SEC SETTLES FICTITIOUS SALES AND SHIPPING DOCUMENTS FRAUD CASE

The following excerpt is from the SEC website:

“On January 30, 2012, the Securities and Exchange Commission filed settled charges against Robert Chiu for aiding and abetting the fraudulent revenue recognition scheme at Syntax-Brillian Corporation (“Syntax”), a developer of high-definition LCD televisions. In addition, on January 12, 2012, Judge Susan R. Bolton of the United States District Court for the District of Arizona entered a default judgment against Thomas Chow, formerly the Chief Procurement Officer and a Director of Syntax. The Court permanently enjoined Chow from future violations of the antifraud, reporting, books and records, internal controls, and misrepresentation to auditor provisions of the federal securities laws, and ordered him to pay disgorgement of $10,370,317.16, prejudgment interest of $2,567,483.64, an insider trading penalty of $30,849,951.48, and a civil penalty of $4,680,000.00 for his role in the financial fraud scheme. Chow was also permanently barred from serving as an officer or director of a publicly traded company.

As alleged in the SEC’s Complaint against Chow, from at least June 2006 through April 2008, Chow and other members of Syntax’s senior management engaged in a complex scheme to overstate Syntax’s revenues and earnings and artificially inflate its stock price. As a result, Syntax reported false and misleading financial statements beginning in the fiscal year ended June 30, 2006, through the fiscal first quarter ended September 30, 2007. The scheme included the creation of fictitious sales and shipping documents and coordinating the circular transfer of funds among and between Syntax, its primary manufacturer in Taiwan, and its purported distributor in Hong Kong.

In its Complaint against Chiu, the SEC alleged that he served as an audit and relationship partner for Syntax’s outside auditor. Specifically, the SEC alleged that Chiu instructed Syntax executives on how to create a backdated distribution agreement to assist them in improperly recognizing revenue in Syntax’s fourth quarter ended June 30, 2006. Additionally, the SEC alleged that after his firm was replaced as Syntax’s auditor, Chiu participated in an engagement for Syntax’s purported distributor, where he learned that it was treating the Syntax sales as agency sales. This treatment was in contrast to Syntax’s treatment of the same sales. Despite his knowledge, Chiu failed to object to his accounting firm’s issuance of multiple consents to the reissuance of its audit opinion to Syntax’s Form 10-K for fiscal year 2007.

Without admitting or denying the allegations in the SEC’s complaint, Chiu consented to the entry of a final judgment permanently enjoining him from aiding and abetting violations of Sections 10(b), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1, and 13b2-2 thereunder. Chiu also consented to the institution of settled administrative proceedings pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice suspending him from appearing or practicing before the Commission as an accountant, with the right to reapply after five years.
The settlement with Chiu takes into account his substantial cooperation with the Commission’s investigation.

The Commission has previously obtained permanent injunctions against defendants James Li, Roger Kao, Christopher Liu, and Wayne Pratt, and collected total disgorgement of $88,000, prejudgment interest of $17,000, and civil penalties of $290,000. In addition, the Commission obtained officer and director bars against Li, Liu, and Pratt, as well as the entry of an administrative order suspending Pratt from appearing or practicing before the Commission as an accountant with the right to reapply after five years.”

SEC REMARKS ON CHARGES BROUGHT AGAINST CREDIT SUISSE EXECUTIVES

REMARKS BY ROBERT KHUZAMI,  DIRECTOR OF THE SEC DIVISION OF ENFORCEMENT

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

February 1, 2012
“For the past three years, the SEC has been aggressively pursuing fraudulent conduct related to the financial crisis. We have brought actions against more than 90 individuals and entities, with more than half of them senior officers such as CEOs and CFOs.

Today, we add four more people to the list of individuals that the SEC has charged for conduct stemming from the financial crisis including the former Global Head of Structured Credit Trading for Credit Suisse, Kareem Serageldin.

Serageldin was a high-ranking member of Credit Suisse’s investment bank. He played a critical role in overseeing the bank’s activities in the structuring, marketing and selling of mortgage-backed securities.

And, in the end, he took advantage of his privileged position within the bank to consistently record fictitious profits on his books, or to cover up losses between the fall of 2007 and early 2008.

The Commission’s case today alleges that these defendants – all highly experienced, well-seasoned investment bankers and traders – corrupted the process of recording the fair value of billions of dollars of predominantly residential mortgage-backed securities owned by Credit Suisse.

Known as RMBS, these securities are created by pooling together large groups of mortgages, which can then be marketed and sold to investors or kept in a firm’s trading books.

While these products were complex, the rules were quite simple: tell the truth about the fair value of the securities that you have on your books, a rule that holds true in good markets and in bad.

Indeed, when banks report to the public about their financial health, investors – and the law – demand that the information is accurate.
In this case, defendants spent countless hours manipulating the prices of these RMBS securities to avoid having to disclose a significant decline in value, while trying to avoid marking the bonds in such a way that their scheme would be detected by the bank.

The Complaint reads like a “Greatest Hits” list of mismarking “how-tos.” For example, the defendants:
Used profit and loss targets to reverse engineer the marks on the bonds, rather than basing those marks on the true market price.

Manually overrode the proper marks when they showed more losses than the defendants wanted to take.
Used a friendly broker-dealer to conceal the fraud by sending that friendly broker-dealer a spreadsheet with Credit Suisse’s marks, and rather than testing those marks, the friendly broker-dealer in effect “laundered” those marks by returning them back to Credit Suisse untested – what was, in effect, a “round trip.”
As a result of defendants’ misconduct, Credit Suisse provided investors with information that painted a rosy and ultimately false picture of the fair value of its subprime exposure at a time when other major banks, one after another, had announced significant losses on their subprime exposure.

The evidence, as laid out in our complaint, is based on e-mails and recorded phone conversations, which show these defendants engaged in multiple acts of deception – acts that sought to obscure the devastating decline in the fair value of billions of dollars of subprime mortgage-backed securities they controlled.

Because Credit Suisse taped the phone lines of some of its trading personnel, our complaint is built around real words uttered by real people in the midst of a fraud.
What’s more, these defendants were incredibly knowledgeable about the markets and financial instruments that they repeatedly mispriced.
Yet, at every turn, they disregarded objective market data so that they could, in Serageldin’s own words, send a “message” to the senior-most management of Credit Suisse that they were generating profits.
I want to add that three of the defendants we have charged cooperated in the government’s investigation.

Before I turn it over to Preet Bharara, I want to thank Preet and Janice Fedarcyk, Assistant Director-in-Charge of the FBI’s New York office, and their teams from the U.S. Attorney’s Office and the FBI – in particular Assistant U.S. Attorney Eugene Ingoglia and Virginia Chavez Romano as well as Special Agent Thomas McGuire. Like always, their work was extraordinary and professional.

Lastly, I want to recognize the dedication of the SEC staff that conducted this investigation. Those individuals – who reviewed millions of pages of documents, highly technical trading spreadsheets, and hundreds of hours of recorded calls – are:
Michael Osnato
Michael Paley
Kenneth Gottlieb
Howard Fischer
Kristine Zaleskas
Michael Fioribello”

LOS VEGAS STOCK PROMOTER CONVICTED OF SECURITIES FRAUD

The following excerpt is from the Department of Justice website:

February 1, 2012
“WASHINGTON – The principal of a Costa Rican brokerage firm and a Las Vegas stock promoter were each convicted yesterday in the Southern District of Florida of all charges for their roles in a stock manipulation scheme that defrauded investors, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.

Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering.  Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.

The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.

Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme.  Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects.   According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.

According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors.  The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public.  The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida.  The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech.  The cash was delivered to Miami via a private jet from an airport outside New York.

The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners.  The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.
At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy.  Montgomery faces a sentence of up to five years for the conspiracy to defraud count.  The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.      
         
Stock promoters Weidenbaum, Barham and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud.  They also will be sentenced by Judge Goldberg on May 9, 2012.  Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud.

The case was investigated by the FBI’s Washington Field Office and the USPIS.  The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division.  The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case.  The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation.  The SEC has a pending parallel civil case.  The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
This prosecution is part of efforts under way by the Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.”

SEC AGREES TO A SETTLEMENT IN ALLEGED BOOK-COOKING CASE AGAINST BRITISH BASED FIRM

The following excerpt is from the SEC website:

January 30, 2012
“The Securities and Exchange Commission today announced four enforcement actions arising from an alleged financial fraud spanning several years at a British subsidiary of the NYSE-listed Symmetry Medical, Inc. (“Symmetry”).

First, the Commission announced today that it has filed and, subject to Court approval, simultaneously settled charges against Richard J. Senior, Matthew Bell, Lynne Norman and Shaun P. Whiteley arising from the alleged financial fraud. According to the Commission’s Complaint, the fraud was orchestrated and carried out by senior executives and accounting staff of the Sheffield, England-based Symmetry Medical Sheffield LTD, f/k/a Thornton Precision Components, Limited (hereinafter “TPC”), particularly by Senior, Bell, Norman and Whiteley, who were, respectively, Symmetry’s VP for European Operations, TPC’s Finance Director, TPC’s Controller and a TPC Management Accountant. According to the Complaint, the fraud involved the systematic understatement of expenses and overstatement of assets and revenues, and materially distorted the financial statements of the Indiana-headquartered Symmetry, into which TPC’s financials were consolidated, for a period running from Symmetry’s December 2004 initial public offering through its second fiscal quarter of 2007. The Complaint further alleges that during the fraud, Senior, Bell and Norman made false certifications as to the accuracy of the financial information reported to Symmetry by TPC, and lied to TPC’s outside auditors. Finally, the Complaint alleges that Senior and Bell sold Symmetry stock during the fraud, at prices each knew or recklessly disregarded were inflated by the fraud at TPC.

According to the Complaint, by their conduct, Senior, Bell, Norman and Whiteley violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted Symmetry’s violation of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B), and Rules 12b-20, 13a-1 and 13a-13 thereunder; Senior and Bell also violated Section 17(a) of the Securities Act of 1933; and Senior, Bell and Norman also violated Exchange Act Rule 13b2-2. The four defendants’ signed Consents—which are subject to approval by the Court—provide that, without admitting or denying the Commission’s allegations, defendants Senior, Bell and Norman would be barred from serving as an officer or director of any public company. (Additionally, Bell, Norman and Whiteley each consented to be permanently barred, in follow-on administrative proceedings, from appearing or practicing before the Commission as accountants.) The final judgment to which Bell consented further orders that he is liable for disgorgement of $136,209 together with $50,728 in prejudgment interest thereon, but, based on his sworn financial statements and supporting documentation, waives payment of disgorgement and prejudgment interest; and the judgment to which Senior consented defers resolution of the monetary portion of his case pending the completion of asset discovery, with which Senior would be ordered to cooperate. Each defendant would also be permanently enjoined against future violations of the statutes and rules each is alleged to have violated.

The Commission also announced that it has filed, and, subject to Court approval, simultaneously settled, a civil action against Symmetry’s former CEO, Brian S. Moore, seeking reimbursement for bonuses and other incentive-based and equity-based compensation pursuant Section 304 of the Sarbanes-Oxley Act of 2002. The Commission’s Complaint alleges that Symmetry was required to restate its annual financial statements for 2005 and 2006, as well as other reporting periods, as a result of misconduct in the reporting of TPC’s financials. The Complaint further alleges that Moore received from Symmetry bonuses and incentive-based and equity-based compensation, and realized profits from the sale of Symmetry stock, during the 12-month periods following the restated financials, but has made no reimbursement thereof. The Complaint does not allege that Moore engaged in the fraud. Moore’s signed Consent—which is subject to approval by the Court—provides that, without admitting or denying the Commission’s allegations, Moore would agree to issuance of a Final Judgment ordering him make reimbursement of $450,000 to Symmetry.

The Commission further announced that, separately, it has instituted and simultaneously settled administrative proceedings against two Associate Chartered Accountants in the United Kingdom, Christopher J. Kelly and Margaret Hebb née Whyte, who were the former audit partner and audit manager, respectively, on Ernst & Young UK LLP’s audits of TPC for the 2004 through 2006 fiscal years (in the case of Kelly) and for the 2005 and 2006 fiscal years (in the case of Hebb). Kelly and Hebb consented to issuance of the Commission’s Order and the sanctions it imposed, without admitting or denying the Order’s findings. The Order found that both Kelly and Hebb engaged in improper professional conduct by, among other things, failing to properly audit TPC’s accounts receivable balances and inventory. Based on these findings, the Order suspended both Kelly and Hebb from appearing or practicing before the Commission as accountants, with the opportunity to seek reinstatement after two years. See Matter of Christopher J. Kelly, ACA and Margaret Hebb, ACA, Admin. Proc. File No. 3-____ (Jan. 30, 2012)

Finally, the Commission further announced that, separately, it has instituted and simultaneously settled administrative proceedings against Symmetry and its CFO, Fred L. Hite. Symmetry and Hite consented to issuance of the Commission’s Order and the sanctions it imposed, without admitting or denying the Order’s findings. With respect to Symmetry, the Order found that, as a result of the fraud at TPC, Symmetry (i) filed periodic reports with the Commission that included materially false and misleading financial statements in violation of Exchange Act Section 13(a) and Rules 12b-20, 13a-1 and 13a-13 and (ii) maintained materially inaccurate books, records and accounts in violation of Exchange Act Section 13(b)(2)(a); and that Symmetry also failed to devise and maintain effective internal accounting controls in violation of Exchange Act Section 13(b)(2)(B). With respect to Hite, the Order found that by failing to provide an internal audit status report concerning TPC to Symmetry’s Audit Committee in July 2006, Hite violated Exchange Act Section 13(b)(5) and was a cause of Symmetry’s violation of Exchange Act Section 13(b)(2)(B); and that by failing to reimburse Symmetry for bonuses, incentive- and equity-based compensation, and Symmetry stock-sale proceeds he received during periods embraced by Symmetry’s restatement, Hite violated Section 304 of the Sarbanes-Oxley Act. Based on the foregoing findings, the Commission ordered Symmetry and Hite to cease-and-desist from committing or causing future violations of the relevant provisions, and ordered Hite to pay a $25,000 penalty and make reimbursement of $185,000 to Symmetry. “

SEC BRINGS CHARGES AGAINST 4 INDIVIDUALS IN ALLEGED $3 BILLION SUB-PRIME BOND SCHEME

The following excerpt is from an e-mail sent out by the Securities and Exchange Commission

"Washington, D.C., Feb 1, 2012 – The Securities and Exchange Commission today charged four former veteran investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC alleges that Credit Suisse’s former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs along with two mortgage bond traders deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books, and send a message to senior management about their group’s profitability. The SEC alleges that the mispricing scheme was driven in part by these investment bankers’ desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse’s investment banking unit.

“The stunning scale of the illegal mismarking in this case was surpassed only by the greed of the senior bankers behind the scheme,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “At precisely the moment investors and market participants were urgently seeking accurate information about financial institutions’ exposure to the subprime market, the senior bankers falsely and selfishly inflated the value of more than $3 billion in asset-backed securities in order to protect their bonuses and, in one case, protect a highly coveted promotion.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Serageldin oversaw a significant portion of Credit Suisse’s structured products and mortgage-related businesses. The traders reported to Higgs and Serageldin. As the subprime credit crisis accelerated in late 2007 and 2008, Serageldin frequently communicated to Higgs the specific profit & loss (P&L) outcome he wanted. Higgs in turn directed the traders to mark the book in a manner that would achieve the desired P&L. However, under the relevant accounting principles and Credit Suisse policy, the group was required to record the prices of these bonds to accurately reflect their fair value. Proper pricing would have reflected that Credit Suisse was incurring significant losses as the subprime market collapsed.

The SEC alleges that the scheme reached its peak at the end of 2007, when the group recorded falsely overstated year-end prices for the subprime bonds. Just days later in a recorded call, Serageldin and Higgs acknowledged that the year-end prices were too high and expressed a concern that risk personnel at Credit Suisse would “spot” their mispricing. Despite acknowledging that the subprime bonds were mispriced, Serageldin approved his group’s year-end results without making any effort to correct the prices. When the mispricing was eventually detected in February 2008, Credit Suisse disclosed $2.65 billion in additional subprime-related losses related to the investment bankers’ misconduct.

The SEC’s complaint alleges that Serageldin, Higgs, and the traders Faisal Siddiqui and Salmaan Siddiqui violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted pursuant to Section 20(e) of the Exchange Act violations of Sections 10(b) and 13(a) and 13(b)(2) of the Exchange Act and Rules 10b-5 12b-20 and 13a-16 thereunder.

Under the SEC’s Statement on the Relationship of Cooperation to Agency Enforcement Decisions (Seaboard Report) and the Enforcement Division’s Cooperation Initiative, entities can benefit from acting swiftly to detect, report, and remediate misconduct and cooperate robustly with the SEC’s investigation. The SEC’s decision not to charge Credit Suisse was influenced by several factors, including the isolated nature of the wrongdoing and Credit Suisse’s immediate self-reporting to the SEC and other law enforcement agencies as well as prompt public disclosure of corrected financial results. Credit Suisse voluntarily terminated the four investment bankers and implemented enhanced internal controls to prevent a recurrence of the misconduct. Credit Suisse also cooperated vigorously with the SEC’s investigation of this matter, providing SEC enforcement officials with timely access to evidence and witnesses. The SEC’s investigation also was assisted by cooperation provided by Higgs, Faisal Siddiqui, and Salmaan Siddiqui.

The SEC’s investigation was conducted by Staff Accountant Kenneth Gottlieb, Senior Counsel Kristine Zaleskas, Senior Specialized Examiner Michael Fioribello, Assistant Regional Director Michael Paley, and Assistant Regional Director Michael Osnato, Jr. in the SEC’s New York Regional Office. Senior Trial Counsel Howard Fischer will lead the SEC’s litigation efforts.

The SEC thanks the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, and United Kingdom Financial Services Authority for their assistance in this matter."

REAL ESTATE INVESTOR PLEADS GUILTY TO BID-RIGGING IN FORECLOSURE MARKET

The following excerpt is from the Department of Justice Website:

“SACRAMENTO, Calif. — A real estate investor pleaded guilty today in U.S. District Court in Sacramento to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif., Sharis A. Pozen, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, announced.

Kenneth A. Swanger pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.

According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit. The illicit profit was divided among the conspirators in payoffs. According to his plea agreement, Swanger participated in the scheme beginning in or about June 2009 until in or about October 2009.
To date, nine individuals, including Swanger, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation. They are: Anthony B. Ghio; John R. Vanzetti; Theodore B. Hutz; Richard W. Northcutt; Yama Marifat; Gregory L. Jackson; Walter Daniel Olmstead; and Robert Rose. In addition, four other investors, Wiley C. Chandler, Andrew B. Katakis, Donald M. Parker and Anthony B. Joachim, and one auctioneer, W. Theodore Longley, were indicted by a federal grand jury in Sacramento on Dec. 7, 2011.

“This type of illegal scheme undermines the transparency and integrity of the competitive market for residential real estate. Today’s guilty plea sends a clear message that the Department of Justice does not tolerate anticompetitive conduct that harms consumers,” said Acting Assistant Attorney General Pozen. “The Antitrust Division will continue to work with its law enforcement partners to prosecute the perpetrators of anticompetitive schemes in public real estate foreclosure auctions in the Sacramento area and into northern California.”
“The Department of Justice is bringing greater scrutiny to auctions of foreclosed properties as part of our effort to root out fraud in the real estate industry in all its forms,” said U.S. Attorney Wagner. “The days when a few players could rig these auctions for their own benefit are ending.”

Swanger pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine. Swanger also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

These charges arose from an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the Antitrust Division’s San Francisco Office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division and the San Joaquin County District Attorney’s Office. Trial attorneys Anna Pletcher and Tai Milder from the Antitrust Division’s San Francisco Office and Assistant U.S. Attorney Russell L. Carlberg are prosecuting the case.”
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