THREE TAKEN TO COURT OVER ALLEGEDLY SELLING FAKE SECURITIES AND RUNNING FAKE TRADING PROGRAMS

The following is an excerpt from the SEC website: “On September 19, 2011, the Securities and Exchange Commission filed an enforcement action in federal court in Massachusetts against Diane Glatfelter of Billerica, Massachusetts, Robert Rice of Tallahassee, Florida, and Robert Anderson of Madison, Indiana, charging each of them with participating in fraudulent schemes involving the promotion and sale of fictitious financial instruments and trading programs. The Commission also charged two entities controlled by Glatfelter and Rice, K2 Unlimited, Inc. and 211 Ventures, LLC, in connection with the scheme. The Commission's Complaint alleges that beginning in 2007, Glatfelter and Rice, through K2 Unlimited and 211 Ventures, offered fraudulent venture capital financing, which was purportedly to be raised through the use of "bank guarantees." According to the Commission's Complaint, Glatfelter, Rice and 211 Ventures also offered direct investments involving fictitious securities and trading programs, promising sky-high returns with guarantees against loss. In fact, the Commission alleges that the bank guarantees were non-existent fictional instruments and that the defendants defrauded investors of at least $1.8 million. The Commission's Complaint also alleges that in early 2009, Glatfelter became associated with Anderson and the two began to offer fraudulent investments to investors, also based in part on the use of various fictitious financial instruments. The Commission's Complaint alleges that Glatfelter and Anderson offered these fraudulent investments through an entity called E-Trust Clearing House, KB. The Commission alleges that Glatfelter and Anderson caused at least $425,000 in investor losses through the E-Trust scheme. The Commission's Complaint alleges that Glatfelter, Rice, Anderson, K2 Unlimited and 211 Ventures violated various anti-fraud, broker-dealer and securities registration provisions of the federal securities laws. Specifically, the complaint alleges that Glatfelter, Rice, Anderson and 211 Ventures violated Sections 5(a) and 5(c) of the Securities Act of 1933; that all defendants violated Section 17(a) of the Securities Act; that all defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; that Glatfelter and Rice aided and abetted K2 Unlimited and 211 Ventures' violations of Section 10(b) and Rule 10b-5 thereunder; and that Glatfelter, Rice and K2 Unlimited violated Section 15(a) of the Exchange Act. The Commission seeks permanent injunctions, disgorgement and prejudgment interest, and civil penalties against each defendant, and a bar prohibiting Glatfelter from serving as an officer or director of a public company. The Commission's Complaint alleges that the defendants in this matter purported to offer investment using the so-called "bank guarantees," stand-by letters of credit, or mid-term notes, among others. The Complaint alleges these instruments are fictitious and are not legitimate investments.”

MAN PLEADS GUILTY TO POORLY MADE, NON-DISCLOSED HIGH RISK INVESTMENTS IN HIS INVESTMENT CLUB

The following excerpt is from the Department of Justice website: Thursday, September 22, 2011 Investment Club Manager Pleads Guilty to $40 Million Fraud WASHINGTON – Alan James Watson, 46, of Clinton Township, Mich., pleaded guilty today to fraudulently soliciting and accepting $40 million from more than 750 members of his investment club and losing nearly all of it through non-disclosed, high-risk investments. Victims were located in Virginia and nationwide. The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Neil H. MacBride for the Eastern District of Virginia and James W. McJunkin, Assistant Director in Charge (ADIC) of the FBI’s Washington Field Office. Watson pleaded guilty before U.S. District Judge Gerald Bruce Lee in the Eastern District of Virginia to one count of wire fraud. He faces a maximum penalty of 20 years in prison when he is sentenced on Dec. 9, 2011. “Without the consent of his clients, Mr. Watson gambled away investors’ funds on risky ventures that led to millions of dollars in losses,” said Assistant Attorney General Breuer. “He used his investment club to cheat people who trusted him out of their savings. The Justice Department will continue to be aggressive in our pursuit of financial fraudsters – whether they are on Wall Street or Main Street.” “A.J. Watson took huge risks with others’ money and lost big,” said U.S. Attorney MacBride. “He covered up his massive losses through lies and deceit to members of his investment club, many of whom would never have joined his club and have now lost everything.” “More than 750 unwitting victims thought they had done their homework and calculated their investment wisely; instead, they were met with false documentation that yielded no return on their investment,” said FBI ADIC McJunkin. “Schemes like this are why the FBI investigates white collar crimes, determined to protect potential victims.” According to a statement of facts filed with his plea agreement, Watson created an investment club in 2004 and served as the club’s chief executive officer. From 2006 to 2009, Watson received almost $40 million from investors. Watson purported that the money would be invested through an equities-trading system developed by an expert consultant, Company A, with a promised return on investment of 10 percent per month. In reality, Watson admitted that only $6 million of the $40 million was ever invested in Company A, while the remaining $34 million was secretly invested in miscellaneous, high-risk ventures without the consent of investment club members. These high-risk investments resulted in a near complete loss of the $34 million. According to court documents, despite the losses for the investors, Watson continued to create false monthly account statements showing net gains from their investments. In addition, Watson included “bonus” items on the account statements that appeared as trading profits, the result of a Ponzi scheme he orchestrated to use new investor funds to pay off earlier investors. In March of 2009, Watson ceased investing in Company A and re-deposited those funds in separate unauthorized ventures. In 2010, nearly a year after he had fully withdrawn finances from Company A, Watson informed investment club members that he had not invested their money as promised, and that none of the reported returns had ever materialized. This resulted in a combined $40 million loss for investment club members. The Commodity Futures Trading Commission (CFTC) has filed a related civil case in the Eastern District of Michigan. This case was investigated by the FBI’s Washington Field Office, the CFTC and the Securities and Exchange Commission. The department thanks these agencies for their substantial assistance in this matter. Trial Attorney Kevin B. Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark D. Lytle are prosecuting the case on behalf of the United States. The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national 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. 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.”

ALLEGED FAKE TAX CREDITS IN LANDFILL METHANE

The following is from the Department of Justice website: Thursday, September 15, 2011 Texas Federal Court Bars Two Men from Promoting Alleged Tax Scam Involving Fictitious Methane at Landfills Customers of Pair Allegedly Claimed at Least $2.6 Million of False Tax Credits “WASHINGTON - A federal court in Beaumont, Texas, has permanently barred two men from promoting an alleged tax fraud scheme involving bogus tax credits for the production of methane gas from landfills, the Justice Department announced today. Ronald Fontenot and Anthony Burrell consented to the civil injunction order against them without admitting wrongdoing. The order was signed by Judge Marcia A. Crone of the U.S. District Court for the Eastern District of Texas. According to the government complaint , which was originally filed in Florida, the scheme involved bogus federal income tax credits available to producers of fuel from non-conventional sources. The government suit alleges that George Calvert and Gregory Guido of Florida, both previously enjoined and criminally convicted as a result of their involvement, concocted the scheme and promoted it through tax preparers like Fontenot and Burrell, who acted as sub-promoters to individual customers. The 32 defendants named in the civil injunction lawsuit allegedly helped customers claim more than $30 million in tax credits for the production and sale of fuel from landfill gas facilities that either did not exist or belonged to others. According to the complaint, Fontenot, of Lake Charles, La., and Burrell, of Livingston, Tex., are allegedly responsible for preparing federal income tax returns for customers that claimed at least $2.6 million in false tax credits.”

FORMER GALLEON TRADER SETTLES CHARGES WITH SEC

The following is an excerpt from the SEC Website: July 20, 2011 SEC v. Michael Cardillo, Civil Action No. 11-CV-0549 (S.D.N.Y.) (RJS) Former Galleon Trader Michael Cardillo Settles SEC Insider Trading Charges The Securities and Exchange Commission announced today that on July 18, 2011, the Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York entered a judgment against Michael Cardillo in SEC v. Michael Cardillo, 11-CV-0549, an insider trading case the SEC filed on January 26, 2011. The SEC charged Cardillo, who was a trader at the hedge fund investment adviser Galleon Management, LP during the relevant time period, with using inside information to trade ahead of the September 2007 announced acquisition of 3Com Corp. and the November 2007 announced acquisition of Axcan Pharma Inc. In its complaint, the SEC alleged that Arthur Cutillo and Brien Santarlas, two former attorneys with the international law firm of Ropes & Gray LLP, misappropriated from their law firm material, nonpublic information concerning the acquisitions of 3Com and Axcan, and tipped the inside information, through another attorney, to Zvi Goffer, a former proprietary trader at Schottenfeld Group LLC, in exchange for kickbacks. The SEC further alleged that Goffer tipped information about these acquisitions to Craig Drimal, a trader who worked out of the offices of Galleon, who tipped the information to Cardillo. As alleged in the complaint, Cardillo then traded in the securities of 3Com and Axcan on behalf of a Galleon hedge fund. To settle the SEC’s charges, Cardillo 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; and (ii) orders him to pay disgorgement of $58,520 plus $9,523 in prejudgment interest, and a civil penalty of $29,260. In a related SEC administrative proceeding, Cardillo consented to the entry of an SEC order barring him from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent. Cardillo previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in a related criminal case, United States v. Michael Cardillo, 11-CR-0078 (S.D.N.Y.), and is awaiting sentencing.

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.”