SEC FILES COMPLAINTS AGAINST FORMER WESTCAP SECURITIES, INC., PRINCIPALS

The following is an excerpt from the SEC website: September 23, 2011 “The Securities and Exchange Commission today filed two separate complaints against the three former principals of Westcap Securities, Inc., a now-defunct broker-dealer – namely Thomas Rubin (“Rubin”), Westcap’s then Chief Executive Officer, Christopher Scott (“Scott”), Westcap’s then Chief Compliance Officer, and Jeff Greeney, Westcap’s then Chief Financial Officer, and their related entities. The Commission alleges that Rubin and Scott committed securities fraud by, among other things, engaging in market manipulation in a broader manipulative scheme, and also, through their respective related entities, BGLR Enterprises, LLC and E-Info Solutions, LLC, violated the registration provisions of Section 5(a) and (c) of the Securities Act of 1933 (“Securities Act”) by selling stock in unlawful unregistered offerings. The Commission separately alleged that Greeney, through his related entity, Big Baller Media Group, LLC, violated the registration provisions by selling stock in unlawful unregistered offerings. The Commission alleges that Rubin and Scott, in violation of Section 17(a) of the Securities Act Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder, participated in a broader market manipulation ring that involved bringing companies public through reverse mergers; using Westcap to raise funds for the newly-created companies through purported private placements; and manipulating the public markets for those newly-created public companies, which allowed Rubin and Scott, through their related entities, to sell their holdings of these companies at artificially inflated prices for total proceeds exceeding $1.5 million. In particular, the Commission alleges that Rubin engaged in various manipulative activities including coordinated and matched trading activity, and that Scott similarly engaged in a number of manipulative activities including assuming trading authority and control over multiple accounts to conduct coordinated trading activity. In one email, Rubin complained to another scheme participant that he, not Rubin, should conduct the manipulative trading by writing, “my job is to bring in all the money and yours [is] to cover the bid,” which referred to entering buy orders to keep the stock price at an artificially inflated level. Scott, in an email to Rubin and another scheme participant, explained that he engaged in manipulation to keep an issuer’s stock price at a certain range - a range that he believed was needed to facilitate Westcap’s concurrent private placement involving that issuer. The Commission seeks injunctions, penny stock bars, disgorgement, and penalties from Rubin and Scott (and their related entities, BGLR Enterprises and E-Info Solutions), in addition to an officer and director bar against Scott because he was an officer of one of the microcap issuers. With respect to Greeney, the Commission alleges that he, through his related entity, sold shares in unregistered offerings of two of the microcap issuers for unlawful profits of approximately $330,000, in violation of the registration provisions of the Securities Act. Greeney and his related entity, Big Baller Media Group, have offered to settle the Commission’s allegations by consenting, without admitting or denying the allegations, to an injunction against future violations of Securities Act Sections 5(a) and 5(c), to be barred from participating in an offering of penny stock for a period of three years, and to pay disgorgement and penalties in amounts to be determined by the Court. The offer of settlement by Greeney and Big Baller Media Group are subject to the Court’s approval. Greeney has also offered to settle a yet-to-be instituted administrative proceeding against him, in which Greeney would consent, if the Court enters an injunction against him, to an order barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization with the right to reapply for admission after three years.”

INSIDER TRADER CHARGED IN ACQUISITIONS OF MILLENNIUM PHARMACEUTICALS INC. AND SEPRACOR INC.

INSIDER TRADING: GETTING BY WITH A LITTLE HELP FROM YOUR FRIEND The following is an excerpt from the SEC website: “Washington, D.C., Sept. 15, 2011 — The Securities and Exchange Commission today charged a former global consulting firm executive and his friend who once worked on Wall Street with insider trading on confidential information about impending takeovers of two biotechnology companies. The SEC alleges that Scott Allen learned confidential information in advance of the acquisitions of Millennium Pharmaceuticals Inc. and Sepracor Inc. through his work at a global consulting firm that was advising the acquiring Japanese companies as they made cash tender offers. Allen allegedly tipped his longtime friend John Michael Bennett, an independent filmmaker who had previously worked at a Wall Street investment bank, as each acquisition took shape. On the basis of the nonpublic information, Bennett purchased thousands of dollars in call options in the companies and also tipped his business partner at the independent film company they co-own. The insider trading by Bennett and his tippee generated more than $2.6 million in illicit profits. Allen received cash from Bennett in exchange for the tips. In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced the unsealing of criminal charges against Allen and Bennett. "Allen sold his clients' secret information to a dear friend for easy cash, thinking they wouldn't get caught," said George S. Canellos, Director of the SEC's New York Regional Office. "We will continue pursue every angle of investigation to uncover and punish this type of betrayal of trust." According to the SEC's complaint filed in federal court in Manhattan, Allen and Bennett have been close friends for more than 15 years. Their scheme allegedly began in February 2008 as Allen first learned about the Millennium transaction through his work at the consulting firm, where he is no longer employed. Allen communicated with Bennett about the Millennium and Sepracor transactions through either phone calls or in-person meetings, some of which are tracked through their simultaneous use of Metrocards at subway stations in New York City and ATM withdrawals of cash made by Bennett prior to those meetings. The SEC alleges that Allen first obtained nonpublic information about the Millennium transaction in mid-February 2008 when his firm began advising Japan-based Takeda Pharmaceutical Company during its negotiations with Millennium. Allen tipped Bennett with inside information concerning Takeda's impending cash tender offer to acquire Millennium's shares. For instance, after Allen received an evening e-mail on February 27 from a Takeda representative stating that the contemplated offer was for "23, potentially 24 per share," he called Bennett just minutes later and then twice again that evening. Bennett then called his business partner. More calls took place the following day, and then on February 29 and continuing up until the week prior to the April 10 public announcement of the acquisition, Bennett and his business partner began amassing Millennium call options. The price of Millennium shares increased more than 48 percent after the public announcement, and beginning that afternoon Bennett and his business partner sold their entire positions of Millennium call options for ill-gotten gains of more than $602,000 and $1.12 million respectively. According to the SEC's complaint, Allen later was participating in his employer's due diligence work in May 2009 for Japanese firm Dainippon Sumitomo Pharma Co. Ltd. (DSP) in connection with its impending acquisition of Sepracor. Allen again tipped Bennett with inside information about the upcoming transaction. In the months leading up to the September 3 public announcement that DSP had agreed to acquire Sepracor through a cash tender offer, Bennett purchased thousands of dollars worth of call options in Sepracor and again tipped his business partner who did the same. Following the public announcement, Sepracor's stock price rose more than 26 percent. Both Bennett and his business partner then liquidated their Sepracor holdings for ill-gotten profits of more than $516,000 and $388,000 respectively. The SEC's complaint names Bennett's wife as a relief defendant for the purposes of seeking disgorgement of unlawful profits in brokerage accounts that Bennett held jointly with her. The SEC's complaint charges Scott Allen and John Michael Bennett with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 14(e) of the Exchange Act and Rule 14e-3 thereunder. The complaint seeks a final judgment permanently enjoining the defendants from future violations of these provisions of the federal securities laws and ordering them to disgorge their ill-gotten gains plus prejudgment interest and pay financial penalties. The SEC's investigation was conducted by Charles D. Riely and Amelia A. Cottrell of the SEC's Market Abuse Unit in New York and Layla Mayer of the SEC's New York Regional Office. The SEC acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York, Federal Bureau of Investigation, and Options Regulatory Surveillance Authority. The SEC's investigation is continuing.”

MONEY MANAGING SCHEME GETS JUDGED

The following is an excerpt from the SEC website: “The Securities and Exchange Commission announced that on September 14, 2011, the Honorable Lawrence E. Kahn, United States District Court Judge for the Northern District of New York, entered a default judgment against Defendants Christopher W. Bass, Swiss Capital Harbor-USA, LLC, Swiss Capital Harbor Fund A Partners, L.P., Swiss Capital Harbor Fund B Partners, L.P. and Swiss Capital Harbor Fund C Partners, L.P. (collectively, the "Defendants"). The default judgment permanently enjoins the Defendants from future violations of 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 and Rule 10b-5 thereunder. The default judgment also grants leave to the SEC to file for disgorgement, prejudgment interest, and civil monetary penalties against the Defendants following sentencing in the pending criminal case against Bass, U.S. v. Christopher Bass, 10-cr-166 (N.D.N.Y) (LEK). On May 24, 2010, the SEC filed its complaint against the Defendants alleging that from at least January 2007 through at least June 2009, the Defendants conducted a Ponzi scheme, through which they fraudulently obtained approximately $5.9 million from over 400 investors. Bass told prospective investors that he would pool their money to be invested in various enterprises by European money managers. Bass claimed that these managers historically had generated monthly returns ranging from 2.8 % to 6 %. According to the SEC's complaint, Bass's representations were false, and Bass did not invest investors' money as claimed. Instead, Defendants used most of the funds to pay Bass's personal expenses, to pay Defendants' corporate operating expenses, and to satisfy certain investors' redemption requests. The SEC acknowledges the assistance of the United States Attorney's Office for the Northern District of New York.”

SEC COMPLAINT ALLEGES FRAUDULENT AND UNREGISTERED OFFERINGS

The following excerpt is from the SEC website: September 15, 2011 The Securities and Exchange Commission announced the filing of a complaint in federal district court against James O’Reilly (O’Reilly), James P. McAluney (McAluney), and Martin Cutler (Cutler) (collectively, “Defendants”). The complaint alleges that O’Reilly, McAluney, and Cutler were the managers and control persons involved in a series of fraudulent and unregistered offerings in Shale Synergy, LLC (Shale), Shale Synergy II, LLC (Shale II), and Ranch Rock Properties, LLC (Ranch Rock). The Complaint alleges that from at least December 2007 until July 2009, Defendants solicited funds from investors through a series of Rule 506 Regulation D offerings of membership interests in Shale, Shale II and Ranch Rock. The Defendants raised approximately $16 million from about 130 investors. The companies were to generate returns of from 7.5% to 9% a quarter from investments in oil and gas interests purchased by Shale, Shale II and Ranch Rock. However, instead of purchasing oil & gas assets, approximately $13 million of the funds raised from investors were transferred to Joseph S. Blimline (Blimline) and various Blimline-controlled entities. Throughout Defendants’ solicitations, Blimline acted as a secret partner. Defendants never disclosed Blimline’s involvement and control, or his past securities disciplinary action to investors. According to the Commission’s complaint filed in U.S. District Court for the Eastern District of Texas, the Defendants falsely represented to investors that Shale would acquire the promissory notes issued by two Blimline entities and acquire substantially all of the entities’ underlying assets. The Complaint alleges that, the defendants failed to disclose that investor funds of Shale, Shale II, and Ranch Rock would be commingled to pay expenses, and that Blimline would be making all investment decision. The Complaint further alleges that although Shale failed to make its December 2008 investor distributions, the Defendants continued to solicit investors for Shale II and Ranch Rock without disclosing the financial difficulties at Shale. The Commission’s complaint seeks to enjoin the defendants from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and civil penalties.”

CHARGES OF INSIDER TRADING BY POLYCOM, INC., FORMER EXECUTIVE ARE SETTLED

September 21, 2011 “The Securities and Exchange Commission announced today that, on September 19, 2011, the Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York entered a consent judgment against Defendant Sunil Bhalla in SEC v. Feinblatt, 11-CV-0170, the last remaining defendant in an insider trading case the SEC filed on January 10, 2011. The Complaint alleged that Bhalla, then a senior executive at Polycom, Inc. (“Polycom”) tipped Roomy Khan, an individual investor, to material, nonpublic information concerning Polycom’s financial performance and anticipated financial performance. The Complaint alleged that Khan traded on the information, and passed it on to certain other defendants in the case, who then traded on the basis of the Polycom inside information and other inside information given to them by Khan, reaping illicit trading profits, in the aggregate, of more than $15 million. The illicit trading profits resulting from Bhalla’s Polycom tip to Khan alleged in the complaint totaled approximately $2.5 million. To settle the SEC’s charges, Bhalla consented to the entry of a judgment that: (i) permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (ii) orders him to pay a civil penalty of $85,000; and (iii) bars him from serving as an officer or director of a public company for 5 years from the date of the entry of the judgment.”

BOSS AT SEC SPEECH ON CONFLICTS OF INTERESTS IN ASSET BACKED SECURITIES BUSINESS

The following is an excerpt from the SEC website: by Chairman Mary Schapiro U.S. Securities and Exchange Commission Washington, D.C. September 19, 2011 Good Morning. This is an open meeting of the U.S. Securities and Exchange Commission on Sept. 19, 2011. “The Commission today will consider whether to propose a rule related to conflicts of interest in the structuring and offering of asset backed securities. It stems from Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This rule is designed to ensure that those who create and sell asset-backed securities cannot profit by betting against those same securities at the expense of those who buy them. At the same time, the rule is not intended to interfere with traditional securitization practices in which loans are originated, packaged into asset-backed securities, and offered to investors in different structures. In drafting the proposed rule, the staff considered several different types of conflicts that could occur with securitizations. For instance, a firm might package an asset-backed security, sell that security to an investor, and then subsequently short the security to potentially profit as the investor incurs a loss. Or a firm might allow a third party to help assemble an asset-backed security in a way that creates an opportunity for the third party to short the security and reap a profit. The staff’s proposal addresses potential conflicts like these. Consistent with the Dodd-Frank Act, the proposed rule would prohibit entities that create and distribute asset-backed securities from engaging in any transaction that would involve or result in a material conflict of interest with someone investing in the security. It would also apply to the entities’ affiliates and subsidiaries. The rule also would provide exceptions for risk-mitigating hedging activities, as well as activity consistent with liquidity commitments and bona fide market-making. As many already know, throughout our Dodd-Frank rule-writing process, we have welcomed public comments even before we propose a rule – and today’s proposal has benefited from that input. Nevertheless, we continue to seek public comment regarding all aspects of this proposal. Among other things, we seek comment on the practical implications of the proposal for the markets, whether it achieves its stated objectives and on whether disclosure of a conflict should have any impact on the proposal. The SEC has made significant progress in writing rules required by Dodd-Frank. Of the nearly 100 mandatory rulemaking provisions, the SEC has now proposed or adopted rules for about three-quarters of them. And today’s proposal is just one of several rulemaking efforts aimed at addressing issues associated with asset-backed securities. For instance, the Commission has adopted rules that require asset-backed security issuers to provide disclosures on the use of representations and warranties in the market for asset-backed securities. We also have adopted rules that require issuers to conduct a review of the assets underlying those securities and disclose the nature of such review with respect to registered asset-backed offerings. Together with other agencies, the SEC also has proposed rules that generally require the sponsor of asset-backed securities to retain no less than five percent of the credit risk of the underlying assets. And in July, the Commission re-proposed some of the rules that we initially proposed pre-Dodd-Frank that related to the shelf registration of asset-backed securities. I want to also note another initiative under the Dodd-Frank Act commonly referred to as the “Volcker Rule.” This rulemaking, which we anticipate proposing along with other financial regulatory agencies in the near future, will prohibit proprietary trading at certain financial entities affiliated with banks. Like Section 621, the Volcker Rule generally would permit risk mitigating hedging activities and market making. As such, we are also asking for comment regarding the interplay of the exceptions in today’s proposed rule with the similar exceptions that we expect to discuss in the Volcker Rule proposal. Before I turn to the staff to provide a detailed discussion about the Division’s recommendation, I would like to thank Robert Cook, Jamie Brigagliano, Nathaniel Stankard, Catherine McGuire, Gregg Berman, Jack Habert, Josephine Tao, Liz Sandoe, Anthony Kelly, and Barry O’Connell for their long hours and hard work devoted to preparing the recommendation before us. I also would like to thank their colleagues. In the Division of Corporation Finance: Paula Dubberly, Katherine Hsu, and David Beaning. From the Division of Enforcement: Jason Anthony and Jeffrey Leasure. In the Office of the General Counsel: Meredith Mitchell, David Blass, Paula Jenson, Janice Mitnick, and Bryant Morris. In the Division of Risk, Strategy, and Financial Innovation: Jennifer Marrietta-Westberg, Eric Carr, Stas Nikolova, and Chuck Dale.”