SEC, CITY OF HARVEY AGREE TO SETTLE FRAUDULENT BOND OFFERING CHARGES

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23149 / December 5, 2014

Securities and Exchange Commission v. City of Harvey, Illinois, et al., Civil Action No. 1:14-cv-4744

City of Harvey Agrees to Settle Charges Stemming from Fraudulent Bond Offering Scheme

The Securities and Exchange Commission announced today that on December 4, 2014, the City of Harvey, Illinois agreed to settle charges stemming from an enforcement action filed in June 2014. The city has consented to the entry of a final judgment which includes undertakings designed to provide significant protections for bond investors.

On June 25, 2014, the SEC obtained an emergency court order in the U.S. District Court for the Northern District of Illinois against the Chicago suburb and its comptroller, Joseph T. Letke, to stop a fraudulent bond offering that the city had been marketing to potential investors. The complaint alleged that the city and Letke had been engaged in a scheme for the past several years to divert bond proceeds from prior bond offerings for improper, undisclosed uses. While investigating Harvey's past bond offerings, the SEC learned that the city intended to issue new limited obligation bonds. The SEC also learned that the city had drafted offering documents that made materially misleading statements about the purpose and risks of those bonds, while omitting that past bond proceeds had been misused.

The city has agreed to the entry of a final judgment which will enjoin it from committing future 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. In addition, Harvey has agreed to retain an independent consultant and an independent audit firm, and will be prohibited from engaging in the offer or sale of any municipal securities for three years unless it retains independent disclosure counsel. These measures are designed to prevent future securities fraud by Harvey and to enhance transparency into Harvey's financial condition for future bond investors. The litigation against Letke is pending.

SEC CHARGES FORMER COO WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23142 / November 25, 2014

Securities and Exchange Commission v. D. Michael Donnelly, Civil Action No. 4:14-cv-01970 (E.D. Mo., November 25, 2014)

SEC Charges Former Solutia Executive with Insider Trading

The Securities and Exchange Commission today charged D. Michael Donnelly, the former Chief Operating Officer of Solutia, Inc., with insider trading in the stock of Solutia based on material non-public information regarding Eastman Chemical Company’s offer to acquire Solutia.  On the morning of January 27, 2012, Solutia and Eastman announced that Eastman would acquire Solutia at an implied value of $27.65 per share for Solutia investors.  At the end of trading on January 27, 2012, Solutia’s stock price closed at $27.51 per share, approximately 41 percent higher than the previous day’s close.

According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of Missouri, Donnelly knew of Eastman’s interest in acquiring Solutia and learned on November 18, 2011, that Eastman would be submitting an improved offer.  The complaint alleges that between November 18, 2011, and November 22, 2011, Donnelly made multiple purchases of Solutia stock totaling 8,130 shares in brokerage accounts in the names of his children.  The complaint also alleges that between February 2, 2012, and February 8, 2012, Donnelly sold all 8,130 shares of Solutia stock for a profit of $104,391.  The complaint alleges that Donnelly misappropriated this information for his own personal benefit and breached the duty of trust and confidence that he owed to Solutia and its shareholders.

Without admitting or denying the SEC’s allegations, Donnelly agreed to settle the case against him.  The settlement is pending final approval by the court.  Specifically, Donnelly consented to the entry of a final judgment permanently enjoining him from violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; requiring him to pay disgorgement of $104,391, the amount of his ill-gotten gains, plus prejudgment interest of $8,371.71, and a civil penalty of $104,391; and prohibiting him from serving as an officer and director of a public company.

SEC FILES ACTION AGAINST MAN WHO ALLEGEDLY DEFRAUDED INVESTORS

U.S. SECURITIES AND EXCHANGE COMMISSION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23146 / December 2, 2014

Securities and Exchange Commission v. Levi Lindemann, Civil Action No. 0:14-cv-04834-PJS-JJK

On November 24, 2014, the Securities and Exchange Commission filed an emergency action alleging that Levi Lindemann, a former registered representative and resident of West Lakeland Minnesota, operated a fraudulent scheme through his private company, Gershwin Financial, Inc. and his sole proprietorship, Alternative Wealth Solutions. The SEC's complaint alleged that from at least September 2009 to August 2013, Lindemann raised approximately $976,000 from six investors located in Wisconsin, including elderly individuals and a member of his own family. The complaint further alleged that Lindemann told these investors that their money would be used to purchase a variety of purported investments including various notes and interests in a unit investment trust. The complaint alleged that in reality, none of these investments were ever made. The complaint charged Lindemann 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.

After a hearing on November 24, 2014, the Honorable Patrick J. Schiltz of the United States District Court for the District of Minnesota issued an Order granting the relief sought by the SEC including a preliminary injunction, freezing assets and other emergency relief. Counsel for Lindemann consented to the relief sought by the SEC.

The SEC's investigation in this matter is continuing.

SEC CHARGES MAN WITH STEALING MONEY HE RECEIVED FROM INVESTORS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges California Resident with Fraudulent Sales of Stock

The Securities and Exchange Commission today charged the owner of several now-defunct investment entities with fraudulently selling shares of stock that he claimed to own when he had actually purchased them for others a few years before.

The SEC alleges that Vinay Kumar Nevatia, who used several aliases while living in Palo Alto, Calif., sold approximately $900,000 worth of stock he supposedly owned in a privately-held information technology company called CSS Corp. Technologies (Mauritius) Limited. He deceived the buyers into believing that he owned the shares, orchestrated a series of secret wire transfers, and induced the stock transfer agent into recording his fraudulent sales. He stole the money he received from investors for his own use.

According to the SEC's complaint filed in federal district court in San Francisco, Kumar provided the true owners of the shares with fake updates on their investments for more than a year after he had disposed of their stock in these subsequent sales in 2011 and 2012. The actual owners had bought the CSS stock through Kumar in 2008. Kumar has never been registered with the SEC nor licensed to trade securities.

The SEC's complaint charges Kumar with violating Sections 17(a)(1), (a)(2), and (a)(3) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, the return of ill-gotten gains, and a financial penalty.

The SEC's investigation was conducted by William T. Salzmann, Jason H. Lee, and Cary S. Robnett of the San Francisco Regional Office with assistance from Kristin A. Snyder, Stephanie A. Wilson, Edward G. Haddad, Brian Applegate, Michael A. Tomars, and Tracey A. Bonner of the San Francisco office's examination program. Mr. Salzmann and Mr. Lee will lead the SEC's litigation. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of California, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

Remarks to the SEC Small Business Forum

Remarks to the SEC Small Business Forum

Statement on Court’s Final Judgment in Case Against Life Partners Holdings, Brian Pardo, and R. Scott Peden

Statement on Court’s Final Judgment in Case Against Life Partners Holdings, Brian Pardo, and R. Scott Peden