INVESTMENT ADVISOR BASED IN CA IS CHARGED BY SEC WITH FRAUD AND BREACH OF FIDUCIARY DUTY

The following excerpt is from the SEC website: “On October 18, 2011, the Securities and Exchange Commission (“Commission”) filed a complaint in United States District Court in Riverside, California against Copeland Wealth Management, A Financial Advisory Corporation (“CWM”), Copeland Wealth Management, A Real Estate Corporation (“Copeland Realty”), and Charles P. Copeland (“Charles Copeland”) for fraud and breach of fiduciary duty. As an investment adviser registered with the Commission, CWM manages approximately $125 million in assets under management. The assets under management are primarily mutual funds and real estate funds. Copeland Realty, an unregistered investment adviser, is the general partner for 21 limited partnerships primarily invested in real estate. Charles Copeland, a certified public accountant, is the founder, co-owner and officer of both CWM and Copeland Realty. The Commission alleges that from 2003 through May 31, 2011, Charles Copeland, CWM, and Copeland Realty raised over $62 million from over 100 investors, including many of Charles Copeland’s accounting clients, by selling interests in limited partnerships operated by CWM and Copeland Realty. According to the Commission’s complaint, throughout the offer and sale of the limited partnerships, Charles Copeland, CWM, and Copeland Realty made material misrepresentations and omissions regarding: (1) the use of investor funds, (2) conflicts of interest, (3) guaranteed returns, (4) the unauthorized trading of put options, and (5) the payment of undisclosed real estate commissions and other related compensation. Without admitting or denying the Commission’s allegations, Charles Copeland, CWM, and Copeland Realty agreed to the entry of an order permanently enjoining them from future violations of 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) and 206(2) of the Investment Advisers Act of 1940. The defendants also agreed to an order appointing a receiver over CWM and Copeland Realty and prohibiting the destruction of documents. Disgorgement plus prejudgment interest and civil penalties are to be determined at a later date.”

MAN AND HIS COMPANIES SCHEME TO PUMP-AND-DUMP HIT A BUMP

The following excerpt is from the SEC website: October 18, 2011 “The Securities and Exchange Commission announced today that on October 14, 2011, the U.S. District Court for the Northern District of Texas entered a judgment against Jason Wynn, of Plano, Texas, and two companies under his control – Wynn Holdings LLC and Wynn Industries LLC. The Commission’s amended complaint alleged that Wynn and his companies violated the antifraud and registration provisions of the federal securities laws through a scheme to pump and dump the stock of four issuers: Beverage Creations, Inc., My Vintage Baby, Inc., ConnectAJet.com, Inc. and Alchemy Creative, Inc. The Commission alleged that Jason Wynn and his companies (1) purchased tens of millions of shares directly from the issuers for pennies per share, (2) touted the stock to investors through a nationwide marketing campaign, and (3) immediately dumped their shares into the public market at grossly inflated prices when no registration statement was filed or in effect. Wynn created artificial demand for the stocks through various ad campaigns, emails and misleading promotional mailers. While the promotional mailers disclosed that the Wynn companies received the stock being touted, they did not disclose that Wynn and his companies intended to sell that stock into the artificially inflated market created by the promotions. The judgment permanently enjoins Wynn, Wynn Holdings, LLC and Wynn Industries, LLC from violating Section 5 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also bars Wynn and his companies from participating in any penny stock offerings and provides that they will be ordered to pay disgorgement and civil penalties determined by the district court at a later date. Wynn and his companies consented to the entry of the judgment without admitting or denying the allegations in the Commission’s amended complaint. Previously, on January 3, 2011, the district court entered a judgment against stock promoter Carlton Fleming and certain entities under his control – Regus Investment Group LLC and Thomas Wade Investments, LLC. The Commission’s case against the remaining defendants – Ryan Reynolds and companies under his control – is pending. The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”

SEC CIVIL ACTION AGAINST INSIDE TRADERS GUPTA AND RAJARATNAM

The following excerpt is from the SEC website: “On October 26, 2011, the Securities and Exchange Commission charged former McKinsey & Co. global head Rajat K. Gupta with insider trading for illegally tipping convicted hedge fund manager Raj Rajaratnam while serving on the boards of Goldman Sachs and Procter & Gamble (P&G). The SEC also filed new insider trading charges against Rajaratnam after first charging him with insider trading in October 2009. According to the SEC’s complaint filed in federal court in Manhattan, Gupta illegally tipped Rajaratnam with insider information about the quarterly earnings of both Goldman Sachs and P&G as well as an impending $5 billion investment in Goldman by Berkshire Hathaway at the height of the financial crisis. Rajaratnam, the founder of Galleon Management who was recently convicted of multiple counts of insider trading in other securities stemming from unrelated insider trading schemes, allegedly caused various Galleon funds to trade based on Gupta’s inside information, generating illicit profits or loss avoidance of more than $23 million. The SEC’s complaint alleges that Gupta provided his friend and business associate Rajaratnam with confidential information learned during board calls and in other communications and meetings relating to his official duties as a director of Goldman and P&G. Rajaratnam used the inside information to trade on behalf of certain Galleon funds, or shared the information with others at his firm who caused other Galleon funds to trade on it ahead of public announcements by the firms. During this period, Gupta had a variety of business dealings with Rajaratnam and stood to benefit from his relationship with him. According to the SEC’s complaint, Gupta while serving as a Goldman board member tipped Rajaratnam about Berkshire Hathaway’s $5 billion investment in Goldman and Goldman’s upcoming public equity offering before that information was publicly announced on Sept. 23, 2008. Based on this inside information, Rajaratnam arranged for Galleon funds to purchase more than 215,000 Goldman shares. Rajaratnam later informed another participant in the scheme that he received the tip on which he traded only minutes before market close. Rajaratnam caused the Galleon funds to liquidate their Goldman holdings the following day after the information became public, making illicit profits of more than $800,000. The SEC also alleges that Gupta tipped Rajaratnam to inside information about Goldman’s positive financial results for the second quarter of 2008. There was a flurry of calls between Gupta and Rajaratnam on the evening of June 10, 2008, after Gupta learned from Goldman CEO Lloyd Blankfein of the firm’s quarterly earnings results, which were significantly better than analyst consensus estimates. The following morning, minutes after the markets opened, Rajaratnam caused Galleon funds to start purchasing Goldman securities including 7,350 out-of-the-money Goldman call options and 350,000 Goldman shares. Rajaratnam liquidated these positions on or around June 17 – the date when Goldman announced its quarterly earnings – generating illicit profits of more than $18.5 million for the Galleon funds. The SEC’s complaint further alleges that Gupta tipped Rajaratnam with confidential information that Gupta learned during an Oct. 23, 2008, board posting call about Goldman’s impending negative financial results for the fourth quarter of 2008. Mere seconds after the board call ended, Gupta tipped Rajaratnam, who then arranged for certain Galleon funds to begin selling their Goldman holdings shortly after the financial markets opened the following day until the funds finished selling off their holdings, which had consisted of more than 150,000 shares. In discussing trading and market information that day with another participant in the insider trading scheme, Rajaratnam explained that while Wall Street expected Goldman to earn $2.50 per share, he heard the prior day from a Goldman board member that the company was actually going to lose $2 per share. As a result of Rajaratnam’s trades based on inside information provided by Gupta, the Galleon funds avoided losses of more than $3.6 million. The SEC’s complaint additionally alleges that Gupta illegally disclosed to Rajaratnam inside information about P&G’s financial results for the quarter ending December 2008. Gupta participated in a telephonic meeting of P&G’s Audit Committee at 9 a.m. on Jan. 29, 2009, to discuss the planned release of P&G’s quarterly earnings the next day. A draft of the earnings release, which had been mailed to Gupta and the other committee members two days before the meeting, indicated that P&G’s expected organic sales would be less than previously publicly predicted. Gupta called Rajaratnam in the early afternoon on January 29, and Rajaratnam shortly afterwards informed another participant in the insider trading scheme that he had learned from a contact on P&G’s board that the company’s organic sales growth would be lower than expected. Galleon funds then sold short approximately 180,000 P&G shares, making illicit profits of more than $570,000. The SEC’s complaint charges each of the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge on a joint and several basis their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties. The complaint also seeks to permanently prohibit Gupta from acting as an officer or director of any registered public company, and to permanently enjoin him from associating with any broker, dealer or investment adviser. The SEC previously instituted an administrative proceeding against Gupta for the conduct alleged in today’s enforcement action, but later dismissed those proceedings while reserving the right to file an action against Gupta in federal court. The SEC previously charged Rajaratnam and others in the widespread insider trading investigation centering on Galleon, the multi-billion dollar New York hedge fund complex founded and controlled by Rajaratnam. The SEC has now charged 29 defendants in its Galleon-related enforcement actions, which have alleged widespread and repeated insider trading at numerous hedge funds, including Galleon, and by other professional traders and corporate insiders in the securities of more than 15 companies. The insider trading generated illicit profits totaling more than $90 million.”.

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.”