SEC ALLEGES PENNY STOCK PUBLICATION MADE MATERIAL MISREPRESENTATIONS AND OMISSIONS

The following excerpt is from the SEC website: December 12, 2011 Securities and Exchange Commission v. Geoffrey J. Eiten and National Financial Communications Corp., 1:11-CV-12185 (District of Massachusetts, Complaint filed December 12, 2011) SEC CHARGES MASSACHUSETTS-BASED PENNY STOCK PROMOTER WITH MAKING FRAUDULENT STATEMENTS The Securities and Exchange Commission, in an action filed today in federal court in Boston, charged Massachusetts resident Geoffrey J. Eiten and his company National Financial Communications Corp. (“NFC”) for making material misrepresentations and omissions in a penny stock publication they issued. The Commission’s complaint alleges that Eiten and NFC publish a penny stock promotion piece called the “OTC Special Situations Reports.” According to the complaint, Eiten, self-proclaimed “America’s Leading Micro-Cap Stock Picker,” promotes penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleges that Eiten and NFC have made misrepresentations in these reports about the penny stock companies they are promoting. For example, the Commission’s complaint alleges that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission’s complaint alleges that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies’ financial condition, future revenue projections, intellectual property rights, and Eiten’s interaction with company management as a basis for his statements. According to the complaint, Eiten and NFC were hired to issue the above reports. Eiten and NFC used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true. The Commission’s complaint charges Eiten and NFC with violating the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder). In its complaint, the Commission seeks permanent injunctions, disgorgement plus prejudgment interest, civil penalties, and penny stock bars pursuant to Section 21(d)(6) of the Exchange Act against the defendants."

SEC CHIEF ACCOUNTANT BESWICK SPEAKS TO AICPA

The following excerpt is from the SEC website:

" Paul A. Beswick Deputy Chief Accountant U.S. Securities and Exchange Commission Washington, D.C. December 5, 2011 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect those of the Commission or of the author’s colleagues upon the staff of the Commission.. Introduction I would like to thank the AICPA for providing me with the opportunity to speak at the AICPA National Conference on Current SEC and PCAOB Developments.

 Today I would like to spend time talking about two topics, one of which you are probably all expecting and the other that might be a bit of a surprise. IFRS Work Plan Let me first start with IFRS. When thinking about what to say in regards to IFRS, I stuck to one overall guiding principle, no new models or new words. The staff has nearly completed our efforts on the Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers (“2010 Work Plan”). As Jim mentioned earlier this morning, the staff published two reports on November 16, 2011 on the comparison of U.S. GAAP to IFRS and an analysis of IFRS in practice. In terms of existing open items, one of the items the Commission discussed in its Statement in Support of Convergence and Global Accounting (“2010 Statement”) regarding readiness for a determination regarding incorporating IFRS into the financial reporting system for U.S. issuers, and which was mentioned earlier, was the satisfactory completion of the convergence projects between the FASB and the IASB. In addition, the staff is continuing to evaluate with respect to the second area of the 2010 Work Plan the governance of the IASB. As noted in the staff’s 2010 Progress Report on the Work Plan, the Monitoring Board and the Trustees are in the final stages of separate but complementary reviews of governance and strategy for the Foundation.

Enhancements under the two reviews should provide for a clarified and enhanced governance structure supporting the IASB as an independent yet accountable standard-setting body. The Monitoring Board and the Trustees intend to publish their package of governance enhancements during December. These are two very important initiatives yet to be completed that the staff expects to inform our thinking around this area of the Work Plan. We are in the process of drafting a final report that summarizes all of our efforts to complete the 2010 Work Plan. The staff is drafting the report to provide our insights on what we have learned during the last almost two years of work. I would hope that the staff could get the final report out as soon as practicable in 2012. 2011 May Staff Paper Earlier, Jim Kroeker noted the feedback received on the May staff paper, Exploring a Possible Method of Incorporation (May Staff Paper). The goal of publishing the May Staff Paper was to foster greater discussion about what may be practicable from the staff’s perspective in terms of incorporating IFRS into the U.S. However, the staff thinking continues to evolve based on the very helpful feedback we were provided, and I thought I would spend some time discussing what we learned from the May Staff Paper and from some of our other outreach. Today I intend to focus on some of the more significant points, but note that the staff intends to include a more comprehensive discussion in the final staff report. The staff received a lot of well thought out and helpful feedback to the May Staff Paper from a wide range of interested parties. While it is impossible to say we received unanimous thinking in the comment letters, there were three themes that I think are important to highlight. However, what I say here could not begin to capture the rich discussion in the letters. They are all on our website. I encourage you to review them yourself. First, and most basic, was strong support for the objective of a single set of high-quality globally accepted accounting standards. The second was support for the general premise of an endorsement mechanism that was described in the May Staff Paper. Third, further progress should be made on the Boards’ joint standard setting projects before IFRS is incorporated into the U.S. In elaborating on an endorsement mechanism, a major theme I took away from the comments is the notion that the FASB has an important role to play and should act as the “endorser” of newly issued IFRS standards on a standard-by-standard basis. An often-provided rationale was that the FASB is best positioned to act in the interest of U.S. investors and the U.S. capital markets. Commenters felt that the FASB’s expertise and long track record of producing high-quality accounting standards would be a positive influence on the quality of IFRS. Some of the additional comments for maintaining a strong FASB included: Help preserve regulatory authority of the Commission and address issues with U.S. GAAP being embedded in thousands of pages of U.S. laws and regulatory text; Ability of the FASB to provide technical assistance to the IASB; Help ensure a robust due process by the IASB; and Assist the U.S. capital markets in the implementation and interpretations of IASB standards. An area where there was a spectrum of views was what threshold the FASB might use when considering whether to endorse an IASB standard. At the risk of using a general characterization, the feedback in this area to me had a little bit of a “Goldilocks” feel to it. Some felt there should be a “higher” threshold than that posited in the paper (that is, that the FASB should have less discretion in considering whether to endorse a standard). Some felt there should be a “lower” threshold, and some felt it was just right. Many of those who supported a “lower” threshold argued that the FASB should be given the tools to modify an IASB standard to the U.S. regulatory environment. Those in the “just right” or “higher” threshold camp noted that the greatest benefit to incorporating IFRS would be muted if the FASB frequently didn’t endorse an IASB standard. There was also a fair amount of comment that it would be important for the Commission to articulate its expectations in this area. So far I have discussed the themes related to those that supported taking a next step towards the objective of a single set of globally accepted accounting standards. This is not to say that the commenters were unanimous on this issue. There certainly were strong voices of those who were not in favor, stating among other things: that the case has not been made for mandatory incorporation, that the cost of incorporation is expected to be significant with no commensurate benefit, either to an individual company and or the U.S. markets, and concerns about the quality of existing IFRS standards. I think these will be important issues the staff will need to consider. Final Thoughts Before turning to my next subject I thought I would leave you with two final thoughts regarding the Work Plan. First, one of the questions we frequently are asked relates to our ability to apply IFRS standards. Having worked in OCA for the last four years, I can tell you that we are frequently asked our views on the application of IFRS in individual fact patterns. I believe we have been able to manage these application questions, including determining what should be the appropriate accounting under IFRS. I also believe that the U.S. involvement in the application of IFRS, as noted by the Chairman of the IASB in a recent speech, would provide a positive impact on the consistent implementation of IFRS globally. One final point I would like to make relates to the objective of a single set of globally accepted accounting standards. Commenters and others have posed the question: If the FASB and the Commission, or for that matter any jurisdiction, retains the ability to deviate from an IASB standard, can we ever truly achieve a single set of high-quality global accounting standards? I first must note as we have in many of our reports under the Work Plan, jurisdictional approaches to IFRS already are diverse, and rarely are direct to IFRS without an incorporation mechanism. As to the U.S., we know there are going to be challenging issues to resolve under any incorporation decision. The issues of LIFO and contingencies immediately come to mind. But even with all of this, I would offer up one final thought for your consideration: Would it better to be 90% converged and understand the differences, or should the objective be abandoned? Stay tuned. We will have a lot more to say on this subject in coming months. Valuation Profession Now after that light topic, let me spend a couple minutes discussing my views on the current state of the valuation profession in the U.S. Last year, you heard Jim Kroeker speak to the importance of and the tenets to building and maintaining public trust in the accounting profession. Today, I am here to advocate for the building of public trust in a profession that is increasingly intertwined with our own; that is the valuation profession. Recent events and developments, chief among them, the broadening application of fair value and fair value-based measures in US GAAP in recent years and the 2008 financial crisis, have cast the spotlight on valuation professionals. The financial reporting process is a collaborative process that relies on many participants with important roles and responsibilities. For valuation professionals, this means the analyses should be based on methodologies that have strong conceptual merit, supported by consistent and supportable assumptions, and are in conformity with the requirements of the relevant accounting standards. These objectives should be central to any analysis, regardless of the role of the valuator. Valuation professionals wear two primary hats within the financial reporting process. They can be management’s specialist where they assist the company in the estimation of values. Or they could be the auditor’s specialist in the evaluation of management’s models, assumptions, and/or value conclusions. As a regulator, we have reviewed analyses under both roles. In many instances, we’ve seen analyses meet the objectives I’ve described, but we’ve also seen our share of those that do not measure up. Valuation professionals stand apart from other significant contributors in the financial reporting process for another reason, their lack of a unified identity. We accountants, for example, have a clearly defined professional identity. At last count, valuation professionals in the US can choose among five business valuation credentials available from four different organizations,i each with its own set of criteria for attainment, yet none of which is actually required to count oneself amongst the ranks of the profession. There are also non-credentialing organizations that seek to advance the interests of the valuation profession.ii While the multiplicity of credentials in the profession is not a problem in and of itself, risks may exist. Risks created by the differences in valuation credentials that exist today range from the seemingly innocuous concerns of market confusion and an identity void for the profession to the more overt concerns of objectivity of the valuator and analytical inconsistency. The fragmented nature of the profession creates an environment where expectation gaps can exist between valuators, management, and auditors, as well as standard setters and regulators. While much of this may be addressed during a particular engagement, this case-by-case approach has the potential to be an inefficient and costly solution to establish a baseline level of understanding of the analyses. Sometimes, expectation gaps can have broader consequences than just within an engagement, as we have seen in the use of third party pricing sources to measure the fair value of certain financial instruments. You will hear more about this from others at this conference. I think one potential solution to consider is whether there should be, similar to other professions, a single set of qualifications with respect to education level and work experience, a continuing education curriculum, standards of practice and ethics, and a code of conduct. One could also contemplate whether a comprehensive inspection program and a fair disciplinary mechanism should be established to encourage proper behavior and enforce the rules of the profession in the public interest. Closing Once again thank you for the opportunity to speak this morning. We will have time for questions later in the day and I hope you enjoy the rest of the conference. i AICPA grants the Accredited in Business Valuation (ABV) credential; American Society of Appraisers confers the Accredited Senior Appraiser (ASA); Institute of Business Appraisers issues the Certified Business Appraiser (CBA); and National Association of Certified Valuation Analysts awards the Certified Valuation Analyst (CVA) and Accredited Valuation Analyst (AVA). ii For example, The Appraisal Foundation, a non-profit organization established by a number of US valuation organizations in 1987, issues the Uniform Standards of Professional Appraisal Practice (USPAP), set qualification criteria for state licensing, certification, and recertification of real property appraisers, and issues guidance on selected technical topics. The enforcement of the requirements promulgated by The Appraisal Foundation is relegated to the various state boards.”

FORMER PRUDENTIAL SECURITIES REPRESENTATIVE FOUND LIABLE FOR DECEPTIVE PRACTICES

The following excerpt is from the SEC website:

December 16, 2011
“The Securities and Exchange Commission announced today that on December 14, 2011, a federal jury returned a verdict in the SEC's favor on securities fraud charges against Frederick J. O'Meally of Bay Shore, New York, a former registered representative of broker-dealer Prudential Securities Inc. alleged to have used deceptive practices to evade blocks on his trading by mutual fund companies. The jury found O'Meally liable for violations of Sections 17(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act"). The verdict against O'Meally followed a five-week trial in New York City, NY before the Honorable Laura Taylor Swain, United States District Court Judge for the Southern District of New York.

The Commission filed its Complaint on August 28, 2006 against four registered representatives formerly employed by Prudential Securities, Inc. The Complaint alleged that, between 2001 and 2003, certain mutual fund companies detected market timing activity by the Defendants and attempted to block the Defendants and their hedge fund customers from further trading in their funds. The Complaint further alleged that the Defendants used fraudulent and deceptive trading practices to conceal their and their customers' identities to evade these blocks. Cases against the three other defendants had been resolved previously by settlement.
The district court will hear further post-trial arguments in January 2012, and may determine the appropriate sanctions and remedies against O'Meally at a later date. In addition, the jury found that O'Meally had not violated Section 10(b) of the Exchange Act and Section 17(a)(1) of the Securities Act.
For further information about the Commission's action in SEC v. O'Meally, et al., see Litigation Release No. 21882 (March 10, 2011) [settlement with Jason N. Ginder]; Litigation Release No. 20910 (February 25, 2009) [settlement with Michael L. Silver and Brian P. Corbett]; In the Matter of Michael L. Silver, Release No. 34-59639 (March 27, 2009); In the Matter of Brian P. Corbett, Release No. 34-59640 (March 27, 2009); Exchange Act Release No. 54371 (August 28, 2006) [settlement with Prudential Equity Group, LLC, formerly known as Prudential Securities, Inc.]; Litigation Release No. 19813 (August 26, 2006) [complaint against O'Meally, et al. filed].”

SEC FREEZES ASSETS OF FOUR CHINESE CITIZENS CHARGED WITH INSIDER TRADING

The following excerpt is from the SEC website: “On December 5, 2011, the Securities and Exchange Commission charged four Chinese citizens and a Chinese-based entity with insider trading and obtained an emergency court order to freeze their assets after they reaped more than $2.7 million in profits by trading in advance of a recent public announcement of a merger agreement between London-based Pearson plc and Beijing-based Global Education and Technology Group, Ltd. The SEC’s complaint names Sha Chen, Song Li, Lili Wang, Zhi Yao, All Know Holdings Ltd., and one or more unknown purchasers of Global Education stock as defendants. The SEC alleges that they purchased American Depository Shares (ADS) of Global Education in the two weeks leading up to a November 21 public announcement of a planned merger between the two education companies. Some of the defendants’ brokerage accounts were dormant until they bet heavily on Global Education shares, and some of the purchases made either equaled or exceeded the stated annual income of that trader. After the agreement was announced, they immediately began selling some of their Global Education shares. Their illicit gains totaled more than $2.7 million. According to the SEC’s complaint, filed in the U.S. District Court in Chicago, Pearson and Global Education each announced before trading began on November 21 that Pearson agreed to acquire all of Global Education’s outstanding stock for $294 million ($11.006 per share traded in the U.S.). Global Education’s stock price increased 97 percent that day, from $5.37 to $10.60. The SEC alleges that the defendants made their purchases of Global Education’s shares while in possession of material, non-public information about the merger. A Global Education co-founder apparently tipped Wang and possibly others about the potential acquisition. Wang then transferred new funds into her previously dormant brokerage account and bought 28,000 Global Education shares. The others also engaged in similarly suspicious trading in Global Education stock, which was typically thin. On November 18, the last trading day before the acquisition announcement, their purchases accounted for more than 35 percent of the entire day’s trading volume for the company’s shares, which trade on the NASDAQ. The SEC alleges that the defendants each violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties. The emergency court order that the SEC obtained on December 5 on an ex parte basis freezes approximately $2.7 million of defendants’ assets held in U.S. brokerage accounts and, among other things, grants expedited discovery and prohibits the defendants from destroying evidence. The investigation is continuing.

SEC MAKES COMMENT ON CITIGROUP CASE

The following excerpt is from the SEC website:

“Washington, D.C., Dec. 15, 2011 — The Securities and Exchange Commission’s Director of the Division of Enforcement, Robert Khuzami, today made the following statement on the Citigroup case:
Last month, a federal district court declined to approve a consent judgment because, in its view, the underlying allegations were ‘unsupported by any proven or acknowledged facts.’ As a result, the court rejected a $285 million settlement between the SEC and Citigroup that reasonably reflected the relief the SEC would likely have obtained if it prevailed at trial.
We believe the district court committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits. For this reason, today we filed papers seeking review of the decision in the U.S. Court of Appeals for the Second Circuit.
We believe the court was incorrect in requiring an admission of facts — or a trial — as a condition of approving a proposed consent judgment, particularly where the agency provided the court with information laying out the reasoned basis for its conclusions. Indeed, in the case against Citigroup, the SEC filed suit after a thorough investigation, the findings of which were described in extensive detail in a 21-page complaint.
The court’s new standard is at odds with decades of court decisions that have upheld similar settlements by federal and state agencies across the country. In fact, courts have routinely approved settlements in which a defendant does not admit or even expressly denies liability, exactly because of the benefits that settlements provide.
In cases such as this, a settlement puts money back in the pockets of harmed investors without years of courtroom delay and without the twin risks of losing at trial or winning but recovering less than the settlement amount - risks that always exist no matter how strong the evidence is in a particular case. Based on a careful balancing of these risks and benefits, settling on favorable terms even without an admission serves investors, including investors victimized by other frauds. That is due to the fact that other frauds might never be investigated or be investigated more slowly because limited agency resources are tied up in litigating a case that could have been resolved.
In contrast, the new standard adopted by the court could in practical terms press the SEC to trial in many more instances, likely resulting in fewer cases overall and less money being returned to investors.
To be clear, we are fully prepared to refuse to settle and proceed to trial when proposed settlements fail to achieve the right outcome for investors. For example, in the cases that the SEC identifies as core financial crisis cases, we filed unsettled actions against 40 of the 55 (70 percent) of the individuals charged — including the action filed against Brian Stoker in this matter. Similarly, we filed unsettled actions against 11 of the 26 (42 percent) of the entities we charged — eight of which we did not litigate against because they were bankrupt, defunct or no longer operating.
In deciding whether to settle, the SEC considers, among other things, limitations under the securities laws. In a case like Citigroup, the applicable statute does not entitle the SEC to recover the amount lost by investors. Instead, in addition to recovering a defendant’s ill-gotten gains, the statute allows a monetary penalty only up to the amount of a defendant’s gain.
The $285 million obtained from Citigroup under the proposed settlement, while less than investor losses, represents most of the total monetary recovery that the SEC itself could have sought at trial. An SEC settlement does not limit the ability of injured investors to pursue claims for additional relief.
Moreover, while the court alluded to Citigroup’s size, the law does not permit the Commission to seek penalties based upon a defendant’s wealth.”

SEC CHARGES FORMER EXECUTIVES AT FANNIE MAE AND FREDDIE MAC WITH SECUITIES FRAUD

The following excerpt is from the Securities and Exchange Commission website:

“Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission's litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.

Three former Fannie Mae executives - former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae's Single Family Mortgage business, Thomas A. Lund - were named in the SEC's complaint filed in U.S. District Court for the Southern District of New York.
The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."

The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others - between March 2007 and August 2008.

The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.
Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.

The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.

In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.

The SEC's complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the "Securities Act"); and that Mudd aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.
The SEC's complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.
The SEC's investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC's litigation efforts.”