Friday, April 20, 2012

SEC Litigation Releases: Week in Review

By Tim Dulaney, PhD

SEC Announces Settlement of Accounting Fraud Charges Against Former CSK Auto Corporation Management, April 18, 2012, (Litigation Release No. 22338)

The US District Court in Phoenix entered a final judgment against three former CSK Auto Corporation employees: Don W. Watson (former CFO, Treasurer and Senior VP), Edward W. O'Brien (former controller) and Gary M. Opper (former director of credit and receivables).  The judgment is a result of the SEC allegations in which the officers overstated CSK's pre-tax income as much as $37.4 million annually from 2002 to 2004 -- so large that the company reported a pre-tax gain rather than a loss in 2003.  O'Brien and Opper were ordered to pay over $40,000 and $10,000, respectively in penalties.  Watson was ordered to reimburse O'Reilly Automotive, Inc. (which acquired CSK) over $600,000 in bonuses and stock profits pursuant to the Sarbanes-Oxley Act.

SEC Charges Los Angeles-Based Perpetrator for Municipal Bond Fraud Scheme, April 17, 2012, (Litigation Release No. 22337)

Earlier this week, the SEC froze the assets of Michael Anthony Gonzalez after it was discovered that he had allegedly been orchestrating a municipal bond investment fraud.  Gonzalez allegedly told potential investors he would invest their money in tax-exempt municipal bonds, but after raising more than $1 million, Gonzalez deposited the money into his personal bank account.  In an effort to cover up his fraud, he issued phony confirmation statements to his investors.  The commission's complaint can be found here (PDF).

Former Gateway CFO Settles SEC Fraud Action, April 18, 2012, (Litigation Release No. 22335)

Last week, the SEC announced that a final judgment against John J. Todd -- former CFO of Gateway, Inc. -- had been entered.  The judgment stems from the complaint filed by the SEC that alleged Todd had misrepresented "Gateway’s financial condition in the third quarter of 2000 in order to meet financial analysts’ earnings and revenue expectations"  Todd has consented to the decade-long officer and director bar as well as financial penalties amounting to over $400,000.

Penny Stock Promoters Enjoined and Barred, April 17, 2012, (Litigation Release No. 22334)

The US District Court for the Northern District of Texas enjoined a large group of individuals and entities for their evasion of securities registration laws by offering and selling securities (penny stocks) of companies with effectively no registration statements.  The court has ordered the group to pay disgorgement totaling over $12 million plus prejudgment interest as well as civil penalties of over $100,000 each.

SEC Charges Petr Murmylyuk with Fraudulent Brokerage Account Intrusion Scheme, April 17, 2012, (Litigation Release No. 22333)

Earlier this week, the SEC filed a civil action in the US District Court for the District of New Jersey against Petr Murmylyuk.  The complaint alleges that Murmylyuk created a brokerage account using a stolen social security number to transact with the online account of an individual to which he had gained access.  In particular, Murmylyuk would sell thinly traded options from his fraudulent account the victim's account and then immediately buy them back at a lower price.  The SEC alleges that Murmylyuk caused the victim's account to lose approximately $140,000 through this trade matching scheme -- with $30,000 directly going to Murmylyuk.

SEC Announces Entry of Consent Judgment and Issues Order Against CPA Charged for his Role in Massive Life Settlement Bonding Investment Fraud, April 16, 2012, (Litigation Release No. 22332)

The US District Court for the Eastern District of Virginia entered a final judgment against Jorge L. Castillo ordering him to pay nearly $100,000 in disgorgement and prejudgment interest for his actions outlined in the January 2011 SEC release (Litigation Release No. 21818).  In particular, Castillo represented himself as an outside and independent auditor of Provident Capital Indemnity (PCI) Ltd.  In this capacity, Castillo allegedly misrepresented PCI's ability to satisfy obligations and included a fictitious asset that comprised up "to 80% of PCI’s total reported assets for the period in question."

SEC Shuts Down Ponzi Scheme Targeting Persian-Jewish Community in Los Angeles, April 13, 2012, (Litigation Release No. 22331)

According to the SEC, Shervin Neman has been running a Ponzi scheme for the past two years in which he has defrauded members of the Los Angeles Persian-Jewish community of over $7 million.  Neman allegedly told investors he was investing in shares of hot technology IPOs and foreclosed residential real estate that would be flipped for a quick profit.  The SEC alleges that "more than 99% of the money Neman raised was used either to pay returns to existing investors, or to fund his lavish lifestyle."  The SEC is seeking disgorgement, prejudgment interest as well as financial penalties against Neman and his wife, Cassandra C. Neman.

2 comments:

  1. I pity the Persian-Jewish people in Los Angeles who were defrauded by Shervin Neman. I can't believe that many people still believe get-rich-quick schemes regardless of status in life.
    sacramento probate attorney

    ReplyDelete
  2. I hope Shervin Neman gets the sanction he deserves for tricking all these innocent people. It's appalling what some people can do just to get rich quickly.

    ReplyDelete

Please keep comments appropriate. Malicious comments or solicitations will be removed.