CFTC ANNOUNCES FRAUD ACTIONS

The following excerpt is from the CFTC website: “The Division’s mission to protect market participants from fraud is reflected by the 55 fraud actions filed in fiscal year 2011 alone, and by the numerous federal court orders obtained by the Division against more than 75 defendants, imposing civil monetary penalties and restitution and disgorgement obligations. In one notable fraud case, CFTC vs Walsh, et al, the Court ordered an initial distribution and return of approximately $792 million to commodity pool investors stemming from an alleged $1.3 billion Ponzi scheme that was the subject of CFTC and Securities and Exchange Commission (SEC) charges in a prior fiscal year. The Division also took action against so-called gatekeepers, charging an accounting firm and two of its partners in two separate cases, for failing to apply generally accepted auditing standards (GAAS) when conducting audits of futures commission merchants that had produced misstated financial statements. See In the Matter of G. Victor Johnson II, McGladrey & Pullen, LLP and Altshuler, Melvoin & Glasser, LLP, CFTC Docket No. 11-01 (October 4, 2010 ) and In the Matter of David Shane and McGladrey & Pullen, LLP, CFTC Docket No. 11-23 (September 22, 2011). Foreign Exchange Currency (Forex) Enforcement The Division of Enforcement filed 23 actions enforcing new regulations that resulted from the Dodd-Frank Act, and that require foreign exchange dealers and introducing brokers to register with the Commission. Separately, and as part of the Division’s prosecution of retail forex fraud, the Division prevailed in a federal jury trial in the United States District Court for the Middle District of Florida, which imposed more than $17 million in sanctions and other relief against Capital Blu Management, LLC and several other defendants. Cooperating with Law Enforcement Partners The Division of Enforcement continues to actively engage in cooperative enforcement with federal and state criminal and civil law enforcement authorities. During FY 2011, more than 70 indictments and convictions were obtained in criminal cases related to CFTC enforcement actions. The Division also engages in cooperative enforcement with international authorities in a wide range of matters from retail fraud to market manipulation. Requests and referrals to and from foreign authorities continued to grow during FY 2011. The Division handled over 530 international requests and referrals, an approximate 20 percent increase over FY 2010."

SEC SETTLES BACKDATED STOCK OPTIONS CLAIMS INVOLVING JUNIPER NETWORKS AND KLA-TENCOR CORP.

The following excerpt is from the SEC website: OCTOBER 19, 2011 “The Securities and Exchange Commission resolved its claims with Lisa C. Berry, the former General Counsel of KLA-Tencor Corp. and Juniper Networks, Inc. The Commission alleged that from 1997 through 2003 Berry caused KLA-Tencor and Juniper to report false financial information to the investing public through her preparation of corporate records that concealed that employee stock option grants were priced with the benefit of hindsight at both companies. Without admitting or denying the Commission's allegations, Berry consented to pay a $350,000 civil penalty, and also to pay disgorgement totaling $77,120, including interest. In addition, Berry consented to the entry of a final judgment that will enjoin her permanently from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, Section 13(b)(5) of the Securities Exchange Act of 1934, and Rule 13b2-1 under the Exchange Act, as well as aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9 thereunder. The United States District Court for the Northern District of California approved the settlement on October 7, 2011. In a separate administrative proceeding, Berry also agreed to be suspended from appearing or practicing as an attorney before the Commission. Under the terms of the agreement, Berry may apply for reinstatement in five years. Berry agreed to the suspension without admitting or denying the Commission's allegations. The Commission previously resolved stock option backdating claims against Juniper, KLA-Tencor, and KLA-Tencor's former Chief Executive Officer, Kenneth L. Schroeder. All consented to resolve the Commission's claims without admitting or denying the Commission's allegations.”

INTERNATIONAL FINANCIAL REGULATORS MEET TO SHARE VIEWS ON MARKET STRUCTURE

The following is an excerpt from the SEC website: “Washington, D.C., Oct. 14, 2011 — Securities and Exchange Commission Chairman Mary Schapiro and Martin Wheatley, Managing Director of the Conduct Business Unit at the U.K. Financial Services Authority (FSA), today co-hosted a meeting among regulators from Europe, the Americas, Asia, and Australia to share views on issues pertaining to equity market structure. The roundtable, held at FSA headquarters in London, considered how advances in technology, new trading strategies, and the increasing integration and globalization of markets have impacted developments in equity market structure. Specifically, the leaders of the various regulatory agencies shared their views on issues related to automated trading strategies, such as high frequency trading, market fragmentation, and undisplayed liquidity (for example, “dark pools”). The participants also discussed possible approaches that regulators might adopt in the light of these market structure developments. The discussion highlighted the need for global coordination on regulatory approaches to many of these issues. Chairman Schapiro said, “The rapid developments in trading technologies and trading platforms have had a profound impact on the evolution in the structure of markets around the world. This roundtable provided an important opportunity for regulators to share their experiences and their views on these developments. Cooperation among regulators at an international level is increasingly vital in ensuring the safety and soundness of our markets and protecting investors, and the meeting was a tremendous success in advancing such cooperation on market structure issues.” Mr. Wheatley added, “The meeting provided an opportunity for regulators from around the globe to discuss vital markets structure issues, particularly the impact and role of high frequency trading. The meeting allowed for the sharing of useful information between the regulators and will contribute to a sound basis for continued work to be done at a global level.” Today’s meeting laid the groundwork for future discussions on these issues, allowing securities regulators an opportunity to continue to work together to address advances in technology and new trading strategies.”

FIXING THE FINANCIAL NEWS FOR FUN AND PROFIT

The following excerpt is from the sec website: On October 13, 2011 the U.S. District Court for the Southern District of Florida entered judgments against a group of penny-stock promoters arising out of their repackaging of “news” issued by a series of sham energy companies. The judgments, which the defendants consented to as part of a settlement with the Commission, require them to pay penalties and to disgorge profits from their illicit activities. The judgments also permanently ban the defendants from touting and other dealings involving penny stocks. The judgments came in a civil action that the Commission filed earlier this year against Miami-based stock-touting company Wall Street Capital Funding LLC (WSCF) and its principals – owners Philip Cardwell and Roy Campbell and their associate Aaron Hume. In its Complaint initiating the action, the SEC alleged that the defendants were in the business of distributing promotional materials styled as “Wall Street News Alerts” for penny-stock companies. According to the SEC, one such company, PrimeGen Energy Corp., purported to have great success in drilling for oil in 2009 and 2010. The SEC alleged, however, that PrimeGen was phony: its corporate headquarters were a rented mailbox in a UPS Store opened with a do-not-forward instruction; its phone line was unattended; and its web page was generated by copying the source code from another company’s web site. As alleged in the Complaint, WSCF’s “investment opinions,” emails, and web profiles typically expressed positive opinions about penny-stock companies, their business prospects, and the future direction of their stock price. WSCF, according to the Complaint, created the misleading appearance of an independent basis for its statements even though it was merely repeating the penny-stock companies’ claims. Moreover, the SEC alleged, even when the defendants received ample warning signs that a scam was afoot, they always did the same thing: they closed their eyes and published. The SEC’s Complaint was filed February 7, 2011 in the U.S. District Court for the Southern District of Florida. The Complaint charged Wall Street Capital Funding LLC, Philip Cardwell, Roy Campbell, and Aaron Hume with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, which prohibit fraudulent conduct in connection with securities transactions. Judge Donald L. Graham presided over the action, No. 11-cv-20413-DLG. The judgments imposed by Judge Graham require the defendants, among other things, to pay penalties and disgorgement totaling $300,000, and permanently bar them from promotional activities and other dealings involving penny stocks. The defendants consented to the judgments without admitting or denying the SEC’s allegations.”

MAN AND HIS INVESTMENT FIRM ACCUSED OF FRAUD BY SEC

The following excerpt is from the SEC website: "On October 18, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Minnesota against David B. Welliver and his investment advisory firm, Dblaine Capital, LLC, for fraud and numerous other violations of the federal securities laws in connection with the offer, sale, and management of a mutual fund, the Dblaine Fund. The SEC’s complaint alleges that Welliver and Dblaine Capital obtained $4 million in loans pursuant to an improper, undisclosed quid pro quo agreement entered into in breach of their fiduciary duties to the Dblaine Fund. Specifically, in exchange for the loans, Welliver and Dblaine Capital committed to invest the fund’s assets in certain “alternative investment” securities recommended by the lender. Welliver and Dblaine Capital then caused the fund to violate various investment restrictions and policies by investing the fund’s assets in a private placement offering that was affiliated with the lender. The complaint also alleges that Welliver and Dblaine further defrauded the Fund by providing an inaccurate valuation for the private placement holding. As a result, Welliver and Dblaine Capital caused the fund to offer, sell, and redeem shares at an inflated net asset value. When Welliver and Dblaine Capital ultimately discovered that the private placement was worthless, they continued their fraud by failing to disclose this to the Fund’s shareholders. The complaint also alleges that, in connection with the fraudulent conduct described above, Welliver and Dblaine Capital made false and misleading statements in various reports and filings with the Commission; engaged in certain prohibited affiliated transactions; and aided and abetted the fund’s violations of various provisions of the Investment Company Act of 1940. The SEC complaint alleges that, as a result of their misconduct, Welliver and Dblaine Capital violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, Sections 17(a)(2), 17(e)(1), 22(e), and 34(b) of the Investment Company Act of 1940, and Rules 22c-1 and 38a-1 thereunder. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains, including prejudgment interest, and civil penalties."

AWARDS PRESENTED FOR UNCOVERING FRAUD DURING FINANCIAL COLLAPSE FRAUD

The following excerpt is from the SEC website: Washington, D.C., Oct. 18, 2011 – The Securities and Exchange Commission announced that eight members of its staff were part of a team that today received the 2011 Award for Excellence in Investigations by the Council of the Inspectors General on Integrity and Efficiency (CIGIE). The award was presented for outstanding cooperation in uncovering and jointly investigating the $2.9 billion fraud scheme that contributed to the collapse in 2009 of Colonial BancGroup Inc. and Taylor, Bean &Whitaker Mortgage Corp. The SEC charged five individuals, including former Taylor, Bean & Whitaker chairman Lee B. Farkas, alleging he arranged to sell more than $1 billion of sham or worthless mortgage loans to Colonial Bank, and attempted to scam the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). Farkas was found guilty of related criminal fraud charges and was sentenced in June to 30 years in prison. This year, the SEC also charged Taylor, Bean & Whitaker’s former chief executive officer and former treasurer, and a former executive and former supervisor at Alabama-based Colonial Bank. “We are extremely proud of our staff’s work on this important case, and delighted to see their efforts honored today,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “This award highlights the enormous individual and team effort to expose frauds stemming from the financial crisis and bring wrongdoers to justice.” SEC employees receiving the award are: Suzanne Ashley, Senior Counsel to the Director of Enforcement and former detailee to the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Rhea Dignam, Regional Director, SEC Atlanta Regional Office William Hicks, Associate Regional Director for Enforcement, Atlanta Regional Office Barry Lakas, Staff Accountant, Atlanta Regional Office Aaron Lipson, Assistant Regional Director, Atlanta Regional Office M. Graham Loomis, Regional Trial Counsel, Atlanta Regional Office Michael Mashburn, Senior Investigations Counsel, Atlanta Regional Office Yolanda Ross, Senior Counsel, Atlanta Regional Office Other federal entities whose staff were honored with the award are the Department of Housing and Urban Development’s Office of Inspector General, the Federal Bureau of Investigation, the Federal Deposit Insurance Corp.’s Office of Inspector General, the Federal Housing Finance Agency’s Office of Inspector General, the Justice Department, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the U.S. District Court for the Eastern District of Virginia."