FDIC WARNS BANKERS OF FRAUDSTERS PREYING ON WEAK BANKS

FROM: FDIC
The FDIC has become aware of multiple instances in which individuals or purported investment advisors have approached financially weak institutions in apparent attempts to defraud the institutions by claiming to have access to funds for recapitalization. These parties also may claim that the investors, or individuals associated with the investors, include prominent public figures and that the investors have been approved by one or more of the federal banking agencies to invest substantial capital in the targeted institutions. Ultimately, these parties have required the targeted institutions to pay, in advance, retention and due diligence fees, as well as other costs. Once paid, the parties have failed to conduct substantive due diligence or to actively pursue the proposed investment.

Institutions should be extremely cautious if approached by any party in a similar manner. Before entering into any agreements or paying any funds, targeted institutions should verify the credibility of such solicitations, including the credibility of the investor group, their principals, and their representatives. Further, institutions deemed to be Critically Undercapitalized for purposes of Prompt Corrective Action are cautioned that prior approval may be required for the payment of retention or due diligence fees, or other costs. If, following assessment of the parties and proposal, it appears likely that a proposal is fraudulent, institutions should submit a Suspicious Activity Report in compliance with Part 353 of the FDIC's Rules and Regulations and ensure that the designated FDIC Case Manager is informed of the solicitation and the institution's actions.

SEC CHARGES ORTHOFIX INTERNATIONAL WITH FCPA VIOLATIONS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Texas-based medical
device company Orthofix International N.V. with violating the Foreign Corrupt
Practices Act (FCPA) when a subsidiary paid routine bribes referred to as
chocolates to Mexican officials in order to obtain lucrative sales contracts
with government hospitals.

The SEC alleges that Orthofixâ's Mexican subsidiary Promeca S.A. de C.V.
bribed officials at Mexico’s government-owned health care and social services
institution Instituto Mexicano del Seguro Social (IMSS). The chocolates came
in the form of cash, laptop computers, televisions, and appliances that were
provided directly to Mexican government officials or indirectly through front
companies that the officials owned. The bribery scheme lasted for several years
and yielded nearly $5 million in illegal profits for the Orthofix
subsidiary.

Orthofix agreed to pay $5.2 million to settle the SEC’s charges.
According to the SEC's complaint filed in U.S. District Court for the Eastern
District of Texas, the bribes began in 2003 and continued until 2010. Initially,
Promeca falsely recorded the bribes as cash advances and falsified its invoices
to support the expenditures. Later, when the bribes got much larger, Promeca
falsely recorded them as promotional and training costs. Because of the bribery
scheme, Promeca's training and promotional expenses were significantly over
budget. Orthofix did launch an inquiry into these expenses, but did very little
to investigate or diminish the excessive spending. Later, upon discovery of the
bribe payments through a Promeca executive, Orthofix immediately self-reported
the matter to the SEC and implemented significant remedial measures. The company
terminated the Promeca executives who orchestrated the bribery scheme.

The SEC's proposed settlement is subject to court approval. Orthofix
consented to a final judgment ordering it to pay $4,983,644 in disgorgement and
more than $242,000 in prejudgment interest. The final judgment would permanently
enjoined the company from violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the
Securities Exchange Act of 1934. Orthofix also agreed to certain undertakings,
including monitoring its FCPA compliance program and reporting back to the SEC
for a two-year period.

Orthofix also disclosed today in an 8-K filing that it has reached an
agreement with the U.S. Department of Justice to pay a $2.22 million penalty in
a related action.

HOUSTON MAN & CO. CHARGED WITH ALLEGED COMMODITY POOL FRAUD

FROM: COMMODITY FUTURES TRADING COMMISSION
July 11, 2012
CFTC Charges Houston-based Christopher Daley and his company, TC Credit Service, LLC, with Solicitation Fraud and Misappropriation in $1.4 Million Dollar Commodity Pool Scheme federal court enters order freezing defendants’ assets and preserving books and recordsWashington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an anti-fraud enforcement action in the U.S. District Court for the Southern District of Texas, charging Christopher D. Daley (Daley) of Houston, Texas, and his firm, TC Credit Service, LLC (TCCS) (doing business as Del-Mair Group, LLC) with operating a commodity pool scheme that fraudulently solicited and accepted approximately $1.4 million from the public. Daley was owner and sole employee of TCCS, and none of the defendants has ever been registered with the CFTC.

On June 19, 2012, a day after the CFTC filed its complaint, the Honorable Judge Lynn N. Hughes, of the U.S. District Court for the Southern District of Texas, issued an emergency order under seal, freezing the defendants’ assets and prohibiting the destruction of books and records.

The CFTC complaint alleges that from at least January 2010 and continuing through at least November 2011, Daley and TCCS fraudulently solicited and accepted at least $1,427,688 from at least 55 members of the public to participate in a commodity pool to trade crude oil futures contracts. TCCS did not at any time during this period maintain any commodity accounts in its name, and Daley’s personal trading accounts sustained consistent net losses each month, according to the complaint. Daley, however, allegedly used only a portion of pool participants’ funds to trade futures contracts, while misappropriating the rest of the funds. Daley used at least $100,000 of pool participants’ funds to pay for personal expenses, such as rent and personal loan payments, and transferred approximately $195,000 of pool participant’s funds to his own personal bank accounts, according to the complaint.

The complaint further alleges that Daley made fraudulent misrepresentations and omissions of material fact, including (1) misrepresenting that Daley’s trading in crude oil futures contracts generated and would generate 20 percent monthly returns on deposits, (2) misrepresenting that the pool never had a losing month, (3) misrepresenting that the pool’s value had increased 60 percent for the year as of March 2011, and (4) omitting that Daley misappropriated pool participants’ funds, that the pool never maintained any commodity interest account in its own name, that Daley’s personal futures trading accounts sustained consistent monthly losses, and that Daley was not properly registered as a Commodity Pool Operator with the CFTC. Moreover, the complaint alleges that Daley issued false account statements to pool participants to conceal the fraud.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws.

CFTC Division of Enforcement staff members responsible for this case are Eugene Smith, Patricia Gomersall, Christine Ryall, Antoinette Chance, Paul Hayeck, and Joan Manley.

CFTC SEEKS ORDER FREEZING ASSETS AND RESTITUTION OF CUSTOMER FUNDS IN COMPLAINT AGAINST PEREGRINE FINANCIAL GROUP, INC.

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Files Complaint Against Peregrine Financial Group, Inc. and Russell R. Wasendorf, Sr. Alleging Fraud, Misappropriation of Customer Funds, Violation of Customer Fund Segregation Laws, and Making False Statements
Commission Seeks an Order Freezing Assets and Restitution of Customer Funds.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed a complaint in the United States District Court for the Northern District of Illinois against Peregrine Financial Group Inc. (PFG), a registered futures commission merchant, and its owner, Russell R. Wasendorf, Sr.(Wasendorf).  The Complaint alleges that PFG and Wasendorf committed fraud by misappropriating customer funds, violated customer fund segregation laws, and made false statements in financial statements filed with the Commission.

The National Futures Association (NFA) is PFG’s Designated Self-Regulatory Organization and is responsible for monitoring and auditing PFG for compliance with the minimum financial and related reporting requirements. According to the Complaint, in July 2012 during an NFA audit, PFG falsely represented that it held in excess of $220 million of customer funds when in fact it held approximately $5.1 million.
The Commission’s action alleges that from at least February 2010 through the present, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations.  The Complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges.
According to the Complaint, Wasendorf attempted to commit suicide yesterday, July 9, 2012.  In the aftermath of that incident, the staff of the NFA received information that Wasendorf may have falsified certain bank records.

In the litigation, the CFTC seeks a restraining order to freeze assets, appoint a receiver and preserve records.  Further, the litigation seeks restitution, disgorgement, and civil monetary penalties among other appropriate relief.

The following CFTC Division of Enforcement staff members are responsible for this case: William Janulis, Jon Kramer, Thaddeus Glotfelty, Melissa Glasbrenner, Rosemary Hollinger, Scott Williamson, Richard Wagner.

SEC CHARGES MEDICAL DEVICE COMPANY WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., July 10, 2012 – The Securities and Exchange Commission today charged Texas-based medical device company Orthofix International N.V. with violating the Foreign Corrupt Practices Act (FCPA) when a subsidiary paid routine bribes referred to as “chocolates” to Mexican officials in order to obtain lucrative sales contracts with government hospitals.

The SEC alleges that Orthofix’s Mexican subsidiary Promeca S.A. de C.V. bribed officials at Mexico’s government-owned health care and social services institution Instituto Mexicano del Seguro Social (IMSS). The “chocolates” came in the form of cash, laptop computers, televisions, and appliances that were provided directly to Mexican government officials or indirectly through front companies that the officials owned. The bribery scheme lasted for several years and yielded nearly $5 million in illegal profits for the Orthofix subsidiary.

Orthofix agreed to pay $5.2 million to settle the SEC’s charges, and agreed to pay a $2.22 million monetaryv penalty as part of a deferred prosecution agreement announced today by the U.S. Department of Justice.

“Once bribery has been likened to a box of chocolates, you know a corruptive culture has permeated your business,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “Orthofix’s lax oversight allowed its subsidiary to illicitly spend more than $300,000 to sweeten the deals with Mexican officials.”

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, the bribes began in 2003 and continued until 2010. Initially, Promeca falsely recorded the bribes as cash advances and falsified its invoices to support the expenditures. Later, when the bribes got much larger, Promeca falsely recorded them as promotional and training costs. Because of the bribery scheme, Promeca’s training and promotional expenses were significantly over budget. Orthofix did launch an inquiry into these expenses, but did very little to investigate or diminish the excessive spending. Later, upon discovery of the bribe payments through a Promeca executive, Orthofix immediately self-reported the matter to the SEC and implemented significant remedial measures. The company terminated the Promeca executives who orchestrated the bribery scheme.

The SEC’s proposed settlement is subject to court approval. Orthofix consented to a final judgment ordering it pay $5.2 million in disgorgement and prejudgment interest, and permanently enjoining the company from violating the books and records and internal controls provisions of the FCPA. Orthofix also agreed to certain undertakings, including monitoring its FCPA compliance program and reporting back to the SEC for a two-year period.

The SEC’s investigation was conducted by Carol Shau and Alka N. Patel in the Los Angeles Regional Office. The SEC acknowledges and appreciates the assistance of the U.S. Department of Justice’s Criminal Division - Fraud Section and the Federal Bureau of Investigation.

A CASE OF USE AND ABUSE OF CLIENT FUNDS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
July 9, 2012
Final Judgment Entered Against Connecticut Man Who Misappropriated Over $1 Million From Vulnerable Investors
The Securities and Exchange Commission (“Commission”) announced that, on July 5, 2012, the United States District Court for the District of Connecticut entered a final judgment by default against Florin S. Ilovici, formerly of Avon, Connecticut. The Commission’s action against Ilovici was originally filed in June 2011 and charged that, starting as early as 2008, Ilovici made material misrepresentations in raising over $1 million in investment funds from at least two elderly Connecticut women who lived alone, had little or no family, and had health problems. The complaint alleged that, instead of investing these funds on their behalf as he promised, Ilovici transferred the investor funds to his personal bank and brokerage accounts where he either lost the funds in risky securities or foreign currency exchange trading or used the funds for personal expenses, including mortgage and credit card payments, travel, and home improvements, all without the knowledge or authorization of his investors. The complaint alleged that Ilovici’s conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The final judgment entered by the Court came in response to a Commission motion for default judgment and permanently enjoined Ilovici from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment also ordered Ilovici to pay disgorgement in the amount of $1,094,984.52, representing profits gained as a result of the conduct alleged in the complaint, plus pre-judgment interest on the disgorgement in the amount of $54,935.50, and a civil penalty in the amount of $900,000.00. The complaint also named Ilovici’s wife, Diana Ilovici, as a relief defendant, as to whom the judgment requires a payment of $30,196.93 in unjust enrichment because she received proceeds of the conduct alleged in the complaint.