TWO ATTORNEYS SETTLE SEC CHARGES OF INSIDER TRADING

The following excerpt is from the SEC website: “The Securities and Exchange Commission announced today that on October 17, 2011, the Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York entered final judgments against Arthur J. Cutillo and Jason C. Goldfarb in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the Commission filed on November 5, 2009. The Commission charged Cutillo and Goldfarb, practicing attorneys at the time of their illicit conduct, with violations of antifraud provisions of the federal securities laws. The Commission alleged that Cutillo misappropriated from his law firm, Ropes & Gray LLP, material, nonpublic information concerning upcoming corporate acquisitions, including the 2007 announced acquisitions of 3Com Corp. and Axcan Pharma Inc. The Commission further alleged that Cutillo, through his friend Goldfarb, tipped the information to Zvi Goffer, a former proprietary trader at the broker-dealer Schottenfeld Group, LLC., in exchange for kickbacks. As alleged in the complaint, Zvi Goffer traded on this inside information and had numerous downstream tippees who also traded on the information, including other Wall Street traders and hedge funds. To settle the Commission’s charges, Cutillo and Goldfarb each consented to the entry of a final judgment that: (i) permanently enjoins each from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders each to pay disgorgement of $32,500, plus $4,204 in prejudgment interest. In related administrative proceedings, the Commission suspended Cutillo and Goldfarb from appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice. Cutillo and Goldfarb each previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in related criminal cases, United States v. Arthur Cutillo, 10-CR-0056 and United States v. Jason Goldfarb, 10-CR-0056 (S.D.N.Y.). Cutillo was sentenced to a 30 month prison term and ordered to pay a criminal forfeiture of $378,608. Goldfarb was sentenced to a three year prison term and ordered to pay a $32,500 fine and criminal forfeiture of $1,103,131“.

SEC OBTAINS ASSET FREEZE CHARGING TEXAS MAN OF LYING TO INVESTORS

The following excerpt is from the SEC website: “Washington, D.C., Oct. 18, 2011 – The Securities and Exchange Commission today announced that it has obtained an emergency court order to freeze the assets of a Texas resident and his company charged with falsely telling investors he was using their money to buy and restructure pools of non-performing home mortgages in the wake of the housing market’s decline. The SEC alleges that James G. “Jay” Temme and Stewardship Fund LP raised at least $35 million since 2008 from various investor groups. To lure those investors, Temme developed relationships with people and entities who “vouched” for Temme, including an investment adviser representative with a major investment bank’s private wealth management group and a Texas-based public company that provides mortgage restructuring services. Investors and their advisers, including the bank representative, were told by Temme that he was using the investors’ money to purchase “tapes” of non-performing mortgages from mortgage lenders at a discount and then paying returns based on principal and interest payments he collected from the homeowners, or based on the resale of the mortgages or underlying properties. In several instances, however, Temme was claiming to own mortgages he had never acquired or purporting to transfer the same pool of mortgages to multiple sets of investors. To carry out his scheme, Temme created false documents, made unauthorized financial transactions, and used new investor funds to pay off earlier investors. “Temme took advantage of investors who believed their investments were helping homeowners restructure their mortgages,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “In many instances, it appears Temme was just pocketing the investments and using the proceeds for his own illicit purposes.” According to the SEC’s complaint unsealed by the judge today in federal court in the Eastern District of Texas, Temme has been the subject of at least one state court asset freeze and various private lawsuits by different investor groups. However, rather than stopping his scheme, Temme ignored the asset freezes, opened new bank accounts, and raised money from new investors to settle suits filed by earlier investors. The SEC’s complaint charges, among other things, that the defendants violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition to emergency and interim relief that has been obtained, the SEC seeks a preliminary injunction and a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest. The case is assigned to U.S. District Judge Michael H. Schneider. The court has scheduled a hearing on the Commission’s motions to appoint a receiver and for a preliminary injunction for Thursday, Oct. 27, 2011, at 2 p.m. CT before U.S. Magistrate Judge Amos L. Mazzant at the U.S. Courthouse in Sherman, Texas. Jonathan Scott, Michael Jackman and Ty Martinez of the Fort Worth Regional Office are conducting the SEC’s investigation, and trial attorney David Reece will lead the litigation. The SEC’s investigation is continuing.”

SEC SETTLES MISREPRESENTATION CHARGES AGAINST AN ENERGY BUSINESS FOUNDER

The following excerpt is from the SEC website: “On October 18, 2011, the Securities and Exchange Commission charged Thomas L. Kivisto of Tulsa, Oklahoma with misleading investors in SemGroup Energy Partners, L.P. (“SGLP”) about risks they faced from energy trading he was conducting at SGLP’s parent and largest customer, SemGroup, L.P. (“SemGroup”). Kivisto has agreed to settle these charges by consenting to injunctive relief, paying a $225,000 civil penalty and forfeiting rights to SGLP limited partnership units recently valued at approximately $1.1 million. The Commission’s complaint, filed in United States District Court in Tulsa, alleges that Kivisto should have known that certain SGLP public filings he signed misled investors about the reliability of SGLP’s revenue stream and the risks SGLP faced from Kivisto’s energy trading. According to the complaint, SemGroup provided up to 89% of SGLP’s revenues and thus was critical to SGLP’s profitability. The SEC alleges that SGLP’s filings assured investors that this revenue stream was “stable and predictable” and protected from volatility in oil prices. The SEC contends, however, that Kivisto’s energy trading increasingly drained SemGroup’s credit facilities and other liquidity sources, jeopardizing its ability to fulfill its commitments to SGLP. Investors were never warned of these risks, according to the SEC. The SEC alleges that these risks came to a head in July 2008, when SemGroup’s lenders cancelled the credit facility and SemGroup filed bankruptcy. After these events, the price of SGLP’s publicly traded limited partnership units declined more than 60%. Privately held SemGroup, based in Tulsa, bought, transported and sold petroleum products. It also traded crude oil and related commodities and derivatives. Kivisto, who helped found the company and served as its CEO and president until its bankruptcy, managed SemGroup’s crude oil trading activities. SGLP (now known as Blueknight Energy Partners, L.P.) went public in July 2007. SGLP primarily owned midstream oil and gas assets such as pipelines and storage facilities. Kivisto served as a director of SGLP’s general partner from its initial public offering until he resigned in July 2008. The Commission alleges that Kivisto signed certain misleading filings SGLP made with the SEC, including registration statements SGLP filed in July 2007 and February 2008 and its annual report on Form 10-K filed in March 2008. Without admitting or denying the Commission’s allegations, Kivisto offered to settle by consenting to entry of a final judgment permanently enjoining him from violating Sections 17(a)(2) and (3) of the Securities Act of 1933, ordering him to pay a $225,000 civil penalty, and requiring him to forfeit all claims to 150,000 SGLP units awarded under the company’s long term incentive plan.”

SEC CHARGES COMPANY PRESIDENT AND FIRM WITH SECURITIES LAW VIOLATIONS

The following excerpt is from the SEC website: “On October 18, 2011, the Securities and Exchange Commission filed a settled civil injunctive action against Long Term-Short Term Inc., d/b/a BetterTrades, and Freddie Rick, the Company's co-founder and president. Without admitting or denying the allegations in the complaint, the defendants consented to judgments enjoining them from violating the antifraud provisions of the federal securities laws. The Company and Rick also agreed to pay, respectively, civil penalties of $750,000 and $150,000, and agreed to continue enforcing internal compliance guidelines designed to prevent future violations. BetterTrades sells products designed to teach how to trade options, including seminars, workshops and software that facilitates options trading. The Commission's complaint alleges that from at least 2007 and continuing through at least 2008, certain BetterTrades instructors falsely claimed to be highly successful options traders using the strategies taught by BetterTrades. In marketing materials, the defendants also claimed that certain Company instructors were successful, active traders. The complaint alleges that the defendants acted recklessly in making these claims without verifying their accuracy, despite red flags that the claims were false. The complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5. The complaint also alleges that certain Company marketing materials claimed that Rick became wealthy through his options trading. According to the complaint, the Company knew or was reckless in not knowing that Rick's wealth came primarily from Company operations. The complaint also alleges that Rick allowed infomercials to air that incorrectly implied that his wealth came from trading. In determining to accept the defendants' settlement offers, the SEC took into account the defendants' voluntary remediation efforts. The Company retained counsel to review how it promoted and sold its classes, products and services, and it adopted policies that set forth standards of behavior expected from instructors, including mandatory instructor training on Company policies and interpretive guidelines, collection of instructor trading records, and vetting of any instructor claims of trading success against trading records. The Company also instituted policies and detailed guidelines regarding, among other things, review and revision of marketing materials, and required student claims of trading success to be vetted against trading records. The Company also took disciplinary actions against instructors who failed to adhere to Company policies. The Commission's settlements with the defendants are subject to the approval of the U.S. District Court for the Eastern District of Virginia.”

BIG MULTINATIONAL BANK CHARGED BY SEC WITH VIOLATIONS OF THE FEDERAL SECURITIES LAWS

The following excerpt is from the SEC website: “Washington, D.C., Oct. 24, 2011 – The Securities and Exchange Commission today charged multinational banking conglomerate Banco Espirito Santo S.A. (BES) with violations of the broker-dealer and investment adviser registration provisions and the securities transaction registration provisions of the federal securities laws. The SEC's enforcement action finds that Lisbon, Portugal-based BES offered brokerage services and investment advice between 2004 and 2009 to approximately 3,800 U.S.-resident customers and clients who were primarily Portuguese immigrants. However, during this time, BES was not registered with the SEC as a broker-dealer or investment adviser, and it offered and sold securities to its U.S. customers and clients without the intermediation of a registered broker-dealer. None of these securities transactions was registered and many of the securities offerings did not qualify for an exemption from registration. BES agreed to settle the SEC's charges and pay nearly $7 million in disgorgement, prejudgment interest and penalties. In determining to accept BES's offer to settle, the SEC considered remedial acts promptly undertaken by BES and its cooperation with SEC staff. "The registration provisions are core safeguards of the integrity of our securities markets and the financial institutions that act as gatekeepers of those markets," said George S. Canellos, Director of the SEC's New York Regional Office. "BES brazenly ignored those provisions over the course of many years by acting as an investment adviser and broker-dealer without registration and by offering and selling securities to members of the U.S. public without any of the disclosures required by the law." Sanjay Wadhwa, Associate Director of the SEC's New York Regional Office, added, "Foreign entities seeking to provide financial or securities-related services in the U.S. must familiarize themselves with the statutory and regulatory framework in this arena. A failure to do so, as was the case here, can be a costly misstep." The SEC's order instituting administrative proceedings against BES describes the various ways that the bank offered and sold securities and provided brokerage and advisory services to its U.S. customers and clients. BES used its Portugal-based Departmento de Marketing de Comunicacao & Estudo do Consumidor (Department of Marketing, Communications, and Consumer Research) to mail U.S. residents marketing materials. A customer service call center operated by a third party and located in Portugal (known as the ES Contact Center) employed individuals who were dedicated to servicing BES's U.S. customers and offered such U.S. customers various financial products. BES also used a state-licensed money transmission service named Espirito Santo e commercial Lisbona Inc. with offices in Connecticut, New Jersey, and Rhode Island. BES also had U.S.-dedicated International Private Banking relationship managers who visited the U.S. approximately twice a year to meet with clients and serviced U.S. clients from Portugal. The SEC's order finds that by acting as an unregistered broker-dealer and investment adviser to U.S. customers and clients, BES willfully violated Section 15(a) of the Securities Exchange Act of 1934, and Section 203(a) of the Investment Advisers Act of 1940. According to the SEC's order, BES also willfully violated Sections 5(a) and 5(c) of the Securities Act of 1933 by offering and selling securities in the U.S. without registration and without an applicable exemption from registration. Without admitting or denying the SEC's findings, BES has agreed to cease and desist from committing or causing any violations of Sections 5(a) and 5(c) of the Securities Act, Section 15(a) of the Exchange Act, and Section 203(a) of the Advisers Act, and to pay nearly $7 million in disgorgement, prejudgment interest and penalties. BES also has agreed to an undertaking that requires it to pay a certain minimum rate of interest to its U.S. customers and clients on securities purchased through BES, and to make whole each of its U.S. customers and clients for any realized or unrealized losses with respect to any securities purchased through BES. The SEC's investigation was conducted by Amelia A. Cottrell, John C. Lehmann, and Charles D. Riely of the SEC's New York Regional Office. The office's broker-dealer examination team of Robert A. Sollazzo, Ellen N. Hersh, Ashok Ginde, and Jennifer A. Grumbrecht provided assistance with the investigation.”

SEC CHARGES FORMER ENERGY COMPANY CEO WITH MISLEADING INVESTORS

The following excerpt is from the SEC website: “Washington, D.C., Oct. 18, 2011 – The Securities and Exchange Commission today charged the co-founder of a Tulsa-based energy company with misleading investors in one of its subsidiaries about liquidity risks they faced from his energy trading. According to the SEC’s complaint filed in federal court in Tulsa, Thomas L. Kivisto was CEO and president of SemGroup L.P., which bought, transported and sold petroleum products and traded crude oil and related commodities and derivatives. Kivisto managed these trading activities. Meanwhile, Kivisto also was a director of SemGroup’s subsidiary, SemGroup Energy Partners L.P. (SGLP), which owns midstream oil and gas assets such as pipelines and storage facilities. SGLP issues publicly-traded limited partnership units, and Kivisto signed certain corporate filings that SGLP made with the SEC, including registration statements and its annual report. The SEC alleges that SGLP’s filings assured investors that its revenue stream from SemGroup, which was its largest customer, was “stable and predictable” and protected from volatility in oil prices. However, unbeknownst to investors, Kivisto’s energy trading was increasingly draining SemGroup’s credit facilities and other liquidity sources and jeopardizing the company’s ability to fulfill its commitments to SGLP. Investors were never warned of these risks, which came to a head in July 2008 when SemGroup’s lenders cancelled the credit facility and the company filed for bankruptcy. The price of SGLP’s limited partnership units subsequently declined more than 60 percent. “Investors have a right to know the risks that could imperil their investment,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Kivisto should have known that the SGLP filings he signed did not warn investors about the risks created by his energy trading, and investors were blindsided when those risks came to fruition.” The SEC alleges that Kivisto should have known that certain SGLP public filings that he signed were misleading investors about the reliability of SGLP’s revenue stream and the risks that SGLP faced from Kivisto’s energy trading. SemGroup provided up to 89 percent of SGLP’s revenues and thus was critical to SGLP’s profitability. SGLP is now known as Blueknight Energy Partners L.P. Kivisto agreed to settle the SEC’s charges without admitting or denying the allegations by paying a $225,000 penalty and forfeiting his rights to SGLP limited partnership units currently worth more than $1.1 million that were awarded to him under SGLP’s long-term incentive plan. He also consented to entry of a final judgment permanently enjoining him from violating the antifraud provisions of the Securities Act of 1933.”