SEC CHARGES 23 COMPANIES, 6 INDIVIDUALS FOR ROLES IN CELLULAR LICENSING FRAUD SCHEME

U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23236 / April 9, 2015

Securities and Exchange Commission v. Janus Spectrum LLC et al., Civil Action No. 2:15-cv-00609-DGC

SEC Charges Firms and Individuals for Defrauding Investors in Cellular Licensing Scheme

On April 6, 2015, the Securities and Exchange Commission charged 12 companies and six individuals with defrauding investors in a scheme involving applications to the Federal Communications Commission (FCC) for cellular spectrum licenses.

According to the SEC's complaint filed in federal district court in Arizona, David Alcorn and Kent Maerki orchestrated the offering fraud through Janus Spectrum LLC, a Glendale, Ariz.-based company they founded and managed. Janus Spectrum held itself out as a service provider that prepares cellular spectrum license applications on behalf of third parties. The complaint alleges that although Alcorn and Maerki had third parties offer and sell securities based on the licenses to investors, they were personally involved in presentations to investors and Maerki appeared in misleading videos, including one called "Money from Thin Air."

The SEC alleges that investors in the scheme were promised potentially lucrative returns based on Janus Spectrum obtaining FCC licenses in the Expansion Band and Guard Band portions of the 800 megahertz (MHz) band. Janus Spectrum and the fundraising entities claimed that investors could profit because Sprint and other major wireless carriers needed licenses in this spectrum. In fact, the value of the licenses was small because this spectrum cannot support cellular systems and is generally used for "push-to-talk" services for local law enforcement or businesses like pizza delivery companies that require less bandwidth.

The SEC's complaint alleges that the scheme raised more than $12.4 million from investors from May 2012 to October 2014. The fundraising entities funneled a significant percentage of the investors' funds to Janus Spectrum, which used only a small portion to prepare applications for FCC licenses. The complaint alleges that instead, all of the individuals in the scheme kept a significant portion of investor funds for personal use.
he SEC's complaint alleges that all of the defendants violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the SEC's complaint alleges that Janus Spectrum, Alcorn, Maerki, Bank, Jones, Johnson, and Chadwick violated Section 15(a) of the Exchange Act. The SEC also seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all defendants.

The SEC's investigation was conducted by Sana Muttalib and Lorraine Pearson and supervised by Victoria A. Levin of the Los Angeles office. The litigation will be handled by Sam Puathasnanon. The SEC appreciates the assistance of the Texas State Securities Board and the Federal Communications Commission.

SEC CHARGES COMPANY WITH CONDUCTING FRAUDULENT OIL AND GAS SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23230 / April 6, 2015

Securities and Exchange Commission v. Team Resources, Inc., et al., Civil Action No. 3:15-CV-1045 (NDTX, April 6, 2015)

SEC Charges California Companies with Running a $33 Million Oil and Gas Scheme

The Securities and Exchange Commission today filed suit in the U.S. District Court for the Northern District of Texas against two California oil-and-gas companies, their principal, and four sales associates, for conducting a long-term fraudulent oil and gas scheme.

The SEC alleges that, from 2007 through 2012, Team Resources, Inc. and Fossil Energy Corp. raised over $33 million from approximately 475 investors nationwide through eight unregistered offerings of oil-and-gas partnership interests. Kevin Albert Boyles controlled both companies, and used his sales staff of Philip Adam Dressner, Michael James Eppy, Andrew Stitt, and John M. Olivia to cold-call potential investors and mislead them into buying the partnership interests. The complaint alleges that the defendants misled investors about such material information as potential returns, the success of past offerings, and how offering proceeds would be used. In addition, Boyles paid large and undisclosed commissions to the salesmen — ranging from 25% to 35% — even though none of them was registered as a broker or associated with a registered broker-dealer. After raising sufficient funds from investors, Team Resources and Fossil Energy contracted with third parties to drill the wells, all of which failed to produce oil and gas in the amounts projected by the defendants.

The SEC charges Team, Fossil, Boyles, Dressner, Eppy and Stitt with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"), and Sections 10(b) and 15(a) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Olivia is charged with violating Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The SEC seeks civil penalties and disgorgement plus prejudgment interest from each defendant, as well as other relief.

To settle the SEC's charges, Team, Fossil, and Boyles have consented to judgments permanently enjoining them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. Olivia has consented to a permanent injunction against violations of Sections 5(a) and 5(c) of the Securities Act, and Section 15(a) of the Exchange Act. Team, Fossil, Boyles, and Olivia have consented to disgorge their ill-gotten gains and to pay civil penalties in amounts to be determined by the court. Boyles and Olivia have also agreed to consent to an administrative order barring each from associating with any broker, dealer, investment adviser, municipal advisor, transfer agent, or nationally recognized statistical rating organization, or from participating in an offering of penny stock.

CFTC CHARGES COMPANY AND PRINCIPALS WITH POOL FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

March 31, 2015

CFTC Charges Maverick International, Inc. and its Principals Wesley Allen Brown and Edward Rubin with Pool Fraud and Other Violations

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a civil enforcement action in the U.S. District Court for the Middle District of Florida, charging Defendants Maverick International, Inc. and its principals, Wesley Allen Brown and Edward Rubin, with operating a fraudulent commodity pool and other violations of federal commodity laws. Maverick International, Inc. purportedly maintains offices in Wilmington, Delaware; however, its address is actually the address of a mail forwarding service. Brown currently resides in North Myrtle Beach, South Carolina, and Rubin resides in Winnabow, North Carolina.

The CFTC Complaint was filed under seal on March 23, 2015, and on March 26, 2015, U.S. District Court Judge Brian J. Davis issued an emergency Order freezing and preserving assets under Defendants’ control and prohibiting them from destroying documents or denying CFTC staff access to their books and records.  The Court scheduled a hearing for April 8, 2015, on the CFTC’s motion for a preliminary injunction.

The CFTC Complaint charges that, as early as June 18, 2008, Defendants solicited and accepted more than $2 million from members of the public to trade commodity futures contracts in a commodity pool. As alleged, the Defendants misappropriated all of the $2 million to pay their personal and business expenses, including rent, meals, and more than $200,000 in cash withdrawals.

The Complaint alleges that Brown used his position as an associate pastor at a Flagler Beach, Florida, church to solicit congregants to participate in the fraudulent scheme. Through in-person solicitations and the Defendants’ website (wealthnavigator.org), Brown represented to actual and potential participants that the Defendants profitably traded commodity futures and precious metals on behalf of participants. These representations were false, because Defendants misappropriated all of the participants’ funds, and no trading on behalf of participants took place, according to the Complaint.

In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.

The CFTC appreciates the assistance of the Office of the State Attorney for the Seventh Judicial District of Florida; the Florida Office of Financial Regulation; the Office of the U.S. Attorney for the Middle District of Florida; the North Carolina Department of the Secretary of State, Securities Division; the Sherriff’s Department, Brunswick County, North Carolina; and the City of Myrtle North Myrtle Beach, Department of Public Safety.

CFTC Division of Enforcement staff members responsible for this action are Timothy J. Mulreany, George Malas, and Paul Hayeck.

Remarks at the Harvard Law School Symposium on Building the Financial System of the 21st Century: An Agenda for Europe and the United States

Remarks at the Harvard Law School Symposium on Building the Financial System of the 21st Century: An Agenda for Europe and the United States

SEC.gov | The Dominance of Data and the Need for New Tools: Remarks at the SIFMA Operations Conference

SEC.gov | The Dominance of Data and the Need for New Tools: Remarks at the SIFMA Operations Conference

SEC CHARGED FORMER TECHNOLOGY CEO WITH USING CORPORATE FUNDS FOR PERSONAL PURPOSES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
03/31/2015 01:00 PM EDT

The Securities and Exchange Commission charged the former CEO of Silicon Valley-based technology firm Polycom Inc. with using nearly $200,000 in corporate funds for personal perks that were not disclosed to investors.

The SEC alleges that Andrew Miller created hundreds of false expense reports with bogus business descriptions for his personal use of company dollars to pay for meals, entertainment, and gifts.  Furthermore, he used Polycom funds to travel with his friends and girlfriend to luxurious international resorts while falsely claiming the trips were business-related site inspections in advance of company sales retreats.  Miller hid the costs by directing a travel agent to bury them in fake budget line items.  In 2012 alone, Miller charged Polycom for more than $115,000 in personal expenses despite publicly reporting that he received less than $35,000 in perks that year.

The SEC separately charged Polycom in an administrative order finding that the company had inadequate internal controls and failed to report Miller’s perks to investors.  Polycom agreed to pay $750,000 to settle the SEC’s charges, without admitting or denying the SEC’s findings as to the company.  The case against Miller continues in federal court.

“CEOs are stewards of corporate assets and must be held to the highest standard of honesty and integrity,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “We will not hesitate to charge executives with fraud when they allegedly use a public company as a personal expense account and hide it from investors.”

According to the SEC’s complaint filed in the San Francisco Division of U.S. District Court for the Northern District of California, Miller’s undisclosed use of company funds for personal perks was wide-ranging:

More than $80,000 for personal travel and entertainment that Miller hid in falsified invoices or passed off as legitimate business expenses
More than $10,000 for clothing and accessories and more than $5,000 worth of spa gift cards that Miller falsely claimed to have given as gifts to customers and employees.

More than $10,000 for tickets to professional baseball and football games that Miller falsely claimed to have attended with clients.

More than $5,000 for plants and a plant-watering service at Miller’s apartment that he falsely claimed were for the company’s San Francisco office
The SEC’s complaint against Miller alleges that he violated the antifraud, proxy solicitation, periodic reporting, books and records and internal controls provisions of the federal securities laws.  The complaint also alleges that he falsely certified the accuracy of Polycom’s annual reports, which incorporated its proxy statements.

The SEC’s order against Polycom found that its internal controls over Miller’s expenses were inadequate.   For example, Polycom allowed Miller to approve his own expenses that were charged on his assistants’ credit cards, and the company allowed him to book and charge airline flights without providing any descriptions of their purpose.  As a result of Miller’s misconduct, Polycom’s proxy statements contained false compensation information and failed to accurately describe Miller’s perks as required.

“Public companies are required to implement and maintain effective controls over executive compensation and expenses,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Miller allegedly exploited weaknesses in Polycom’s controls to steer himself a series of perks to the detriment of shareholders.”

The SEC’s investigation was conducted by David Berman and John Roscigno of the San Francisco office, and the case was supervised by Tracy Davis.  The SEC’s litigation against Miller will be led by Susan LaMarca and David Johnson.