SECURITY COMPANY ALLEGEDLY SOLD FAKE SECURITIES

The following is an excerpt from the SEC website: “On October 7, 2011, United States District Judge John G. Koeltl entered an order, consistent with a stipulated agreement between the Commission and Defendants, preliminarily enjoining Murdoch Security & Investigations, Inc. (“Murdoch”) and its two principal officers, Robert Goldstein and William Vassell from continuing an allegedly illegal, unregistered offering and sale of securities that the Commission alleges raised more than $1 million from noteholders, who were promised 22% annual interest on their investments. Judge Koeltl’s order also preliminarily enjoined Defendants Murdoch and Goldstein from further violations of certain anti-fraud provisions of the federal securities laws and froze certain of Defendants’ assets pending final disposition of the case. The Commission’s complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Defendants, beginning in approximately October 2010, offered and sold notes to investors by placing advertisements in the Wall Street Journal and other financial press. The Commission further alleges that Murdoch, through Goldstein, misrepresented material facts to investors about the security company, including boasts of highly lucrative overseas operations when, in fact, Murdoch lacked any international business whatsoever. According to the Commission’s complaint, Murdoch told investors that capital was needed to finance acquisitions of additional security companies that would enhance Murdoch’s overall revenues and fund 22% interest payments to noteholders. In reality, the Commission alleges, money from new investors has been used primarily to fund interest payments to earlier investors and to pay the salaries of Defendants Goldstein and Vassell. The Commission’s complaint charges each Defendant with violations of Sections 5(a) and 5(c) of the Securities Act of 1933, and Defendants Murdoch and Goldstein with violations of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking permanent injunctions against the defendants, and to have them return their allegedly ill-gotten gains with prejudgment interest, and pay civil monetary penalties. The Commission acknowledges the assistance of the New York District Attorney’s Office in connection with this matter.”

SEC SAYS FORMER BANK EXECUTIVES COOKED THE BOOKS DURING FINANCIAL CRISIS

The following excerpt is from the SEC website: “Washington, D.C., Oct. 11, 2011 – The Securities and Exchange Commission today charged former bank executives with misleading investors about mounting loan losses at San Francisco-based United Commercial Bank during the height of the financial crisis in 2008 and 2009. The SEC alleges that the bank’s former chief executive officer Thomas Wu, chief operating officer Ebrahim Shabudin, and senior officer Thomas Yu concealed losses on loans and other assets from the bank’s auditors, causing the bank’s public holding company UCBH Holdings Inc. (UCBH) to understate 2008 operating losses by at least $65 million (approximately 50 percent). A few months later, continued declines in the value of the bank’s loans led the bank to fail, and the California Department of Financial Institutions closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. United Commercial Bank was one of the 10 largest bank failures of the recent financial crisis, causing a loss of $2.5 billion to the FDIC’s insurance fund. “Today’s charges reflect an all too familiar pattern – corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “But accountability for these executives begins today.” Marc Fagel, Director of the SEC’s San Francisco Regional Office, added, “This investigation shows how federal regulators can work together to ferret out fraud by the guardians of financial institutions entrusted to deal honestly with public investors.” According to the SEC’s complaint filed in federal court in San Francisco, UCBH and its subsidiary United Commercial Bank grew rapidly, doubling in size after an initial public offering in 1998. It was the first U.S. bank to acquire a bank in the People’s Republic of China, and Wu was considered a rising star in the banking industry. By 2009, however, Wu found himself at the helm of a bank on the brink of failure. The SEC alleges that Wu, Shabudin, and Yu deliberately delayed the proper recording of loan losses, and each committed securities fraud by making false and misleading statements to investors and UCBH’s independent auditors. During December 2008 and the first three months of 2009 as the company prepared its 2008 financial statements, Wu, Shabudin, and Yu were aware of significant losses on several large loans. Among other things, these executives allegedly learned about dramatically reduced property appraisals and worthless collateral securing the loans, yet they repeatedly hid this information from UCBH’s auditors and investors. The SEC’s complaint also alleges that the bank’s former chief financial officer Craig On acted negligently by misleading the company’s outside auditors and aiding the filing of false financial statements. On agreed to settle the SEC charges without admitting or denying the allegations. He will be permanently enjoined from violating certain antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and will pay a $150,000 penalty. On also consented to an administrative order suspending him from appearing or practicing before the SEC as an accountant, with a right to apply for reinstatement after five years. The litigation against the other defendants is ongoing. Lloyd Farnham, Michael Fortunato, Jason Habermeyer, and Cary Robnett of the SEC’s San Francisco Regional Office conducted the SEC’s investigation. The SEC’s litigation will be handled by Lloyd Farnham and Robert Mitchell. The U.S. Attorney for the Northern District of California today announced parallel criminal charges against former employees of the bank, and the FDIC announced enforcement actions against 13 individuals for violations of federal banking regulations. The SEC acknowledges the assistance of the FDIC, U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), FDIC’s Office of Inspector General, and Office of Inspector General for the Board of Governors of the Federal Reserve System.”

TWO ACCUSED OF VIOLATING ANTIFRAUD PROVISIONS OF THE FEDERAL SECURITIES LAWS

September 29, 2011 The following is an excerpt from the SEC website: “The Securities and Exchange Commission announced that, on September 28, 2011, it filed a civil action in the United States District Court for the District of Utah against Christopher A. Seeley, a resident of Herriman, Utah, and Justin G. Dickson, a resident of Salt Lake City, Utah, alleging that both of the Defendants violated the antifraud, securities offering registration and broker-dealer registration provisions of the federal securities laws. In its Complaint, the Commission alleges that Seeley conducted a fraudulent offering through two entities, AVF, Inc. and AV Funding, LLC (collectively, “Alden View”), and that Dickson conducted a fraudulent offering through AV Funding, LLC. According to the Complaint, from 2006 to 2009, Alden View raised $7.9 million from investors through the sale of promissory notes by representing to investors that Alden View was engaged a sophisticated real-estate lending business. In reality, Alden View funneled the majority of its investors’ funds into two Ponzi schemes that were run by its most significant borrowers. In doing so, Seeley and Dickson misled investors regarding, among other things: Alden View’s primary borrower’s loan and payment history, the security obtained by Alden View from its borrowers, and Alden View’s due diligence and knowledge of how its borrowers were using investor funds. The Complaint alleges that, based on this conduct, Seeley and Dickson violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission seeks permanent injunctions, disgorgement, and civil penalties against Seeley and Dickson.”

INVESTMENT ADVISOR TO PAY FOR FRAUDULENT MISREPRESENTATIONS

The following is an excerpt from the SEC website: September 29, 2011 ‘The Securities and Exchange Commission announced today that, on September 21, 2011, the United States District Court for the Eastern District of Pennsylvania entered a judgment against Defendant Alfred Clay Ludlum, III in the matter captioned Securities and Exchange Commission v. Alfred Clay Ludlum, III, et al., Civil Action No.10-cv-7379 (E.D. Pa.). Ludlum is the founder, president, chief compliance officer, and sole individual in control of Printz Capital Management, LLC (Printz Capital), which was registered with the Commission as an investment adviser from September 19, 2006 until its registration was revoked on June 27, 2011. Ludlum also wholly controls Printz Financial Group, Inc. and PCM Global Holdings LLC (together with Printz Capital, the Printz Entities). In a civil action filed on December 20, 2010, the Commission alleged that Ludlum and the Printz Entities made fraudulent misrepresentations and material omissions to investors, including Printz Capital advisory clients, concerning unregistered offerings of equity and debt securities in the Printz Entities. These investors were told that their funds would be used for working capital and to grow and operate the businesses of the Printz Entities when, in fact, Ludlum used most of these funds to support lifestyle, pay his personal expenses, and repay other investors. The Commission also alleged that Ludlum fraudulently obtained loans from one advisory client and made unauthorized transfers of funds belonging to three advisory clients to accounts that he controlled. The complaint further alleged that Ludlum failed to register the securities offerings in the Printz Entities with the Commission, even though no exemption from registration applied, and that Printz Capital, aided and abetted by Ludlum, violated additional provisions governing investment advisers. To settle the SEC’s charges, Ludlum, without admitting or denying the allegations of the complaint, except as to jurisdiction, consented to the entry of a judgment that: (i) permanently enjoins him from violating Sections 5 and 17(a) of the Securities Act of 1933 (the Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of Investment Advisers Act of 1940 (the Advisers Act), and from aiding and abetting any violations of Sections 203, 204, and 207 of the Advisers Act; and (ii) provides that Ludlum will be ordered to pay disgorgement, prejudgment interest, and penalties in amounts to be determined by the court, upon motion by the Commission. Based on the entry of these injunctions, on September 29, 2011 the SEC issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing against Ludlum. Previously in this matter, a final judgment was entered by default against the Printz Entities on March 15, 2011,, which permanently enjoined them from violating Sections 5 and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, permanently enjoined Printz Capital from violating Sections 206(1), 206(2), 203A, 204, and 207 of the Advisers Act, and permanently enjoined Printz Financial Group, Inc. from violating Securities Act Rule 503(a) of Regulation D. Pursuant to the final judgment, the Printz Entities were ordered to pay, jointly and severally, $735,617 in disgorgement, $49,817 in prejudgment interest, and a civil penalty of $735,617. No part of this judgment has been paid to date. The Commission subsequently instituted administrative proceedings against Printz Capital pursuant to Section 203(e) of the Advisers Act, and Printz Capital consented to the issuance of an order on June 27, 2011 revoking its registration with the Commission as an investment adviser.”

INVESTMENT ADVISOR CHARGED WITH SELLING PIPE DREAMS

The following excerpt is from the SEC website: “Washington, D.C., Sept. 28, 2011 — The Securities and Exchange Commission today charged a Long Island-based investment adviser with defrauding investors in hedge funds investing in PIPE transactions and misappropriating more than $1 million in client assets for his personal use. The SEC alleges that Corey Ribotsky and his firm The NIR Group LLC repeatedly lied to investors to hide the truth that his PIPE investment and trading strategy was failing during the financial crisis. For example, Ribotsky falsely told investors that despite the adverse market conditions he could liquidate all of the PIPE investments in 36 to 48 months — a practical impossibility given the size of the investments. Meanwhile, Ribotsky misused investor money by writing checks to pay for personal services and such luxury items as a Lexus, Mercedes, and Rolex watch. “In a classic betrayal of trust, Ribotsky stole from his investors and falsely assured them that his struggling hedge funds were thriving,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This enforcement action reflects our continuing commitment to bring to justice individuals and companies that committed fraud during the credit crisis.” A “PIPE” transaction involves “private investment in public equity.” Microcap public companies often engage in PIPE transactions to raise capital. According to the SEC’s complaint filed in federal district court in Brooklyn, N.Y., NIR’s family of AJW Funds provided cash financing to distressed, emerging growth, and start-up microcap companies quoted on the Over-the-Counter Bulletin Board or the Pink Sheets. The AJW Funds were typically invested in 120 to 130 different companies at any given time. The SEC alleges that beginning in July 2004, Ribotsky began siphoning assets from one of the AJW Funds he was managing through NIR. Ribotsky typically wrote checks to himself or to “cash” and then instructed NIR office employees to cash the checks at a nearby bank. They would then give Ribotsky the money. Although Ribotsky was warned by NIR’s head accountant that he could not lawfully take this money for himself, Ribotsky continued to do so anyway for the next five years. According to the SEC’s complaint, NIR’s strategy of investing in distressed and start-up companies began to show signs of failure by mid-to-late 2007. Many of the distressed companies to which the AJW Funds had made loans were by then essentially defunct or on the verge of filing for bankruptcy. The SEC alleges that Ribotsky made false and misleading statements to investors while his hedge funds were struggling to create the illusion of success. For instance, an NIR employee — who also is charged in the SEC’s complaint — prepared an investor chart accurately showing that NIR had invested a total of $31.4 million in 57 deals for the relevant period. When Ribotsky reviewed the chart, he told the employee that “investors can’t see this” and instructed him to “change the number to something near $60 million” before sending it to investors so they would falsely see an average investment of at least $1 million per deal. Ribotsky continued to make false and misleading statements to investors even after the AJW Funds’ outside auditor had calculated that it would take decades — if possible at all — to liquidate all of the AJW Funds’ PIPE investments under NIR’s stated investment and trading strategy. The SEC further alleges that Ribotsky used money from one group of investors to pay another group of investors in 2007 without adequately disclosing this to any of the investors. Ribotsky’s misconduct also included his failure to conduct any meaningful due diligence before selling a third party $43.2 million of AJW Funds assets in November and December 2008 — a transaction that allowed Ribotsky to book a purported “realized” gain at a critical time without his funds actually receiving any money. NIR’s offering materials and investor communications touted that NIR engages in extensive due diligence reviews before making investment decisions on behalf of the AJW Funds. The third-party purchaser soon defaulted on his payment obligations and has never paid for any of the assets. The SEC’s complaint charges Ribotsky and NIR with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint seeks a final judgment permanently enjoining Ribotsky and NIR from future violations of the above provisions of the federal securities laws and ordering them to disgorge any ill-gotten gains plus prejudgment interest and pay monetary penalties.”

SEC GETS EMERGENCY COURT ORDER HALTING AN ALLEGED PONZI SCHEME

The following excerpt is from the SEC website: "Washington, D.C., Oct. 6, 2011 – The Securities and Exchange Commission announced that it obtained an emergency court order today to halt a Ponzi scheme that promised investors rich returns on water-filtering natural stone pavers, but bilked them of approximately $26 million over a four-year period. The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that convicted felon Eric Aronson and others defrauded investors in PermaPave Companies, a group of firms based on Long Island, N.Y., and controlled by Aronson. About 140 individuals, many working in the construction or landscaping business, invested in the scheme between 2006 and 2010, the SEC alleged. Investors were told that PermaPave Companies had a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial mark-up, yielding monthly returns to investors of 7.8% to 33%. In reality, the complaint states that there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales. Lacking the profits promised to investors, Aronson and two other PermaPave Companies executives, Vincent Buonauro Jr., and Robert Kondratick, used new investments to make payments to earlier investors and then siphoned off much of the rest for themselves, buying luxury cars, gambling trips to Las Vegas, and jewelry. In addition, the complaint alleges that Aronson used investors’ money to make court-ordered restitution payments to victims of a previous scheme to which he pleaded guilty to conducting in 2000. “Aronson and his associates operated the PermaPave Companies as a classic Ponzi scheme,” said George S. Canellos, Director of the New York Regional Office. “They created the façade of a profitable business, promised investors extraordinary rates of return, and used much of their investors’ money to fund their own lavish lifestyle.” The U.S. Attorney’s Office for the Eastern District of New York, which conducted a parallel investigation of the matter, today filed criminal charges against Aronson, Buonauro, and Kondratick, who were arrested earlier today. According to the SEC’s complaint, when investors began demanding money owed to them, Aronson accused them of committing a felony by lending the PermaPave Companies money at the interest rates he promised them, which he suddenly claimed were usurious. Aronson and his attorney, Fredric Aaron, then allegedly made false statements to persuade investors to convert their securities into ones that deferred payments owed them for several years. The SEC also alleges that the defendants used some of the money raised through the Ponzi scheme to purchase a publicly traded company, Interlink-US-Network, Ltd. Several months later, the SEC said Interlink issued a Form 8-K, signed by Kondratick, which falsely stated that LED Capital Corp. had agreed to invest $6 million in Interlink. According to the complaint, LED Capital Corp. did not have $6 million and had no dealings, let alone any agreements, with Interlink. U.S. District Court Judge Jed S. Rakoff granted the SEC’s request to freeze assets of the defendants and eight relief defendants. The SEC is seeking preliminary and permanent injunctions against the defendants, and to have them return their allegedly illicit profits with prejudgment interest, and pay civil monetary penalties. In addition, the SEC seeks to bar Aronson, Kondratick, and Aaron from participating in penny-stock offerings and from serving as officers or directors of public companies. The SEC’s complaint charges Aronson, Kondratick, Buonauro, the PermaPave Companies, and Interlink with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and charges Aaron with aiding and abetting the Section 10(b) and Rule 10b-5 violations. The complaint charges Interlink with violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder, and charges Aronson, Kondratick, and Aaron with aiding and abetting these violations. The complaint also asserts violations of Section 5(a) and 5(c) of the Securities Act as to Aronson, Buonauro, and the PermaPave Companies and violations of Section 15(a) of the Exchange Act as to Aronson and Buonauro. The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Securities Fraud Squad of Federal Bureau of Investigation in connection with this matter. Celeste Chase, Daniel Michael, and Desiree M.C. Marmita, conducted the SEC’s investigation; Howard Fischer of the SEC’s New York Regional Office will lead the litigation."