SEC CHARGES LAWYER WITH OPINION LETTER FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Dec. 7, 2012 — The Securities and Exchange Commission today announced charges against a Florida-based securities lawyer for issuing fraudulent attorney opinion letters that resulted in more than 70 million shares of microcap stock becoming available for unrestricted trading by investors.

An attorney opinion letter is required from a licensed and duly authorized securities lawyer in order to facilitate the transfer of restricted microcap shares on the over-the-counter markets. In April 2010, the Pink Sheets (now OTC Markets Group) banned Guy M. Jean-Pierre of Pompano Beach, Fla., from issuing attorney opinion letters due to "repeated missing information and inconsistencies" about the issuers and his lack of due diligence in his past letters.

The SEC alleges that Jean-Pierre has since engaged in a scheme to continue writing and issuing attorney opinion letters in the name of his niece by applying her signature without her consent. Jean-Pierre (also known as Marcelo Dominguez de Guerra) sought to evade the ban by forming a new company called Complete Legal Solutions and misrepresenting that his niece was conducting the legal work that was allegedly performed.

"Securities lawyers are trusted gatekeepers in the issuance of stock, and it is particularly offensive when attorneys like Jean-Pierre blatantly break the rules and commit fraud," said Andrew M. Calamari, Director of the SEC’s New York Regional Office. "The SEC is committed to punishing offenders like Jean-Pierre as we continue to root out the enablers of microcap fraud in our markets."

According to the SEC’s complaint filed late yesterday in U.S. District Court for the Southern District of New York, Jean-Pierre hatched a plan within two weeks of his ban to continue issuing attorney opinion letters through Complete Legal and his niece’s identity. Jean-Pierre’s niece, a licensed attorney herself, was looking for work at the time. Jean-Pierre told his niece about his work issuing attorney opinion letters and offered to pay her to assist him. He suggested they form Complete Legal and asked her to send him three copies of her signature and a copy of her driver’s license. Jean-Pierre’s niece complied with his requests with the understanding this information was needed to incorporate Complete Legal. Afterwards, Jean-Pierre never requested that his niece do any legal work at Complete Legal and she was not compensated for any such work.

Instead, the SEC alleges that Jean-Pierre used the new company and his niece’s identity to continue his prior practice of issuing attorney opinion letters. Each of these letters contained fraudulent statements and falsely represented his niece as the signatory. Jean-Pierre’s niece did not write any of the letters and did not make the representations concerning the issuers. Jean-Pierre fabricated attorney opinion letters on Complete Legal letterhead for at least 11 companies that traded publicly on the Pink Sheets. Certain letters resulted in Pink Sheet issuers being granted the improved status of having adequate current information in the public domain under Rule 144(c)(2) of the Securities Act of 1933. This status kept the issuers from being tagged on the Pink Sheets’ website with a red "STOP" sign near its ticker symbol with the moniker of "OTC Pink No Information" and a large warning that the company "may not be making material information publicly available."

According to the SEC’s complaint, adequate current public information about an issuer must be available for certain selling security holders to comply with the Rule 144 safe harbor allowing companies to issue unregistered securities pursuant to Section 4(1) of the Securities Act. Jean-Pierre falsely issued letters bearing his niece’s signature to transfer agents opining that restrictive legends could be legally removed from either pre-existing stock certificates or newly issued stock certificates pursuant to Rules 144 or 504 of the Securities Act.

The SEC’s complaint alleges that Jean-Pierre violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, a permanent injunction, and a bar from participating in the offering of any penny stock pursuant to Section 20(g) of the Securities Act.

The SEC’s investigation, which is continuing, has been conducted by Megan Genet and Steven G. Rawlings in the New York Regional Office. Todd Brody, Barry Kamar, and Ms. Genet are handling the SEC’s litigation.

COURT ORDER PERMANENTLY BARS DEFNEDANTS FROM COMMODITY INDUSTRY

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court in New York Orders Defendants Forex Capital Trading Group, Forex Capital Trading Partners, and Highland Stone Capital Management to Pay over $1.8 Million for Fraud in Off-Exchange Foreign Currency Scheme

Court order permanently bars defendants from the commodities industry

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered a default judgment and permanent injunction order against defendants Forex Capital Trading Group, Inc. (Forex Group), Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J. The order requires these defendants to pay a civil monetary penalty of $1,352,293 and to disgorge $450,764 of ill-gotten gains for the benefit of defrauded customers. The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the Commodity Exchange Act and CFTC regulations, as charged.

The order stems from a CFTC anti-fraud enforcement action filed on July 27, 2011 against these three companies and their principals (see CFTC Press Release 6083-11, July 28, 2011). The order finds that Forex Group, Forex Partners, and Highland Stone fraudulently solicited 106 customers who invested more than $2.8 million to trade retail foreign currency (forex). In soliciting customers, the defendants falsely claimed, on their websites and elsewhere, that their forex trading for customers was profitable for a period of several years, the order finds. The defendants’ claims included a falsely reported customer gain of 51.94 percent in 2010, a year, in fact, in which their customers lost more than $1.2 million. Overall, customers lost more than 93 percent of their total invested principal through the defendants’ forex trading, the order finds.

The order also finds that the defendants distributed false account statements to prospective customers showing profitable trading and acted in capacities requiring registration with the CFTC, but were not registered.

The CFTC’s litigation is continuing against the principals of Forex Partners and Forex Group, namely Susan G. Davis of Jersey City, N.J., and David E. Howard II, of New York, N.Y., and against the principal of Highland Stone, Joseph Burgos, of Rutherford, N.J.

The CFTC appreciates the assistance of the U.K. Financial Services Authority in this matter.

CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

MAN PLEADS GUILTY IN SECURITEIS FRAUD CASE AND IS BARRED FROM SECURITIES INDUSTRY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

December 4, 2012

Defendant in SEC Action Pleads Guilty to Criminal Charges and is Barred from the Securities Industry
the Securities and Exchange Commission announced today that Arnett L. Waters of Milton, Massachusetts, a principal of a broker-dealer and investment adviser who is a defendant in a securities fraud action filed by the Commission in May 2012, has pleaded guilty to criminal charges brought by the U.S. Attorney for the District of Massachusetts and has been barred from the securities industry by the Commission. Waters' guilty plea to securities fraud and other charges occurred on November 29, 2012, and follows an earlier guilty plea by Waters in October 2012 to criminal contempt charges for violating a preliminary injunction order obtained by the Commission in its case. The Commission's Order barring Waters from the securities industry was issued on December 3, 2012.

The Commission filed an emergency enforcement action against Waters on May 1, 2012, alleging that he and two companies under his control, broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC, defrauded investors from at least 2009-2012 by, among other things, misappropriating investor funds and spending it on personal expenses. On May 3, 2012, the Court entered a preliminary injunction order that, among other things, froze Waters' assets and required him to provide an accounting of all his assets to the Commission. On August 7, 2012, the Commission filed a civil contempt motion against Waters, alleging that he had violated the court's preliminary injunction order by establishing an undisclosed bank account, transferring funds to that account, dissipating assets, and failing to disclose the bank account to the Commission, as required by the Court's order. On August 9, 2012, the U.S. Attorney for the District of Massachusetts filed a separate criminal contempt action against Waters based on the same allegations. On October 2, 2012, Waters pleaded guilty to the criminal contempt charges, and the Court ordered him detained pending sentencing.

The Commission's Order barring Waters from the securities industry was issued on December 3, 2012, and is based on his October 2, 2012 guilty plea to criminal contempt charges. The Order bars Waters from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.

The U.S. Attorney for the District of Massachusetts also charged Waters with a broader array of securities fraud and other violations on October 17, 2012. On November 29, 2012, Waters pleaded guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice. The counts of the criminal information to which Waters pleaded guilty alleged that, from at least 2007 through 2012, he used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012. Waters also pleaded guilty to engaging in a criminal scheme to defraud clients of his rare coin business. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers' behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information to which Waters pleaded guilty further alleged that he engaged in money laundering through two transactions totaling $77,000. Finally, Waters pleaded guilty to allegations that he made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.

Waters has been detained since October 2, 2012, when the Court ordered him held pending sentencing in the criminal contempt action. He is currently scheduled to be sentenced in April 2013 in connection with the guilty pleas in the two separate criminal actions against him.

Statement on Money Market Funds as to Recent Developments

Statement on Money Market Funds as to Recent Developments

ATTORNEY FOUND LIABLE FOR ISSUING FALSE LEGAL OPINION REGARDING A STOCK OFFERING

FROM: U.S. SECURITIES AND EXCHANGE COMMISSSION

Attorney Virginia K. Sourlis Found Liable for Aiding and Abetting Securities Fraud by Issuing False Legal Opinion in Connection with Illegal Stock Offering

On November 20, 2012, the Federal District Court in SEC v. Greenstone Holdings, Inc., et al., 10 civ. 1302 (S.D.N.Y.), granted the SEC partial summary judgment against attorney Virginia K. Sourlis, holding Sourlis liable for aiding and abetting securities fraud by issuing a false legal opinion that certain of her co-defendants used to obtain illegally more than six million shares of unrestricted stock of Greenstone Holdings, Inc.

According to the SEC's summary judgment motion, in early 2006, Sourlis intentionally authored a materially false and misleading legal opinion, which Greenstone used to illegally issue over six million shares of stock in unregistered transactions. Among other things, Sourlis falsely described promissory notes, note holders, and communications with those holders, none of which actually existed. The SEC asserted that, contrary to Sourlis' fraudulent opinion letter, the stock issuance did not qualify for an exemption from registration under the federal securities laws.

In finding Sourlis liable for fraud, at the November 16, 2012 hearing on the SEC's summary judgment motion, the District Court stated that Sourlis' opinion "represents that Ms. Sourlis spoke to note-holders which did not exist . . . And several other facts for which there was no evidentiary support." The Court further stated that Sourlis' opinion "represented as fact matters that were contrary to fact, and to me the most egregious representation was the representation that the writer of the letter had spoken to the original note-holders which is repeated in the letter."

The Court held Sourlis liable for aiding and abetting securities fraud under Section 10(b) of the Securities Exchange Act of 1934 but denied the SEC summary judgment against Sourlis for primary liability under Section 10(b). The Court also reserved decision on the SEC's non-fraud claim that Sourlis violated Section 5 of the Securities Act of 1933. On the basis of the Court's November 20 liability holding, the SEC intends to seek from the Court against Sourlis injunctive relief, financial penalties, disgorgement, and a penny stock bar.

ACCOUNTING FIRMS ACCUSED BY SEC OF FAILURE TO PRODUCE AUDIT WORK PAPERS

　
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Dec. 3, 2012 — The Securities and Exchange Commission today began administrative proceedings against the China affiliates of each of the Big Four accounting firms and another large U.S. accounting firm for refusing to produce audit work papers and other documents related to China-based companies under investigation by the SEC for potential accounting fraud against U.S. investors.

The SEC charged the following firms with violating the Securities Exchange Act and the Sarbanes-Oxley Act, which requires foreign public accounting firms to provide the SEC upon request with audit work papers involving any company trading on U.S. markets:
BDO China Dahua Co. Ltd
Deloitte Touche Tohmatsu Certified Public Accountants Ltd
Ernst & Young Hua Ming LLP
KPMG Huazhen (Special General Partnership)
PricewaterhouseCoopers Zhong Tian CPAs Limited
According to the SEC’s order instituting the proceedings, SEC investigators have been making efforts for the past several months to obtain documents from these firms. The audit materials are being sought as part of SEC investigations into potential wrongdoing by nine China-based companies whose securities are publicly traded in the U.S. The audit firms have refused to cooperate in the investigations.

"Only with access to work papers of foreign public accounting firms can the SEC test the quality of the underlying audits and protect investors from the dangers of accounting fraud," said Robert Khuzami, Director of the SEC’s Division of Enforcement. "Firms that conduct audits knowing they cannot comply with laws requiring access to these work papers face serious sanctions."

An administrative law judge will schedule a hearing and determine the appropriate remedial sanction against the firms. The order requires the administrative law judge to issue an initial decision no later than 300 days from the date of service of the order.

The SEC has launched an initiative to address concerns arising from reverse mergers and foreign issuers. Through the work of a Cross Border Working Group, the agency has deregistered the securities of nearly 50 companies and filed fraud cases against more than 40 foreign issuers and executives. The SEC’s Enforcement Division has taken a series of actions against China-based audit firms. Earlier this year, the SEC announced an enforcement action against Shanghai-based Deloitte Touche Tomatsu for refusing to produce documents for an SEC investigation into one of its China-based clients. That proceeding is ongoing. The SEC previously filed a subpoena enforcement action in federal court against the firm for failing to produce documents in response to a subpoena pertaining to its longtime client Longtop Financial Technologies Limited. In the separate administrative proceeding against Longtop, an administrative law judge found that Longtop was delinquent in its reporting obligations and ordered Longtop’s securities registration to be revoked.

"U.S. investors should be able to rely on the quality of audited financial statements," said Kara Brockmeyer, co-head of the SEC’s Cross Border Working Group. "Our Working Group’s actions demonstrate how the SEC is proactively identifying emerging risks to protect U.S. investors from accounting fraud."

This enforcement action was coordinated by the Cross Border Working Group and involved investigative teams in SEC offices in Washington D.C., Boston, New York, Fort Worth, and Los Angeles.