FINAL JUDGEMENT ENTERED IN INSIDER TRADING SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Court Enters Final Judgments Against Former Wall Street Banker, Downstream Russian Trader and Trader’s Wife in Insider Trading Scheme

The Securities and Exchange Commission announced that on January 14, 2013, the Honorable Alvin K. Hellerstein of the United States District Court for the Southern District of New York entered a final judgment by default against defendant Alexander Vorobiev ("Vorobiev") and his wife, relief defendant Tatiana Vorobieva ("Vorobieva") (collectively, the "Vorobievs"), for their role in a serial scheme involving insider trading ahead of numerous health care-related acquisitions, tender offers, and other transactions.

Also, the Commission announced that on October 3, 2012, Judge Hellerstein entered a final judgment against Igor Poteroba ("Poteroba"), formerly an investment banker with UBS Securities LLC ("UBS"), who also had been charged in this matter with insider trading for misappropriating highly confidential inside information from UBS about those health care transactions and tipping that information to his friend, Aleksey Koval ("Koval"), also a financial professional, who, in turn, tipped Vorobiev.

The Commission's complaint, filed on March 24, 2010, alleges that, from at least July 2005 through February 2009, Poteroba, Koval, and Vorobiev participated in an insider trading ring that netted over $1 million in illicit profits. According to the complaint, Poteroba was the source of material, nonpublic information about eleven impending corporate transactions, which he obtained through his work as an investment banker in UBS's Global Healthcare Group. Poteroba misappropriated the material, nonpublic information from his employer and its clients in breach of duties of confidentiality that he owed them. Pursuant to the insider trading scheme as described in the complaint, Poteroba tipped defendant Koval, with the material, nonpublic information, and Koval, in turn, tipped his friend Vorobiev and placed trades through an account maintained by Vorobiev. The Commission's complaint alleges that both Koval and Vorobiev traded securities on the basis of that information. Because Vorobiev conducted some of the trading using his wife’s accounts, Vorobieva was named as a relief defendant.

Poteroba previously had been permanently enjoined from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and Rule 14e-3 thereunder (see Litigation Release No. 21681 (Oct. 4, 2010)). On September 28, 2010, the Commission entered an order barring Poteroba from association with any broker, dealer, or investment adviser. In a parallel criminal proceeding, on December 21, 2010, Poteroba pleaded guilty to securities fraud and conspiracy to commit securities fraud.

The final judgment in the civil action against Poteroba found him liable for disgorgement in the amount of $416,336, representing profits obtained as a result of the conduct alleged in the Complaint, together with prejudgment interest in the amount of $49,071. The final judgment deemed these amounts satisfied by Poteroba’s payment of a forfeiture of $465,095 in a parallel criminal proceeding. No civil penalty was imposed on Poteroba in the final judgment. In the criminal proceeding, Poteroba had been sentenced to twenty-two months of imprisonment and ordered to pay a penalty of $25,000.

The Vorobievs failed to respond to the complaint and the Commission moved for entry of judgment by default. The final judgment in the civil action against Vorobiev: (1) permanently enjoined him from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and Rule 14e-3 thereunder; (2) found him liable for disgorgement in the amount of $146,541.20, representing profits obtained as a result of the conduct alleged in the Complaint, together with prejudgment interest in the amount of $21,389.80; and (3) imposed a civil penalty of $1,885,382.12, for a total judgment award of $2,053,313.73. In partial satisfaction of that award, the Court ordered that more than $220,000 in funds held in brokerage accounts in Vorobiev’s name, previously frozen by court order in the SEC’s action, be remitted to the SEC for transfer to the U.S. Treasury.

The final judgment against Vorobieva found her liable for disgorgement in the amount of $481,919.71, representing profits obtained as a result of the conduct alleged in the Complaint, together with prejudgment interest in the amount of $70,343.12, for a total judgment award of $552,262.83. In partial satisfaction of that award, the Court ordered that nearly $125,000 in funds held in brokerage accounts in Vorobieva’s name, also frozen by court order in the SEC’s action, be remitted to the SEC for transfer to the U.S. Treasury.

The Commission's civil action against defendant Koval remains pending before the Court.

ALLEGED INSIDER TRADING VIA INFORMATION GAINED FROM LAWYER WIFE

FROM: U.S. SECURITEIS AND EXCHANGE COMMISSION

The Securities and Exchange Commission today charged a Houston man with insider trading ahead of the acquisition of Santa Clara-based National Semiconductor Corporation based on confidential details that he gleaned from his wife, a partner at a large law firm that was consulted on the deal.

The SEC alleges that James Balchan immediately bought shares of National Semiconductor stock after his wife informed him that a social event for the company's general counsel had been cancelled because he was busy working on an imminent merger. Balchan and his wife were among the invitees to the event. Balchan made nearly $30,000 in illicit profits when he sold his shares after Texas Instruments publicly announced its acquisition of National Semiconductor and the stock price jumped more than 75 percent.

Balchan agreed to pay nearly $60,000 to settle the SEC's charges.

According to the SEC's complaint filed in U.S. District Court for the Southern District of Texas, another partner at the firm where Balchan's wife worked began organizing informal client "wine and dine" events for the first weekend of April 2011 in honor of National Semiconductor's general counsel. The partner was close to Balchan's wife and socially acquainted with Balchan. The partner invited both of them to the weekend events and told them that National Semiconductor's general counsel would be in attendance.

According to the SEC's complaint, the partner called National Semiconductor's general counsel a few days before the weekend and was informed that he was working on the company's impending acquisition. The general counsel sought the law firm's advice in dealing with certain regulatory issues arising from the deal. He also informed the partner that, in light of the acquisition, he would be unable to attend the event that coming weekend. When the law partner advised Balchan's wife that National Semiconductor's general counsel cancelled the client weekend because of the imminent acquisition, she shared the information with Balchan in confidence later that night in the context of discussing their weekend plans.

The SEC alleges that the very next morning, Balchan misappropriated the confidential information he learned about the acquisition and purchased 2,000 National Semiconductor shares. A few days later, Balchan purchased 1,000 shares. Texas Instruments issued a press release on April 4 announcing its acquisition of National Semiconductor. Each of Balchan's National Semiconductor trades was based on inside information in violation of duties of trust and confidence that he owed to his wife. Balchan was aware that his wife owed a duty of trust or confidence to her law firm and its clients.

The SEC's complaint charges Balchan with violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Balchan has settled the SEC's charges without admitting or denying the allegations. He has agreed to the entry of a judgment enjoining him from future violations of relevant provisions of the Exchange Act, and to pay disgorgement and prejudgment interest of $30,615.18, and an additional penalty equal to his profits of $29,052.39.

The SEC's investigation was conducted by Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.

SEC OBTAINS JUDGMENTS AGAINST FORMER OFFICERS OF GIBRALTAR ASSET MANAGEMENT GROUP, LLC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

On February 5, 2013, the Securities and Exchange Commission announced that the Honorable Robert L. Wilkins, United States District Judge for the District of Columbia, entered final judgments on January 16, 2013, against three defendants to settle charges related to their collaboration in a multi-million dollar Washington-area Ponzi scheme operated through Gibraltar Asset Management Group, LLC and Garfield Taylor, Inc. (GTI):

Benjamin C. Dalley, of Washington D.C., formerly Vice President of Operations at Gibraltar, without admitting or denying the allegations in the SEC's complaint, consented to the entry of a Final Judgment permanently enjoining him from aiding and abetting violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Final Judgment orders him to pay $72,500 in disgorgement and prejudgment interest and a civil penalty of $40,000.

Randolph M. Taylor, of Washington D.C., formerly Vice President for Organizational Development at Gibraltar, without admitting or denying the allegations in the SEC's complaint, consented to the entry of a Final Judgment permanently enjoining him from aiding and abetting violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Final Judgment orders him to pay $584,148.32 in disgorgement and prejudgment interest, but waives payment of all but $30,000 of this amount, and does not impose a civil penalty, based upon his sworn Statement of Financial Condition. In connection with the settlements reached with Dalley and Randolph Taylor, Relief Defendant Reverb Enterprises, LLC consented to a judgment, which the Court entered on December 13, 2012, ordering it to pay $165,635 in disgorgement, representing profits gained as a result of the scheme.

William B. Mitchell, of Middle River, Md., formerly Vice President for Finance at GTI and an Executive Vice President of Strategic Planning at Gibraltar, without admitting or denying the allegations in the SEC's complaint consented to the entry of a Final Judgment permanently enjoining him from violating Section 15(a)(1) of the Securities Exchange Act of 1934. The Final Judgment orders Mitchell to pay $164,131 in disgorgement and prejudgment interest, but waives payment of all but $15,000 of this amount, and does not impose a civil penalty, based upon his sworn Statement of Financial Condition.

Based upon the entry of the Court's injunction against Mitchell, on January 30, 2013, the Commission instituted settled administrative proceedings against Mitchell. Without admitting or denying the Commission's findings, except as to his admission of the entry of the Final Judgment by the Court, Mitchell consented to the entry of the Commission's Order, which bars him 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 Commission filed a complaint on November 18, 2011, alleging that Gibraltar's and GTI's former Chief Executive Officer, Garfield M. Taylor, operating through GTI. and Gibraltar, with the assistance of Benjamin C. Dalley, Randolph M. Taylor, William B. Mitchell, Jeffrey A. King and Maurice G. Taylor, conducted a multi-million Ponzi scheme targeting investors in the Washington D.C. metropolitan area. According to the SEC's complaint, the defendants defrauded more than $27 million from approximately 130 investors between 2005 and 2010.

The Commission's case is still pending against the remaining defendants: Garfield M. Taylor, Jeffrey A. King, Maurice G. Taylor, GTI, Gibraltar, and The King Group, LLC. On December 13, 2012, the Court granted the Commission's motion for summary judgment on all charges sought by the Commission against Garfield Taylor. The Court will determine the appropriate injunctive relief, as well as the specific amount of disgorgement and penalty that Garfield Taylor will be ordered to pay, when it enters its Final Judgment against him.

SEC CHAIRMAN WALTER MAKES REMARKS AT TRAINING CONFERENCE

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Opening Remarks at Foreign Bribery and Corruption Training Conference
by Chairman Elisse Walter
U.S. Securities and Exchange Commission
Washington, D.C.
February 11, 2013

Good morning. On behalf the Securities and Exchange Commission and my colleagues at the Department of Justice and the Federal Bureau of Investigation, I am honored to have the opportunity to welcome you to Washington D.C. and this Foreign Bribery and Corruption Conference.

It’s a pleasure to look out over this group and see in attendance men and women representing more than 50 law enforcement and financial regulatory agencies from developed and developing nations in every corner of the globe.

We are a diverse group. And each of the different nations and agencies we represent has different priorities and strategies, mandates and jurisdictions, traditions and laws. But when I look around this room, I don’t see a hundred discrete agendas thrown randomly together. Instead I see the strong core of an international network, coming together in the shared pursuit of a global financial system that benefits honest competitors and drives growing prosperity in all nations.

While we differ in a variety of ways, we have one important thing in common: we understand that fair and honest financial markets are an important pillar of economic growth for countries of every size and in every region. And we understand that only by collaborating in pursuit of those fair and honest markets can we bring them about. We all benefit when we are able to limit corruption and manipulation, and we all suffer when even a few markets are tainted by greed and graft.

It’s basic common sense: whatever larger growth and development strategies our nations pursue, the ability to attract private capital and investment and to encourage trade are critical components of energetic economies.

In today’s financial environment, capital flows freely around the world in fractions of a second – rewarding economies with functioning financial systems, and avoiding those in which the normal risks of investing are compounded by the possibility of corruption and manipulation. This makes market regulation not merely a question of law and order, but of nation-building – of creating an environment in which available capital supports rapid development and broader prosperity for the people we represent.

In country after country, we see the people demanding – often in forceful public demonstrations – an end to cronyism, bribes, and corruption. They are passionate because they understand that applying the rule of law to market transactions opens markets and brings economic opportunity for all.

They know that the quality of their roads, their electrical grid, and their medical facilities suffers when the highest bribe, not the best proposal, determines contracts.

This is where you all come in, where you have an opportunity to not only prosecute wrongful conduct, but to change culture for the benefit of billions and help them build their children a better world.

Whatever our nation of origin, we are all in this together. Increasing investment and encouraging growth in any one nation benefits all of its neighbors and trading partners. Stable financial markets fueling growing economies can create a virtuous cycle of international trade and investment that benefits us all.

The same economic globalization that allows capital to move freely into stable financial markets around the world can impede as well as encourage our efforts, though. Failure to enforce laws can put honest companies at a disadvantage, harming those that play by the rules. It can mean higher costs and economic inefficiencies for countries that lack the will or the expertise to crack down on corruption – benefiting a few individuals or groups while harming the larger populace and a nation’s development goals.

And as Chairman of the U.S. Securities and Exchange Commission, I have a particular reason for looking forward to our collaboration in pursuit of corrupt practices. At the SEC, one of our primary mandates is to protect investors.

And we have found that corrupt practices by a registered company are generally indicators of larger problems within the business – problems with the potential to harm that business’s shareholder-owners.

Bribery and other corrupt practices may result in accounting fraud and falsified disclosures where shareholders are not getting an accurate picture of a company’s finances in their regulatory filings. Bribery means losing control of – or deliberately falsifying – books and records. Often, key executives or board members are kept in the dark, limiting their ability to make informed decisions about the company’s business. Obviously, engaging in corrupt practices means weakening or circumventing internal control mechanisms, leaving a company less able to detect and end not just corruption but other questionable practices.

A company that has lost its moral compass is in grave danger of losing its competitive roadmap, as well – while shareholders are kept in the dark.

And so, just as we are committed to fighting practices that encourage corruption, weaken markets and slow growth in all of the countries represented here, I look forward to working with you to uncover, investigate, and end practices by companies that harm our moral standing, our economic competitiveness, and the shareholders my agency represents.

I always come away from meetings like this encouraged. There will always be individuals and firms who look no further than their own short-term interests and care little for laws and regulation designed to promote and protect the greater good. And the global economy has given them a greater field to play on – to circumvent the rules in ways that harm us all.

But I know, as well, that the agencies you represent and people like you see the larger picture – you understand the damage done by corrupt practices. I see an increasing commitment to fighting corruption here in the U.S. – where our Foreign and Corrupt Practices Act activity has increased substantially in recent years – and around the globe. And I am pleased with the increasing collaboration I have seen over the many years I have served at the SEC, as nations increasingly come together to fight for fair and honest markets.

Thank you for coming to this conference. I hope that you will not only learn new skills and procedures and share with us those you have already mastered, but that you will meet your counterparts at my agency and the others represented here and begin building not just a legal framework, but a personal network against the practices we abhor.

Thank you.

SEC FILES CHARGES OF INVESTMENT FRAUD AGAINST FIVE FORMER EXECUTIVES OF CAY CLUBS RESORTS AND MARINIAS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Five Former Executives of Cay Clubs Resorts and Marinas in $300 Million Real Estate Investment Fraud

The Securities and Exchange Commission filed a civil fraud action in the United States District Court for the Southern District of Florida against five former executives of the defunct Florida-based companies known collectively as Cay Clubs Resorts and Marinas, for conducting an offering fraud and Ponzi scheme that raised more than $300 million from nearly 1,400 investors nationwide.

According to the SEC's complaint, from late 2004 through 2008, former Cay Clubs CEO and President Fred Davis Clark, Jr., former manager and sales agent Cristal R. Coleman, former Chief Accounting Officer David W. Schwarz and former Sales Directors Barry J. Graham and Ricky Lynn Stokes, conducted a multi-year scheme to defraud investors who purchased units at Cay Clubs' resort locations in Florida and Las Vegas, Nevada. Clark, Coleman, Graham and Stokes solicited investors directly and through a network of hundreds of sales agents touting the profitability of Cay Clubs' investments by promising investors immediate income from a guaranteed 15% return; instant equity in undervalued properties; historic appreciation; development of a network of luxury destination resorts at its nationwide locations; at least $30,000 of unit upgrades; and, a future income stream through the rental program Cay Clubs managed.

The SEC alleges that Cay Clubs, through Clark and Schwarz, used a web of entities and bank accounts to conceal a Ponzi scheme that commingled investors' funds and used new investor deposits to pay leaseback returns to earlier investors. Clark and the other executives paid themselves exorbitant salaries and commissions in excess of $30 million and failed to fulfill their promises. Additionally, Clark and Coleman misappropriated millions of dollars of investor funds to purchase airplanes, boats, and to pay for unrelated business ventures that included investments in precious metals and a liquor distillery that produced Pirate's Choice Rum.

The SEC further alleges that Cay Clubs' representations about investors' profitability and "instant equity" were false because the purported triple-digit returns were the result of undisclosed insider transactions among Cay Clubs and Coleman, Graham, and Stokes to make it appear that the units had enormous rates of appreciation over a short period of time when in fact the transactions were part of an insider flipping scheme. Cay Clubs continued to solicit new investors despite the fact that the company's financial condition had deteriorated so significantly that it did not have sufficient funds to make "guaranteed" leaseback or rental payments to investors. Clark and Coleman left the United States and now reside in the Cayman Islands.

The SEC's complaint alleges that Clark, Coleman, Graham, and Stokes violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. Additionally, the SEC's complaint alleges that Graham and Stokes violated Section 15(a)(1) of the Exchange Act, and that Schwarz violated Section 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) and Rule 10b-5(a) and (c) of the Exchange Act. The SEC complaint seeks from all defendants disgorgement of ill-gotten gains plus prejudgment interest, injunctive relief to enjoin them from future violations of the federal securities laws, an accounting, civil money penalties from Clark, Coleman and Stokes, and an order to repatriate assets.

SEC CHARGED IT SPECIALISTS WITH INSIDER TRADING

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission charged two information technology specialists at a Bend, Oregon-based health insurance company with insider trading on confidential information about the acquisition of their employer.

The SEC alleges that Daniel Vance of Bend and Blake Wellington of Hillsboro, Oregon, learned that their employer Clear One Health Plans was involved in advanced merger negotiations with competitor PacificSource Health Plans. Rather than keep the information confidential, Wellington and Vance improperly used the information to personally profit by purchasing Clear One shares. Clear One's share price jumped by more than 150 percent after the companies announced the merger on Dec. 30, 2009.

According to the SEC's complaint filed in federal court in Oregon, Daniel Vance gained access to the confidential deal information on Dec. 16, 2009, when he was asked by Clear One's CEO to help resolve an e-mail issue. Vance saw confidential merger documents being sent to the CEO of PacificSource. Vance then informed Blake Wellington, who was his supervisor. The very next day, Wellington purchased 3,700 Clear One shares and Vance purchased 1,200 Clear One shares. Clear One's share price jumped by more than 150 percent after the companies announced the merger on Dec. 30, 2009. Wellington and Vance immediately began selling their stock, reaping more than $70,000 in profits.

The SEC alleges that Wellington and Vance took unusual steps to finance their purchases of Clear One shares. For instance, Wellington obtained a $25,000 loan from an online peer lending site. Vance borrowed $5,285 from his 401(k) retirement account, sold personal computer equipment, and sold his truck to finance his purchases of Clear One shares.

The complaint alleges that, by their conduct, Wellington and Vance violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC's allegations, both Wellington and Vance consented to permanent injunctions against violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Wellington consented to pay full disgorgement of his trading profits totaling $55,891.50 plus prejudgment interest of $5,644.04 and a penalty of $55,891.50, and Vance consented to pay full disgorgement of his trading profits totaling 17,509.75 plus prejudgment interest of $1,768.18 and a penalty of $17,509.75.

The SEC thanks the Financial Industry Regulatory Authority (FINRA) for its assistance in this matter.