Friday, June 22, 2012

SEC Litigation Releases: Week in Review

By Tim Dulaney, PhD

SEC Charges Massachusetts Investment Adviser with Fraud and Obtains Asset Freeze June 20, 2012, (Litigation Release No. 22396).

Earlier this week, the SEC charged Gary J. Martel with defrauding investors through his companies Martel Financial Group and MFG Funding.  According to the complaint (link opens PDF), Martel defrauded at least a dozen investors of millions of dollars.  Martel allegedly told his clientele (including retirees) that he would invest in fixed-income securities.  Martel allegedly composed fraudulent account statements and made small interest payments to his clients to boost confidence in his legitimacy.  The SEC alleges that, rather than investing the funds as represented, Martel instead diverted the funds to his businesses.  A federal judge has now frozen Martel's assets.

US District Court Enters Final Judgments Against Ponzi Schemers Clements and Smidi June 18, 2012, (Litigation Release No. 22395).

Last March, the SEC filed a complaint (Litigation Release No. 21910) against James Clements and Zeina Smidi alleging that the duo perpetrated a $30 million Ponzi scheme that took advantage of hundreds of investors nationwide between 2005 and 2007 through their companies, known generally as Maximum Return Transaction or MRT.  The US District Court for the Southern District of Florida has ordered Clements and Smidi to pay financial penalties in excess of $750,000 and $5 million, respectively.

Former CEO of Massachusetts-Based LocatePlus Holdings Corporation Sentenced to 60 Months' Imprisonment for Securities Fraud June 18, 2012, (Litigation Release No. 22394).

Jon Latorella, the former CEO of LocatePlus Holdings Corporation (an information technology company), was sentenced to five years imprisonment followed by three years of supervised release as a result of the November 2010 charges by the US Attorney's Office.  The charges alleged that Latorella and the former CFO of LocatePlus, James Fields, implemented a scheme to artificially inflate the revenue of LocatePlus and to manipulate the stock price of another company.  The SEC's civil injunctive action has been "stayed until the conclusion of the criminal case [...] against Fields and LocatePlus".

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