SEC SETTLES INSIDER TRADING CASE INVOLVING KRONOS INC.

The following is an excerpt from the SEC website:

"The Securities and Exchange Commission announced today that on June 28, 2011, The Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York entered a judgment against David Plate in SEC v. Galleon Management, LP, et al., 09-CV-8811, an insider trading case the SEC filed on October 16, 2009. The SEC charged Plate, who was a registered representative and a proprietary trader at the broker-dealer Schottenfeld Group, LLC, during the relevant time period, with using inside information to trade ahead of an impending acquisition announcement.

In its action, the SEC alleged that, in March 2007, Plate was tipped inside information that Kronos Inc. would be acquired in about a week for a substantial premium. On the basis of the material non-public information he received, Plate traded in a Schottenfeld account he managed.

To settle the SEC's charges, Plate consented to the entry of a judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders him to pay disgorgement of $43,876.37, plus prejudgment interest of $9,415.54. The judgment further provides that the Court later will determine issues relating to a civil penalty. Plate previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in a related criminal case, United States v. David Plate, 10-CR-0056 (S.D.N.Y.)."

FORMER CEO OF STARMEDIA AGREES TO SETTLE SEC CASE

The U.S. Securities and Exchange Commission today announced that on June 30, 2011, the U.S. District Court for the Southern District of New York entered a settled final judgment as to Fernando J. Espuelas, a co-founder of StarMedia Network, Inc. and the company's former Chief Executive Officer. StarMedia is a now-defunct Internet portal that was based in New York City. The Commission's amended complaint alleges that for fiscal year 2000 and the first two quarters of fiscal year 2001, StarMedia's books and records, and its filings with the Commission, misstated the quality and amount of the company's revenue. The amended complaint also alleges that StarMedia executives made misstatements regarding the company's revenue to certain entities from which it was attempting to obtain financing. In its amended complaint, the Commission alleged violations of the federal securities laws by eight former StarMedia executives.
Without admitting or denying the allegations in the amended complaint, Espuelas consented to the entry of the Final Judgment permanently enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Rule 13b2-1 promulgated under the Securities Exchange Act of 1934 (Exchange Act), and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-1, and ordering him to pay a civil penalty in the amount of $40,000.”

SHEILA BAIR STEPS DOWN TODAY AS FDIC CHAIRMAN

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

FOR IMMEDIATE RELEASE
July 8, 2011 Media Contact:
Andrew Gray
Office: 202-898-7192
E-mail: angray@fdic.gov


Sheila C. Bair today officially stepped down as FDIC Chairman. Ms. Bair has served as Chairman since June 26, 2006. Vice Chairman Martin J. Gruenberg will assume the role of Acting Chairman effective as of the close of business today. Gruenberg has served as Vice Chairman of the FDIC Board of Directors since August 22, 2005. He has previously served as Acting Chairman from November 15, 2005 to June 26, 2006.

Sheila C. Bair said, "It is with great pride that I leave the FDIC after the completion of my five year term. It has been a remarkable journey. I feel honored to have served two Presidents and privileged to have led this great agency that worked so effectively to preserve confidence and stability in the banking system at a critical time."

"While I will truly miss the organization, I have the utmost confidence in Marty's stewardship of the FDIC and its unparalleled professional staff."

Chairman Bair will join the Pew Charitable Trusts as a senior advisor on September 7, after spending the summer with her family.

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 7,575 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations."

THE FINAL JUDGEMENT AGAINST BIOVAIL EXECUTIVES

The following excerpt is from the SEC web site:

FINAL JUDGMENTS ENTERED AGAINST FORMER BIOVAIL EXECUTIVES EUGENE MELNYK AND BRIAN CROMBIE
“On April 14, 2011, the Honorable Lewis A. Kaplan of the United States District Court for the Southern District of New York entered a final consent judgment against defendant Brian Crombie, Biovail Corporation's former chief financial officer, with respect to violations of the federal securities laws alleged by the Commission in a civil enforcement action filed in March 2008. Crombie consented to a final judgment that (i) permanently enjoins him from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2 and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-16; (ii) requires him to pay a civil penalty in the amount of $100,000; and (iii) bars him from serving as an officer or director of a public company for five years.
Additionally, on February 15, 2011, the court entered a judgment by consent against Biovail's former chief executive officer, Eugene Melnyk, that (i) permanently enjoins Melnyk from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5; (ii) imposes a civil penalty in the amount of $150,000; and (iii) bars Melnyk from serving as an officer or director of a public company for five years. As the Commission previously has settled all charges against the other defendants identified in the complaint, the settlements with Melnyk and Crombie provide final resolution to this matter.
Biovail previously settled with the Commission by consenting to a judgment that, among other things, permanently enjoins it from violating antifraud and other provisions of the federal securities laws, imposed a $10 million civil penalty, and ordered it to pay disgorgement of $1. The Commission previously settled its claims against former Biovail vice president of corporate affairs Kenneth G. Howling by entry on December 21, 2009, of a final consent judgment that permanently enjoined Howling from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 and imposed a civil penalty in the amount of $50,000. The Commission settled its claims against former Biovail vice president, controller and assistant secretary John Miszuk by entry on September 8, 2010, of a final consent judgment that (i) permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 13b2-1 and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-16; (ii) required him to pay a civil penalty in the amount of $75,000; and (iii) bars him from serving as an officer or director of a public company for five years.”

GARY GENSLER SPEAKS

The following speech is an excerpt from the CFTC website:

"Opening Statement, Meeting of the Commodity Futures Trading Commission
Chairman Gary Gensler
July 7, 2011

Good morning. This meeting will come to order. This is a public meeting of the Commodity Futures Trading Commission (CFTC) to consider issuance of final rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act. I’d like to welcome members of the public, market participants and members of the media to today’s meeting, as well as welcome those listening to the meeting on the phone or watching the live webcast.

During today’s meeting, the Commission will embark upon the final rulemaking phase of implementing the Dodd-Frank Act. Specifically, we will consider final rulemakings relating to:

Enhancing the Commission’s ability to protect against fraud and manipulation;
Large trader reporting for swaps on physical commodities;
Definition of “agricultural commodity;”
Preventing certain business affiliate marketing and establishing other consumer information protections under the Fair Credit Reporting Act; and
Expanding scope of privacy protections for consumer financial information under the Gramm-Leach-Bliley Act.
Before we hear from the staff, I’d like to thank the dedicated CFTC staff for their tireless efforts to implement the Dodd-Frank Act while also enforcing the agency’s existing statutory authority. Staff has taken on the many challenges of bringing oversight to a swaps market that is more than seven times the size of the futures market that we have historically regulated, with limited funding and limited staff resources. They should be commended for their contributions to the agency, the financial markets, the economy and the American public.

I also would like to thank Commissioners Dunn, Sommers, Chilton and O’Malia for their significant contributions to the rule-writing process.

It is important to remember why it is so essential that we finalize rules to bring oversight to the swaps market. The 2008 financial crisis was very real. Millions more Americans are out of work today than if not for the financial crisis. Millions of homeowners now have homes worth less than their mortgages. Millions of people have had to dig into their savings; millions more haven’t seen their investments regain the value they had before the crisis. There remains significant uncertainty in the economy.

The 2008 financial crisis came upon us because the financial system failed. The financial regulatory system failed as well. Though there were many causes to the crisis, it is clear that swaps played a central role. They added leverage to the financial system with more risk being backed up by less capital. They contributed, particularly through credit default swaps, to the bubble in the housing market and helped to accelerate the financial crisis. They contributed to a system where large financial institutions were thought to be not only too big to fail, but too interconnected to fail. Swaps – initially developed to help manage and lower risk – actually concentrated and heightened risk in the economy and to the public.

Today’s public commission meeting is the first of many to fully implement the Dodd-Frank Act. This spring, we substantially completed the proposal phase of rule-writing and further benefited from an extra 30 days for public comment. The staff and commissioners now are turning toward final rules. And today, we are taking up five very important rules.

In the coming several months, we will have additional public meetings to finalize rules; for example: whistleblower rules; the process for review of swaps for mandatory clearing; and the registration requirements for swap data repositories.

Each of these rules is an essential component to fulfilling the requirements of the Dodd-Frank Act to bring essential protections to the swaps markets and to the broader economy.

Before we hear from the staff on the rulemakings that we will consider today, I will recognize my fellow Commissioners for their opening statements."

$230 MILLION RETURNED TO U.S. WHILE PONZI SCHEME INVESTIGATED

The following excerpt comes from the SEC website:

"Washington, D.C., June 28, 2011 — The Securities and Exchange Commission today told a federal court that $230 million held in an offshore account by a hedge fund has been returned to the U.S. and will remain frozen pending completion of the SEC’s Ponzi scheme lawsuit against the fund’s adviser and its principal.

In a filing in the U.S. District Court for the District of Connecticut, the SEC said the money was returned as a result of the court order obtained by the SEC in its case against Francisco Illarramendi of Connecticut and his firm Highview Point Partners LLC, which managed three hedge funds.

“We’re pleased with the return of this money to the U.S. and believe it will help preserve these assets for the benefit of defrauded investors,” said David P. Bergers, Director of the SEC’s Boston Regional Office.

Ethiopis Tafara, Director of the SEC’s Office of International Affairs, added, “In this case, the ability to freeze and repatriate the alleged financial crime proceeds was critical to the SEC’s effective enforcement of the U.S. securities laws.”

The SEC charged Illarramendi and his unregistered investment advisory firm MK Capital Management in January with running a multi-year, multi-million dollar Ponzi scheme. Stamford, Conn.-based Highview was added as a defendant in May. Three hedge funds managed by Highview and several entities affiliated with MK Capital Management were named as relief defendants for allegedly holding funds tainted by the Ponzi scheme.

After an evidentiary hearing, the Honorable Janet Bond Arterton, U.S. District Judge for the District of Connecticut, entered an order on June 16 freezing the assets of three hedge funds and ordering that all assets of the funds, including $230 million held in an offshore account, be immediately returned to the U.S.

Judge Arterton had previously frozen the assets of Illarramendi, Highview, MK Capital Management, and several affiliated entities.

In its filing today, the SEC informed the court that the $230 million was received last week and is being held in a bank within the U.S.

The SEC charges Illarramendi, Highview, and Michael Kenwood Capital Management with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and also charges Highview with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The following entities are named as relief defendants, alleging that they received investor funds to which they have no right: Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., and Highview Point LP, Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP. In addition to preliminary emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties from the defendants, and disgorgement plus interest from the relief defendants.

Last year, the SEC returned more than $2.2 billion to harmed investors through financial recoveries in SEC enforcement actions.

Carlos J. Costa-Rodrigues, Sofia T. Hussain, Michelle Perillo, and LeeAnn Ghazil Gaunt of the SEC’s Boston Regional Office conducted the investigation following an examination conducted by Zerubbabel Johnson, Stephen M. Latin, Michael D. O’Connell, and Elizabeth Salini. Timothy Geishecker of the SEC’s Office of International Affairs assisted with the investigation. The SEC’s litigation effort is being led by Rua M. Kelly and Kathleen B. Shields. The SEC’s investigation is ongoing."