $17,742 in his own brokerage accounts.
Without admitting or denying the SEC’s allegations, Hollander agreed to settle the charges against him. The settlement is pending final approval by the court. Specifically, Hollander consented to the entry of a final judgment permanently enjoining him from violating Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, ordering him to pay disgorgement of $95,807 plus prejudgment interest of and imposing a civil penalty of $95,807. Hollander also consented to the entry of a Commission order, based upon the entry of a final judgment, barring him from association with a broker, dealer, investment adviser, municipal securities dealer or transfer agent with the right to reapply after three years.
The SEC acknowledges the assistance of the United States Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in connection with this matter.”
Tuesday, May 17, 2011
SEC USES DEFERRED PROSECUTION AGREEMENT IN BRIBERY CASE
Under FCPA companies are often charged for bribing foreign officials. Unfortunately, in many places companies in order to do business are forced to give bribes. In the following case the SEC is allowing a corporation to come clean and help with the investigation in order to avoid further prosecution. This excerpt of this case has been taken from the SEC web site:
“Washington, D.C., May 17, 2011 – The Securities and Exchange Commission today entered into a Deferred Prosecution Agreement (DPA) with Tenaris S.A. in its first-ever use of the approach to facilitate and reward cooperation in SEC investigations.
The agreement with Tenaris involves allegations that the global manufacturer of steel pipe products violated the Foreign Corrupt Practices Act (FCPA) by bribing Uzbekistan government officials during a bidding process to supply pipelines for transporting oil and natural gas. The SEC alleges that Tenaris made almost $5 million in profits when it was subsequently awarded several contracts by the Uzbekistan government. Under the terms of the DPA, Tenaris must pay $5.4 million in disgorgement and prejudgment interest.
Tenaris is the first company to enter into a DPA with the SEC, an approach announced last year to encourage individuals and companies to provide information about misconduct and assist with an SEC investigation. When Tenaris conducted a thorough, worldwide internal review of its operations and controls, it discovered FCPA violations by personnel in Uzbekistan and informed the SEC. In response to its findings, Tenaris reviewed its controls and compliance measures and significantly enhanced its anti-corruption policies and practices. Tenaris has agreed to cooperate further with the SEC, Justice Department, and any other law enforcement agency in connection with this case. Tenaris also agreed to pay a $3.5 million criminal penalty in a Non-Prosecution Agreement announced today by the Justice Department.
“The Tenaris foreign bribery scheme was unacceptable and unlawful, but the company’s response demonstrated high levels of corporate accountability and cooperation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The company’s immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training made it an appropriate candidate for the Enforcement Division’s first Deferred Prosecution Agreement. Effective enforcement of the securities laws includes acknowledging and providing credit to those who fully and completely support our investigations and who display an exemplary commitment to compliance, cooperation, and remediation.”
Cheryl Scarboro, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Tenaris’s conduct was clearly in violation of the FCPA. The company’s employees bribed government officials in Uzbekistan to obtain government contracts. But when Tenaris discovered the illegal conduct, it took noteworthy steps to address the violations and significantly enhance its anti-corruption policies and practices to remediate weaknesses in its internal controls.”
Tenaris is incorporated in Luxembourg and its American Depositary Receipts (TS) are listed on the New York Stock Exchange. According to the DPA, the SEC alleges that Tenaris bid on a series of contracts in 2006 and 2007 and bribed Uzbekistan officials to gain access to confidential bids by competitors. Tenaris used the information to revise its own bids, and as a result was awarded several contracts by the Uzbekistan government.
Under the terms of the DPA, the SEC will refrain from prosecuting the company in a civil action for its violations if Tenaris complies with certain undertakings. Among other things, Tenaris has agreed to enhance its policies, procedures, and controls to strengthen compliance with the FCPA and anti-corruption practices. Tenaris will implement due diligence requirements related to the retention and payment of agents, provide detailed training on the FCPA and other anti-corruption laws, require certification of compliance with anti-corruption policies, and notify the SEC of any complaints, charges, or convictions against Tenaris or its employees related to violations of any anti-bribery or securities laws. Tenaris has agreed to continue to fully cooperate with the SEC in its investigation.”
The SEC has said this is a first of its kind case and as such, the SEC should be commended for using the real prosecutorial tactic of allowing the alleged criminal get a lighter sentence in exchange for full cooperation.
“Washington, D.C., May 17, 2011 – The Securities and Exchange Commission today entered into a Deferred Prosecution Agreement (DPA) with Tenaris S.A. in its first-ever use of the approach to facilitate and reward cooperation in SEC investigations.
The agreement with Tenaris involves allegations that the global manufacturer of steel pipe products violated the Foreign Corrupt Practices Act (FCPA) by bribing Uzbekistan government officials during a bidding process to supply pipelines for transporting oil and natural gas. The SEC alleges that Tenaris made almost $5 million in profits when it was subsequently awarded several contracts by the Uzbekistan government. Under the terms of the DPA, Tenaris must pay $5.4 million in disgorgement and prejudgment interest.
Tenaris is the first company to enter into a DPA with the SEC, an approach announced last year to encourage individuals and companies to provide information about misconduct and assist with an SEC investigation. When Tenaris conducted a thorough, worldwide internal review of its operations and controls, it discovered FCPA violations by personnel in Uzbekistan and informed the SEC. In response to its findings, Tenaris reviewed its controls and compliance measures and significantly enhanced its anti-corruption policies and practices. Tenaris has agreed to cooperate further with the SEC, Justice Department, and any other law enforcement agency in connection with this case. Tenaris also agreed to pay a $3.5 million criminal penalty in a Non-Prosecution Agreement announced today by the Justice Department.
“The Tenaris foreign bribery scheme was unacceptable and unlawful, but the company’s response demonstrated high levels of corporate accountability and cooperation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The company’s immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training made it an appropriate candidate for the Enforcement Division’s first Deferred Prosecution Agreement. Effective enforcement of the securities laws includes acknowledging and providing credit to those who fully and completely support our investigations and who display an exemplary commitment to compliance, cooperation, and remediation.”
Cheryl Scarboro, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Tenaris’s conduct was clearly in violation of the FCPA. The company’s employees bribed government officials in Uzbekistan to obtain government contracts. But when Tenaris discovered the illegal conduct, it took noteworthy steps to address the violations and significantly enhance its anti-corruption policies and practices to remediate weaknesses in its internal controls.”
Tenaris is incorporated in Luxembourg and its American Depositary Receipts (TS) are listed on the New York Stock Exchange. According to the DPA, the SEC alleges that Tenaris bid on a series of contracts in 2006 and 2007 and bribed Uzbekistan officials to gain access to confidential bids by competitors. Tenaris used the information to revise its own bids, and as a result was awarded several contracts by the Uzbekistan government.
Under the terms of the DPA, the SEC will refrain from prosecuting the company in a civil action for its violations if Tenaris complies with certain undertakings. Among other things, Tenaris has agreed to enhance its policies, procedures, and controls to strengthen compliance with the FCPA and anti-corruption practices. Tenaris will implement due diligence requirements related to the retention and payment of agents, provide detailed training on the FCPA and other anti-corruption laws, require certification of compliance with anti-corruption policies, and notify the SEC of any complaints, charges, or convictions against Tenaris or its employees related to violations of any anti-bribery or securities laws. Tenaris has agreed to continue to fully cooperate with the SEC in its investigation.”
The SEC has said this is a first of its kind case and as such, the SEC should be commended for using the real prosecutorial tactic of allowing the alleged criminal get a lighter sentence in exchange for full cooperation.
FINAL JUDGMENT AGAINST GARY TRUMP IN SECURITIES CASE
The following excerpt is from the SEC web site:
“Litigation Release No. 21939 / April 20, 2011
Accounting and Auditing Enforcement Release No. 3272 / April 20, 2011
Securities and Exchange Commission v. Duane Martin and Gary Trump, Civil Action No. 09-cv-05259 (N.D. Ill.)
COURT ENTERS A FINAL JUDGMENT AGAINST STOCK PROMOTER GARY TRUMP
On April 12, 2011, the District Court for the Northern District of Illinois entered a Final Judgment against stock promoter Gary Trump in a civil action brought by the United States Securities & Exchange Commission (the “Commission”). The Commission sued Trump as well as Duane Martin, the former CEO of St. Charles, Illinois-based Universal Food & Beverage, Inc. ("Universal"), a now-defunct company, for violating federal securities laws. Trump was charged with violating the registration provisions of the Securities Act of 1933 (the "Securities Act") for improperly issuing S-8 stock to stock promoters and Martin's personal creditors. The Final Judgment entered against Trump permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act and permanently bars him from participating in any penny stock offerings. It also orders him to pay $69,976.27 in disgorgement and prejudgment interest, but waives payment based on his demonstrated inability to pay. The Final Judgment was entered based on Trump’s Consent to Final Judgment in which he neither admitted nor denied the allegations in the Commission's Complaint.
The Commission's Complaint alleged that Trump and Martin violated the registration provisions of the Securities Act by improperly issuing S-8 stock to stock promoters and Martin's personal creditors. Trump, who took S-8 shares in exchange for promoting Universal stock, (a) helped engineer the illegal S-8 offering by hand-picking a team of promoters who participated in the offering and (b) illegally distributed his S-8 shares to the public without registration. The Complaint also pled several fraud claims against Martin.
The Commission previously settled its claims against Duane Martin by which Martin agreed to entry of (1) a permanent injunction, (2) a permanent penny stock bar, and (3) a permanent officer and director bar. In addition, on March 16, 2010, the United States Attorney’s Office for the Northern District of Illinois (“USAO”) charged Martin with wire fraud based largely on the misconduct identified in the Commission’s Complaint. Martin pled guilty and, on July 13, 2010, was sentenced to 41 months in prison and ordered to pay $618,441 in restitution to Universal’s creditors.”
“Litigation Release No. 21939 / April 20, 2011
Accounting and Auditing Enforcement Release No. 3272 / April 20, 2011
Securities and Exchange Commission v. Duane Martin and Gary Trump, Civil Action No. 09-cv-05259 (N.D. Ill.)
COURT ENTERS A FINAL JUDGMENT AGAINST STOCK PROMOTER GARY TRUMP
On April 12, 2011, the District Court for the Northern District of Illinois entered a Final Judgment against stock promoter Gary Trump in a civil action brought by the United States Securities & Exchange Commission (the “Commission”). The Commission sued Trump as well as Duane Martin, the former CEO of St. Charles, Illinois-based Universal Food & Beverage, Inc. ("Universal"), a now-defunct company, for violating federal securities laws. Trump was charged with violating the registration provisions of the Securities Act of 1933 (the "Securities Act") for improperly issuing S-8 stock to stock promoters and Martin's personal creditors. The Final Judgment entered against Trump permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act and permanently bars him from participating in any penny stock offerings. It also orders him to pay $69,976.27 in disgorgement and prejudgment interest, but waives payment based on his demonstrated inability to pay. The Final Judgment was entered based on Trump’s Consent to Final Judgment in which he neither admitted nor denied the allegations in the Commission's Complaint.
The Commission's Complaint alleged that Trump and Martin violated the registration provisions of the Securities Act by improperly issuing S-8 stock to stock promoters and Martin's personal creditors. Trump, who took S-8 shares in exchange for promoting Universal stock, (a) helped engineer the illegal S-8 offering by hand-picking a team of promoters who participated in the offering and (b) illegally distributed his S-8 shares to the public without registration. The Complaint also pled several fraud claims against Martin.
The Commission previously settled its claims against Duane Martin by which Martin agreed to entry of (1) a permanent injunction, (2) a permanent penny stock bar, and (3) a permanent officer and director bar. In addition, on March 16, 2010, the United States Attorney’s Office for the Northern District of Illinois (“USAO”) charged Martin with wire fraud based largely on the misconduct identified in the Commission’s Complaint. Martin pled guilty and, on July 13, 2010, was sentenced to 41 months in prison and ordered to pay $618,441 in restitution to Universal’s creditors.”
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