SEC GETS FAST FROZEN ASSETS OF THREE INSIDER TRADING FIRMS

The following is an excerpt from the SEC website:

Washington, D.C., July 18, 2011 – The Securities and Exchange Commission today announced that it has obtained asset freezes and other emergency relief against three Swiss-based entities it has charged with insider trading ahead of a July 11 public announcement that Swiss-based Lonza Group Ltd would be acquiring Connecticut-based Arch Chemicals Inc.

According to the SEC’s complaint filed on July 15 within days of the alleged insider trading, Compania International Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management Services purchased more than a million common shares of Arch between July 5 and July 8, mostly in accounts based in London, England. Immediately after the acquisition announcement on July 11, the firms began selling the recently-purchased shares of Arch common stock for millions of dollars in profits.

According to the SEC’s complaint, at the time the three entities purchased their Arch shares, they are believed to have been in possession of material, non-public information about Lonza’s proposed acquisition of Arch.

“The SEC’s swift action to secure a judicial freeze order only four days after the observation of suspicious trading prevented millions of dollars from moving offshore,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

In filing its complaint in U.S. District Court for the Southern District of New York, the SEC requested emergency relief noting that because the defendants are foreign entities and placed their trades in overseas accounts, there was a substantial risk that, upon clearance at U.S. brokerage firms, the proceeds of the trades would likely be transferred overseas.

The Honorable P. Kevin Castel, acting as emergency judge, granted the SEC’s requested relief late in the day on July 15. Among other things, the court’s order froze certain assets of the defendants and ordered repatriation of all assets obtained from the trading described in the SEC’s complaint. The court has scheduled a preliminary injunction hearing in this matter for July 25 at 10 a.m. ET. The case has been assigned to the Honorable Denise L. Cote.

The SEC’s investigation was conducted by Assistant Regional Director Silvestre A. Fontes, Assistant Regional Director Sandra Bailey, and Senior Counsel Thomas J. Rappaport with assistance from the Division of Enforcement’s Market Abuse Unit headed by Daniel M. Hawke. The litigation will be conducted by Michael D. Foster. The SEC acknowledges the assistance of the FINRA Office of Fraud Detection and Market Intelligence in its investigation."

SEC ALLEGES THERE WAS A WHITE COLLAR CRIME FAMILY

The following is an excerpt from the SEC website: July 22 , 2011 Securities and Exchange Commission v. Gerald Harold Levine, et al., 2:07-CV-00506 (LDG/RJJ) (District of Nevada, Complaint filed April 17, 2007) Court Enters Judgments Against Las Vegas Husband and Wife For Securities Fraud The Securities and Exchange Commission announced that on July 8, 2011, the U.S. District Court for the District of Nevada entered final judgments against MaryAnn Metz, the former secretary/treasurer and a director of Nu Star Holdings, Inc. (“Nu Star”), and Darin Scott Metz (also known as Damien Metz), her husband, who was president of a related company named Global Environmental Systems, Inc. The Metzes were the only remaining defendants in a pending offering fraud and market manipulation case. The Commission’s complaint, filed on April 17, 2007, alleged that the Metzes and others, including MaryAnn’s parents Gerald and Marie Levine, engaged in a fraudulent scheme to sell approximately $4.5 million worth of shares of Pink Sheet companies, primarily to investors in the United Kingdom, out of boiler rooms in Barcelona, Spain and Santa Ana, California, in violation of the federal securities laws. The complaint also alleged that the Metzes participated in a related market manipulation scheme involving stock of the same Pink Sheet companies, including Nu Star. The Commission alleged that MaryAnn Metz, who was one of two officers and directors of Nu Star, participated in the offering fraud by: (1) failing to disclose that the Levines, who were Nu Star’s majority shareholders, had previously been found liable for committing securities fraud; (2) failing to disclose that the president of Nu Star had been suspended from the practice of law for three years; and (3) failing to disclose to investors the excessive commissions that were paid to the boiler room sales force from the proceeds of the sale of Nu Star stock. The complaint also alleged that both Metzes purchased Nu Star shares in trades that were orchestrated with Gerald Levine and others at increasing prices in order create the illusion that there was a robust and increasing market for Nu Star’s shares, and that the shares had value. Without admitting or denying the Commission’s allegations, except as to jurisdiction, the Metzes consented to the final judgments, which bar them from serving as officers or directors of publicly traded companies. MaryAnn is barred permanently, and Darin is barred for ten years. The final judgments also permanently bar both Metzes from participating in the offering of a penny stock. Additionally, MaryAnn Metz is permanently enjoined from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (“Exchange Act”), while Darin Metz is permanently enjoined from violating Exchange Act Section 10(b) and Rule 10b-5. The final judgments also order Mary Ann Metz to disgorge $172,088, but waive payment and decline to impose penalties against her or Darin Metz based on their financial inability to pay. MaryAnn Metz also consented to the dismissal of her appeal of the order granting the Commission’s motion for summary judgment against her. SEC v. MaryAnn Metz, Case No. 10-17271 (9th Cir.) The Court previously granted the Commission’s motion on summary judgment against Nu Star, the Levines, and Alan Copeland. The Levines’ appeal of that decision is pending. SEC v. Gerald Levine, et al., Case No. 10-16238 (9th Cir.)"

FORMER EXECUTIVE AT PITNEY BOWES IS CHARGED WITH INSIDER TRADING

The following excerpt is from the SEC website:

The Securities and Exchange Commission filed a civil injunctive action today in the United States District Court for the District of Columbia charging Howard B. Wildstein, a former Pitney Bowes, Inc. executive, with insider trading in the stock of MapInfo Corporation in advance of the March 15, 2007 public announcement that Pitney Bowes had entered into a definitive agreement to acquire MapInfo.
According to the SEC's complaint, Wildstein acquired material nonpublic information concerning the acquisition through his employment at Pitney Bowes. In particular, as alleged in the complaint, in late February 2007, Wildstein learned that MapInfo was a potential target of Pitney Bowes and that executives of Pitney Bowes who were responsible for mergers and acquisitions had recently visited MapInfo. On March 1 and March 2, 2007, based on this material nonpublic information, Wildstein purchased 8,000 shares of MapInfo common stock. After the acquisition was publicly announced, Wildstein sold all 8,000 shares, realizing an unlawful profit of $51,177.
Without admitting or denying the allegations in the complaint, Wildstein has consented to the entry of a final judgment that permanently enjoins him from violating Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder, and requires him to pay a total of $114,848 in disgorgement, prejudgment interest, and civil penalties. The settlement is subject to approval by the court.”

ALLEGED SECURITIES FRAUDSTERS HELD ACCOUNTABLE: MAYBE?

Sometimes those who are found to have committed a crime don't go to prison. In the case below an alleged fraudster does not get much from the actions taken by the SEC however, he may get some prison time from a parallel case that was prosecuted by the U.S. Attorneys Office. Of course the SEC does not have the power to prosecute individuals in a way that leads to prison time like the U.S. Attorneys Office. Only civil penalties can come from the SEC. The following case is an excerpt from the SEC website:

"July 14, 2011
JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF ENTERED AGAINST DEFENDANTS ROBERT C. BROWN, JR. AND TREBOR COMPANY AND ORDERS INSTITUTING ADMINISTRATIVE PROCEEDINGS, MAKING FINDINGS AND IMPOSING SANCTIONS AGAINST ROBERT C. BROWN, JR.
Securities and Exchange Commission v. Robert C. Brown, Jr., et al., Civil Action No. 3:08-cv-03517-EMC (N.D. Ca.)
The United States Securities and Exchange Commission (“Commission”) announced that on July 1, 2011, the Honorable Edward M. Chen, United States District Court Judge for the Northern District of California, entered judgments of permanent injunction against Defendants Robert C. Brown, Jr. and Trebor Company.

The final judgment against Brown and Trebor Company enjoins them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and Sections 206(1) and 206(2) of the Investment Advisers of 1940 (“Advisers Act”).

On July 23, 2008, the Commission filed its complaint against the Defendants alleging that they violated the anti-fraud provisions of the federal securities laws by, among other things, offering a variety of investment programs that falsely promised astronomical returns. One program promised, for example, to double investor money in eight months. The complaint also alleged that Brown raised more than $20 million. Instead of investing that money, however, Brown transferred millions of dollars to himself and spent the money on lavish personal expenses.

On April 6, 2010, Brown pleaded guilty to one count of wire fraud in a parallel criminal action brought by the United States Attorney’s Office for the Eastern District of California. Later this year, Brown will be sentenced to prison and ordered to pay restitution to the victims of his fraud.

In addition to the relief described above, Brown consented to the entry of an order, without admitting or denying any of the findings in the Order, except he admitted entry of the injunction and conviction, in a separate Commission administrative proceeding barring him permanently, pursuant to Section 203(f) of the Advisers Act, from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical ratings organization."

SENIOR WHITE HOUSE ADVISOR EVALUATES ANNIVERSARY OF WALL STREET REFORM BILL

The following e-mail was sent out today by White House Senior Advisor David Plouffe. In the e-mail Mr. Plouffee discusses the reason for the Wall Street Reform Bill which was signed into law by President Obama one year ago. “Good afternoon, One year ago today, after a tough battle with the special interests in Washington, President Obama signed Wall Street Reform into law. That law does three important things. First, it brings to an end taxpayer funded bailouts, so taxpayers will never again be left paying the bill if a big bank fails. Second, it stops the reckless risk-taking by Wall Street that put consumers in jeopardy and led to the economic crisis. And third, this law puts in place the strongest consumer protections in history. And to make sure you can count on those consumer protections, we put a first-ever consumer watchdog in charge. It’s a new bureau – a new cop on the beat – with just one job: looking out for families in the financial system. The President faced a lot of opposition when we fought for this bill. An army of lobbyists and lawyers were looking to preserve the status quo, and one year later, they’re still at it. The special interests are trying to water down what we passed, and spending tens of millions of dollars to get their way. And they’ve got friends in high places. But President Obama has made it clear: he’s not going to let them win. He’ll veto any effort to weaken or repeal Wall Street Reform. He’s not going to let them take us backward. We can’t afford to go back to the days when consumers were ripped off by misleading fees and deceptive lending and our economy was vulnerable to greed and recklessness -- not when we know that millions of middle class families are still hurting because of the damage that was done. So we have a lot of work to do to rebuild this economy. We’ve got to rein in the deficit to put our economy on stronger footing and ensure that seniors and middle-class families aren’t bearing the entire burden when millionaires and billionaires, oil companies, hedge fund managers and corporate jet owners are let off the hook. We’ve got to keep money in your pockets by preventing payroll taxes from going up for working people. We’ve got to continue to make smart investments in clean energy, innovation and technology to create the good paying jobs of the future. But we’ve also got to keep up the fight to solve the problems that led us into this economic mess in the first place. It comes down to this. You shouldn’t need to have lobbyists on the payroll to have your voice heard in Washington. And in your financial dealings, you deserve a basic measure of protection against abuse. You should have the freedom to buy a home or open a credit card or take out a student loan with confidence that you’re getting a fair deal. That’s what these consumer protections will do. That’s why Wall Street Reform matters. Sincerely, David Plouffe
 Senior Advisor to the President”

PRESIDENT OF TECH COMPANY SENTENCED FOR DEFRAUDING E-RATE PROGRAM

The following is an excerpt from the Department Of Justice website:

“MONDAY, JULY 18, 2011

WASHINGTON — The president and part owner of a Michigan-based Internet and technology services company was sentenced today to serve 15 months in prison for defrauding the federal E-Rate program, the Department of Justice announced.
Jeremy R. Sheets was also sentenced by Judge Paul L. Maloney of U. S. District Court in Kalamazoo, Mich., to pay a $12,000 criminal fine and to pay $115,534 in restitution for engaging in wire fraud in connection with the E-Rate applications of two school districts his company serviced in western Michigan. Sheets was charged with wire fraud on Dec. 9, 2010, and pleaded guilty on Jan. 24, 2011.
As a result of the Antitrust Division's investigation into fraud and anticompetitive conduct in the E-Rate program, a total of seven companies and 24 individuals have pleaded guilty, been convicted at trial or entered civil settlements. Those companies and individuals have been sentenced to pay criminal fines and restitution totaling more than $40 million. Eighteen individuals, including Sheets, have been sentenced to serve prison time.
According to the charge, Sheets violated E-Rate program rules by compensating two school districts for their share of E-Rate expenses. In addition, Sheets utilized E-Rate funds to purchase undisclosed items, some of which were not eligible for E-Rate funding. Sheets concealed his violation of E-Rate program rules from the E-Rate program by fraudulently misrepresenting that the schools had been billed for their E-Rate expenses when, in fact, Sheets had reimbursed the schools for their share of expenses. The department said Sheets engaged in the wire fraud beginning in or about December 2001 and continuing until about December 2007.
The E-Rate program was created by Congress in the Telecommunications Act of 1996 and is administered by the Universal Service Administrative Company, under the auspices of the Federal Communications Commission (FCC). The program provides subsidies to economically disadvantaged schools and libraries. Depending on the financial needs of the applicant schools, the program pays 20 to 90 percent of the cost for Internet access and telecommunications services, as well as internal computer and communications networks.
Today's sentencing resulted from an investigation by the Department of Justice Antitrust Division's Chicago Field Office, with the assistance of the U.S. Attorney's Office in Grand Rapids, the FBI's Grand Rapids Office of its Detroit Division and the FCC's Office of Inspector General. “