SEC SETTLES BACKDATED STOCK OPTIONS CLAIMS INVOLVING JUNIPER NETWORKS AND KLA-TENCOR CORP.

The following excerpt is from the SEC website: OCTOBER 19, 2011 “The Securities and Exchange Commission resolved its claims with Lisa C. Berry, the former General Counsel of KLA-Tencor Corp. and Juniper Networks, Inc. The Commission alleged that from 1997 through 2003 Berry caused KLA-Tencor and Juniper to report false financial information to the investing public through her preparation of corporate records that concealed that employee stock option grants were priced with the benefit of hindsight at both companies. Without admitting or denying the Commission's allegations, Berry consented to pay a $350,000 civil penalty, and also to pay disgorgement totaling $77,120, including interest. In addition, Berry consented to the entry of a final judgment that will enjoin her permanently from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, Section 13(b)(5) of the Securities Exchange Act of 1934, and Rule 13b2-1 under the Exchange Act, as well as aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9 thereunder. The United States District Court for the Northern District of California approved the settlement on October 7, 2011. In a separate administrative proceeding, Berry also agreed to be suspended from appearing or practicing as an attorney before the Commission. Under the terms of the agreement, Berry may apply for reinstatement in five years. Berry agreed to the suspension without admitting or denying the Commission's allegations. The Commission previously resolved stock option backdating claims against Juniper, KLA-Tencor, and KLA-Tencor's former Chief Executive Officer, Kenneth L. Schroeder. All consented to resolve the Commission's claims without admitting or denying the Commission's allegations.”

INTERNATIONAL FINANCIAL REGULATORS MEET TO SHARE VIEWS ON MARKET STRUCTURE

The following is an excerpt from the SEC website: “Washington, D.C., Oct. 14, 2011 — Securities and Exchange Commission Chairman Mary Schapiro and Martin Wheatley, Managing Director of the Conduct Business Unit at the U.K. Financial Services Authority (FSA), today co-hosted a meeting among regulators from Europe, the Americas, Asia, and Australia to share views on issues pertaining to equity market structure. The roundtable, held at FSA headquarters in London, considered how advances in technology, new trading strategies, and the increasing integration and globalization of markets have impacted developments in equity market structure. Specifically, the leaders of the various regulatory agencies shared their views on issues related to automated trading strategies, such as high frequency trading, market fragmentation, and undisplayed liquidity (for example, “dark pools”). The participants also discussed possible approaches that regulators might adopt in the light of these market structure developments. The discussion highlighted the need for global coordination on regulatory approaches to many of these issues. Chairman Schapiro said, “The rapid developments in trading technologies and trading platforms have had a profound impact on the evolution in the structure of markets around the world. This roundtable provided an important opportunity for regulators to share their experiences and their views on these developments. Cooperation among regulators at an international level is increasingly vital in ensuring the safety and soundness of our markets and protecting investors, and the meeting was a tremendous success in advancing such cooperation on market structure issues.” Mr. Wheatley added, “The meeting provided an opportunity for regulators from around the globe to discuss vital markets structure issues, particularly the impact and role of high frequency trading. The meeting allowed for the sharing of useful information between the regulators and will contribute to a sound basis for continued work to be done at a global level.” Today’s meeting laid the groundwork for future discussions on these issues, allowing securities regulators an opportunity to continue to work together to address advances in technology and new trading strategies.”

FIXING THE FINANCIAL NEWS FOR FUN AND PROFIT

The following excerpt is from the sec website: On October 13, 2011 the U.S. District Court for the Southern District of Florida entered judgments against a group of penny-stock promoters arising out of their repackaging of “news” issued by a series of sham energy companies. The judgments, which the defendants consented to as part of a settlement with the Commission, require them to pay penalties and to disgorge profits from their illicit activities. The judgments also permanently ban the defendants from touting and other dealings involving penny stocks. The judgments came in a civil action that the Commission filed earlier this year against Miami-based stock-touting company Wall Street Capital Funding LLC (WSCF) and its principals – owners Philip Cardwell and Roy Campbell and their associate Aaron Hume. In its Complaint initiating the action, the SEC alleged that the defendants were in the business of distributing promotional materials styled as “Wall Street News Alerts” for penny-stock companies. According to the SEC, one such company, PrimeGen Energy Corp., purported to have great success in drilling for oil in 2009 and 2010. The SEC alleged, however, that PrimeGen was phony: its corporate headquarters were a rented mailbox in a UPS Store opened with a do-not-forward instruction; its phone line was unattended; and its web page was generated by copying the source code from another company’s web site. As alleged in the Complaint, WSCF’s “investment opinions,” emails, and web profiles typically expressed positive opinions about penny-stock companies, their business prospects, and the future direction of their stock price. WSCF, according to the Complaint, created the misleading appearance of an independent basis for its statements even though it was merely repeating the penny-stock companies’ claims. Moreover, the SEC alleged, even when the defendants received ample warning signs that a scam was afoot, they always did the same thing: they closed their eyes and published. The SEC’s Complaint was filed February 7, 2011 in the U.S. District Court for the Southern District of Florida. The Complaint charged Wall Street Capital Funding LLC, Philip Cardwell, Roy Campbell, and Aaron Hume 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, which prohibit fraudulent conduct in connection with securities transactions. Judge Donald L. Graham presided over the action, No. 11-cv-20413-DLG. The judgments imposed by Judge Graham require the defendants, among other things, to pay penalties and disgorgement totaling $300,000, and permanently bar them from promotional activities and other dealings involving penny stocks. The defendants consented to the judgments without admitting or denying the SEC’s allegations.”

MAN AND HIS INVESTMENT FIRM ACCUSED OF FRAUD BY SEC

The following excerpt is from the SEC website: "On October 18, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Minnesota against David B. Welliver and his investment advisory firm, Dblaine Capital, LLC, for fraud and numerous other violations of the federal securities laws in connection with the offer, sale, and management of a mutual fund, the Dblaine Fund. The SEC’s complaint alleges that Welliver and Dblaine Capital obtained $4 million in loans pursuant to an improper, undisclosed quid pro quo agreement entered into in breach of their fiduciary duties to the Dblaine Fund. Specifically, in exchange for the loans, Welliver and Dblaine Capital committed to invest the fund’s assets in certain “alternative investment” securities recommended by the lender. Welliver and Dblaine Capital then caused the fund to violate various investment restrictions and policies by investing the fund’s assets in a private placement offering that was affiliated with the lender. The complaint also alleges that Welliver and Dblaine further defrauded the Fund by providing an inaccurate valuation for the private placement holding. As a result, Welliver and Dblaine Capital caused the fund to offer, sell, and redeem shares at an inflated net asset value. When Welliver and Dblaine Capital ultimately discovered that the private placement was worthless, they continued their fraud by failing to disclose this to the Fund’s shareholders. The complaint also alleges that, in connection with the fraudulent conduct described above, Welliver and Dblaine Capital made false and misleading statements in various reports and filings with the Commission; engaged in certain prohibited affiliated transactions; and aided and abetted the fund’s violations of various provisions of the Investment Company Act of 1940. The SEC complaint alleges that, as a result of their misconduct, Welliver and Dblaine Capital violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, Sections 17(a)(2), 17(e)(1), 22(e), and 34(b) of the Investment Company Act of 1940, and Rules 22c-1 and 38a-1 thereunder. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains, including prejudgment interest, and civil penalties."

AWARDS PRESENTED FOR UNCOVERING FRAUD DURING FINANCIAL COLLAPSE FRAUD

The following excerpt is from the SEC website: Washington, D.C., Oct. 18, 2011 – The Securities and Exchange Commission announced that eight members of its staff were part of a team that today received the 2011 Award for Excellence in Investigations by the Council of the Inspectors General on Integrity and Efficiency (CIGIE). The award was presented for outstanding cooperation in uncovering and jointly investigating the $2.9 billion fraud scheme that contributed to the collapse in 2009 of Colonial BancGroup Inc. and Taylor, Bean &Whitaker Mortgage Corp. The SEC charged five individuals, including former Taylor, Bean & Whitaker chairman Lee B. Farkas, alleging he arranged to sell more than $1 billion of sham or worthless mortgage loans to Colonial Bank, and attempted to scam the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). Farkas was found guilty of related criminal fraud charges and was sentenced in June to 30 years in prison. This year, the SEC also charged Taylor, Bean & Whitaker’s former chief executive officer and former treasurer, and a former executive and former supervisor at Alabama-based Colonial Bank. “We are extremely proud of our staff’s work on this important case, and delighted to see their efforts honored today,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “This award highlights the enormous individual and team effort to expose frauds stemming from the financial crisis and bring wrongdoers to justice.” SEC employees receiving the award are: Suzanne Ashley, Senior Counsel to the Director of Enforcement and former detailee to the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Rhea Dignam, Regional Director, SEC Atlanta Regional Office William Hicks, Associate Regional Director for Enforcement, Atlanta Regional Office Barry Lakas, Staff Accountant, Atlanta Regional Office Aaron Lipson, Assistant Regional Director, Atlanta Regional Office M. Graham Loomis, Regional Trial Counsel, Atlanta Regional Office Michael Mashburn, Senior Investigations Counsel, Atlanta Regional Office Yolanda Ross, Senior Counsel, Atlanta Regional Office Other federal entities whose staff were honored with the award are the Department of Housing and Urban Development’s Office of Inspector General, the Federal Bureau of Investigation, the Federal Deposit Insurance Corp.’s Office of Inspector General, the Federal Housing Finance Agency’s Office of Inspector General, the Justice Department, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the U.S. District Court for the Eastern District of Virginia."

CITIGROUP TO PAY $185 MILLION TO SETTLE CHARGES

The following excerpt is from the SEC website: “Washington, D.C., Oct. 19, 2011 – The Securities and Exchange Commission today charged Citigroup’s principal U.S. broker-dealer subsidiary with misleading investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing market in which Citigroup bet against investors as the housing market showed signs of distress. The CDO defaulted within months, leaving investors with losses while Citigroup made $160 million in fees and trading profits. The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select. Citigroup has agreed to settle the SEC’s charges by paying a total of $285 million, which will be returned to investors. The SEC also charged Brian Stoker, the Citigroup employee primarily responsible for structuring the CDO transaction. The agency brought separate settled charges against Credit Suisse’s asset management unit, which served as the collateral manager for the CDO transaction, as well as the Credit Suisse portfolio manager primarily responsible for the transaction, Samir H. Bhatt. “The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost.” Kenneth R. Lench, Chief of the Structured and New Products Unit in the SEC Division of Enforcement, added, “As the collateral manager, Credit Suisse also was responsible for the disclosure failures and breached its fiduciary duty to investors when it allowed Citigroup to significantly influence the portfolio selection process.” According to the SEC’s complaints filed in U.S. District Court for the Southern District of New York, personnel from Citigroup’s CDO trading and structuring desks had discussions around October 2006 about the possibility of establishing a short position in a specific group of assets by using credit default swaps (CDS) to buy protection on those assets from a CDO that Citigroup would structure and market. After discussions began with Credit Suisse Alternative Capital (CSAC) about acting as the collateral manager for a proposed CDO transaction, Stoker sent an e-mail to his supervisor. He wrote that he hoped the transaction would go forward and described it as the Citigroup trading desk head’s “prop trade (don’t tell CSAC). CSAC agreed to terms even though they don’t get to pick the assets.” The SEC alleges that during the time when the transaction was being structured, CSAC allowed Citigroup to exercise significant influence over the selection of assets included in the Class V III portfolio. The transaction was marketed primarily through a pitch book and an offering circular for which Stoker was chiefly responsible. The pitch book and the offering circular were materially misleading because they failed to disclose that Citigroup had played a substantial role in selecting the assets and had taken a $500 million short position that was comprised of names it had been allowed to select. Citigroup did not short names that it had no role in selecting. Nothing in the disclosures put investors on notice that Citigroup had interests that were adverse to the interests of CDO investors. According to the SEC’s complaints, the Class V III transaction closed on Feb. 28, 2007. One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.” On Nov. 7, 2007, a credit rating agency downgraded every tranche of Class V III, and on Nov. 19, 2007, Class V III was declared to be in an Event of Default. The approximately 15 investors in the Class V III transaction lost virtually their entire investments while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position. The SEC alleges that Citigroup and Stoker each violated Sections 17(a)(2) and (3) of the Securities Act of 1933. While the SEC’s litigation continues against Stoker, Citigroup has consented to settle the SEC’s charges without admitting or denying the SEC’s allegations. The settlement is subject to court approval. Citigroup consented to the entry of a final judgment that enjoins it from violating these provisions. The settlement requires Citigroup to pay $160 million in disgorgement plus $30 million in prejudgment interest and a $95 million penalty for a total of $285 million that will be returned to investors through a Fair Fund distribution. The settlement also requires remedial action by Citigroup in its review and approval of offerings of certain mortgage-related securities. The SEC instituted related administrative proceedings against CSAC, its successor in interest Credit Suisse Asset Management (CSAM), and Bhatt. The SEC found that as a result of the roles that they played in the asset selection process and the preparation of the pitch book and the offering circular for the Class V III transaction, CSAM and CSAC violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 17(a)(2) of the Securities Act and that Bhatt violated Section 17(a)(2) of the Securities Act and caused the violations of Section 206(2) of the Advisers Act by CSAC. Without admitting or denying the SEC’s findings, CSAM and CSAC consented to the issuance of an order directing each of them to cease and desist from committing or causing any violations, or future violations, of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and requiring them to pay disgorgement of $1 million in fees that it received from the Class V III transaction plus $250,000 in prejudgment interest, and requiring them to pay a penalty of $1.25 million. Without admitting or denying the SEC’s findings, Bhatt consented to the issuance of an order directing him to cease and desist from committing or causing any violations or future violations of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and suspending him from association with any investment adviser for a period of six months.”