Friday, October 12, 2012

SEC Litigation Releases: Week in Review

SEC Brings New Charges in Insider Trading Case Against Chinese Citizens, October, 12, 2012, (Litigation Release No. 22508)

In December 2011, the SEC charged several Chinese citizens and Chinese-based entity, All Know Holdings Ltd., with insider trading concerning the merger between Pearson plc and Global Education and Technology Group, Ltd. The SEC filed an amended complaint (PDF) on October 4, 2012, naming Jie Meng as a new defendant. According to the complaint, Meng received information regarding the merger from friend Angela Yang (a.k.a. Yang Yan), who was an employee of Pearson. Meng used money from Yang as well as money from relief defendant Song Li's bank account to purchase over 24,000 shares of Global Education securities in Li's brokerage account. Allegedly, Meng made nearly $150,000 in illicit profits. Due to an asset freeze on Li's account, however, Meng was unable to liquidate Li's account. Meng has agreed to pay, jointly and severally with Li, nearly $150,000 in disgorgement and prejudgment interest. Meng has also been ordered to pay a $71,000 civil penalty. In regards to the other defendants, Lili Wang has been ordered to pay almost $400,000 in disgorgement, prejudgment interest, and civil penalties.

Defendant James L. Douglas A/K/A James L. Cooper Held in Civil Contempt after Failing to Comply with Judgment, October, 12, 2012, (Litigation Release No. 22507)

The SEC announced that James L. Douglas (a.k.a James L. Cooper) was found to be in civil contempt for not paying in full a judgment entered against him in 1983. This judgment (which resulted from a SEC complaint alleging Douglas raised over $7.5 million by "offering and selling unregistered oil and gas partnerships") ordered Douglas "to disgorge $200,000 within three years." Douglas only paid a little over $120,000, leaving an unpaid balance of over $78,000. In 1988, Douglas was found to be in contempt based on the non-payment and a warrant was issued for his arrest. However, Douglas's location was unknown to U.S. Marshals until 2010 when he had returned to the U.S. to file a suit "on behalf of his deceased wife's estate." On August 20, 2012, the Court again held Douglas in contempt. This time, the Court ruled that Douglas "must pay post-judgment interest at the statutory rate of 10.74% from the 'date of the entry of the judgment' in 1983." According to the SEC's calculation, this post-judgment interest "now exceeds $1.7 million."

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