SEC GETS JUDGMENTS IN CHINA VOICE HOLDINGS CORP. ALLEGED PONZI SCHEME

October 4, 2011 The following excerpt is from the SEC website: “On October 4, 2011, the Securities and Exchange Commission announced that the Honorable Reed O’Connor, United States District Judge for the Northern District of Texas, recently entered orders permanently enjoining multiple defendants in a case involving the co-founder of China Voice Holding Corp. Without admitting or denying the allegations in the Commission’s complaint, Alex Dowlatshahi and Christopher Mills consented to the entry of judgments that permanently enjoin them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, companies owned and controlled by Dowlatshahi and Mills, including Defendants Integrity Driven Network Corp., Lucrative Enterprises Corp., Synergetic Solutions LLC, Silver Summit Holdings LLC, and Sleeping Bear LLC, were permanently enjoined from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The judgments also provide that upon motion of the Commission, the Court may order disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties in amounts the Court deems appropriate. The judgments were entered on August 31, 2011, and September 19, 2011. On September 23, 2011, Defendant Ilya Drapkin was permanently enjoined from violating Section 17(a)(3) of the Securities Act. In addition the judgment permanently bars Drapkin from participating in the offer or sale of penny stocks and provides that, upon motion of the Commission, the Court shall order disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties in amounts the Court deems appropriate. Drapkin’s companies, Defendants MG TK Corp. and SMI Chips, Inc., also shall be ordered to pay disgorgement of ill-gotten gains and prejudgment interest in amounts the Court deems appropriate upon motion of the Commission. The Defendants consented to the entry of the judgment without admitting or denying the allegations in the Commission’s complaint. On September 26, 2011, Defendant Gerald Patera, and his companies, Defendants Capital Bankers Group Ltd. and Third Securities Corp., were permanently enjoined from violating Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. In addition, the judgment permanently bars Patera from participating in the offer or sale of penny stocks and provides that, upon motion of the Commission, the Court shall order disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties in amounts the Court deems appropriate. The Defendants consented to the entry of the judgment without admitting or denying the allegations in the Commission’s complaint. The Commission filed an emergency action on April 28, 2011, alleging that China Voice’s co-founder and former Chief Financial Officer, David Ronald Allen, with the assistance Dowlatshahi and Mills, and numerous related entities, launched what became a Ponzi scheme that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated business, including China Voice. On June 5, the Honorable Judge Reed O’Connor, United States District Judge, entered a preliminary injunction, which, along with freezing the assets of multiple defendants and relief defendants, prevents the defendants from violating certain provisions of the securities laws, orders the preservation of documents, and requires the defendants to provide an accounting to determine the disposition of investor funds. The SEC’s complaint also charges China Voice, its former chairman and CEO William Burbank IV, and Allen for a series of fraudulent statements about China Voice’s financial condition and business prospects, as well as Patera, Drapkin, and Robert Wilson for their roles in the scheme. The Commission’s case is still pending against remaining defendants Allen, Burbank, Wilson, China Voice, and various of their related entities.”

PHONY DOCUMENTS LEAD TO SEC CHARGES

The following is an excerpt from the SEC website: “Washington, D.C., Sept. 28, 2011 – The Securities and Exchange Commission today charged a San Francisco-area investment adviser with fraud for lying to clients about how brokerage commission rebates were being used and producing phony documents to cover up the fraud during an SEC examination. The SEC alleges that Kurt Hovan misappropriated more than $178,000 in “soft dollars” that he falsely claimed to be using to pay for legitimate investment research on his clients’ behalf. In reality, Hovan was secretly funneling the money for such undisclosed uses as office rent, computer hardware, and his brother’s salary. When SEC examination staff asked Hovan to provide documentation to back up his claims, he created phony research reports. The SEC also charged his wife Lisa Hovan and his brother Edward Hovan for their roles in the fraudulent scheme at Hovan Capital Management (HCM). Soft dollars are credits or rebates from brokerage firms on commissions paid by clients for trades executed in the client accounts of an investment adviser. If appropriately disclosed, an investment adviser may retain the soft dollar credits to pay for a limited category of brokerage and research services that benefit clients. According to the SEC’s complaint filed in federal court in San Francisco, Kurt and Lisa Hovan falsely disclosed to clients that HCM would use soft dollars only for certain research services. Instead, they used $166,667 in soft dollars to pay Edward Hovan’s salary over a 10-month period in 2008 and 2009. To cover up these payments, the three Hovans created a shell company – “Bolton Research” – secretly controlled by Edward Hovan. Through this company, the Hovans invoiced HCM’s brokerage firms for research services that had never been rendered. Once Edward Hovan received the payments, he kicked back approximately 40 percent ($65,000) to Kurt and Lisa Hovan to pay the office rent. The SEC further alleges that Kurt and Lisa Hovan instructed a research provider paid with soft dollars to pad its invoices by $12,000 and kick back this amount to help HCM pay for a new computer server. During a January 2010 examination of HCM, the SEC staff asked HCM to provide copies of the research reports prepared by Bolton Research in exchange for the soft dollar payments. In response, Kurt Hovan quickly drafted numerous research reports and doctored materials to make them appear as if they had been prepared by Bolton. Hovan provided these phony documents to SEC examiners. The SEC’s complaint charges Kurt Hovan with violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5, Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940 (“Advisers Act”), Section 17(e)(1) of the Investment Company Act of 1940 (“Investment Company Act”), and aiding and abetting violations of Section 204(a) of the Advisers Act and Rule 204-2(a)(7). The SEC’s complaint charges Lisa Hovan with violating Section 10(b) of the Exchange Act and Rule 10b-5, Section 207 of the Advisers Act, and aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 and 206(1) and 206(2) of the Advisers Act. The SEC’s complaint charges Edward Hovan with violating Section 10(b) of the Exchange Act and Rule 10b-5 and Section 17(e)(1) of the Investment Company Act, and aiding and abetting violations of Sections 206(1) and 206(2) of the Advisers Act. The SEC’s complaint charges HCM with violating Section 10(b) of the Exchange Act and Rule 10b-5, Sections 204(a), 206(1), 206(2), and 207 of the Advisers Act, and Section 17(e)(1) of the Investment Company Act. The complaint seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties. The SEC’s case was investigated by Karen Kreuzkamp and Robert S. Leach of the San Francisco Regional Office. The examination of HCM was conducted by Karah To, Tracey A. Bonner, and Ada C. Chee of the San Francisco Regional Office’s investment adviser/investment company examination program. The U.S. Attorney’s Office for the Northern District of California today filed criminal charges against Kurt Hovan. The Commission would like to thank the U.S. Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation for their assistance in this matter.”

UNREGISTERED ADVISOR CHARGED WITH FRAUD

The following excerpt is from the SEC website: September 27, 2011 “On September 27, 2011, the Securities and Exchange Commission filed a civil injunctive action against Shreyans Desai and ShreySiddh Capital, LLC (SSC) in the United States District Court for the District of New Jersey. The Commission's complaint alleges fraudulent conduct by Desai in connection with the purchase and sale of securities for individuals who provided Desai with more than $245,000 to invest on their behalf. According to the complaint, from April 2009 to February 2011, Desai, acting through SSC, an unregistered investment adviser founded by Desai, made numerous materially false and misleading statements to potential investors, including that SSC was a securities broker registered with the Commission and that potential investors would receive returns of at least 50% if they invested their money with SSC. Desai also guaranteed to investors that he would not lose their money. On the basis of Desai's misrepresentations, five individuals gave Desai money to invest on their behalf through SSC. Desai then misappropriated investor money, using it to, among other things, make donations to a local religious institution and pay the personal debts and expenses of Desai's family members. Desai also lost investor money through bad trades. To hide the fact that Desai had misappropriated or lost investor money, Desai provided SSC investors with account statements that overstated the value of the investors' accounts by as much as 300%. According to the Commission's complaint, Desai and SSC also acted as securities brokers by engaging in the regular business of effecting transactions in securities for the accounts of others and by holding themselves out as securities brokers that were registered with the Commission. At the time, however, neither Desai nor SSC was registered with the Commission as a broker and neither was associated with a registered broker-dealer. The Commission's complaint charges Desai and SSC with violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Commission is seeking permanent injunctive relief, civil penalties and disgorgement against Desai and SSC.”

CLAIMS OF A 6300% RETURN ON INVESTMENT MAY NOT BE TRUE ACCORDING TO THE SEC

The following is from the SEC website: September 23, 2011 “The Securities and Exchange Commission today charged two San Francisco-area men with fraud for offering investors extraordinary returns as high as 6,300 percent when instead their money was spent on multi-million dollar home improvements and other luxuries. The SEC alleges that Jason G. Rivera, Jr., Marc C. Harmon, and two companies controlled by Rivera raised nearly $8 million from investors in two separate schemes, one involving purported trading in gold and diamonds and the other involving purported trading in collateralized mortgage obligations (CMOs). However, the funds raised from investors weren’t used for those purposes as Rivera diverted most of the money for his personal exploits, including a $360,000 surprise birthday party for his wife. According to the SEC’s complaint filed in federal court in San Francisco, Rivera previously worked in real estate and portrayed himself to investors as a successful financier. He raised approximately $4.5 million from investors in 2007 and 2008 through his company, the Joseph Rene Corporation (JRC). He touted JRC as a route to “financial freedom” and “maximum results with minimum risk” in a brochure he distributed to investors, assuring them high returns by pooling investor money and placing it in “hard assets” such as real estate, oil, diamonds, and gold. However, as Rivera instead spent investor money as his own and was unable to make payments to investors as promised, he tried to placate them with falsehoods. For example, Rivera claimed in a June 2008 e-mail to JRC investors that glitches in the banking system had delayed their payouts, but “your money is still making money.” In a follow-up e-mail, he maintained that despite the worldwide financial downturn, JRC was “thriving,” had “lost NO money,” and all investor funds were “safe.” The SEC alleges that Rivera later teamed up with Harmon, an unemployed construction worker at the time who had no training or experience in selling or managing investment programs. Together they raised an additional $3.2 million from 2008 to 2010 through a second company, Executive Members Management Group (EMMG). Rivera and Harmon led investors to believe they could make rapid profits of up to 6,300 percent by investing in trading programs involving CMOs and other financial instruments. Specifically, Harmon falsely claimed that EMMG used “licensed traders” and “trading platforms,” and he falsely boasted to investors that extremely wealthy individuals had invested millions of dollars with EMMG. Harmon even lied to several investors about a phony trip he took to the United Kingdom in an effort to place their money in a trading program. In both schemes, the SEC alleges that Rivera used investor funds to afford such personal luxuries as several Mercedes Benz automobiles, jewelry, restaurant meals, and basketball season tickets. Rivera misused investor funds in the JRC scheme to pay for approximately $1.5 million in improvements to his 8,000-square foot home in Alamo, Calif. He later misused investor funds in the EMMG scheme to make $1.1 million in additional improvements to his home. Rivera also paid approximately $180,000 to Harmon. The complaint charges Rivera, Harmon, JRC, and EMMG with violating 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 (Exchange Act) and Rule 10b-5 thereunder. The complaint also charges Rivera with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Harmon with violating Section 15(a)(1) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil monetary penalties.”

DODD-FRANK ON CONGO CONFLICT MINERALS ROUNDTABLE OCTOBER 18, 2011

The following is an excerpt from an SEC e-mail: “Washington, D.C., Sept. 29, 2011 — The Securities and Exchange Commission today announced that it will host a public roundtable next month to discuss the agency’s required rulemaking under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which relates to reporting requirements regarding conflict minerals originating in the Democratic Republic of the Congo and adjoining countries. The event will take place on October 18 from 12:30 p.m. to 5:15 p.m. and will provide a forum for various stakeholders to exchange views and provide input on issues related to the SEC’s required rulemaking. The panel discussions will focus on key regulatory issues such as appropriate reporting approaches for the final rule, challenges in tracking conflict minerals through the supply chain, and workable due diligence and other requirements related to the rulemaking. “We are committed to writing an effective rule as soon as possible, and the roundtable will help us do that,” said Meredith Cross, Director of the SEC’s Division of Corporation Finance. Roundtable panelists are expected to reflect the views of different constituencies, including affected issuers, human rights organizations, and other stakeholders. A final agenda including a list of participants will be announced closer to the date of the roundtable. The roundtable will be held in the auditorium at the SEC’s headquarters at 100 F Street NE in Washington D.C. The roundtable will be open to the public with seating on a first-come, first-served basis, and the discussion also can be viewed via live webcast on the SEC website.”

SEC DISMISSED CLAIMS IN CIVIL FRAUD CASE IN LIEU OF PARALLEL CRIMINAL CONVICTION

The following excerpt is from the SEC website: September 26, 2011 “The Securities and Exchange Commission has voluntarily dismissed its claims for disgorgement, prejudgment interest, and civil penalties against former Jefferson County, Alabama Commission president Larry Langford. The Commission dismissed its claims against Langford due to the 15-year prison sentence and significant restitution and forfeiture orders entered against Langford in a parallel criminal case that arose out of the Commission’s investigation. The Eleventh Circuit Court of Appeals recently upheld the criminal sentence, which included orders to pay $119,985 in restitution to the Internal Revenue Service and forfeit $241,843.65 in benefits he received to the government. Following the Commission’s dismissal notice, the Honorable Abdul K. Kallon, United States District Judge for the Northern District of Alabama dismissed the claims against Langford and dismissed the now-completed case. The Commission’s complaint against Langford alleged he accepted approximately $156,000 in cash, loans, and other benefits in exchange for steering County bond and swap business to a long-time friend and local broker dealer. On August 8, 2011, the Court granted the Commission’s motion for summary judgment against Langford and permanently enjoined him from further violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5.”