Friday, August 17, 2012

SEC Litigation Releases: Week in Review

SEC Charges Oracle Corporation with FCPA Violations Related to Secret Side Funds in India,  August 16, 2012, (Litigation Release No. 22450).

According to the complaint (opens to PDF), the Indian subsidiary of Oracle Corporation, Oracle India Private Limited, "structured transactions with India's government...in a way that enabled Oracle India's distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds." Oracle India's alleged misconduct occurred from 2005 to 2007, when the company would often use the side funds to pay unauthorized and "storefront-only" vendors. These side funds then created the risk for illicit activity including bribery or embezzlement. The SEC charged Oracle Corporation with violating the Foreign Corrupt Practices Act and various sections of the Exchange Act. Oracle has agreed to a judgment enjoining it from violating the Exchange Act and will pay a $2 million civil penalty. The settlement accounts for Oracle's voluntary disclosure of its subsidiary's conduct and measures taken to enhance its FCPA compliance program, including firing the employees involved in the scheme.

SEC Halts Denver-Based Ponzi Scheme,  August 15, 2012, (Litigation Release No. 22449).

The SEC announced fraud charges and an asset freeze against Bridge Premium Finance LLC, Michael J. Turnock, and William P. Sullivan, II, "for allegedly perpetrating a Ponzi scheme." Bridge Premium raised at least $15.7 million in investors' funds which purportedly "would be used to make loans to small businesses to pay their up-front, annual commercial insurance premiums." Bridge Premium enticed investors with promises of annual returns of 12 percent and guarantees that their funds were "100% Protected." However, according to the SEC, Bridge Premium paid investor returns with funds from other investors since at least 2002. Furthermore, Bridge Premium's offering was not registered with the SEC. The SEC has charged Bridge Premium with violating sections of the Securities Act and the Exchange Act. Under the Exchange act, "Turnock is liable as a control person...for Bridge Premium's violations." Additionally, the SEC alleges that Sullivan violated various sections of the Securities Act and Exchange Act. The Court issued a "Temporary Restraining Order, Asset Freeze, Other Equitable Relief, and Order Setting Preliminary Injunction Hearing...on August 14, 2012." Bridge Premium's, Turnock's, and Sullivan's assets have all been frozen by the Court's order.

SEC Charges Petro-Suisse Ltd. and Mark Gasarch with Offering Fraud,  August 14, 2012, (Litigation Release No. 22448).

According to the complaint (opens to PDF), from 2003 to 2006 Petro-Suisse Ltd. along with its Director, Mark Gasarch, Treasurer, and legal counsel offered fraud through the medium of 21 private placements memorandums. These PPMs purported that Petro-Suisse or an affiliate would "cause each of the 21 partnerships to enter into written agreements to finance the drilling of oil wells in Trinidad." These partnerships would then "receive contractual rights to receive returns measured by the net revenues of the wells drilled." However, the partnerships never entered into any such written agreements, rendering these PPMs materially false and misleading. Petro-Suisse and Gasarch consented to Final Judgments enjoining them from violating sections of the Exchange Act and have agreed to pay over $8 million jointly and severally in disgorgement. Additionally, Gasarch has agreed to pay a $130,000 civil penalty.

SEC Charges Home and Construction Loan Companies and Their Principal with Offering Fraud,  August 14, 2012, (Litigation Release No. 22447).

The SEC filed a civil injunction against Ivan Wade Brown and his wholly-owned and solely-controlled companies: Highland Residential, LLC and Avanti Capital Partners, LLC. According to the complaint (opens to PDF), beginning in 2004 Ivan Wade Brown raised over $27 million dollars in investor funds through the "fraudulent and unregistered sale of promissory notes in Highland and Avanti." He initially sold these promissory notes for Highland in 2004, but he formed Avanti when the Utah Division of Securities started investigating his and Highland's conduct in 2007 . Brown claimed the funds would be used to make secured bridge loans under little-to-no risk circumstances. Instead, he allegedly used these funds for personal use, to make Ponzi payments, to invest in unidentified properties, and to invest in other suspected frauds. The SEC has charged Brown, Highland, and Avanti with violating sections of the Securities Act and Exchange Act.  

Court Enters Final Judgment Against Alero Odell Mack, Jr.,  August 14, 2012, (Litigation Release No. 22446).

On August 7, 2012, the Court entered a Final Judgment against Alero Odell Mack, Jr. regarding a SEC complaint that Mack along with Steven Enrico Lopez, Sr. and various entities under Mack's control raised around $4 million in investor funds through fraudulent investment schemes. The Final Judgement enjoins Mack from violating sections of the Securities Act, Exchange Act and the Investment Advisers Act of 1940. Additionally, Mack has been ordered to pay over $1 million in disgorgement, prejudgment interest and penalties. 

SEC Charges Six Individuals in $6 Million "Shell-Factory" Scheme,  August 14, 2012, (Litigation Release No. 22445).

According to the complaint (opens to PDF), from 2006 to 2011 Thomas D. Coldicutt, Jr., Elizabeth L. Coldicutt, Robert C. Weaver, Jr., Christopher C. Greenwood, Linda S. Farrell, and Susana Gomez "engaged in an elaborate scheme to create and sell at least 15 public shell companies." They reaped almost $6 million in ill-gotten gains from the scheme. Allegedly, husband-and-wife duo, Thomas and Elizabeth Coldicutt, "installed nominee officers and directors in corporations they secretly controlled." The corporate nominees, including Farrell, Weaver, Greenwood, and Gomez, were then directed and assisted by the Coldicutts to submit "materially false and misleading registration statements and reports to the SEC." The SEC contends that "these companies' SEC filings failed to disclose that the Coldicutts controlled and funded the companies." Furthermore, the SEC alleges that the Coldicutts "obtained nominees to purchase stock in the companies" and then provided the nominees with "all or most of the funds to purchase the stock." The shell companies were supposedly formed to pursue mining activities, when in fact these companies never conducted nor ever intended to conduct any real mining activities. Farrell, Weaver, Greenwood, and Gomez all "act[ed] as corporate nominees, recruit[ed] other nominees to hold stock in the shells, and sign[ed] materially false and misleading SEC filings." Additionally Weaver, Greenwood, and Farrell each "formed, registered, marketed, and ultimately sold at least one shell." 


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