JUSTICE PROPOSES DISMISSING ANTI-TRUST SUIT AGAINST DEUTSCHE AND NYSE EURONEXT

The following excerpt is from the Department of Justice website:

“Justice Department Dismisses Antitrust Lawsuit Against Deutsche Börse and NYSE EuronextCompanies Abandon Proposed Merger

WASHINGTON – The Department of Justice today announced that it filed a notice with the U.S. District Court for the District of Columbia to dismiss its antitrust lawsuit regarding the potential merger of Deutsche Börse AG and NYSE Euronext. The department said that the lawsuit and proposed settlement are no longer necessary since the parties have formally abandoned their plans to merge. 
 
Background
 
On Dec. 22, 2011, the department filed an antitrust lawsuit in U.S. District Court for the District of Columbia, alleging that the transaction as originally proposed would have substantially lessened competition for displayed equities trading services, listing services for exchange-traded products, including exchange-traded funds, and real-time proprietary equity data products in the United States. At the same time, the department filed a proposed settlement of the lawsuit that would preserve competition in the United States by requiring Deutsche Börse to direct its subsidiary, International Securities Exchange Holdings Inc., to sell its 31.5 percent stake in Direct Edge Holdings LLC, the fourth largest stock exchange operator in the United States, and agree to other restrictions.
 
The European Commission recently prohibited the transaction due to the proposed deal’s effect on European consumers. The department’s Antitrust Division and the European Commission communicated extensively throughout the course of their respective investigations, with frequent contact between the leadership and investigative staffs, aided by waivers provided by the merging parties.” 

LONDON BASED MEDICAL DEVICE COMPANY CHARGED WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT

The following excerpt is from a Securities and Exchange Commission e-mail:

“Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Smith & Nephew PLC and its U.S. subsidiary Smith & Nephew Inc. agreed to pay more than $22 million in agreements with the SEC and U.S. Department of Justice. The charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies.

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

“Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”

According to the SEC’s complaint against Smith & Nephew PLC filed in federal court in Washington D.C., U.S. subsidiary Smith & Nephew Inc. and German subsidiary Smith & Nephew Orthopaedics GmbH has sold orthopedic products in Greece since the 1970s through the Greek distributor. Greece has a national health care system in which most Greek hospitals are publicly-owned and operated, and doctors who work at those publicly-owned hospitals are government employees and “foreign officials” as defined in the FCPA.

The SEC alleges that the misconduct began in 1997, when Smith & Nephew’s subsidiaries developed a scheme to make payments to three shell entities in the United Kingdom controlled by the distributor. Those funds were used by the distributor to pay bribes to the Greek doctors on behalf of the Smith & Nephew subsidiaries. Smith & Nephew failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments. In one e-mail exchange between employees at the U.S. subsidiary and the distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “… In case it is not clear to you, please understand that I am paying cash incentives right after each surgery…” Smith & Nephew Inc. determined not to reduce the commissions.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its subsidiary Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. Smith & Nephew PLC consented without admitting or denying the SEC’s allegations, to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering it to retain an independent compliance monitor for a period of 18 months to review its FCPA compliance program.
The SEC’s investigation was conducted by Tracy L. Price of the Enforcement Division’s FCPA Unit along with Brent S. Mitchell and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice Fraud Section and the Federal Bureau of Investigation. The SEC’s investigation into the medical device industry is continuing.”

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.”