This is a photo of the National Register of Historic Places listing with reference number 7000063
Friday, November 30, 2012
SEC BELIEVES THAT DECIMAL POINTS ARE IMPORTANT
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Nov. 20, 2012 — The Securities and Exchange Commission sanctioned two investment advisory firms for impeding examinations conducted by SEC staff.
An SEC investigation found that Evens Barthelemy and his New York-based firm Barthelemy Group LLC misled SEC examiners by inflating the firm’s claimed assets under management (AUM) ten-fold in an apparent attempt to show that the firm was eligible for SEC registration. Another SEC investigation found that Seth Richard Freeman and his San Francisco-area firm EM Capital delayed nearly 18 months in producing books and records related to the firm’s mutual fund advisory business.
Both firms agreed to settle the SEC’s charges against them.
"Barthelemy was not truthful and Freeman was not responsive during their respective interactions with SEC examiners," said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. "We will continue to pursue enforcement actions against firms that obstruct or delay the SEC’s critical work in overseeing investment advisers."
Carlo di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations, added, "Examinations of SEC-registered firms play a vital role in protecting markets and investors, and we expect their candor and prompt cooperation as SEC staff works to promote compliance, monitor risk, and prevent fraud."
According to the SEC’s order against Barthelemy and his firm, when examiners asked for a list of client assets, Barthelemy misrepresented his firm’s AUM as $26.28 million instead of the actual $2.628 million. He downloaded client account balances from the firm’s online custodial platform onto a spreadsheet, and then manually moved the decimal points for each client one place to the right before providing it to the SEC staff. From July 2009 to early 2011, Barthelemy improperly registered Barthelemy Group with the SEC on the basis of the aspirational AUM that was 10 times higher than reality. Barthelemy Group, through Barthelemy’s actions as chief compliance officer, also failed to adopt reasonable compliance policies and procedures or to maintain required books and records concerning codes of ethics and providing the firm’s disclosure brochure to clients.
Barthelemy agreed to be barred from the securities industry and from associating with an investment company, with the right to reapply after two years. Without admitting or denying the allegations, Barthelemy and his firm consented to cease-and-desist orders, and the firm was censured. Barthelemy and his firm also will provide a copy of the proceeding to their clients and appropriate state securities regulators, will post a copy on the firm’s website, and will disclose the proceeding in an amended SEC Form ADV filing.
According to the SEC’s order issued today against Freeman and his firm, they failed to immediately furnish the required books and records upon request by SEC staff in December 2010. EM Capital and Freeman repeatedly promised to provide the records including financial statements, e-mails, and documents related to their management of a mutual fund. However, they did not fully comply until September 2012, months after learning that SEC staff was considering enforcement action against them.
Freeman and EM Capital agreed to pay a combined $20,000 penalty. Without admitting or denying the SEC’s findings, Freeman and EM Capital also agreed to censures and cease-and-desist orders.
The SEC’s investigation of Barthelemy Group was conducted by David Neuman and Scott Weisman of the SEC’s Asset Management Unit. The examination of Barthelemy Group was conducted by Dawn Blankenship, Kristine Geissler, Arjuman Sultana, Margaret Pottanat, and Anthony Fiduccia of the New York Regional Office’s investment adviser/investment company examination program. The SEC’s investigation of EM Capital was conducted by Sahil W. Desai and Erin E. Schneider of the San Francisco Regional Office, who are members of the SEC’s Asset Management Unit. The examination of EM Capital was conducted by Tom Dutton, Ada Chee, and Ed Haddad of the San Francisco Regional Office’s investment adviser/investment company examination program.
Washington, D.C., Nov. 20, 2012 — The Securities and Exchange Commission sanctioned two investment advisory firms for impeding examinations conducted by SEC staff.
An SEC investigation found that Evens Barthelemy and his New York-based firm Barthelemy Group LLC misled SEC examiners by inflating the firm’s claimed assets under management (AUM) ten-fold in an apparent attempt to show that the firm was eligible for SEC registration. Another SEC investigation found that Seth Richard Freeman and his San Francisco-area firm EM Capital delayed nearly 18 months in producing books and records related to the firm’s mutual fund advisory business.
Both firms agreed to settle the SEC’s charges against them.
"Barthelemy was not truthful and Freeman was not responsive during their respective interactions with SEC examiners," said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. "We will continue to pursue enforcement actions against firms that obstruct or delay the SEC’s critical work in overseeing investment advisers."
Carlo di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations, added, "Examinations of SEC-registered firms play a vital role in protecting markets and investors, and we expect their candor and prompt cooperation as SEC staff works to promote compliance, monitor risk, and prevent fraud."
According to the SEC’s order against Barthelemy and his firm, when examiners asked for a list of client assets, Barthelemy misrepresented his firm’s AUM as $26.28 million instead of the actual $2.628 million. He downloaded client account balances from the firm’s online custodial platform onto a spreadsheet, and then manually moved the decimal points for each client one place to the right before providing it to the SEC staff. From July 2009 to early 2011, Barthelemy improperly registered Barthelemy Group with the SEC on the basis of the aspirational AUM that was 10 times higher than reality. Barthelemy Group, through Barthelemy’s actions as chief compliance officer, also failed to adopt reasonable compliance policies and procedures or to maintain required books and records concerning codes of ethics and providing the firm’s disclosure brochure to clients.
Barthelemy agreed to be barred from the securities industry and from associating with an investment company, with the right to reapply after two years. Without admitting or denying the allegations, Barthelemy and his firm consented to cease-and-desist orders, and the firm was censured. Barthelemy and his firm also will provide a copy of the proceeding to their clients and appropriate state securities regulators, will post a copy on the firm’s website, and will disclose the proceeding in an amended SEC Form ADV filing.
According to the SEC’s order issued today against Freeman and his firm, they failed to immediately furnish the required books and records upon request by SEC staff in December 2010. EM Capital and Freeman repeatedly promised to provide the records including financial statements, e-mails, and documents related to their management of a mutual fund. However, they did not fully comply until September 2012, months after learning that SEC staff was considering enforcement action against them.
Freeman and EM Capital agreed to pay a combined $20,000 penalty. Without admitting or denying the SEC’s findings, Freeman and EM Capital also agreed to censures and cease-and-desist orders.
The SEC’s investigation of Barthelemy Group was conducted by David Neuman and Scott Weisman of the SEC’s Asset Management Unit. The examination of Barthelemy Group was conducted by Dawn Blankenship, Kristine Geissler, Arjuman Sultana, Margaret Pottanat, and Anthony Fiduccia of the New York Regional Office’s investment adviser/investment company examination program. The SEC’s investigation of EM Capital was conducted by Sahil W. Desai and Erin E. Schneider of the San Francisco Regional Office, who are members of the SEC’s Asset Management Unit. The examination of EM Capital was conducted by Tom Dutton, Ada Chee, and Ed Haddad of the San Francisco Regional Office’s investment adviser/investment company examination program.
Thursday, November 29, 2012
CFTC CHARGES MAN/COMPANY WITH EMBEZZLEMENT BY PONZI SCHEME
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges North Carolina Resident Michael Anthony Jenkins and his Company, Harbor Light Asset Management, LLC, with Solicitation Fraud, Misappropriation, and Embezzlement in Ponzi Scheme
Defendants charged with fraudulently soliciting and accepting at least $1.79 million from approximately 377 persons
In a related criminal action, Jenkins was indicted for securities fraud and is in custody awaiting trial
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal civil enforcement action in the U.S. District Court for the Eastern District of North Carolina, charging Michael Anthony Jenkins of Raleigh, N.C., and his company, Harbor Light Asset Management, LLC (HLAM), with operating a Ponzi scheme for the purpose of trading E-mini S&P 500 futures contracts (E-mini futures). From at least January 2011 through January 2012, the defendants fraudulently solicited at least $1.79 million from approximately 377 persons, primarily located in Raleigh, N.C., in connection with the scheme, according to the complaint.
The CFTC complaint also charges Jenkins, the owner and President of HLAM, with embezzlement and failure to register with the CFTC as a futures commission merchant. Furthermore, Jenkins allegedly misappropriated $748,827 of investors’ funds to trade gold and oil futures, stock index futures, and E-mini futures in his personal accounts. Jenkins also used misappropriated funds to pay for charges at department and discount stores and gasoline stations, and for cellular phone bills and airline tickets, according to the complaint.
The CFTC complaint, filed on November 20, 2012, alleges that HLAM’s Investment Agreement falsely represented to investors that their investment was solely for investing in E-mini futures and that investors’ funds would be immediately wired to a specific trading account. However, according to the complaint, most of investors’ funds were misappropriated by HLAM and Jenkins. To conceal and continue the fraud, Jenkins allegedly sent trading spreadsheets and statements to investors that falsely reported trades and profits earned and inflated the value of investments. The defendants’ fraudulent conduct resulted in a loss of approximately $1.3 million in investor funds, consisting of $1.16 million in misappropriated and embezzled funds and $140,000 in trading losses, according to the complaint.
In its continuing litigation, the CFTC seeks restitution, return by Jenkins and HLAM of all ill-gotten gains received, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act, as charged.
In a related criminal action by the Securities Division of the North Carolina, Department of the Secretary of State, Jenkins was indicted on August 20, 2012 on three counts of securities fraud in The General Court of Justice, State of North Carolina, Wake County, and is in custody awaiting trial.
The CFTC appreciates the assistance of the Securities Division of the North Carolina Department of the Secretary of State.
CFTC Division of Enforcement staff members responsible for this action are Xavier Romeu-Matta, Nathan B. Ploener, Christopher Giglio, Manal Sultan, Lenel Hickson, Stephen J. Obie, and Vincent A. McGonagle.
CFTC Charges North Carolina Resident Michael Anthony Jenkins and his Company, Harbor Light Asset Management, LLC, with Solicitation Fraud, Misappropriation, and Embezzlement in Ponzi Scheme
Defendants charged with fraudulently soliciting and accepting at least $1.79 million from approximately 377 persons
In a related criminal action, Jenkins was indicted for securities fraud and is in custody awaiting trial
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal civil enforcement action in the U.S. District Court for the Eastern District of North Carolina, charging Michael Anthony Jenkins of Raleigh, N.C., and his company, Harbor Light Asset Management, LLC (HLAM), with operating a Ponzi scheme for the purpose of trading E-mini S&P 500 futures contracts (E-mini futures). From at least January 2011 through January 2012, the defendants fraudulently solicited at least $1.79 million from approximately 377 persons, primarily located in Raleigh, N.C., in connection with the scheme, according to the complaint.
The CFTC complaint also charges Jenkins, the owner and President of HLAM, with embezzlement and failure to register with the CFTC as a futures commission merchant. Furthermore, Jenkins allegedly misappropriated $748,827 of investors’ funds to trade gold and oil futures, stock index futures, and E-mini futures in his personal accounts. Jenkins also used misappropriated funds to pay for charges at department and discount stores and gasoline stations, and for cellular phone bills and airline tickets, according to the complaint.
The CFTC complaint, filed on November 20, 2012, alleges that HLAM’s Investment Agreement falsely represented to investors that their investment was solely for investing in E-mini futures and that investors’ funds would be immediately wired to a specific trading account. However, according to the complaint, most of investors’ funds were misappropriated by HLAM and Jenkins. To conceal and continue the fraud, Jenkins allegedly sent trading spreadsheets and statements to investors that falsely reported trades and profits earned and inflated the value of investments. The defendants’ fraudulent conduct resulted in a loss of approximately $1.3 million in investor funds, consisting of $1.16 million in misappropriated and embezzled funds and $140,000 in trading losses, according to the complaint.
In its continuing litigation, the CFTC seeks restitution, return by Jenkins and HLAM of all ill-gotten gains received, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act, as charged.
In a related criminal action by the Securities Division of the North Carolina, Department of the Secretary of State, Jenkins was indicted on August 20, 2012 on three counts of securities fraud in The General Court of Justice, State of North Carolina, Wake County, and is in custody awaiting trial.
The CFTC appreciates the assistance of the Securities Division of the North Carolina Department of the Secretary of State.
CFTC Division of Enforcement staff members responsible for this action are Xavier Romeu-Matta, Nathan B. Ploener, Christopher Giglio, Manal Sultan, Lenel Hickson, Stephen J. Obie, and Vincent A. McGonagle.
Wednesday, November 28, 2012
EXECUTIVE PLEADS GUILTY IN MAJOR MORTGAGE-DOCUMENT FRAUD SHEME
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, November 20, 2012
Former Executive at Florida-Based Lender Processing Services Inc. Admits Role in Mortgage-Related Document Fraud Scheme
Over 1 Million Documents Prepared and Filed with Forged and False Signatures, Fraudulent Notarizations
WASHINGTON – A former executive of Lender Processing Services Inc. (LPS) – a publicly traded company based in Jacksonville, Fla. – pleaded guilty today, admitting her participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States.
The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.
The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court. Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime. The date for sentencing has not yet been set.
"Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis," said Assistant Attorney General Breuer. "She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others. Appropriately, she now faces the prospect of prison time."
"Homeownership is a huge step for American citizens," said U.S. Attorney O’Neill. "The process itself is often intimidating and lengthy. Consumers rely heavily on the integrity and due diligence of those serving as representatives throughout this process to secure their investments. When the integrity of this process is compromised, illegally, public confidence is eroded. We must work to assure the public that their investments are sound, worthy, and protected."
Special Agent in Charge Steinbach stated, "Our country is increasingly faced with more pervasive and sophisticated fraud schemes that have the potential to disrupt entire markets and the economy as a whole. The FBI, with our partners, is committed to addressing these schemes. As these schemes continue to evolve and become more sophisticated, so too will we."
Brown was the chief executive of DocX LLC, which was involved in the preparation and recordation of mortgage-related documents throughout the country since the 1990s. DocX was acquired by an LPS predecessor company, and was part of LPS’s business when LPS was formed as a stand-alone company in 2008. At that time, DocX was rebranded as "LPS Document Solutions, a Division of LPS." Brown was the president and senior managing director of LPS Document Solutions, which constituted DocX’s operations.
DocX’s main clients were residential mortgage servicers, which typically undertake certain actions for the owners of mortgage-backed promissory notes. Servicers hired DocX to, among other things, assist in creating and executing mortgage-related documents filed with recorders’ offices. Only specific personnel at DocX were authorized by the clients to sign the documents.
According to plea documents filed today, employees of DocX, at the direction of Brown and others, began forging and falsifying signatures on the mortgage-related documents that they had been hired to prepare and file with property recorders’ offices. Unbeknownst to the clients, Brown directed the authorized signers to allow other DocX employees, who were not authorized signers, to sign the mortgage-related documents and have them notarized as if actually executed by the authorized DocX employee.
Also according to plea documents, Brown implemented these signing practices at DocX to enable DocX and Brown to generate greater profit. Specifically, DocX was able to create, execute and file larger volumes of documents using these signing and notarization practices. To further increase profits, DocX also hired temporary workers to sign as authorized signers. These temporary employees worked for much lower costs and without the quality control represented by Brown to DocX’s clients. Some of these temporary workers were able to sign thousands of mortgage-related instruments a day. Between 2003 and 2009, DocX generated approximately $60 million in gross revenue.
After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country. Many of these documents – particularly mortgage assignments, lost note affidavits and lost assignment affidavits – were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions. Brown admitted she understood that property recorders, courts, title insurers and homeowners relied upon the documents as genuine.
Brown also admitted that she and others also took various steps to conceal their actions from clients, LPS corporate headquarters, law enforcement authorities and others. These actions included testing new employees to ensure they could mimic signatures, lying to LPS internal audit personnel during reviews of the operation in 2009, making false exculpatory statements after being confronted by LPS corporate officials about the acts and lying to the FBI during its investigation. LPS closed DocX in early 2010.
This case is being prosecuted by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida. This case is being investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.
Tuesday, November 20, 2012
Former Executive at Florida-Based Lender Processing Services Inc. Admits Role in Mortgage-Related Document Fraud Scheme
Over 1 Million Documents Prepared and Filed with Forged and False Signatures, Fraudulent Notarizations
WASHINGTON – A former executive of Lender Processing Services Inc. (LPS) – a publicly traded company based in Jacksonville, Fla. – pleaded guilty today, admitting her participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States.
The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.
The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court. Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime. The date for sentencing has not yet been set.
"Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis," said Assistant Attorney General Breuer. "She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others. Appropriately, she now faces the prospect of prison time."
"Homeownership is a huge step for American citizens," said U.S. Attorney O’Neill. "The process itself is often intimidating and lengthy. Consumers rely heavily on the integrity and due diligence of those serving as representatives throughout this process to secure their investments. When the integrity of this process is compromised, illegally, public confidence is eroded. We must work to assure the public that their investments are sound, worthy, and protected."
Special Agent in Charge Steinbach stated, "Our country is increasingly faced with more pervasive and sophisticated fraud schemes that have the potential to disrupt entire markets and the economy as a whole. The FBI, with our partners, is committed to addressing these schemes. As these schemes continue to evolve and become more sophisticated, so too will we."
Brown was the chief executive of DocX LLC, which was involved in the preparation and recordation of mortgage-related documents throughout the country since the 1990s. DocX was acquired by an LPS predecessor company, and was part of LPS’s business when LPS was formed as a stand-alone company in 2008. At that time, DocX was rebranded as "LPS Document Solutions, a Division of LPS." Brown was the president and senior managing director of LPS Document Solutions, which constituted DocX’s operations.
DocX’s main clients were residential mortgage servicers, which typically undertake certain actions for the owners of mortgage-backed promissory notes. Servicers hired DocX to, among other things, assist in creating and executing mortgage-related documents filed with recorders’ offices. Only specific personnel at DocX were authorized by the clients to sign the documents.
According to plea documents filed today, employees of DocX, at the direction of Brown and others, began forging and falsifying signatures on the mortgage-related documents that they had been hired to prepare and file with property recorders’ offices. Unbeknownst to the clients, Brown directed the authorized signers to allow other DocX employees, who were not authorized signers, to sign the mortgage-related documents and have them notarized as if actually executed by the authorized DocX employee.
Also according to plea documents, Brown implemented these signing practices at DocX to enable DocX and Brown to generate greater profit. Specifically, DocX was able to create, execute and file larger volumes of documents using these signing and notarization practices. To further increase profits, DocX also hired temporary workers to sign as authorized signers. These temporary employees worked for much lower costs and without the quality control represented by Brown to DocX’s clients. Some of these temporary workers were able to sign thousands of mortgage-related instruments a day. Between 2003 and 2009, DocX generated approximately $60 million in gross revenue.
After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country. Many of these documents – particularly mortgage assignments, lost note affidavits and lost assignment affidavits – were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions. Brown admitted she understood that property recorders, courts, title insurers and homeowners relied upon the documents as genuine.
Brown also admitted that she and others also took various steps to conceal their actions from clients, LPS corporate headquarters, law enforcement authorities and others. These actions included testing new employees to ensure they could mimic signatures, lying to LPS internal audit personnel during reviews of the operation in 2009, making false exculpatory statements after being confronted by LPS corporate officials about the acts and lying to the FBI during its investigation. LPS closed DocX in early 2010.
This case is being prosecuted by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida. This case is being investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.
Tuesday, November 27, 2012
2012 YIELDS NEAR RECORD RESULTS FOR SEC ENFORCEMENTS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Nov. 14, 2012 — Building on last year’s record results, the Securities and Exchange Commission today announced that it filed 734 enforcement actions in the fiscal year that ended Sept. 30, 2012, one shy of last year’s record of 735. Most significantly, that number included an increasing number of cases involving highly complex products, transactions, and practices, including those related to the financial crisis, trading platforms and market structure, and insider trading by market professionals. Twenty percent of the actions were filed in investigations designated as National Priority Cases, representing the Division’s most important and complex matters.
The SEC also announced that it obtained orders in fiscal year 2012 requiring the payment of more than $3 billion in penalties and disgorgement for the benefit of harmed investors. It represents an 11 percent increase over the amount ordered last year. In the past two years, the SEC has obtained orders for $5.9 billion in penalties and disgorgement.
"The record of performance is a testament to the professionalism and perseverance of the staff and the innovative reforms put in place over the past few years," said SEC Chairman Mary L. Schapiro. "We’ve now brought more enforcement actions in each of the last two years than ever before including some of the most complex cases we’ve ever seen."
Robert Khuzami, Director of the SEC’s Division of Enforcement, added, "It’s not simply numbers, but the increasing complexity and diversity of the cases we file that shows how successful we’ve been. The intelligence, dedication, and deep experience of our enforcement staff are, more than any other factors, responsible for the Division’s success."
The sustained high-level performance comes two years after the Division underwent its most significant reorganization since it was established in the early 1970s. The results in 2012 were aided by many of the reforms and innovations put in place in the past two years, such as increased expertise in complex and emerging financial markets, products, and transactions, including through enhanced training, the hiring of industry experts, and the creation of specialized enforcement units focused on high-priority misconduct; a flatter management structure; streamlined and centralized processes and the improved utilization of information technology; and a vastly enhanced ability to collect, process, and analyze tips and complaints.
Financial Crisis-Related Cases
Among the cases filed by the SEC in FY 2012 were 29 separate actions naming 38 individuals, including 24 CEOs, CFOs and other senior corporate officers, regarding wrongdoing related to the financial crisis.
These cases included enforcement actions involving:
The former senior officers of Fannie Mae and Freddie Mac for misleading statements regarding the extent of each company’s holdings of higher-risk mortgage loans.
Former investment bankers at Credit Suisse for fraudulently overstating the prices of $3 billion in subprime bonds.
Several bank and mortgage executives including those at United Commercial Bank, TierOne Bank, Franklin Bank, and Thornburg Mortgage for misleading investors about mounting loan losses and the deteriorating financial condition of their institutions.
The U.S. investment banking subsidiary of Japan-based Mizuho Financial Group for misleading investors in a CDO by using "dummy assets" to inflate the deal’s credit ratings.
During the last 2½ years, the agency has filed actions related to the financial crisis against 117 defendants – nearly half of whom were CEOs, CFOs and other senior corporate executives, resulting in approximately $ 2.2 billion in disgorgement, penalties, and other monetary relief obtained or agreed to. The SEC brought enforcement actions against Goldman Sachs, J.P Morgan Securities, and Morgan Keegan as well as senior executives from Countrywide, New Century, and American Home Mortgage.
Insider Trading Cases
Insider trading cases also are on the upswing with 58 actions filed in FY 2012 by the SEC, an increase over last year’s total of 57 actions. The 168 total insider trading actions filed since October 2009 have been the most in SEC history for any three-year period.
In these actions, the SEC has charged approximately 400 individuals and entities for illegal trading totaling approximately $600 million in illicit profits. Among those charged in SEC insider trading cases in 2012 were:
Former McKinsey & Co. global head Rajat Gupta for illegally tipping convicted hedge fund manager Raj Rajaratnam.
Hedge funds Diamondback Capital and Level Global Investors and affiliated traders and analysts.
Hedge fund manager Douglas Whitman.
John Kinnucan and his expert network consulting firm Broadband Research Corporation.
A second round of charges in an insider trading case involving former professional baseball players and the former top executive at Advanced Medical Optics.
Other Enforcement Matters
In order to ensure fair trading and equal access to information in the securities markets, the SEC brought several actions involving compliance failures and rules violations relating to stock exchanges, alternative trading platforms, and other market structure participants.
These cases included:
First-of-its-kind charges against the New York Stock Exchange for compliance failures that gave certain customers an improper head start on trading information.
The first-ever action against a "dark pool" trading platform (Pipeline Trading Systems) for failing to disclose to its customers that the vast amount of orders were filled by an affiliated trading operation.
An action against Direct Edge Holdings LLC for violations at two of its electronic stock exchanges and a broker-dealer arising out of weak controls that resulted in millions of dollars in trading losses and a systems outage.
In the NYSE matter, the exchange and its parent company NYSE Euronext agreed to pay a $5 million penalty, marking the first-ever SEC financial penalty against an exchange.
Investment Advisers: The SEC filed numerous actions resulting from several risk-based, proactive measures that identify threats at an early stage so that early action to halt the misconduct can be initiated and investor harm minimized. In 2012, several actions resulted from the Division’s investment adviser compliance initiative, which looks for registered investment advisers who lack effective compliance programs designed to prevent securities laws violations.
The SEC also filed actions charging three advisory firms and six individuals as part of the Aberrational Performance Inquiry into abnormal performance returns by hedge funds. Other actions against investment advisers included cases against UBS Financial Services of Puerto Rico and two executives for misleading disclosures relating to certain proprietary closed-end mutual funds, Morgan Stanley Investment Management for an improper fee arrangement, and OppenheimerFunds for misleading investors in two funds suffering significant losses during the financial crisis. UBS paid more than $26 million to settle the SEC’s charges while OppenheimerFunds paid more than $35 million for its violations.
The SEC filed 147 enforcement actions in 2012 against investment advisers and investment companies, one more than the previous year’s record number.
Issuer Disclosures:
The SEC brought 79 actions in FY 2012 for financial fraud and issuer disclosure violations. Those cases included actions against Life Partners Holdings and senior executives for fraudulent disclosures related to life settlements; two executives at China-based Puda Coal for defrauding investors about the nature of the company’s assets; and an enforcement action against Shanghai-based Deloitte Touche Tohmatsu for its refusal to provide the SEC with audit work papers related to a China-based company under investigation for potential accounting fraud against U.S. investors.
Broker-Dealers:
The agency filed 134 enforcement actions related to broker-dealers, a 19 percent increase over the previous year. Broker-dealer actions included charges against a Latvian trader and electronic trading firms for their roles in an online account intrusion scheme that manipulated the prices of more than 100 NYSE and Nasdaq securities as well as charges against New York-based brokerage firm Hold Brothers On-Line Investment Services and three of its executives for their roles in allowing overseas traders to access the markets and conduct manipulative trading through accounts the firm controlled. The defendants in the Hold Brothers action paid a total of $4 million to settle the SEC’s charges.
FCPA:
The SEC filed 15 actions in FY 2012 for violations of the Foreign Corrupt Practices Act. FCPA actions were filed against former Siemens executives, Magyar Telekom, Biomet, Smith & Nephew, Pfizer, Tyco International, and a former executive at Morgan Stanley’s real estate investment and fund advisory business.
Municipal Securities:
The SEC filed 17 enforcement actions related to municipal securities, more than double the number filed in 2011. Among those charged in SEC municipal securities actions were the former mayor and city treasurer of Detroit in a pay-to-play scheme involving investments of the city’s pension funds, and Goldman Sachs for violations of various municipal securities rules resulting from undisclosed "in-kind" non-cash contributions that one of its investment bankers made to a Massachusetts gubernatorial candidate.
Washington, D.C., Nov. 14, 2012 — Building on last year’s record results, the Securities and Exchange Commission today announced that it filed 734 enforcement actions in the fiscal year that ended Sept. 30, 2012, one shy of last year’s record of 735. Most significantly, that number included an increasing number of cases involving highly complex products, transactions, and practices, including those related to the financial crisis, trading platforms and market structure, and insider trading by market professionals. Twenty percent of the actions were filed in investigations designated as National Priority Cases, representing the Division’s most important and complex matters.
The SEC also announced that it obtained orders in fiscal year 2012 requiring the payment of more than $3 billion in penalties and disgorgement for the benefit of harmed investors. It represents an 11 percent increase over the amount ordered last year. In the past two years, the SEC has obtained orders for $5.9 billion in penalties and disgorgement.
"The record of performance is a testament to the professionalism and perseverance of the staff and the innovative reforms put in place over the past few years," said SEC Chairman Mary L. Schapiro. "We’ve now brought more enforcement actions in each of the last two years than ever before including some of the most complex cases we’ve ever seen."
Robert Khuzami, Director of the SEC’s Division of Enforcement, added, "It’s not simply numbers, but the increasing complexity and diversity of the cases we file that shows how successful we’ve been. The intelligence, dedication, and deep experience of our enforcement staff are, more than any other factors, responsible for the Division’s success."
The sustained high-level performance comes two years after the Division underwent its most significant reorganization since it was established in the early 1970s. The results in 2012 were aided by many of the reforms and innovations put in place in the past two years, such as increased expertise in complex and emerging financial markets, products, and transactions, including through enhanced training, the hiring of industry experts, and the creation of specialized enforcement units focused on high-priority misconduct; a flatter management structure; streamlined and centralized processes and the improved utilization of information technology; and a vastly enhanced ability to collect, process, and analyze tips and complaints.
Financial Crisis-Related Cases
Among the cases filed by the SEC in FY 2012 were 29 separate actions naming 38 individuals, including 24 CEOs, CFOs and other senior corporate officers, regarding wrongdoing related to the financial crisis.
These cases included enforcement actions involving:
Former investment bankers at Credit Suisse for fraudulently overstating the prices of $3 billion in subprime bonds.
Several bank and mortgage executives including those at United Commercial Bank, TierOne Bank, Franklin Bank, and Thornburg Mortgage for misleading investors about mounting loan losses and the deteriorating financial condition of their institutions.
The U.S. investment banking subsidiary of Japan-based Mizuho Financial Group for misleading investors in a CDO by using "dummy assets" to inflate the deal’s credit ratings.
During the last 2½ years, the agency has filed actions related to the financial crisis against 117 defendants – nearly half of whom were CEOs, CFOs and other senior corporate executives, resulting in approximately $ 2.2 billion in disgorgement, penalties, and other monetary relief obtained or agreed to. The SEC brought enforcement actions against Goldman Sachs, J.P Morgan Securities, and Morgan Keegan as well as senior executives from Countrywide, New Century, and American Home Mortgage.
Insider Trading Cases
Insider trading cases also are on the upswing with 58 actions filed in FY 2012 by the SEC, an increase over last year’s total of 57 actions. The 168 total insider trading actions filed since October 2009 have been the most in SEC history for any three-year period.
In these actions, the SEC has charged approximately 400 individuals and entities for illegal trading totaling approximately $600 million in illicit profits. Among those charged in SEC insider trading cases in 2012 were:
Hedge funds Diamondback Capital and Level Global Investors and affiliated traders and analysts.
Hedge fund manager Douglas Whitman.
John Kinnucan and his expert network consulting firm Broadband Research Corporation.
A second round of charges in an insider trading case involving former professional baseball players and the former top executive at Advanced Medical Optics.
Other Enforcement Matters
In order to ensure fair trading and equal access to information in the securities markets, the SEC brought several actions involving compliance failures and rules violations relating to stock exchanges, alternative trading platforms, and other market structure participants.
These cases included:
The first-ever action against a "dark pool" trading platform (Pipeline Trading Systems) for failing to disclose to its customers that the vast amount of orders were filled by an affiliated trading operation.
An action against Direct Edge Holdings LLC for violations at two of its electronic stock exchanges and a broker-dealer arising out of weak controls that resulted in millions of dollars in trading losses and a systems outage.
In the NYSE matter, the exchange and its parent company NYSE Euronext agreed to pay a $5 million penalty, marking the first-ever SEC financial penalty against an exchange.
Investment Advisers: The SEC filed numerous actions resulting from several risk-based, proactive measures that identify threats at an early stage so that early action to halt the misconduct can be initiated and investor harm minimized. In 2012, several actions resulted from the Division’s investment adviser compliance initiative, which looks for registered investment advisers who lack effective compliance programs designed to prevent securities laws violations.
The SEC also filed actions charging three advisory firms and six individuals as part of the Aberrational Performance Inquiry into abnormal performance returns by hedge funds. Other actions against investment advisers included cases against UBS Financial Services of Puerto Rico and two executives for misleading disclosures relating to certain proprietary closed-end mutual funds, Morgan Stanley Investment Management for an improper fee arrangement, and OppenheimerFunds for misleading investors in two funds suffering significant losses during the financial crisis. UBS paid more than $26 million to settle the SEC’s charges while OppenheimerFunds paid more than $35 million for its violations.
The SEC filed 147 enforcement actions in 2012 against investment advisers and investment companies, one more than the previous year’s record number.
Issuer Disclosures:
The SEC brought 79 actions in FY 2012 for financial fraud and issuer disclosure violations. Those cases included actions against Life Partners Holdings and senior executives for fraudulent disclosures related to life settlements; two executives at China-based Puda Coal for defrauding investors about the nature of the company’s assets; and an enforcement action against Shanghai-based Deloitte Touche Tohmatsu for its refusal to provide the SEC with audit work papers related to a China-based company under investigation for potential accounting fraud against U.S. investors.
Broker-Dealers:
The agency filed 134 enforcement actions related to broker-dealers, a 19 percent increase over the previous year. Broker-dealer actions included charges against a Latvian trader and electronic trading firms for their roles in an online account intrusion scheme that manipulated the prices of more than 100 NYSE and Nasdaq securities as well as charges against New York-based brokerage firm Hold Brothers On-Line Investment Services and three of its executives for their roles in allowing overseas traders to access the markets and conduct manipulative trading through accounts the firm controlled. The defendants in the Hold Brothers action paid a total of $4 million to settle the SEC’s charges.
FCPA:
The SEC filed 15 actions in FY 2012 for violations of the Foreign Corrupt Practices Act. FCPA actions were filed against former Siemens executives, Magyar Telekom, Biomet, Smith & Nephew, Pfizer, Tyco International, and a former executive at Morgan Stanley’s real estate investment and fund advisory business.
Municipal Securities:
The SEC filed 17 enforcement actions related to municipal securities, more than double the number filed in 2011. Among those charged in SEC municipal securities actions were the former mayor and city treasurer of Detroit in a pay-to-play scheme involving investments of the city’s pension funds, and Goldman Sachs for violations of various municipal securities rules resulting from undisclosed "in-kind" non-cash contributions that one of its investment bankers made to a Massachusetts gubernatorial candidate.
Monday, November 26, 2012
TWO FORMER STANFORD FINANCIAL GROUP EXECUTIVES CONVICTED FOR ROLES IN FRAUD SCHEME
FROM: U.S. DEPARTMENT OF JUSTICE
Monday, November 19, 2012
Former Executives of Stanford Financial Group Entities Convicted for Roles in Fraud Scheme
WASHINGTON – A Houston federal jury has convicted Gilbert T. Lopez Jr., the former chief accounting officer of Stanford Financial Group Company, and Mark J. Kuhrt, the former global controller of Stanford Financial Group Global Management, for their roles in helping Robert Allen Stanford perpetrate a fraud scheme involving Stanford International Bank (SIB).
The guilty verdict was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Special Agent in Charge Lucy Cruz of IRS-Criminal Investigation.
Stanford, who was convicted in a separate trial held earlier this year, illegally used billions of dollars of SIB’s assets to fund his personal business ventures, to live a lavish lifestyle, and for other improper purposes.
The evidence presented at the trial of Lopez and Kuhrt established that they were aware of and tracked Stanford’s misuse of SIB’s assets, kept the misuse hidden from the public and from almost all of Stanford’s other employees, and worked behind the scenes to prevent the misuse from being discovered.
The trial against Lopez and Kuhrt spanned five weeks. After approximately three days of deliberations, the jury found both Lopez, 70, and Kuhrt, 40, both of Houston, guilty of 10 of 11 counts in the indictment. Each defendant was convicted of one count of conspiracy to commit wire fraud and nine counts of wire fraud. Each was found not guilty on one wire fraud count.
Both defendants were immediately remanded into custody.
U.S. District Judge David Hittner, who presided over the trial, has set sentencing for Feb. 14, 2013. At sentencing, Lopez and Kuhrt will each face a maximum of 20 years in prison on each count of conviction.
The investigation was conducted by the FBI, U.S. Postal Inspection Service, IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration. The case was prosecuted by Deputy Chief Jeffrey Goldberg and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorney Jason Varnado of the Southern District of Texas.
Monday, November 19, 2012
Former Executives of Stanford Financial Group Entities Convicted for Roles in Fraud Scheme
WASHINGTON – A Houston federal jury has convicted Gilbert T. Lopez Jr., the former chief accounting officer of Stanford Financial Group Company, and Mark J. Kuhrt, the former global controller of Stanford Financial Group Global Management, for their roles in helping Robert Allen Stanford perpetrate a fraud scheme involving Stanford International Bank (SIB).
The guilty verdict was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Special Agent in Charge Lucy Cruz of IRS-Criminal Investigation.
Stanford, who was convicted in a separate trial held earlier this year, illegally used billions of dollars of SIB’s assets to fund his personal business ventures, to live a lavish lifestyle, and for other improper purposes.
The evidence presented at the trial of Lopez and Kuhrt established that they were aware of and tracked Stanford’s misuse of SIB’s assets, kept the misuse hidden from the public and from almost all of Stanford’s other employees, and worked behind the scenes to prevent the misuse from being discovered.
The trial against Lopez and Kuhrt spanned five weeks. After approximately three days of deliberations, the jury found both Lopez, 70, and Kuhrt, 40, both of Houston, guilty of 10 of 11 counts in the indictment. Each defendant was convicted of one count of conspiracy to commit wire fraud and nine counts of wire fraud. Each was found not guilty on one wire fraud count.
Both defendants were immediately remanded into custody.
U.S. District Judge David Hittner, who presided over the trial, has set sentencing for Feb. 14, 2013. At sentencing, Lopez and Kuhrt will each face a maximum of 20 years in prison on each count of conviction.
The investigation was conducted by the FBI, U.S. Postal Inspection Service, IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration. The case was prosecuted by Deputy Chief Jeffrey Goldberg and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorney Jason Varnado of the Southern District of Texas.
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