Many small investors dream of have a big payoff if they could just get in on the right deal at the right time. There are of course people who will target such investors with scams such as amazing real estate development deals or perhaps an initial public offering of a stock. Certainly, if you could have purchased some Microsoft stock before the company became public you could have become very wealthy. Unfortunately, such deals are usually reserved for investment bankers and small investors have very little chance of investing in any legitimate profitable company when it is on the verge of becoming public. I remember when a Mutual Savings and Loan company that I had an account with offered to sell stock to its staff and account holders just before the firm became a publicly traded entity. I did not buy stock because I thought the company had questionable loan practices. For sure the company went public and within two years it was insolvent. The stock price never moved much above the IPO price which was not much different than the price paid for the stock before the offering.
In the following case the SEC alleges that mUrgent Corporation ran a high pressure boiler room operation to sell stock in the company prior to an imminent initial public offering:
“On April 21, 2011, the Securities and Exchange Commission filed a complaint in the United States District Court for the Central District of California against mUrgent Corporation, Vladislav Walter Bugarski (Walter), and his twin sons Vladimir Boris Bugarski (Boris) and Aleksander Negovan Bugarski (Aleks). The SEC alleges that the defendants defrauded investors in a $10 million boiler room scheme.
The SEC alleges that mUrgent, chief executive officer Boris Bugarski, chief financial officer Walter Bugarski, and chief operating officer Aleks Bugarski operated a boiler room at the company to sell mUrgent stock. Boiler room employees cold-called investors, used high pressure sales tactics, and misrepresented to investors that mUrgent had a prospering business and would imminently conduct an initial public offering (IPO). The SEC also alleges that mUrgent and the Bugarskis falsely told investors that stock sale proceeds would not be used to pay cash salaries to the Bugarskis.
According to the SEC’s complaint, mUrgent and the Bugarskis conducted two unregistered securities offerings beginning in 2008 that raised nearly $10 million from at least 130 investors nationwide. The Bugarskis misused investor money to fund more than $1.3 million in cash salary and bonuses for themselves. They also established a separate “slush fund” of more than $500,000, and used investor funds to pay for luxury cars and other personal expenses.
The SEC seeks permanent injunctions against mUrgent and the Bugarskis for violations of the antifraud, offering registration, and broker registration provisions of the federal securities laws, disgorgement, civil penalties, and an order prohibiting the Bugarskis from serving as officers or directors of any public company.
As alleged in the SEC’s complaint, the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.”
This is a photo of the National Register of Historic Places listing with reference number 7000063
Saturday, May 28, 2011
Friday, May 27, 2011
PONZI SCHEMER GOES TO PRISON
The following case an excerpt from the SEC web site:
“May 12 , 2011
COURT ENTERS JUDGMENT OF PERMANENT INJUNCTION AGAINST LUIS FELIPE PEREZ AND THE COMMISSION DISMISSES ITS MONEY CLAIMS AGAINST PEREZ IN LIGHT OF HIS 10-YEAR PRISON SENTENCE AND $14 MILLION RESTITUTION ORDERS IN PARALLEL CRIMINAL ACTION
SEC v. Luis Felipe Perez, Case No. 1:10-CV-21804-Martinez/McAliley (S.D. Fla.)
The Commission announced that on May 9, 2011, the Honorable Jose E. Martinez, United States District Court Judge for the Southern District of Florida, entered judgment of permanent injunction against Luis Felipe Perez. Perez consented to the entry of an injunction against future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the Commission dismissed its claims for disgorgement, prejudgment interest, and a civil penalty against Perez based on his criminal sentences and restitution orders in Case Nos. 10-20584-CR and 10-20411-CR before the Southern District of Florida.
On June 2, 2010, the Commission filed its complaint against Perez alleging that he orchestrated a $40 million Ponzi scheme with funds primarily raised from investors in the Miami Hispanic community to purportedly support jewelry businesses and pawn shops.”
“May 12 , 2011
COURT ENTERS JUDGMENT OF PERMANENT INJUNCTION AGAINST LUIS FELIPE PEREZ AND THE COMMISSION DISMISSES ITS MONEY CLAIMS AGAINST PEREZ IN LIGHT OF HIS 10-YEAR PRISON SENTENCE AND $14 MILLION RESTITUTION ORDERS IN PARALLEL CRIMINAL ACTION
SEC v. Luis Felipe Perez, Case No. 1:10-CV-21804-Martinez/McAliley (S.D. Fla.)
The Commission announced that on May 9, 2011, the Honorable Jose E. Martinez, United States District Court Judge for the Southern District of Florida, entered judgment of permanent injunction against Luis Felipe Perez. Perez consented to the entry of an injunction against future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the Commission dismissed its claims for disgorgement, prejudgment interest, and a civil penalty against Perez based on his criminal sentences and restitution orders in Case Nos. 10-20584-CR and 10-20411-CR before the Southern District of Florida.
On June 2, 2010, the Commission filed its complaint against Perez alleging that he orchestrated a $40 million Ponzi scheme with funds primarily raised from investors in the Miami Hispanic community to purportedly support jewelry businesses and pawn shops.”
TWO ITALIAN CITIZENS SETTLE INSIDER TRADING CHARGES WITH SEC
The following is an excerpt from the SEC web site:
April 18, 2011
“The Securities and Exchange Commission today announced a proposed settlement with two Italian citizens, Oscar Ronzoni and Paolo Busardò, their investment vehicle, Tatus Corp. (“Tatus”), and another related entity, A-Round Investment SA (“A-Round”), for alleged insider trading in the securities of DRS Technologies, Inc. (“DRS”). In October 2010, the Commission amended its Complaint in its previously-filed action against unknown purchasers of DRS and American Power Conversion Corp. (“APCC”) call options to name these defendants, in addition to two others who have previously settled with the Commission. Ronzoni, Busardo, and their related entities have agreed to settle the Commission’s charges by, among other things, paying approximately $1.46 million in disgorgement and penalties.
In its October 2010 Amended Complaint, the Commission alleges that Ronzoni, Busardò, Tatus, and A-Round purchased DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information concerning the acquisition of DRS. According to the Amended Complaint, the settling defendants purchased the DRS call options in advance of a May 8, 2008 Wall Street Journal article reporting advanced merger negotiations between Finmeccanica S.p.A. and DRS, and confirmation by DRS the same day that it was engaged in talks regarding a potential strategic transaction. On May 5 and 6, 2008, Ronzoni purchased a total of 340 DRS call options; on May 7, 2008, Ronzoni also purchased, through Tatus, 800 DRS call options; and, on May 7, 2008, Busardò through A-Round purchased a total of 130 DRS call options. Following the May 8th Wall Street Journal article, Ronzoni made a profit of $156,400, Tatus made a profit of $695,459.97, and Busardò, through A-Round, made a profit of $115,840 after liquidating their DRS call option stakes.
Under the terms of the proposed settlement, Ronzoni, Busardò, Tatus, and A-Round would consent, without admitting or denying the allegations of the Amended Complaint, to the entry of final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering them to be jointly and severally liable for the payment of $967,699.97 in disgorgement, $8,689 in prejudgment interest, and a civil penalty of $483,849.99. The settlement remains subject to the approval of the U.S. District Court for the Southern District of New York. If approved, the settlement would bring this litigation to a close and bring the total disgorgement and penalties collected in this civil action to approximately $4.4 million. For more information, please see Litigation Release Nos. 20654 (July 25, 2008) and 21687A (October 7, 2010).
The SEC acknowledges the assistance of the U.S. Department of Justice, the Options Regulatory Surveillance Authority, the Swiss Financial Market Supervisory Authority, and the Swiss Federal Office of Justice in this matter.”
April 18, 2011
“The Securities and Exchange Commission today announced a proposed settlement with two Italian citizens, Oscar Ronzoni and Paolo Busardò, their investment vehicle, Tatus Corp. (“Tatus”), and another related entity, A-Round Investment SA (“A-Round”), for alleged insider trading in the securities of DRS Technologies, Inc. (“DRS”). In October 2010, the Commission amended its Complaint in its previously-filed action against unknown purchasers of DRS and American Power Conversion Corp. (“APCC”) call options to name these defendants, in addition to two others who have previously settled with the Commission. Ronzoni, Busardo, and their related entities have agreed to settle the Commission’s charges by, among other things, paying approximately $1.46 million in disgorgement and penalties.
In its October 2010 Amended Complaint, the Commission alleges that Ronzoni, Busardò, Tatus, and A-Round purchased DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information concerning the acquisition of DRS. According to the Amended Complaint, the settling defendants purchased the DRS call options in advance of a May 8, 2008 Wall Street Journal article reporting advanced merger negotiations between Finmeccanica S.p.A. and DRS, and confirmation by DRS the same day that it was engaged in talks regarding a potential strategic transaction. On May 5 and 6, 2008, Ronzoni purchased a total of 340 DRS call options; on May 7, 2008, Ronzoni also purchased, through Tatus, 800 DRS call options; and, on May 7, 2008, Busardò through A-Round purchased a total of 130 DRS call options. Following the May 8th Wall Street Journal article, Ronzoni made a profit of $156,400, Tatus made a profit of $695,459.97, and Busardò, through A-Round, made a profit of $115,840 after liquidating their DRS call option stakes.
Under the terms of the proposed settlement, Ronzoni, Busardò, Tatus, and A-Round would consent, without admitting or denying the allegations of the Amended Complaint, to the entry of final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering them to be jointly and severally liable for the payment of $967,699.97 in disgorgement, $8,689 in prejudgment interest, and a civil penalty of $483,849.99. The settlement remains subject to the approval of the U.S. District Court for the Southern District of New York. If approved, the settlement would bring this litigation to a close and bring the total disgorgement and penalties collected in this civil action to approximately $4.4 million. For more information, please see Litigation Release Nos. 20654 (July 25, 2008) and 21687A (October 7, 2010).
The SEC acknowledges the assistance of the U.S. Department of Justice, the Options Regulatory Surveillance Authority, the Swiss Financial Market Supervisory Authority, and the Swiss Federal Office of Justice in this matter.”
Thursday, May 26, 2011
FORMER NASDAQ MANAGING DIRECTOR FACES 20 YEARS IN PRISON
The following is an excerpt from the Department of Justice web site:
WASHINGTON – A former managing director of the NASDAQ Stock Market pleaded guilty today for his participation in an insider trading scheme in which he purchased and sold stock in NASDAQ-listed companies based on material, non-public information he obtained in his capacity as a NASDAQ executive, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and Postal Inspector in Charge of Criminal Investigations Gerald O’Farrell of the U.S. Postal Inspection Service (USPIS).
Donald Johnson, 56, a resident of Ashburn, Va., pleaded guilty before U.S. District Judge Anthony J. Trenga in the Eastern District of Virginia to one count of securities fraud. In pleading guilty, he admitted that he purchased and sold stock in NASDAQ-listed companies based on material, non-public information, or inside information, on several different occasions from 2006 to 2009.
“Mr. Johnson was a fox in a hen-house,” said Assistant Attorney General Breuer. “NASDAQ-listed companies entrusted him with their sensitive, non-public information so that he could provide them with analyses about their stock. He then used that very information to cheat the system and make an illegal profit. Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished. The integrity of our securities markets is vital to the U.S. economy, and the Justice Department is determined to take on insider trading at every level.”
“Don Johnson used sensitive, confidential information as an executive at NASDAQ to pad his retirement by more than $600,000,” said U.S. Attorney MacBride. “He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year. But he learned what every other trader on Wall Street must now realize: We’re watching.”
“The U.S. Postal Inspection Service continues to identify and aggressively investigate those who commit securities fraud,” said Postal Inspector in Charge of Criminal Investigations O’Farrell. “The agency has placed a team of highly trained Postal Inspectors at the Department of Justice in Washington, D.C., working in partnership with Department of Justice attorneys, to assure that criminals who defraud innocent citizens are prosecuted to the fullest extent of the law.”
According to court documents, from 2006 to September 2009, Johnson was a managing director on NASDAQ’s market intelligence desk in New York. The market intelligence desk provides trading analysis and market information to the companies that list on NASDAQ. According to court documents, Johnson monitored the stock of companies traded on NASDAQ and offered NASDAQ-listed companies information and analyses concerning trading in their own stock. To enable him to perform these services, NASDAQ-listed companies routinely entrusted Johnson with material, non-public information about their stock, including advance notice of announcements concerning earnings, regulatory approvals and personnel changes. Johnson admitted that he repeatedly used this information to purchase or sell short stock in various NASDAQ-listed companies shortly before the information was made public. He would then generate substantial gains by reversing those positions soon after the announcement. According to court documents, to conceal his illegal trading, Johnson executed these trades in a brokerage account in his wife’s name. Johnson failed to disclose this account to NASDAQ in violation of NASDAQ rules.
Johnson admitted that he made illegal purchases and sales of stock in NASDAQ-listed companies on at least eight different occasions, generating gains totaling more than $640,000. The companies whose securities he traded were Central Garden and Pet Co.; Digene Corporation; Idexx Laboratories Inc.; Pharmaceutical Product Development Inc.; and United Therapeutics Corporation. According to court documents, in November 2007, Johnson used inside information related to successful trial results for United Therapeutics’ drug Viveta (now called Tyvaso) to purchase shares of United Therapeutics before the trial results were announced. Soon after the announcement, Johnson sold the shares and gained more than $175,000 in profits. According to court documents, in July 2009, Johnson used inside information about the approval of its drug Tyvaso to purchase shares of United Therapeutics before the approval was announced. He sold the shares after the announcement and gained more than $110,000 in profits.
Johnson is scheduled to be sentenced on Aug. 12, 2011. The maximum penalty for securities fraud is 20 years in prison and a fine of $5 million.
In a related action, the Securities and Exchange Commission today filed a civil enforcement action against Johnson in the Southern District of New York.
This case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Raymond E. Patricco Jr., of the Eastern District of Virginia. The case was investigated by USPIS. The Financial Industry Regulatory Authority provided assistance. Brigham Cannon, formerly a Trial Attorney of the Criminal Division, also assisted with the investigation.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. “
WASHINGTON – A former managing director of the NASDAQ Stock Market pleaded guilty today for his participation in an insider trading scheme in which he purchased and sold stock in NASDAQ-listed companies based on material, non-public information he obtained in his capacity as a NASDAQ executive, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and Postal Inspector in Charge of Criminal Investigations Gerald O’Farrell of the U.S. Postal Inspection Service (USPIS).
Donald Johnson, 56, a resident of Ashburn, Va., pleaded guilty before U.S. District Judge Anthony J. Trenga in the Eastern District of Virginia to one count of securities fraud. In pleading guilty, he admitted that he purchased and sold stock in NASDAQ-listed companies based on material, non-public information, or inside information, on several different occasions from 2006 to 2009.
“Mr. Johnson was a fox in a hen-house,” said Assistant Attorney General Breuer. “NASDAQ-listed companies entrusted him with their sensitive, non-public information so that he could provide them with analyses about their stock. He then used that very information to cheat the system and make an illegal profit. Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished. The integrity of our securities markets is vital to the U.S. economy, and the Justice Department is determined to take on insider trading at every level.”
“Don Johnson used sensitive, confidential information as an executive at NASDAQ to pad his retirement by more than $600,000,” said U.S. Attorney MacBride. “He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year. But he learned what every other trader on Wall Street must now realize: We’re watching.”
“The U.S. Postal Inspection Service continues to identify and aggressively investigate those who commit securities fraud,” said Postal Inspector in Charge of Criminal Investigations O’Farrell. “The agency has placed a team of highly trained Postal Inspectors at the Department of Justice in Washington, D.C., working in partnership with Department of Justice attorneys, to assure that criminals who defraud innocent citizens are prosecuted to the fullest extent of the law.”
According to court documents, from 2006 to September 2009, Johnson was a managing director on NASDAQ’s market intelligence desk in New York. The market intelligence desk provides trading analysis and market information to the companies that list on NASDAQ. According to court documents, Johnson monitored the stock of companies traded on NASDAQ and offered NASDAQ-listed companies information and analyses concerning trading in their own stock. To enable him to perform these services, NASDAQ-listed companies routinely entrusted Johnson with material, non-public information about their stock, including advance notice of announcements concerning earnings, regulatory approvals and personnel changes. Johnson admitted that he repeatedly used this information to purchase or sell short stock in various NASDAQ-listed companies shortly before the information was made public. He would then generate substantial gains by reversing those positions soon after the announcement. According to court documents, to conceal his illegal trading, Johnson executed these trades in a brokerage account in his wife’s name. Johnson failed to disclose this account to NASDAQ in violation of NASDAQ rules.
Johnson admitted that he made illegal purchases and sales of stock in NASDAQ-listed companies on at least eight different occasions, generating gains totaling more than $640,000. The companies whose securities he traded were Central Garden and Pet Co.; Digene Corporation; Idexx Laboratories Inc.; Pharmaceutical Product Development Inc.; and United Therapeutics Corporation. According to court documents, in November 2007, Johnson used inside information related to successful trial results for United Therapeutics’ drug Viveta (now called Tyvaso) to purchase shares of United Therapeutics before the trial results were announced. Soon after the announcement, Johnson sold the shares and gained more than $175,000 in profits. According to court documents, in July 2009, Johnson used inside information about the approval of its drug Tyvaso to purchase shares of United Therapeutics before the approval was announced. He sold the shares after the announcement and gained more than $110,000 in profits.
Johnson is scheduled to be sentenced on Aug. 12, 2011. The maximum penalty for securities fraud is 20 years in prison and a fine of $5 million.
In a related action, the Securities and Exchange Commission today filed a civil enforcement action against Johnson in the Southern District of New York.
This case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Raymond E. Patricco Jr., of the Eastern District of Virginia. The case was investigated by USPIS. The Financial Industry Regulatory Authority provided assistance. Brigham Cannon, formerly a Trial Attorney of the Criminal Division, also assisted with the investigation.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. “
SEC FILES INJUNCTIVE ACTION AGAINST INDIVIDUALS AND COMPANIES
In the following case the SEC alleges a fraudulent offering of promissory notes. The case below is an excerpt from the SEC web site:
“On April 8, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Central District of California against Luis Garg, Jason Zakocs, and four companies owned and/or controlled by Garg, RealFund Investment Trust ("RealFund"), First Atlanta, LP ("First Atlanta"), Weatherby LP ("Weatherby"), and Citiprop Corporation ("Citiprop"), for allegedly participating in fraudulent offerings of promissory notes. RealFund and Citiprop are based in, and Garg and Zakocs reside in, Los Angeles, California. First Atlanta and Weatherby are based in Atlanta, Georgia.
The Complaint alleges that, from at least April 2008 through January 2010, the defendants raised approximately $1 million from 20 to 30 investors who invested in high-yield promissory notes, issued by RealFund, First Atlanta, and Weatherby, the proceeds from which were to be used for real estate development projects. According to the Complaint, the defendants told investors that their investments were risk-free and guaranteed annual returns ranging from 8% to 24%. In addition to alleging that these representations were false, the Complaint alleges that the defendants falsely advised investors that their promissory notes would be fully secured by equity in the underlying real estate projects. The Complaint further alleges that, notwithstanding the defendants' assurances as to the safety of their investment program and unbeknownst to investors, one of the note issuers and real estate development companies for the investment program, First Atlanta, had been involved in bankruptcy proceedings for nearly the entire offering period. In addition, the Complaint alleges that, notwithstanding First Atlanta's default on some of the promissory notes beginning in September 2009, the defendants failed to disclose this information to new investors and continued to offer and sell their promissory notes as a safe and guaranteed investment through January 2010. According to the Complaint, the note offerings were not registered with the Commission, RealFund was not registered with the Commission as a broker or dealer, and neither Garg nor Zakocs were associated persons of a registered broker or dealer at the time they sold the promissory notes.
The Complaint claims that, based on this conduct, all of the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Complaint also claims that RealFund, Garg, and Zakocs violated Section 15(a) of the Exchange Act.”
“On April 8, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Central District of California against Luis Garg, Jason Zakocs, and four companies owned and/or controlled by Garg, RealFund Investment Trust ("RealFund"), First Atlanta, LP ("First Atlanta"), Weatherby LP ("Weatherby"), and Citiprop Corporation ("Citiprop"), for allegedly participating in fraudulent offerings of promissory notes. RealFund and Citiprop are based in, and Garg and Zakocs reside in, Los Angeles, California. First Atlanta and Weatherby are based in Atlanta, Georgia.
The Complaint alleges that, from at least April 2008 through January 2010, the defendants raised approximately $1 million from 20 to 30 investors who invested in high-yield promissory notes, issued by RealFund, First Atlanta, and Weatherby, the proceeds from which were to be used for real estate development projects. According to the Complaint, the defendants told investors that their investments were risk-free and guaranteed annual returns ranging from 8% to 24%. In addition to alleging that these representations were false, the Complaint alleges that the defendants falsely advised investors that their promissory notes would be fully secured by equity in the underlying real estate projects. The Complaint further alleges that, notwithstanding the defendants' assurances as to the safety of their investment program and unbeknownst to investors, one of the note issuers and real estate development companies for the investment program, First Atlanta, had been involved in bankruptcy proceedings for nearly the entire offering period. In addition, the Complaint alleges that, notwithstanding First Atlanta's default on some of the promissory notes beginning in September 2009, the defendants failed to disclose this information to new investors and continued to offer and sell their promissory notes as a safe and guaranteed investment through January 2010. According to the Complaint, the note offerings were not registered with the Commission, RealFund was not registered with the Commission as a broker or dealer, and neither Garg nor Zakocs were associated persons of a registered broker or dealer at the time they sold the promissory notes.
The Complaint claims that, based on this conduct, all of the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Complaint also claims that RealFund, Garg, and Zakocs violated Section 15(a) of the Exchange Act.”
SEC CHARGED FORMER NASDAQ MANAGING DIRECTOR WITH INSIDER TRADING
Insider trading is the way you can make incredible amounts of money on Wall Street. Fortunately, for investors no privy to insider information the Obama Administration has created a champion in the current SEC. In the following case excerpted from the SEC web site the SEC sets forth the charges against a former managing director of the NASDAQ Stock Exchange:
“Washington, D.C., May 26, 2011 — The Securities and Exchange Commission today charged a former managing director of The NASDAQ Stock Market with insider trading on confidential information that he stole while working in a market intelligence unit that communicates with companies in advance of market-moving public announcements.
The SEC alleges that Donald L. Johnson traded in advance of such public announcements as corporate leadership changes, earnings reports and forecasts, and regulatory approvals of new pharmaceutical products. He often placed the illegal trades directly from his work computer through an online brokerage account in his wife’s name. Johnson obtained illicit trading profits of more than $755,000 during a three-year period.
Johnson also has been charged in a parallel criminal action announced by the U.S. Department of Justice today.
“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”
Antonia Chion, Associate Director of the SEC’s Division of Enforcement, added, “Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients. Johnson assured at least one corporate official that she could share material nonpublic information with him because he was obligated as a NASDAQ employee to hold such information in confidence, and then he illegally traded on it.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Johnson illegally traded in advance of nine announcements involving NASDAQ-listed companies from August 2006 to July 2009. Johnson took advantage of both favorable and unfavorable information that was entrusted to him in confidence by NASDAQ and its listed company clients, shorting stocks on several occasions and establishing long positions in other instances. Johnson lives in Ashburn, Va., and worked in various positions for the NASD and NASDAQ for 20 years until his retirement from NASDAQ in September 2009.
According to the SEC’s complaint, Johnson worked in NASDAQ’s Corporate Client Group (CCG) from January 2000 to October 2006. He then transferred to the Market Intelligence Desk, a specialized department within the CCG that provides issuers with general market updates, overviews of their company’s sector, and commentary regarding the factors influencing day-to-day trading activity in their stocks.
The SEC alleges that Johnson had frequent and significant interactions with senior executives of NASDAQ-listed issuers, including CEOs, CFOs, and investor relations officers at his assigned companies. The corporate executives who shared nonpublic information with Johnson did so based on the understanding that it would be kept confidential and that Johnson could not use the information for his personal benefit.
For example, the SEC alleges that Johnson obtained illicit profits of approximately $175,000 by insider trading in the stock of United Therapeutics Corp. (UTHR). Johnson spoke by phone with executives at UTHR including the CFO and general counsel on Oct. 30, 2007, and he became aware of the successful completion of a trial for its drug Viveta (later renamed Tyvaso). Despite the nonpublic and highly confidential nature of the Viveta trial results discussed with him, Johnson purchased 10,000 shares of UTHR stock in his wife’s brokerage account on October 31. After UTHR issued a press release on November 1 announcing the successful trial results, Johnson began selling all of the stock that he had purchased the day before, placing sell orders online from his office computer at NASDAQ.
The SEC’s complaint charges Johnson with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest and a monetary penalty. Johnson’s wife Dalila Lopez is named as a relief defendant in the SEC’s complaint for the purpose of recovering illicit profits in her possession.
The SEC acknowledges the assistance of the Fraud Section of the Justice Department’s Criminal Division and the U.S. Postal Inspection Service. The SEC brought its enforcement action in coordination with these other members of the Financial Fraud Enforcement Task Force. The SEC also acknowledges FINRA and NASDAQ for their assistance in this investigation.”
If these allegations are true, then one might come to the conclusion that most of the people in power in the United States are just big crooks. At least the SEC, DOJ and, USPS seem to have some people working for these agencies who do not believe that fraud is just an excellent business practice used by America’s most talented entrepreneurs.
“Washington, D.C., May 26, 2011 — The Securities and Exchange Commission today charged a former managing director of The NASDAQ Stock Market with insider trading on confidential information that he stole while working in a market intelligence unit that communicates with companies in advance of market-moving public announcements.
The SEC alleges that Donald L. Johnson traded in advance of such public announcements as corporate leadership changes, earnings reports and forecasts, and regulatory approvals of new pharmaceutical products. He often placed the illegal trades directly from his work computer through an online brokerage account in his wife’s name. Johnson obtained illicit trading profits of more than $755,000 during a three-year period.
Johnson also has been charged in a parallel criminal action announced by the U.S. Department of Justice today.
“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”
Antonia Chion, Associate Director of the SEC’s Division of Enforcement, added, “Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients. Johnson assured at least one corporate official that she could share material nonpublic information with him because he was obligated as a NASDAQ employee to hold such information in confidence, and then he illegally traded on it.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Johnson illegally traded in advance of nine announcements involving NASDAQ-listed companies from August 2006 to July 2009. Johnson took advantage of both favorable and unfavorable information that was entrusted to him in confidence by NASDAQ and its listed company clients, shorting stocks on several occasions and establishing long positions in other instances. Johnson lives in Ashburn, Va., and worked in various positions for the NASD and NASDAQ for 20 years until his retirement from NASDAQ in September 2009.
According to the SEC’s complaint, Johnson worked in NASDAQ’s Corporate Client Group (CCG) from January 2000 to October 2006. He then transferred to the Market Intelligence Desk, a specialized department within the CCG that provides issuers with general market updates, overviews of their company’s sector, and commentary regarding the factors influencing day-to-day trading activity in their stocks.
The SEC alleges that Johnson had frequent and significant interactions with senior executives of NASDAQ-listed issuers, including CEOs, CFOs, and investor relations officers at his assigned companies. The corporate executives who shared nonpublic information with Johnson did so based on the understanding that it would be kept confidential and that Johnson could not use the information for his personal benefit.
For example, the SEC alleges that Johnson obtained illicit profits of approximately $175,000 by insider trading in the stock of United Therapeutics Corp. (UTHR). Johnson spoke by phone with executives at UTHR including the CFO and general counsel on Oct. 30, 2007, and he became aware of the successful completion of a trial for its drug Viveta (later renamed Tyvaso). Despite the nonpublic and highly confidential nature of the Viveta trial results discussed with him, Johnson purchased 10,000 shares of UTHR stock in his wife’s brokerage account on October 31. After UTHR issued a press release on November 1 announcing the successful trial results, Johnson began selling all of the stock that he had purchased the day before, placing sell orders online from his office computer at NASDAQ.
The SEC’s complaint charges Johnson with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest and a monetary penalty. Johnson’s wife Dalila Lopez is named as a relief defendant in the SEC’s complaint for the purpose of recovering illicit profits in her possession.
The SEC acknowledges the assistance of the Fraud Section of the Justice Department’s Criminal Division and the U.S. Postal Inspection Service. The SEC brought its enforcement action in coordination with these other members of the Financial Fraud Enforcement Task Force. The SEC also acknowledges FINRA and NASDAQ for their assistance in this investigation.”
If these allegations are true, then one might come to the conclusion that most of the people in power in the United States are just big crooks. At least the SEC, DOJ and, USPS seem to have some people working for these agencies who do not believe that fraud is just an excellent business practice used by America’s most talented entrepreneurs.
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