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This is a photo of the National Register of Historic Places listing with reference number 7000063

Monday, June 23, 2014

FINAL JUDGMENTS ENTERED IN INSIDER TRADING CASE INVOLVING MERGERS, DRUG APPROVAL, EARNINGS REPORTS

FROM:  US. SECURITIES AND EXCHANGE COMMISSION 
Court Enters Final Judgments by Consent Against Michael Pendolino, Lawrence D. Grum, and Michael L. Castelli

The Securities and Exchange Commission announced that on June 12, 2014, in SEC v. Lazorchak et al., Civ. Act. No. 12-07164 KSH-PS, the Honorable Katharine S. Hayden, United States District Court Judge for the District of New Jersey, entered final judgments by consent against Defendants Michael Pendolino (Pendolino), of Nashua, New Hampshire; Lawrence D. Grum (Grum), of Livingston, New Jersey; and Michael L. Castelli (Castelli), of Morris Plains, New Jersey. The judgments permanently enjoin Pendolino, Grum, and Castelli from future violations of antifraud provisions of the federal securities laws and order them to pay disgorgement and prejudgment interest.

The SEC's complaint, filed on November 19, 2012, alleged an insider-trading scheme spanning five years and involving illegal tipping by insiders at three public companies: Celgene Corp. (Celgene), Sanofi-Aventis Corporation (Sanofi); and (3) Stryker Corp. (Stryker), and at least eleven material events, including mergers, a drug approval application, and quarterly earnings information. The SEC further alleged that the insiders tipped material nonpublic information about each of these corporate events to Grum and Castelli who, in turn, traded on the basis of, and tipped that information to others. As alleged, the Celgene insider also tipped material nonpublic information about two of the events to his high school friend, Pendolino, who traded on the basis of, and tipped that information to others.

The judgments permanently enjoin Pendolino, Grum, and Foldy from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and order them to pay combined disgorgement and prejudgment interest as follows: Pendolino, $68,862.12; Grum, $838,758.75; Castelli, $716,208.90.

Pendolino, Grum, and Castelli were criminally charged in a parallel criminal action in federal district court in the District of New Jersey. They have since pled guilty to charges of conspiracy to commit securities fraud and/or securities fraud and have been sentenced: Pendolino to probation of one year, and Grum and Castelli to prison terms of a year and a day, and nine months, respectively. United States v. Pendolino, 2:13-00657-KSH; United States v. Grum, 2:13-00737-KSH; United States v. Castelli, 2:13-00738-KSH.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, the Financial Industry Regulatory Authority, and the Options Regulatory Surveillance Authority.

Sunday, June 22, 2014

COURT ORDERS $44 MILLION IN SANCTIONS FOR COMMODITY POOL FRAUD AND MISAPPROPRIATION

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court in Utah Imposes over $44 Million in Sanctions against Robert Andres and His Company, Winsome Investment Trust, and Robert Holloway and His Company, US Ventures, for Commodity Pool Fraud and Misappropriation

The U.S. Attorney’s Office for the District of Utah Filed Parallel Criminal Actions against Andres and Holloway

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order requiring Defendants Robert J. Andres of Houston, Texas, his company, Winsome Investment Trust (Winsome), Robert L. Holloway of San Diego, California, and his company US Ventures LC (USV), to pay a civil monetary penalty of $32,370,000 and restitution for defrauded customers totaling $12 million. The court’s Order also imposes permanent trading and registration bans against Andres, Winsome, Holloway, and USV and prohibits them from violating provisions of the Commodity Exchange Act, as charged.

The default judgment Order stems from a CFTC civil enforcement action filed on January 24, 2011, that charged the Defendants with fraud in the operation of a commodity futures pool (see CFTC Press Release 5976-11). The Order (see Related Link) was entered by the Honorable Bruce S. Jenkins of the U.S. District Court for the District of Utah on June 6, 2014.

Specifically, the Order finds that:

• From at least May 2005 through November 2008, Andres and Winsome fraudulently solicited and accepted at least $50.2 million from at least 243 individuals to invest in a commodity futures pool operated by Holloway and USV.  In their solicitations, Andres and Winsome falsely claimed a successful track record and guaranteed the return of participants’ principal and profits; however, contrary to Andres’s and Winsome’s claims of consistently profitable trading, USV’s and Holloway’s futures trading was not successful, sustaining overall net losses of approximately $10.7 million.

• The Defendants allegedly traded only a portion of Winsome’s pool’s funds and misappropriated the majority of participant funds to pay purported “profits” to pool participants in a manner akin to a Ponzi scheme, to provide money to Andres’ wife, and to invest in various unrelated and undisclosed businesses, including using $4.2 million of participant funds to purchase an aerospace consulting business.

• Holloway used participant funds to pay personal and unrelated business expenses, and to pay for houses, cars, home furnishings, jewelry, lawn and maid services, and credit card bills in the name of his wife.  Holloway also used participant funds to finance his wife’s eBay business, Alcoy Enterprises, LLC.

• Andres and Holloway attempted to conceal the fraud by directing employees to falsify participants’ account records and by providing e-mailed account statements to participants falsely representing that Holloway profitably traded pool funds -– sustaining virtually no losses during the relevant period.

In a parallel criminal actions brought by the U.S. Attorney’s Office for the District of Utah, Andres was indicted on five counts of wire fraud, and Holloway was indicted on four counts of wire fraud and one count of making and filing a false income tax return. Holloway’s trial date is currently set for July 8, 2014. Andres pleaded guilty to one count of wire fraud, and he is scheduled to be sentenced on August 20, 2014.

The CFTC appreciates the assistance of the ComisiĆ³n Nacional del Mercado de Valores (Spain), the Dubai Financial Services Authority, and the British Virgin Islands Financial Services Commission.

CFTC Division of Enforcement staff members responsible for this case are Alan Edelman, Kevin S. Webb, Michelle S. Bougas, Heather Johnson, Kara Mucha, James H. Holl III, and Gretchen L. Lowe.

Saturday, June 21, 2014

4 CHARGED IN $12 MILLION INSIDER TRADING CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Four California Residents in $12 Million Insider Trading Scheme

The Securities and Exchange Commission today charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.

The SEC alleges that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, Calif. Khan used the confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results. Besides trading in his own brokerage account, Khan traded in his brother-in-law’s account as well as an account belonging to another acquaintance. Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information. The insider trading resulted in collective profits of more than $12 million.

The SEC further alleges that at the outset of the scheme, Chaganlal gave $17,000 to Khan for the purpose of insider trading in Ross securities using the brother-in-law’s account. They attempted to disguise the exchange by using two cashier’s checks for $8,500 purchased in the name of Chaganlal’s wife of a different surname. Khan later funneled $130,000 of the generated trading profits back to Chaganlal by using third-party intermediaries. For example, Khan wrote Akbari a check for $35,000, and Akbari in turn wrote two checks totaling $35,000 to Chaganlal’s wife. Another $75,000 was routed in a roundabout way to a title company so it could be credited at closing toward Chaganlal’s purchase of a newly-built home.

According to the SEC’s complaint filed in federal court in San Francisco, Khan separately made approximately $450,000 in illicit profits by insider trading in stock options of software company Taleo Corporation ahead of its 2012 acquisition by Oracle Corporation. Khan began purchasing large numbers of options in Taleo six days before the merger announcement based on nonpublic information he received from an insider he knew at Oracle. Khan had never previously traded in Taleo securities.

The SEC alleges that the serial insider trading involving Ross securities began in August 2009 and continued until December 2012, when Chaganlal was terminated by the company. He had access to confidential sales figures on an internal webpage limited to a relatively small group of Ross employees. Chaganlal regularly communicated the confidential details to Khan so he could trade ahead of impending monthly sales announcements by Ross. Khan generated $5.4 million in profits in his own account, and $6 million in profits in his brother-in-law’s account. Khan’s supervisor Mendonsa made approximately $800,000 in insider trading profits based on the nonpublic information that Khan in turn tipped to him. Akbari made approximately $2,000 by insider trading on Khan’s illegal tips.

The SEC’s complaint names two relief defendants - Khan’s acquaintance Michael Koza and Khan’s brother-in-law Shahid Khan - for the purposes of recovering insider trading profits in their brokerage accounts through trades conducted by Khan. They each have agreed to settle the matter by paying the court the entire amount of insider trading profits remaining in their accounts, which total $240,741 for Shadid Khan and $31,713 for Koza.

The SEC’s complaint charges Saleem Khan, Chaganlal, Mendonsa, and Akbari with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits plus interest, and financial penalties. The complaint also seeks an officer-and-director bar against Chaganlal.

The SEC’s investigation, which is continuing, has been conducted by Victor Hong and Elena Ro. The case has been supervised by Steven Buchholz and Jina L. Choi of the Market Abuse Unit and San Francisco Regional Office as well as Joseph G. Sansone of the Market Abuse Unit. The SEC’s litigation will be led by Aaron Arnzen. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority.


Friday, June 20, 2014

ALZHEIMER PRODUCTS COMPANY AND PRESIDENT ORDERED TO PAY $1.9 MILLION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Court Orders California Company and Its President to Pay Over $1.9 Million in Investment Scheme Involving Purported Alzheimer's Treatment

The Securities and Exchange Commission announced that on June 10, 2014, a California federal court entered final judgments against Your Best Memories International Inc., a promoter of a purported Alzheimer’s treatment, its president, Robert Hurd, and Smokey Canyon Financial Inc., another company controlled by Hurd.  Your Best Memories and Hurd, both of Los Angeles, California, were charged as defendants in a fraud action filed by the Commission in June 2013.  The Commission alleged that they claimed to be in the business of raising money from investors on behalf of a Massachusetts-based company that was in the business of developing products intended to improve memory function in individuals suffering from Alzheimer's disease and other conditions.  The Commission charged Your Best Memories and Hurd with misleading investors about how their funds would be used and making misleading statements that one of the products touted to investors had received approval from the U.S. Food and Drug Administration as a treatment for Alzheimer's disease.  Smokey Canyon Financial, based in Reno, Nevada, was charged by the Commission as a relief defendant because it received investor funds.

According to the Commission’s complaint, filed on June 20, 2013, Your Best Memories and Hurd falsely told investors that their funds would largely be used to finance the development and marketing of products intended to improve memory function in individuals suffering from Alzheimer’s disease, dementia or memory loss.  The Commission alleged that, unbeknownst to investors, a mere 17% of the funds raised were used for their intended purpose, while 37% of investor funds were funneled to Hurd or his company, Smokey Canyon Financial.  The Commission also alleged that Your Best Memories and Hurd made Ponzi payments to investors (using investors' principal to make payments purporting to be investment returns to other investors) and falsely stated that they had secured FDA approval to sell coconut oil as a treatment for Alzheimer’s disease, when, in fact, the FDA had never approved such a claim.  The complaint alleged that, in total, Your Best Memories raised approximately $1.2 million from more than 50 investors in an unregistered securities offering.

The final judgments, entered by default by the United States District Court for the Central District of  California, imposed permanent injunctions prohibiting Your Best Memories and Hurd from future violations of Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934.  Your Best Memories, Hurd, and Smokey Canyon Financial also were ordered to pay disgorgement of $963,000 and prejudgment interest of $34,170.  In addition, Your Best Memories and Hurd were ordered jointly and severally to pay a civil penalty of $963,000.

On March 14, 2014, the Court entered a partial final judgment, by consent, against the other Defendant in the action, Kenneth Gross, of Porter Ranch, California, who was charged with selling Your Best Memories stock without being registered as a broker-dealer as required by the federal securities laws.  The judgment permanently enjoined Gross from future violations of Sections 5(a) and (c) of the Securities Act and Section 15(a) of the Exchange Act, with disgorgement, prejudgment interest and civil penalties to be decided by the Court at a later date.   The Commission also instituted a settled follow-on administrative proceeding against Gross on March 6, 2014, permanently barring him from the securities industry.

Wednesday, June 18, 2014

CFTC OBTAINS DEFAULT JUDGEMENT IN COMMODITY POOL FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Obtains Default Judgment against New York-based SK Madison Commodities, LLC and its Principals, Michael James Seward and Yan Kaziyev, for Commodity Pool Fraud and Other Violations

Federal Court Orders Defendants to Pay More than $3.5 Million in Restitution and a Monetary Penalty in CFTC Anti-Fraud Action

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York (Manhattan) entered an Order of default judgment and permanent injunction against CFTC Defendants Michael James Seward, Yan Kaziyev, and their company SK Madison Commodities, LLC (SKMC), a Commodity Pool Operator based in New York City. The Order requires the Defendants to pay restitution totaling $1,036,981.01 and a civil monetary penalty of $2,486,865.57. The Order also imposes permanent trading and registration bans against the Defendants and orders that assets controlled by SK Madison, LLC, a successor company named as a Relief Defendant in the action, be released and applied toward payment of Defendants’ restitution obligation.

The court’s Order, entered on June 9, 2014, stems from a CFTC Complaint filed on March 24, 2014 (see CFTC Press Release 6892-14) alleging that Seward and Kaziyev, by and through SKMC, fraudulently solicited more than $1.3 million from members of the public to trade futures in a commodity pool by, among other things, misrepresenting their trading practices and historical trading returns. The Complaint further alleged that the Defendants prepared and distributed to pool participants false account statements and performance reports showing huge profits while at the same time, Defendants were losing money trading futures and diverting large amounts of pool participants’ funds for Defendants’ own use. In addition to fraud, the Complaint charged Defendants with certain registration violations. As a result of the filing of this action, more than $500,000 of pool participant funds controlled by the Defendants and the Relief Defendant were frozen.

The CFTC Division of Enforcement staff members responsible for this case are Daniel Jordan, Michael Loconte, Matthew Elkan, and Rick Glaser.

Monday, June 16, 2014

FINAL "PAY TO PLAY" RETIREMENT FUND DEFENDANT CHARGED BY SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Final Defendant Settles SEC Fraud Charges in "Pay to Play" Case Involving New York State Common Retirement Fund

On May 22, 2014, the Honorable Katherine Polk Failla, United States District Judge for the Southern District of New York, entered a final judgment against defendant Saul Meyer in the enforcement action arising from the "pay-to-play" scheme involving the New York State's Common Retirement Fund ("Common Fund"). Starting on March 19, 2009, the Commission filed securities fraud and related charges against several participants in the scheme, including Henry Morris ("Morris"), the top political advisor to former New York State Comptroller Alan Hevesi, and David Loglisci ("Loglisci"), formerly the Deputy Comptroller and the Common Fund's Chief Investment Officer. Morris and Loglisci orchestrated a scheme to extract sham finder fees and other payments and benefits from investment management firms seeking to do business with the Common Fund. In all, the Commission charged seventeen defendants, including various nominee entities through which payments were funneled and certain of the investment management firms and their principals. Meyer was the principal of an investment management firm and is alleged to have made unlawful payments to Morris in connection with one of the transactions at issue. The civil action had been stayed until the outcome of the New York Attorney General's Office's parallel criminal action against some of the defendants charged by the Commission, including Meyer.

Meyer previously pled guilty to the parallel criminal charges and was sentenced to a term of conditional discharge due to his cooperation with law enforcement authorities and ordered to forfeit $1 million. In the SEC's federal court action, Meyers consented to entry of a judgment that permanently enjoins him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In addition to the judgment entered in the federal court action, the Commission issued an administrative order on June 10, 2014 imposing remedial sanctions against Meyer. The Commission's administrative order bars Meyer from associating with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent, subject to a right to reapply after seven years.

The Commission's claims in this action are now fully resolved. The Commission acknowledges the assistance and cooperation of the New York Attorney General's Office in this matter.