NEBRASKA RESIDENT CHARGED WITH FRUAD IN COMMODITY POOL

The following case is an excerpt from the CFTC website:

"CFTC Charges Grand Island, Nebraska Resident with Fraud and Records Violations in Connection with $4 Million Commodity Pool
Grace Elizabeth Reisinger and ROF Consulting, LLC charged with solicitation fraud and records violations.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a complaint in the U.S. District Court for the District of Nebraska, charging Grace Elizabeth Reisinger of Grand Island, Neb., and ROF Consulting, LLC (ROF) with operating a fraudulent commodity pool scheme. The defendants operated the commodity pool NCCN, LLC (NCCN).

The CFTC complaint, filed on June 29, 2011, alleges that from at least February 28, 2005 to October 26, 2009, Reisinger and ROF fraudulently solicited and accepted approximately $4 million from NCCN pool participants. The defendants allegedly operated NCCN while not being registered as Commodity Pool Operators (CPOs), as required under the Commodity Exchange Act and CFTC regulations. Reisinger also allegedly acted as a CPO for a part of the relevant period under a falsely claimed exemption from the registration requirement.

The complaint also charges Reisinger with making several fraudulent representations to actual and prospective pool participants. Such fraudulent misrepresentations included that she was exempt from the CFTC’s registration requirement, that the pool only solicited and accepted funds from participants who met the definition of a “qualified eligible person” (QEP), and that the minimum required investment in the pool was $5 million. Reisinger and ROF also allegedly failed to (1) furnish pool participants with required monthly account statements and annual reports, (2) advise pool participants that Reisinger and ROF directed fees paid from pool participants’ funds to an undisclosed “foreign introducing broker,” and (3) advise pool participants that Reisinger and ROF were required to be registered as CPOs.

Specifically, the CFTC complaint alleges that months after the date Reisinger and ROF delivered subscription agreements for the pool to some prospective pool participants and began acting as the CPOs of NCCN, she filed a letter with the National Futures Association (NFA) on June 24, 2005 claiming exemption from the requirement to register as a CPO pursuant to CFTC regulation 4.13(a)(4), 17 C.F.R. § 4.13(a)(4)(2005). Accordingly, prior to June 24, 2005, Reisinger acted as the CPO of NCCN without registration or a claimed exemption from registration, according to the complaint. Throughout this same period ROF also allegedly acted as the CPO of NCCN without being registered as a CPO and without a claimed exemption from the requirement to register as a CPO, according to the complaint.

Because Reisinger could not reasonably believe all persons participating in the pool were QEPs, admitted that she “did not know” whether some participants were QEPs at the time she accepted their funds, and failed to provide all participants with the required written statements mandated by CFTC regulation 4.13(a)(5)(i)(A) and (B), 17 C.F.R. § 4.13(a)(5)(i)(A) and (B) (2005), according to the complaint. Reisinger was not eligible for the exemption that she claimed and, therefore, should have been registered as a CPO, according to the complaint.

At no time during the relevant period did Reisinger amend her claimed notice of exemption from the requirement to register as a CPO, despite knowledge that her claimed exemption was invalid, according to the complaint.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent trading and registration bans and a permanent injunction against further violations of the federal commodities laws."

INSIDER TRADING STRIKES AGAIN

The following is an excerpt from the SEC web site:

“The Securities and Exchange Commission announced today that, on June 8, 2011, the Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York entered a judgment against Defendant Shammara Hussain in SEC v. Feinblatt, 11-CV-0170, an insider trading case the SEC filed on January 10, 2011. The Judge also entered a stipulation and order of dismissal as to Defendant Trivium Capital Management LLC, a New York-based hedge fund investment adviser which has wound down its investment management business, in exchange for its agreement to cooperate and cease doing business.
The Complaint alleged that Robert Feinblatt, a co-founder and principal of Trivium, and Jeffrey Yokuty, a Trivium analyst, engaged in insider trading in the securities of Polycom, Hilton, Google and Kronos. The complaint further alleged that Polycom senior executive Sunil Bhalla and Hussain, an employee at investor relations consulting firm Market Street Partners that did work for Google, tipped the inside information that enabled the insider trading by Feinblatt and Yokuty on behalf of Trivium’s hedge funds for illicit profits of more than $15 million.
To settle the SEC’s charges, Hussain consented to the entry of a judgment that: (i) permanently enjoins her from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders her to pay disgorgement of $21,619.80, plus $4,795.47 in prejudgment interest, plus a civil penalty of $21,619.80. Based on Hussain’s financial condition, the Court did not order a higher penalty. Trivium has agreed to cooperate and to not in the future engage in investment management or other operations.”

JUDGE ENTERS FINAL JUDGEMENT AGAINST TWO PENNY STOCK PROMOTERS

The following is an excerpt from the SEC website:

"The SEC announced today that on June 24, 2011, the Honorable Judge Richard A. Lazzara, United States District Judge for the Middle District of Florida, entered final judgments against two penny stock promoters, Robert M. Esposito and Gregory A. King, ordering them to pay $19,515,598 and $943,166, respectively, in disgorgement and civil penalties, in a fraudulent touting case the Commission filed on March 17, 2008. SEC v. Esposito, et al., No. 08 CV 494 T26 (M.D. Fla.). See Lit. Rel. No. 20499. The Court had previously entered judgments against Esposito and King permanently enjoining them from violating the anti-fraud and other provisions of the federal securities laws, and barring them from participating in any future penny stock offering. See Lit. Rel. No. 21449 (March 11, 2010).

In this action, the Commission charged that Esposito, King, and others participated in a fraudulent touting scheme of the stock of Anscott Industries, Inc. The complaint alleged that in April 2003, Esposito, a penny stock promoter, orchestrated a reverse merger between Anscott (then a private company) and Liquidix, Inc., a public shell company which, after the merger, changed its name to Anscott. According to the complaint, Esposito received 4 million shares of Anscott stock from the company as compensation for arranging the reverse merger and for future stock promotion work. The complaint further alleged that a fraudulent Form S-8 registration statement was filed with the Commission for the 4 million shares of Anscott issued to Esposito, which improperly enabled Esposito to sell these shares to the public during the fraudulent touting scheme.

As alleged in the complaint, after the reverse merger and the issuance of shares to Esposito, Esposito paid King, another penny stock promoter with whom Esposito had worked previously, to prepare and disseminate materially false and misleading tout sheets promoting Anscott stock. The Commission alleged that these tout sheets -- crafted to appear like independent investment newsletters and entitled the Wall Street Bulletin -- recommended Anscott as a "strong buy," and were disseminated to the public through fax spamming from late May 2003 through July 2003.

According to the complaint, these tout sheets, which King prepared, contained materially false and misleading representations about Anscott's products, business affiliations, and projected revenues. The complaint further alleged that these tout sheets failed to disclose, among other information, that Esposito, who was paid by the company to promote Anscott stock, was paying King to prepare and disseminate these "newsletters," and that Esposito was selling his Anscott stock during the touting scheme contrary to the Wall Street Bulletin's "strong buy" recommendation and price targets.

During the touting campaign, the price of Anscott's stock rose from around $1.40 a share in mid-May 2003, to a high of $4.59 a share on July 11, 2003. The complaint alleged that Esposito sold most of his Anscott stock to the public, realizing millions of dollars in illicit profits.

The Court's final judgment against Esposito orders him to pay disgorgement of $7,691,135, prejudgment interest of $4,133,326, and third tier civil penalty of $7,691,135. The judgment against Esposito also (a) permanently enjoins him from future violations of Sections 17(a), 5(a) and 5(c) of the Securities Act of 1933, Sections 10(b) and 13(d) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13d-1 and 13d-2; and (b) permanently bars him from participating in any future penny stock offerings.

The Court's final judgment against King orders him to pay disgorgement of $358,000, prejudgment interest of $227,166, and a third tier civil penalty of $358,000. The judgment against King also (a) permanently enjoins him from future violations of Sections 17(b) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and (b) permanently bars him from participating in any future penny stock offerings.

The Court previously entered final judgment against other defendants in this case, Anscott and its CEO, Jack R. Belluscio, on October 27, 2008: (1) permanently enjoining them from future violations of Sections 5(a) and 5(c) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; (2) permanently barring Belluscio from acting as an officer or director of a public company; (3) ordering Belluscio to pay third tier civil penalties of $240,000; and (4) ordering Anscott to pay third tier civil penalties of $1,200,000. In a related administrative proceeding, on May 7, 2008, the Commission issued an Order revoking the registration of Anscott securities pursuant to Section 12(j) of the Exchange Act. See In the Matter of Anscott Industries, Inc., Release No. 34-57791."

COURT SAYS VIOLATER OF ANTIFRAUD PROVISIONS OF SECURITY LAWS MUST PAY

"The Securities and Exchange Commission announced that on June 20, 2011, the United States District Court for the Middle District of Florida entered a final judgment of permanent injunction and other relief against Defendant Shawn A. Icely. The final judgment enjoins Icely from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. In addition to injunctive relief, the final judgment orders Icely to pay disgorgement of $391,435.26, prejudgment interest of $20,316.76, and imposes a civil penalty of $130,000. Icely consented to entry of the final judgment without admitting or denying any of the allegations in the complaint.

The Commission commenced this action by filing its complaint against Icely on October 21, 2010. The complaint alleges Icely violated the antifraud provisions of the federal securities laws in connection with his misappropriation of hundreds of thousands of dollars from customers of American Portfolios Financial Services, Inc. while he was employed there as a registered representative."

INVESTORS PLEAD GUILTY TO BID RIGGING FORCLOSURE AUCTIONS

The following is from the Department of Justice website:

WASHINGTON — Eight California real estate investors have agreed to plead guilty for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Charges were filed today in U.S. District Court for the Northern District of California in Oakland, Calif., against Thomas Franciose of San Francisco; William Freeborn of Alamo, Calif.; Robert Kramer of Oakland, Calif.; Thomas Legault of Clayton, Calif.; David Margen of Berkeley, Calif.; Brian McKinzie of Hayward, Calif.; Jaime Wong of Dublin, Calif.; and Jorge Wong of San Leandro, Calif.

According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, Calif. While some of the conspirators participated in the conspiracies in both Alameda and Contra Costa Counties, the collusive activity occurred independently in each county, and some individuals only participated in the conspiracy in one county.

“While the country faces unprecedented home foreclosure rates, the collusion taking place at these auctions is artificially driving down foreclosed home prices and is lining the pockets of the colluding real estate investors,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division will vigorously pursue these kinds of collusive schemes that eliminate competition from the marketplace.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

“Through the hard work and partnership between the FBI and the Antitrust Division, we have been able to secure a victory in our fight against bid-rigging and anticompetitive practices in foreclosure auctions,” said FBI Special Agent in Charge Stephanie Douglas of the San Francisco Field Office. “We continue to ask for the public’s assistance in identifying and reporting those engaged in this type of activity.”

According to the court documents, the real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California, participating in a conspiracy in various lengths of time between May 2008 and January 2011. After the conspirators’ designated bidder bought a property, the conspirators would hold a secret, private auction at which each participant would bid the amount above the public auction price he was willing to pay. The department said that the secret, private auctions took place at or near the courthouse steps where the public auctions were held. The highest bidder at the private auction won the property. According to the court documents, the difference between the public auction price and that at the second auction was the group’s illicit profit, and it was divided among the conspirators, often in cash.

In addition, the eight conspirators were charged with using the U.S. mail in carrying out their conspiracy to defraud financial institutions by paying potential competitors not to bid competitively in the public auctions for foreclosed properties, according to court filings.

Franciose, Jaime Wong and Jorge Wong were charged with one count each of bid rigging to obtain selected real estate at foreclosure auctions in Alameda County and one count each of conspiracy to commit mail fraud. Freeborn and Legault were charged with one count each of bid rigging to obtain selected real estate at foreclosure auctions in Contra Costa County and one count each of conspiracy to commit mail fraud. Kramer, Margen and McKinzie were each charged with two counts of bid rigging to obtain selected real estate at foreclosure auctions in Alameda and Contra Costa Counties and two counts each of conspiracy to commit mail fraud.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.

The Antitrust Division and the FBI have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions, and today’s charges are part of the department’s ongoing effort to combat this conduct and restore competition to public auctions. The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm, or call the FBI tip line at 415-553-7400.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). 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. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov."

HOST STATE LOAN-TO-DEPOSIT RATIOS

The following is an excerpt from an e-mail from the FDIC:

"The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency today issued the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on June 24, 2010.

In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.

Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank's statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.

A second step is conducted if a bank's statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank's interstate branches.

A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency."