FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Brothers with Insider Trading
On June 11, 2013, the Securities and Exchange Commission filed a civil injunctive action in the Northern District of Ohio against Andrew W. Jacobs ("A. Jacobs") and his brother Leslie J. Jacobs II ("L. Jacobs"). The Commission alleges that A. Jacobs provided L. Jacobs material non-public information about a pending tender offer for Chattem, Inc. securities. L. Jacobs then traded on the basis of the information he received from his brother.
According to the Commission's complaint, on December 21, 2009, Sanofi-Aventis ("Sanofi"), a French pharmaceutical company, announced its intent to make a tender offer for Chattem, a Tennessee-based distributor of over-the-counter pharmaceutical products, at the price of $93.50 per share ("Announcement"). Shares of Chattem closed 32.60% higher on the day of the Announcement than the prior trading day's close of $69.98 and volume increased more than 3,000% to 10.3 million shares.
The Commission alleges that A. Jacobs learned of the tender offer in a confidential conversation with his brother-in-law, who was at the time a Chattem executive. The executive, with whom A. Jacobs had been friends since business school and who was married to his wife's sister, requested that A. Jacobs keep their discussion confidential. A. Jacobs agreed to do so. Nonetheless, according to the complaint, the next day, A. Jacobs called his brother L. Jacobs A and told him that Chattem was going to be acquired. A few days later, L. Jacobs purchased 2000 shares of Chattem at a cost of $136,579.85. After the Announcement, L. Jacobs sold those shares for a profit of $49,457.21.
The Commission's complaint, filed in the United States District Court for the Northern District of Ohio, alleges that each defendant violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and seeks against each defendant permanent injunctions, disgorgement with prejudgment interest and civil monetary penalties pursuant to Section 21A of the Exchange Act. The Commission also seeks an officer and director against A. Jacobs, who was a high-level executive of a public company at the time of the tip.
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Files Enforcement Action against Arizona Resident for Issuing False Account Statements and Operating as an Unregistered Commodity Pool Operator
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil complaint against Thomas L. Hampton, an Arizona resident. The CFTC’s complaint charges Hampton with acting as an unregistered commodity pool operator (CPO) and issuing false account statements in violation of the Commodity Exchange Act.
The complaint filed on June 11, 2013, in the United States District Court for the District of Arizona Phoenix Division alleges that from approximately September 2010 through at least September 2011 ("relevant period"), Hampton, while acting as an unregistered CPO, operated Hampton Capital Markets, LLC, an Arizona limited liability company, as a commodity pool and/or hedge fund. The complaint further alleges that, during the relevant period, Hampton solicited approximately $5.2 million from at least 72 pool participants to invest in the pool for the purpose of trading commodity futures contracts, including E-mini S&P 500 futures contracts and E-mini Dow futures contracts, as well as securities based index products. The complaint also alleges that Hampton defrauded pool participants by issuing false account statements that represented that the pool was generating significant trading profits, when Hampton knew that the pool was sustaining consistent net losses.
In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws.
The CFTC appreciates the assistance of the Arizona Corporation Commission, Securities Division and the United States Attorney’s Office for the Southern District of New York.
CFTC Division of Enforcement staff responsible for this case are: Eugene Smith, Tracey Wingate, Kyong J. Koh, Peter M. Haas, Paul G. Hayeck, and Joan Manley.
FROM: SECURITIES AND EXCHANGE COMMISSION
Former Trader Emanuel Goffer Settles SEC Insider Trading Charges
The Securities and Exchange Commission announced today that on June 7, 2013, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a final judgment against Emanuel Goffer in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the SEC filed on November 5, 2009. In its complaint, the SEC charged nine defendants, including Goffer, a former proprietary trader at the broker-dealer Spectrum Trading, LLC, with insider trading ahead of corporate acquisition announcements.
The SEC's complaint alleged that Zvi Goffer, Emanuel's brother, orchestrated this insider trading scheme in which an attorney with the law firm Ropes & Gray LLP misappropriated from the firm material, nonpublic information concerning potential corporate acquisitions, and tipped the inside information, through another attorney, to Zvi, in exchange for kickbacks. The complaint further alleged that Zvi tipped the information to a number of individuals, including his brother Emanuel. As alleged in the complaint, the tips related to potential acquisitions involving Ropes & Gray clients, including the acquisitions of Alliance Data Systems Corp., Avaya Inc. and 3Com Corp. As alleged in the complaint, Emanuel Goffer traded on the inside information he received from his brother, resulting in illicit profits of more than $1.3 million.
To settle the SEC's charges, Goffer consented to the entry of a final judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders disgorgement plus prejudgment interest of $1,546,021. The disgorgement obligation will be off-set in part by a forfeiture order in a related criminal case, and the remainder waived in light of his financial condition. In related administrative proceedings, Goffer also consented to the entry of an SEC order barring him from association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent, and barring him from participating in any offering of a penny stock. In the related criminal case, Goffer was convicted of securities fraud and conspiracy to commit securities fraud, and was sentenced to three years in prison and ordered to forfeit $761,623. United States v. Emanuel Goffer, 10-CR-0056 (S.D.N.Y.).
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 10, 2013 — The Securities and Exchange Commission today charged the leader of a Detroit-based investment adviser for stealing nearly $3.1 million from the pension fund that the firm manages for the city's police officers and firefighters so he could buy two strip malls in California. The SEC charged four other top officials at the firm for helping him try to cover up the theft.
The SEC alleges that Chauncey C. Mayfield, who is the founder, president, and CEO of MayfieldGentry Realty Advisors, took the money from the Police and Fire Retirement System of the City of Detroit without obtaining permission. He used it to purchase the shopping properties and title them in the name of a MayfieldGentry affiliate. Other executives at MayfieldGentry gradually became aware that Mayfield had siphoned money away from their biggest client. Rather than come clean about the theft and risk losing the sizeable business the firm received from the pension fund, MayfieldGentry officials instead devised a plan to secretly repay the pension fund by cutting costs at the firm and selling the strip malls. Their plan ultimately failed when MayfieldGentry could not raise enough capital to put the stolen amount back into the pension fund.
Mayfield and his firm agreed to settle the charges by paying back the stolen amount.
"Mayfield stole pension money from Detroit's retired police officers, firefighters, and surviving spouses and children to buy strip malls," said Andrew Ceresney, Co-Director of the SEC's Division of Enforcement. "To make matters worse, other senior officers at the firm joined together with him to cover up his deceitful and grave betrayal of trust, all for the purpose of keeping the client."
The other MayfieldGentry executives charged in the SEC's complaint are chief financial officer Blair D. Ackman, chief operating officer Marsha Bass, chief investment officer W. Emery Matthew, and chief compliance officer and general counsel Alicia M. Diaz.
According to the SEC's complaint filed in federal court in Detroit, Mayfield took the money from a trust account for the pension fund in 2008. The stolen money could have provided a year of benefits for more than 100 retired police officers, firefighters, and surviving spouses and children. Shortly thereafter, Mayfield told Ackman about the misappropriation, and by May 2011 the other principals at MayfieldGentry were aware of the misdeed. They proceeded to hide the theft by affirmatively misleading the pension fund.
The SEC alleges that during a critical budget meeting with fund trustees in 2011, Diaz stressed MayfieldGentry's success in generating a cash return for the pension fund. He stated that "the cash we deliver at the end of the day is the ultimate testimony in terms of what we do." Diaz touted a projection that MayfieldGentry would remit $4.96 million to the pension fund in 2012. Diaz never told the pension fund trustees that the cash remittance would be reduced by more than 60 percent once the stolen money was taken into account. At the same meeting, Matthews claimed that MayfieldGentry had achieved a benchmark-beating 6.8 percent return for the pension fund. He didn't explain that the 6.8 percent return would be materially impacted by the $3.1 million theft.
According to the SEC's complaint, MayfieldGentry and its executives continued to cover up the theft until they finally informed the pension fund on the evening before the SEC filed a complaint against Mayfield and his firm in May 2012 for their participation in a "pay-to-play" scheme involving the former mayor and treasurer of Detroit. Upon learning of the theft, the pension fund promptly terminated its relationship with MayfieldGentry.
The SEC's complaint alleges that MayfieldGentry and Chauncey Mayfield violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and Ackman, Bass, Matthews, and Diaz aided and abetted those violations. Mayfield and his firm agreed to pay disgorgement in the amount of $3,076,365.88 and be permanently enjoined from violating Sections 206(1) and 206(2) of the Advisers Act. They neither admit nor deny the allegations in the settlement, which is subject to court approval. In a parallel criminal matter, Mayfield is awaiting sentencing in connection with his guilty plea for participation in the pay-to-play scheme.
The SEC's investigation was conducted jointly by the Chicago Regional Office, the Division of Enforcement's Asset Management Unit, and the Municipal Securities and Public Pensions Unit. The investigation was conducted by Brian D. Fagel, Eric A. Celauro, Peter K.M. Chan, and John J. Sikora, Jr. The SEC's litigation against the remaining four defendants will be led by Timothy S. Leiman.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 7, 2013 — The Securities and Exchange Commission today charged a South Pasadena, Calif.-based wealth management company and a former fund manager with insider trading on non-public information about technology companies. The charges are the agency’s latest in its ongoing investigation into expert networks and hedge fund trading.
The SEC alleges that Whittier Trust Company and fund manager Victor Dosti participated in an insider trading scheme involving the securities of Dell, Nvidia Corporation, and Wind River Systems. Dosti generated profits and avoided losses for funds he managed at Whittier Trust by trading on confidential information that he obtained from Danny Kuo, a Whittier Trust fund manager who Dosti supervised. .
Whittier Trust and Dosti agreed to pay nearly $1.7 million to settle the charges.
"Time and again, Dosti received what he knew was inside information from Kuo and traded on it to generate illicit gains for the funds he managed," said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. "Now, he and Whittier Trust join a long list of insider trading perpetrators who have been held accountable by the SEC for their transgressions."
The SEC has charged more than three dozen individuals and firms in enforcement actions arising out of its expert networks investigation, which has uncovered widespread insider trading at several hedge funds and other investment advisory firms.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Dosti used non-public information obtained from employees at Dell and Nvidia to trade in advance of five quarterly earnings announcements in 2008, 2009 and 2010. Dosti reaped profits and avoided losses of more than $475,000 for Whittier Trust funds. Dosti also made $247,000 in illicit profits for Whittier Trust funds by trading Wind River stock based upon detailed information that Kuo obtained from an Intel employee about Intel’s confidential negotiations to acquire Wind River in 2009.
The SEC’s complaint charges Whittier Trust and Dosti with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 17(a) of the Securities Act of 1933. Whittier Trust agreed to pay disgorgement of $724,051.62 plus prejudgment interest of $75,296.00 and a penalty of $724,051.62. Dosti agreed to pay disgorgement of $77,900.00 plus prejudgment interest of $2,951.43, and a penalty of $77,900.00. The settlements are subject to court approval and would permanently enjoin Whittier Trust and Dosti from future violations of the antifraud provisions of the federal securities laws. Whittier Trust and Dosti neither admit nor deny the SEC’s charges. The SEC acknowledges the cooperation of Whittier Trust in the investigation.
The SEC’s investigation has been conducted by Stephen Larson, Daniel Marcus and Joseph Sansone – members of the SEC’s Market Abuse Unit in New York – and Matthew Watkins, Justin Smith, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 12, 2013 — The Securities and Exchange Commission today charged the former head of the Miami office at brokerage firm Direct Access Partners (DAP) for his role in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank.
The SEC charged four individuals last month who enabled the global markets group at DAP to generate more than $66 million in revenue from transaction fees related to fraudulent trades they executed for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to the Vice President of Finance at BANDES, who authorized the fraudulent trades.
The SEC alleges that as managing partner of the global markets group, Ernesto Lujan was an integral participant in the wide-ranging fraudulent scheme that included sham arrangements to hide the kickback payments and route money to the BANDES official through shell corporations. Lujan and others charged in the scheme deceived DAP's clearing brokers, executed internal wash trades, interpositioned another broker-dealer in the trades to conceal their role in the transactions, and engaged in massive roundtrip trades to pad their revenue.
"For a scheme this bold to succeed, it required the sneaky collaboration of several individuals including the head of the Miami office," said Andrew M. Calamari, Director of the SEC's New York Regional Office. "Lujan and the others may have believed they were covering their tracks, but the SEC's exam and enforcement teams unraveled their fraud."
In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Lujan.
The SEC's amended complaint filed in federal court in Manhattan charges Lujan and the other defendants with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.
The SEC's investigation, which is continuing, has been conducted by Wendy Tepperman, Amanda Straub, and Michael Osnato of the New York Regional Office. The SEC's litigation is being led by Howard Fischer. An SEC examination of DAP that that led to the investigation was conducted by members of the New York office's broker-dealer examination staff. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the Department of Justice's Criminal Division, and the Federal Bureau of Investigation.
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