FINANCIAL MANAGEMENT COMPANY ACCUSED OF SCAMMING THE ELDERLY

From:  U.S. Securities and Exchange Commission
Press Release
SEC Halts Fraud Targeting Seniors
FOR IMMEDIATE RELEASE
2017-72
Washington D.C., March 27, 2017—
The Securities and Exchange Commission today announced an emergency asset freeze and temporary restraining order against a Chicago-based investment adviser and his financial management company accused of scamming elderly investors out of millions of dollars.

The SEC alleges that Daniel H. Glick and his unregistered investment advisory firm Financial Management Strategies (FMS) provided clients with false account statements to hide Glick’s use of client funds to pay personal and business expenses, purchase a Mercedes-Benz, and pay off loans and debts among other misuses.

According to the SEC’s complaint, Glick was barred by FINRA in 2014 and had his Certified Financial Planner designation and Certified Public Accountant license revoked for conduct unrelated to today’s SEC charges.

“As alleged in our complaint, Daniel Glick raised millions of dollars from elderly clients by claiming that he would pay their bills, handle their taxes, and invest on their behalf.  In reality, Daniel Glick used much of their money to do what was best for Daniel Glick,” said David Glockner, Director of the SEC’s Chicago Regional Office.

The SEC’s complaint also names Glick Accounting Services, Glick’s business partner David B. Slagter, and Glick’s business acquaintance Edward H. Forte as relief defendants for the purposes of recovering client funds that Glick transferred or paid them in the form of advances or loans.

The court issued a temporary restraining order against Glick and FMS at the SEC’s request, and issued an order freezing the assets of Glick, FMS, and Glick Accounting Services.

The SEC encourages investors to check the background of anyone offering to sell them investments.

The SEC’s investigation, which is continuing, is being conducted by Michelle Muñoz Durk and John Kustusch, and the case is being supervised by Jeffrey A. Shank.  The SEC’s litigation will be led by Steven C. Seeger.  The SEC’s examination that led to the investigation was conducted by Terrence Bohan, Michael Altschuler, and Christine Little, and it was supervised by Rosanne Smith.

CASINO-GAMING COMPANY TO PAY HALF-MILLION PENALTY IN WHISTLEBLOWER RETALIATION CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release

SEC: Casino-Gaming Company Retaliated Against Whistleblower

FOR IMMEDIATE RELEASE

2016-204

Washington D.C., Sept. 29, 2016 — The Securities and Exchange Commission today announced that casino-gaming company International Game Technology (IGT) has agreed to pay a half-million dollar penalty for firing an employee with several years of positive performance reviews because he reported to senior management and the SEC that the company's financial statements might be distorted.

In its second whistleblower retaliation case since the Dodd-Frank Act authorized the agency to bring such charges, the SEC found that the employee was removed from significant work assignments within weeks of raising concerns about the company's cost accounting model.  He was terminated approximately three months later.

"Strong enforcement of the anti-retaliation protections is critical to the success of the SEC's whistleblower program.  This whistleblower noticed something that he felt might lead to inaccurate financial reporting and law violations, and he was wrongfully targeted for doing the right thing and reporting it," said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.

"Bringing retaliation cases, including this first stand-alone retaliation case, illustrates the high priority we place on ensuring a safe environment for whistleblowers,” said Jane A. Norberg, Chief of the SEC’s Office of the Whistleblower.  "We will continue to exercise our anti-retaliation authority when companies take reprisals for whistleblowing efforts."

According to the SEC's order, IGT conducted an internal investigation into the allegations made by the whistleblower, who did not oversee the company's accounting functions, and determined its reported financial statements contained no misstatements.

Without admitting or denying the SEC's findings, IGT agreed to pay the $500,000 penalty and cease and desist from committing or causing any further violations of Section 21F(h) of the Securities Exchange Act of 1934.

The SEC’s investigation was conducted by Brent W. Wilner, Rhoda H. Chang, and Gary Y. Leung, and the case was supervised by Diana K. Tani, John W. Berry, C. Dabney O’Riordan, and Michele W. Layne of the Los Angeles Regional Office.  The SEC appreciates the assistance of the U.S. Labor Department's Occupational Safety and Health Administration.

FINANCE EXEC SENTENCE TO PRISON FOR OBSTRUCTION OF JUSTICE

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, August 23, 2016

Financial Services Company Executive Sentenced to 15 Months for Obstruction of Justice

The CEO of Preferred Merchants LLC, a financial services company based in Napa, California, was sentenced today in the U.S. District Court for the Western District of North Carolina to 15 months in prison for engaging in an elaborate obstruction of justice scheme to conceal from the government millions of dollars, which were subject to a freeze order and seizure warrant.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division; U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina; Special Agent in Charge Michael Rolin of the U.S. Secret Service’s Charlotte, North Carolina, Field Division; and Special Agent in Charge Thomas J. Holloman III of the Internal Revenue Service-Criminal Investigation (IRS-CI) Charlotte Field Office made the announcement.

On March 23, Jaymes Meyer, aka James Meyer, 47, pleaded guilty to one count of obstruction of justice.  In addition to imposing the prison term, U.S. District Judge Max O. Cogburn Jr. of the Western District of North Carolina entered a monetary judgment of $4.8 million against Meyer.

According to the plea agreement, in or about 2012, the U.S. Securities and Exchange Commission’s (SEC’s) Division of Enforcement commenced a securities fraud investigation concerning a Ponzi scheme centering on Rex Ventures Group LLC (RVG), a North Carolina-based company for which Preferred Merchants held millions in assets in treasury and trust accounts.  As a result of its investigation, the SEC filed a civil enforcement action against RVG, resulting in an order freezing all of RVG’s assets and appointing a receiver to marshal, manage and distribute remaining RVG assets to impacted investors.  The U.S. Secret Service also obtained a seizure warrant of RVG assets held by Meyer through Preferred Merchants.  Meyer admitted that in August 2012, the SEC informed him of, among other things, the investigation and the freeze order and requested that Meyer freeze any RVG assets in his possession, custody or control.

According to the plea agreement, in response to this request, Meyer misled the SEC by falsely implying that Preferred Merchants did not exercise dominion or control over any RVG assets when, in fact, Meyer controlled approximately $17.4 million in RVG assets.  Meyer further admitted that he wired approximately $4.8 million from an RVG trust account to a brokerage account under his control after learning about the SEC’s investigation and used that money to purchase homes in Napa and the Turks and Caicos, and took additional measures to conceal his RVG assets.

Meyer also admitted that throughout the pending civil litigation surrounding the RVG scheme, he made fraudulent and misleading statements to the U.S. District Court for the Western District of North Carolina, the SEC and the court-appointed receiver during depositions.

In connection with his plea agreement, Meyer consented to the $4.8 million money judgment entered against him and forfeited the homes that he purchased in the Turks and Caicos and Napa as proceeds of the obstruction of justice offense.

The U.S. Secret Service and IRS-CI investigated the case.  Assistant U.S. Attorney Jennifer Grus Sugar of the Western District of North Carolina and Trial Attorneys Kevin Lowell and Brian D. Frey of the Criminal Division’s Asset Forfeiture and Money Laundering Section – Bank Integrity Unit prosecuted the case.

SEC ANNOUNCES CHARGES AGAINST 71 MUNICIPAL BOND ISSUERS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges 71 Municipal Issuers in Muni Bond Disclosure Initiative

FOR IMMEDIATE RELEASE

2016-166

Washington D.C., Aug. 24, 2016 — The Securities and Exchange Commission today announced enforcement actions against 71 municipal issuers and other obligated persons for violations in municipal bond offerings.

The actions were brought under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.  The initiative offered favorable settlement terms to municipal bond underwriters, issuers, and obligated persons that self-reported certain violations of the federal securities laws.  Obligated persons are typically nonprofit entities such as hospitals and colleges that borrow the proceeds of bond issuances and are obligated to pay principal and interest on the bonds.

The SEC found that from 2011 to 2014, the 71 issuers and obligated persons sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations.  Continuing disclosure provides municipal bond investors with important information, including annual financial reports, on an ongoing basis.  The SEC’s 2012 Municipal Market Report identified issuers’ failure to comply with their continuing disclosure obligations as a major challenge for investors seeking information about their municipal bond holdings.

“The diversity among the 71 entities in these actions demonstrates that continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” said Andrew Ceresney, Director of the SEC Enforcement Division. “The MCDC Initiative has brought attention to this important issue and resulted in increased compliance by municipal issuers and underwriters.”

The parties settled the actions without admitting or denying the findings and agreed to cease and desist from future violations.  Pursuant to the terms of the initiative, they also agreed to undertake to establish appropriate policies, procedures, and training regarding continuing disclosure obligations; comply with existing continuing disclosure undertakings, including updating past delinquent filings, disclose the settlement in future offering documents, and cooperate with any subsequent investigations by the SEC.

“The terms of the settlements reflect the credit these issuers earned for their cooperation in self-reporting pursuant to the MCDC initiative,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit.  “Because the issuers also voluntarily agreed to take steps to prevent future violations, both they and their investors have benefited from the initiative.”

The SEC has now filed a total of 143 actions against 144 respondents as part of the MCDC Initiative.  Today’s actions are the first against municipal issuers since the first action under the initiative was announced in July 2014 against a California school district.  The SEC filed actions under the initiative against a total of 72 municipal underwriting firms, comprising 96 percent of the market share for municipal underwritings, in June 2015, in September 2015, and in February 2016.

The MCDC Initiative is being led by Kevin Guerrero of the Enforcement Division’s Public Finance Abuse Unit.  The cases announced today were investigated by members of the unit, including Michael Adler, Joseph Chimienti, Kevin Currid, Susan Curtin, Peter Diskin, Brian Fagel, Natalie Garner, Warren Greth, Sally J. Hewitt, Jason Howard, Jason Lee, Robbie Mayer, Heidi Mitza, William Salzmann, Cori Shepherd, Ivonia K. Slade, Steven Varholik, Jonathan Wilcox, Monique C. Winkler, and Deputy Chief Mark R. Zehner with assistance from Peter Moores and Ellen Moynihan of the Boston Regional Office, Howard Kaplan of the Enforcement Division’s Center for Risk and Quantitative Analytics, and Rebecca Olsen, Hillary Phelps, and Adam Wendell of the Office of Municipal Securities.

SEC ANNOUNCES FRAUD CHARGES AGAINST HEDGE FUND INVOLVED WITH TERMINALLY ILL PATIENTS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Press Release

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Hedge Fund Manager Charged in Scheme Involving Terminally Ill

FOR IMMEDIATE RELEASE

2016-162

Washington D.C., Aug. 15, 2016 — The Securities and Exchange Commission today announced fraud charges against a hedge fund manager and his firm accused of paying terminally ill individuals to use their names on purportedly joint brokerage accounts so he could purchase investments on behalf of his hedge fund and redeem them early by invoking a survivor’s option.
An SEC examination of investment advisory firm Eden Arc Capital Management uncovered the scheme alleged by the SEC Enforcement Division in an order instituted today.  Donald Lathen of New York City allegedly used contacts at nursing homes and hospices to identify patients with less than six months to live, and he successfully recruited at least 60 of them by paying $10,000 apiece to use their names on accounts.  When a patient died, Lathen allegedly redeemed investments in the accounts by falsely representing to issuers that he and the terminally ill individuals were joint owners of the accounts.  Lathen’s hedge fund was the true owner of the survivor’s option investments.  Issuers paid out more than $100 million in early redemptions as a result of the alleged misrepresentations and omissions by Lathen and Eden Arc Capital.

The SEC Enforcement Division further alleges that Lathen violated the custody rule by failing to properly place the hedge fund’s cash and securities in an account under the fund’s name or in an account containing only clients’ funds and securities, under the investment adviser’s name as agent or trustee for the client.

“We allege that Lathen deceived issuers by falsely claiming that he and the deceased jointly owned the bonds when the hedge fund was the true owner of the investments,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Lathen allegedly put hedge fund client assets at risk by keeping them in accounts in his and the terminally ill individuals’ names rather than following the custody rule.”

The SEC Enforcement Division alleges that Lathen, Eden Arc Capital Management, and Eden Arc Capital Advisors violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The Enforcement Division further alleges that Eden Arc Capital Management violated Section 206(4) of the Advisers Act and Rule 206(4)-2, and Lathen aided and abetted and caused those violations.

The matter will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate.

The SEC’s investigation was conducted by Janna Berke, Judith Weinstock, Frank Milewski, Adam Grace, and Michael Birnbaum.  The case was supervised by Lara Shalov Mehraban and the litigation will be led by Alexander Janghorbani, Ms. Weinstock, and Ms. Berke.  The SEC examiners who detected the wrongdoing during the examination of Eden Arc Capital Management are Kathleen Raimondi, Lawrence Chinsky, and George DeAngelis.

FORMER HEAD RMBS TRADER AT GOLDMAN SACHS SETTLES FRAUD CHARGES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Former Goldman Sachs Trader Settles Fraud Charges

FOR IMMEDIATE RELEASE

2016-163

Washington D.C., Aug. 16, 2016 — The Securities and Exchange Commission today announced that the former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.

An SEC investigation found that Edwin Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS, then re-selling them at higher prices to the buying customer with Goldman keeping the difference.  On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.

“With no public exchange showing the price for each RMBS trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.  “Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation.”

The SEC’s order finds that Chin’s misconduct began in 2010 and continued until he left Goldman in 2012.  Without admitting or denying the findings, Chin agreed to the entry of the order finding that he violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5.  He agreed to pay $200,000 in disgorgement, $50,000 in prejudgment interest, and a $150,000 penalty.

The SEC’s continuing investigation has been conducted by Andrew Feller, David London, and Heidi Mitza, and the case has been supervised by Celia Moore and Michael Osnato.