Friday, June 8, 2012

SEC Litigation Releases: Week in Review

By Tim Dulaney, PhD

Court Enters Final Judgments, Including Indemnity Bars, Against Rajnish K. Das and Stormy L. Dean, Former CFOs of infoUSA, Inc., June 1, 2012, (Litigation Release No. 22388)

As a result of the SEC complaint (link opens PDF) against Rajnish K. Das and Stormy L. Dean, the US District Court for the District of Nebraska barred the pair from serving as an officer or director of a public company for three years and levied a civil penalty of $50,000 against each of them.  In the complaint, the SEC alleged Das and Dean authorized company funds to be used for infoUSA CEO's personal expenses and underreported infoUSA CEO's compensation in company filings.  The court declared "that Das and Dean each acted in bad faith towards the shareholders of infoUSA, Inc. and that the defendants each knew their actions were contrary to the interests of the company and its shareholders."

SEC Charges Three Former CONSOL Energy, Inc. Employees with Illegal Trading in Advance of an Acquisition Announcement, June 1, 2012, (Litigation Release No. 22387)

The SEC recently charged Charles E. Mazur, Jr. (CONSOL's former Director of Corporate Strategy), Joseph A. Cerenzia (CONSOL's former Director of Public Relations) and James S. Poland (CONSOL's former General Manager of Engineering) with insider trading in CONSOL securities ahead of the public announcement of the acquisition of a portion of Dominion Resources, Inc.  In total, the trio has been fined more than $130,000 in disgorgement, prejudgment interest and civil penalties as a result of their actions.

SEC Charges Additional Defendants for Defrauding Investors in $90 Million Ponzi Scheme, June 1, 2012, (Litigation Release No. 22386)

The SEC amended its complaint (PDF) against Brian Raymond Callahan that stopped a nearly $100 million continuing Ponzi scheme to include additional offshore funds controlled by Callahan, Callahan's brother in law Adam Judd Manson and two of Manson's entities.  In addition, Callahan's wife (Sheri Manson Callahan) was named as a relief defendant in this matter.  According to the amended complaint, Manson helped create a paper trail to conceal the scheme, provided unsecured promissory notes, misrepresented the outstanding principal balances on the promissory notes as well as the callability of the notes.

SEC Charges Controlling Person of Transfer Agent for Misappropriating Share Certificates and Illegally Selling Stock, June 1, 2012, (Litigation Release No. 22385)

Late last month, the SEC filed a settled civil action against Steven H. Bethke as a result of a complaint that alleged Bethke misappropriated share certificates of Bederra Corporation.  Bethke allegedly used stolen stock certificates to issue more than a billion Bederra shares in exchange for approximately $350,000.  To facilitate his scheme, Bethke forged signatures of Bederra executives and misrepresented the securities' eligibility for registration exemptions.  Without admitting or denying the allegations in the complaint (PDF), Bethke has consented to a final judgment.

SEC Files Action Against Three Penny-Stock Fraudsters, June 1, 2012, (Litigation Release No. 22384)

Earlier this month, the SEC charged James Roland Dial (Grifco International, Inc.'s former president, CEO and director), Evan Nicholas Jarvis and Alex W. Ellerman (two stock promotors) with conducting a scheme to manipulate the market for Grifco International, Inc.'s stock.  The trio allegedly flooded the market with supposedly unrestricted Grifco securities -- which were not registered with the SEC and satisfied no exemptions from registration requirements -- and misleading marketing materials.  The trio allegedly realized over $3 million in ill-gotten gains.  The trio has consented to the entry of a final judgment requiring a total payment of over $4 million in financial penalties.  Dial and Jarvis have also been sentenced to five years in prison for wire fraud, while Ellerman received a reduced sentence for his cooperation in the investigation.

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