REAL ESTATE FUND MANAGER PERMANENTLY BARRED FROM THE SECURITIES INDUSTRY

The following excerpt is from the SEC website: 

February 2, 2012

"On December 14, 2011, the Honorable Cathy Seibel, United States District Judge for the Southern District of New York, entered a judgment permanently enjoining Lloyd V. Barriger from violating the registration and antifraud provisions of the federal securities laws. The judgment further orders Barriger to disgorge ill-gotten gains, together with prejudgment interest, and pay a civil penalty, but defers the Court’s determination of the amount of disgorgement and penalty to be paid until a later date, pending a motion by the Commission. Barriger consented to entry of the judgment without admitting or denying the allegations in the Commission’s complaint.

In a related administrative proceeding, on January 11, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Barriger. The Order bars Barriger from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock. Lloyd V. Barriger, Exchange Act Release No. 66142 (January 11, 2012). Barriger consented to the issuance of the Order without admitting or denying any of the findings except he admitted to the entry of the final judgment.

The Commission’s complaint, filed on May 13, 2011 in federal court in White Plains, New York, charged Barriger with fraud in connection with two upstate New York real estate funds he managed — the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). The complaint alleged that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition — which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.

The Commission’s complaint also alleged that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments, causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purportedly accrued 8% per year Preferred Return.

Finally, the complaint alleged that Barriger defrauded Campus and its prospective investors by (1) causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress; (2) by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund; and (3) by causing Campus to engage in other transactions that personally benefitted Barriger, without disclosing that to prospective Campus investors.

The complaint alleged that, as a result of the foregoing, Barriger violated Sections 5(a), 5(c) and 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 judgment entered on December 14th permanently enjoins Barriger from violating those provisions.

Barriger has also been criminally charged in connection with the conduct alleged in the Commission’s complaint. United States v. Lloyd Barriger, 11 Cr. 416 (CS) (S.D.N.Y.)

FINAL JUDGEMENT ENTERED AGAINST FORMER CEO OF BROOKS AUTOMATION, INC.

The following excerpt is from the SEC website:

"The Commission announced that on February 1, 2012, the U.S. District Court for the District of Massachusetts entered a final judgment by consent against Robert J. Therrien of Boston, Massachusetts, a defendant in a civil injunctive action filed by the Commission in July 2007. The Commission alleged in its complaint that Therrien, the former CEO of Massachusetts-based Brooks Automation, Inc. (“Brooks”) engaged in a scheme to falsify company records to create the false appearance that certain options granted below the then-current market price actually had been granted at the then-current market price on an earlier date. Without admitting or denying the allegations in the Commission's Complaint, Therrien consented to the entry of a final judgment enjoining him from violating the antifraud, books and records, and other provisions of the federal securities laws, ordering him to disgorge $728,269, representing profits gained, and the proceeds of the sale of 150,000 shares of Brooks stock and to pay a civil penalty of $100,000, and barring him from serving as an officer or director of a public company.

The Commission's Complaint, filed July 26, 2007, alleged that, Therrien, in or about November 1999, created and signed false documents resulting in the issuance of the options to himself, which he immediately exercised, to purchase 225,000 shares of Brooks’ common stock. The Commission further alleged that Therrien signed these false documents after learning that his options to purchase the shares had expired unexercised a few months earlier in or about August 1999. According to the Complaint, the documents Therrien signed falsely indicated that he had actually exercised his option before it expired. As a result, according to the Complaint, Therrien received undisclosed compensation from Brooks, and Brooks failed to report this compensation in its Commission filings.

The final judgment imposed a permanent injunction prohibiting Therrien from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; ordering him to pay $728,269 in disgorgement and to pay to Brooks the proceeds of the sale of 150,000 shares of Brooks stock; ordering him to pay a civil penalty in the amount of $100,000; and barring him from acting as an officer or director of a public company.

The Commission filed a settled enforcement action against Brooks in May 2008 concerning Therrien’s conduct and other issues."

JUDGMENTS ENTERED AGAINST FORMER TRADERS FOR INSIDER TRADING

The following excerpt is from the SEC website: 

"The Securities and Exchange Commission announced today that on January 31, 2012, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered judgments against David Plate and Craig Drimal in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the SEC filed on November 5, 2009. The SEC charged Drimal, a former trader who worked out of the offices of Galleon Management, LP, and Plate, a former proprietary trader at the broker-dealer Schottenfeld Group, LLC, with trading on inside information related to corporate acquisitions.

The SEC’s complaint alleged that Arthur Cutillo, a former attorney with the law firm Ropes & Gray LLP, misappropriated from his law firm material, nonpublic information concerning the potential acquisitions, and tipped the inside information, through another attorney, to Zvi Goffer, a proprietary trader at Schottenfeld, in exchange for kickbacks. The complaint further alleged that Goffer tipped the information to a number of individuals, including Drimal and Plate. As alleged in the complaint, Drimal traded on, and tipped, inside information in advance of the announced acquisitions of Avaya Inc. in June 2007, 3Com Corp. in September 2007 and Axcan Pharma Inc. in November 2007, and Plate traded on inside information in advance of the Axcan announcement.

To settle the SEC’s charges, Drimal and Plate each consented to the entry of a final judgment that: (i) permanently enjoins each from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders each to pay disgorgement plus prejudgment interest. The final judgment against Drimal orders disgorgement of $6,711,805, plus prejudgment interest of $970,481. The final judgment against Plate orders disgorgement of $134,983, plus prejudgment interest of $17,460. In related administrative proceedings, Drimal and Plate each consented to the entry of an SEC order barring each from association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent, and barring each from participating in any offering of a penny stock. The SEC previously announced the entry of a judgment against Plate in a separate case alleging insider trading in connection with other securities.See SEC v. Galleon, LP, et al., No. 09-CIV-8811 (S.D.N.Y.) (JSR).

In related criminal cases, Drimal and Plate previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud. United States v. Craig Drimal, 10-CR-0056 (S.D.N.Y.) and United States v. David Plate, 10-CR-0056 (S.D.N.Y.). Drimal was sentenced to a five and one-half year prison term and ordered to pay criminal forfeiture of $11,000,000. Plate was sentenced to six months of home confinement and three years probation, and ordered to pay criminal forfeiture of $289,000."

SEC ALLEGES FRIENDS AND FAMILY INVESTMENT FRAUD

The following excerpt is from the SEC website:

“The Securities and Exchange Commission announced today that on January 30, 2012 the Honorable Richard M. Berman of the United States District Court for the Southern District of New York entered a final judgment against defendants Christopher T. Vulliez and Amphor Advisors, LLC. The final judgment imposes a permanent injunction against future violations of the antifraud provisions of the federal securities laws and orders defendants to pay disgorgement.

The Commission’s Complaint alleged that, between March 2010 and January 2011, Vulliez and Amphor misappropriated at least $700,000 from his closest family and friends. According to the complaint, Vulliez made false and misleading statements to his clients that he would invest their funds in a biotech company. Instead, he and Amphor misappropriated the funds. The Complaint charged Vulliez and Amphor with violating 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), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.

The final judgment permanently enjoins defendants Vulliez and Amphor from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. In addition, the final judgment orders defendants to pay disgorgement, on a joint and several basis, of $820,500. Defendants consented to the entry of the final judgment.

In a related criminal action, on December 7, 2011, Vulliez pled guilty to, inter alia, one count of Scheme to Defraud in the First Degree in violation of Penal Law §190.65(1)(b) and ten counts of Securities Fraud in violation of General Business Law § 352-C(6), before the Supreme Court of the State of New York for the County of New York in The People of the State of New York v. Christopher T. Vulliez, Superior Court Information No. 5556/2011, Docket No. 2011NY087021. Pursuant to a plea agreement, Vulliez will receive a sentence of six months incarceration followed by five years of probation and be ordered to pay restitution in the amount of $2,176,755.48.

Earlier, on August 20, 2011, the Commission filed an Amended Complaint to name Sophie Pachella and EatStrong, LLC as relief defendants. The Amended Complaint alleged that Vulliez diverted a portion of the investor funds that he had misappropriated to EatStrong and Pachella. On August 31, 2011, Judge Berman entered a final judgment that ordered EatStrong and Pachella to pay disgorgement, on a joint and several basis, of $375,000. EatStrong and Pachella consented to the entry of the final judgment.
The Commission acknowledges the assistance provided by the Manhattan District Attorney’s Office.”

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”