FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Statement of Chairman Gary Gensler Before the Financial Stability Oversight Council
April 25, 2013
I support the Financial Stability Oversight Council’s (FSOC) annual report and the recommendations. I want thank the FSOC members and their staffs for their work on this year’s important report and capturing the vulnerability to our financial system in its seven themes. I appreciate and wish to compliment their dedication to and coordination on financial reform.
Congress asked us to make recommendations once a year to enhance the integrity, efficiency, competitiveness and stability of U.S. financial markets.
In addition, we are to make recommendations to promote market discipline and maintain investor confidence. In that regard, the report recommends reforms of wholesale funding markets; housing finance; reference rates, such as LIBOR and similar interest rate benchmarks; and heightened risk management and supervisory attention.
Further, the FSOC agencies have made great progress on financial reform since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Working with FSOC agencies, the CFTC has completed most of the Title VII swaps market reforms on transparency, clearing and oversight of swap dealers. The market is increasingly moving to implementation of these common-sense rules of the road.
There are two critical areas, however, in which the CFTC must complete reforms.
First, it is a priority to finish rules to promote pre-trade transparency, including those for swap execution facilities and the block rule for swaps.
Second, it’s a priority that the Commission, working with domestic and international regulators, complete guidance on the cross-border application of swaps market reform.
FROM: U.S. SECURITIES AND EXCHANGE COMISSION
SEC Announces Settlements with Cache Decker and David Decker in SEC V. Zufelt
The United States Securities and Exchange Commission (Commission) announced that on March 6, 2013, Judge Dee Benson entered final judgments against Cache D. Decker and David M. Decker, Jr. The Commission's complaint alleges that Cache and David Decker participated in and aided and abetted Ponzi schemes operated by Anthony C. Zufelt ("Zufelt").
Without admitting or denying the allegations of the complaint, the Deckers each consented to the entry of a final judgment permanently enjoining them from directly or indirectly violating Sections 5, 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934. Â The final judgment against David Decker orders him to pay disgorgement of $141,000 and prejudgment interest of $39,582. The final judgment also orders David Decker to pay a civil penalty of $25,000. The final judgment against Cache Decker orders him to pay disgorgement of $43,000 and prejudgment interest of $9,395 over three years. The Court did not order Cache Decker to pay a civil penalty based on his sworn statement of financial condition.
The Commission filed a complaint on June 23, 2010, alleging that from approximately June 2005 through June 2006, Zufelt operated a Ponzi scheme through his company Zufelt, Inc. (ZI), and that between July 2006 and December 2006 he ran a second fraudulent scheme through Silver Leaf Investments, Inc. ("SLI"). The Complaint alleges that, in connection with these schemes, the Deckers each made materially false and misleading statements to investors about, among other things, the profitability of ZI and SLI, the ability of ZI and SLI to repay investors, the use of investor funds, and the security of the investments. The Order finds that the Deckers acted as unregistered broker-dealers and sold unregistered ZI and SLI securities.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The United States Securities and Exchange Commission ("Commission") filed a civil action in the United States District Court for the Southern District of Florida against Mark D. Begelman, charging him with insider trading for purchasing Bluegreen Corporation stock in advance of BFC Financial Corporation's announcement that it would acquire Bluegreen.
The Commission’s complaint alleges that as a member of the World President’s Organization ("WPO"), Begelman learned from a fellow WPO member material, non-public information concerning Bluegreen’s and BFC’s negotiations and plans to enter into a business combination. Begelman’s fellow WPO member was a high-ranking executive in both companies. It was the specific written policy of the WPO that matters of a confidential nature were to be kept confidential. The complaint alleges that Begelman placed an order to purchase 25,000 shares of Bluegreen stock on November 3, 2011 in breach of a duty of trust and confidence he owed to the WPO member who was the source of the material, non-public information. On November 14, 2011, BFC announced that the companies had entered into a definitive merger agreement. The day that the acquisition was announced, Bluegreen’s share price rose nearly 46%, and Begelman sold all of his Bluegreen shares. Begelman made $14,949.34 in illegal trading profits.
Without admitting or denying the Commission's allegations, Begelman agreed to settle the case against him. The settlement is pending final approval by the court. Specifically, Begelman consented to the entry of a final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; requiring him to pay disgorgement of $14,949.34, the amount of his ill-gotten gains, plus prejudgment interest of $377.22, and a civil penalty of $14,949.34; and prohibiting him from serving as an officer and director of a public company for a period of five years.
The Commission thanks FINRA's Office of Fraud Detection and Market Intelligence for its assistance in this matter. The Commission’s investigation was conducted in the Miami Regional Office by Senior Investigations Counsel Gary M. Miller under the supervision of Assistant Regional Director Elisha L. Frank. Regional Trial Counsel, Robert K. Levenson will lead the Commission’s district court action.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., April 22, 2013 — The Securities and Exchange Commission today announced a non-prosecution agreement (NPA) with Ralph Lauren Corporation in which the company will disgorge more than $700,000 in illicit profits and interest obtained in connection with bribes paid by a subsidiary to government officials in Argentina from 2005 to 2009. The misconduct was uncovered in an internal review undertaken by the company and promptly reported to the SEC.
The SEC has determined not to charge Ralph Lauren Corporation with violations of the Foreign Corrupt Practices Act (FCPA) due to the company's prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC's investigation. Ralph Lauren Corporation's cooperation saved the agency substantial time and resources ordinarily consumed in investigations of comparable conduct.
The NPA is the first that the SEC has entered involving FCPA misconduct. NPAs are part of the SEC Enforcement Division's Cooperation Initiative, which rewards cooperation in SEC investigations. In parallel criminal proceedings, the Justice Department entered into an NPA with Ralph Lauren Corporation in which the company will pay an $882,000 penalty.
"When they found a problem, Ralph Lauren Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation," said George S. Canellos, Acting Director of the SEC's Division of Enforcement. "The NPA in this matter makes clear that we will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully with the SEC."
Kara Brockmeyer, the SEC's FCPA Unit Chief, added, "This NPA shows the benefit of implementing an effective compliance program. Ralph Lauren Corporation discovered this problem after it put in place an enhanced compliance program and began training its employees. That level of self-policing along with its self-reporting and cooperation led to this resolution."
According to the NPA, Ralph Lauren Corporation's cooperation included:
Reporting preliminary findings of its internal investigation to the staff within two weeks of discovering the illegal payments and gifts.
Voluntarily and expeditiously producing documents.
Providing English language translations of documents to the staff.
Summarizing witness interviews that the company's investigators conducted overseas.
Making overseas witnesses available for staff interviews and bringing witnesses to the U.S.
According to the NPA, the bribes occurred during a period when Ralph Lauren Corporation lacked meaningful anti-corruption compliance and control mechanisms over its Argentine subsidiary. The misconduct came to light as a result of the company adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina.
As outlined in the NPA, Ralph Lauren Corporation's Argentine subsidiary paid bribes to government and customs officials to improperly secure the importation of Ralph Lauren Corporation's products in Argentina. The purpose of the bribes, paid through its customs broker, was to obtain entry of Ralph Lauren Corporation's products into the country without necessary paperwork, avoid inspection of prohibited products, and avoid inspection by customs officials. The bribe payments and gifts to Argentine officials totaled $593,000 during a four-year period.
Under the NPA, Ralph Lauren Corporation agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest.
The SEC took into account the significant remedial measures undertaken by Ralph Lauren Corporation, including a comprehensive new compliance program throughout its operations. Among Ralph Lauren Corporation's remedial measures have been new compliance training, termination of employment and business arrangements with all individuals involved in the wrongdoing, and strengthening its internal controls and its procedures for third party due diligence. Ralph Lauren Corporation also conducted a risk assessment of its major operations worldwide to identify any other compliance problems. Ralph Lauren Corporation has ceased operations in Argentina.
The SEC's investigation was conducted by Kristin A. Snyder and Tracy L. Davis in the San Francisco Regional Office. The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Eastern District of New York, and the Federal Bureau of Investigation in this matter.
FROM: COMMODITY FUTURES TRADING COMMISSION
Federal Court Orders North Carolina Residents Timothy Bailey and Michael Hudspeth, and their Company, PMC Strategy, LLC, to Pay over $1.8 Million for Fraud in Foreign Currency Ponzi Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained federal court orders requiring Defendants Timothy Bailey of Monroe, North Carolina, Michael Hudspeth, formerly of Statesville, North Carolina, and their company, PMC Strategy, LLC (PMC), to pay over $1.8 million for solicitation fraud and misappropriation in connection with an off-exchange foreign currency (forex) Ponzi scheme that solicited at least $669,000 from more than 22 individuals
Judge Graham C. Mullen of the U.S. District Court for the Western District of North Carolina entered an Order of Default Judgment and Permanent Injunction against Defendants PMC and Bailey on October 18, 2012, requiring PMC and Bailey jointly to pay over $429,700 in restitution to defrauded pool participants. The Order also imposes a civil monetary penalty of $560,000 on PMC and $420,000 on Bailey and permanently bans them from trading and registering with the CFTC. The Order finds that PMC and Bailey violated the anti-fraud provisions of the Commodity Exchange Act (CEA) by fraudulently soliciting pool participants to trade forex, misappropriating pool participant funds, issuing false account statements, and refusing to return pool participant funds. PMC claimed to have earned a profit of $160,000 from January through June 2008 as a result of its forex trading, according to the Order. However, these representations were false, as PMC was not formed until June 18, 2008, and engaged in no forex trading until July 2008. Furthermore, PMC and Bailey sent false monthly profit checks to pool participants purporting to represent profits earned, when in fact PMC incurred trading losses in 15 of the 22 months it traded, and was overall net negative from October 2008 onward, according to the Order.
Subsequently, on April 3, 2013, Judge Mullen granted Summary Judgment against Defendant Hudspeth finding him liable for the same violations of the CEA as Bailey and PMC, and making Hudspeth jointly and severally liable with Bailey and PMC for the $429,700 restitution award previously ordered by the Court. The Order also imposes a $420,000 civil monetary penalty against Hudspeth and permanently bans him from the commodities industry.
The CFTC Division of Enforcement staff members responsible for this case are Eugenia Vroustouris, Michael Loconte, Daniel Jordan, Rick Glaser, and Richard B. Wagner.
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