Friday, January 18, 2013

SEC Litigation Releases: Week in Review

SEC Charges Georgia Resident with Insider Trading, January 17, 2013, (Litigation Release No. 22596)

According to the complaint (opens to PDF), John M. Darden III traded with non-public information regarding the merger between Southwest Airlines Company and AirTran Holdings, Inc. Darden, who gained over $150,000 in profits from the illicit trading, agreed to a final judgment that provides permanent injunctive relief and orders him to pay over $325,000 in disgorgement, prejudgment interest, and penalties.

SEC Files Settled Insider Trading Charges Against Former Trader Eric Rogers, January 17, 2013, (Litigation Release No. 22595)

According to the complaint (opens to PDF), Eric Rogers participated in an insider trading scheme concerning the 2007 acquisition of 3Com Corp that generated $207,000 in illegal profits. Rogers, a former proprietary trader at Spectrum Trading LLC, allegedly gained the insider knowledge from coworker Emanuel Goffer, who learned of it from his brother Zvi Goffer, a proprietary trader at Schottenfeld Group LLC. Zvi Goffer gained the information from two former attorneys at Ropes & Gray LLP, Arthur Cutillo and Brien Santarlas.  Rogers has agreed to a final judgment that enjoins him from violating sections of the Exchange Act and orders him to pay over $125,000 in disgorgement and prejudgment interest. However, due to Rogers' financial condition, the payment obligations have been waived. Additionally, Rogers has agreed to a penny stock bar and a bar from associating with "any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization."

SEC Obtains Significant Relief in Summary Judgment Win Against Defendants Charged with Defrauding Investors in Fictitious Offerings, January 15, 2013, (Litigation Release No. 22594)

A summary judgment was entered against Francis E. Wilde, Steven E. Woods, Mark A. Gelazela, Bruce H. Haglund, and their entities, Matrix Holdings LLC, BMW Majestic LLC, IDLYC Holdings Trust, and IDLYC Holdings Trust LLC, for their involvement in "two 'prime bank' or 'high yield' investment schemes that defrauded investors out of more than $11 million." The two schemes allegedly began in April 2008 and Ocotber 2009. The final judgment permanently enjoins "Francis E. Wilde, Steven E. Woods, Mark A. Gelazela, Bruce H. Haglund, and entities they control, from violations of the antifraud and other securities law provisions" and imposes an officer and director bar against Wilde and Haglund. The judgment also orders Wilde and Matrix to pay over $13.5 million in disgorgement and prejudgment interest, plus a civil penalty "equal to the amount of disgorgement plus prejudgment interest." In addition, Woods, Gelazela, Haglund, BMW Majestic, IDLYC and IDLYC LLC have been ordered to pay over $6.7 million in disgorgement and prejudgment interest, plus a civil penalty "equal to the amount of disgorgement plus prejudgment interest." Finally, relief defendants IBalance LLC, Maureen Wilde, and Shillelagh Capital Corporation have all been ordered to pay over $2.3 million combined in disgorgement and prejudgment interest.

Commission Settles with Four Defendants in Sedona Corporation Market Manipulation Fraud, January 15, 2013, (Litigation Release No. 22593)

Final judgments have been entered against Andreas Badian, Jeffrey "Danny" Graham, Pond Securities Corporation, and Ezra Birnbaum," for their alleged "fraudulent manipulative trading in the securities of Sedona Corporation." The final judgment permanently enjoins Badian, Pond, and Birnbaum from violating various securities law provisions and ordered Badian, Graham, Pond, and Birnbaum to pay approximately $675,000 combined in disgorgement, prejudgment interest, and civil penalties.
  
United States District Court Enters Final Judgments in Penny Stock Distribution Scheme Charged by the SEC, January 14, 2013, (Litigation Release No. 22592)

Final judgments were entered against Christel S. Scucci, her mother Karen S. Beach, their companies Protégé Enterprises, LLC and Capital Edge Enterprises, LLC, and their attorney, Cameron H. Linton, for their involvement in a scheme "to unlawfully acquire and sell shares of penny stock that were never registered for sale to the public." The court entered a judgment against Linton in September 2012, permanently enjoining him from violating Section 5 of the Securities Act as well as ordering him to pay over $13,000 in disgorgement and penalties. In addition the judgment ordered a penny stock bar against him and suspended him from "from appearing or practicing before the Commission as an attorney." In November 2012, final judgments were entered against Beach, Scucci, Capital Edge, and Protégé permanently enjoining them from violating Section 5 of the Securities Act, and ordering them to pay over $1.8 million combined in disgorgement, prejudgment interest and penalties. In addition, a penny stock bar has been ordered against these defendants as well.

Final Judgment Entered Ordering Massachusetts-Based Investment Adviser to Pay Over $7.2 Million, January 11, 2013, (Litigation Release No. 22591)

Final judgments were entered against investment adviser Gary J. Martel, who conducted business under the names Martel Financing Group and MFG Funding, for allegedly "selling fictitious investment products and using the funds raised for purposes other than making the investments he promised." The final judgment permanently enjoins Martel from violating various sections of the securities laws and ordered him to pay over $7.2 million in disgorgement, prejudgment interest, and civil penalties. In December 2012, Martel pled guilty to criminal charges brought against him based on the same charges.

Court Finds in Favor of Three Remaining Defendants in Penny Stock and Accounting Fraud Case, January 11, 2013, (Litigation Release No. 22590)

Final judgments were entered in favor of attorneys Daniel G. Chapman and Sean P. Flanagan, and consultant James L. Ericksteen on January 7th, 2013. The defendants had been charged with directly violating and aiding and abetting "others in violating antifraud provisions of the federal securities laws" in connection with the stock manipulation and accounting fraud with Exotics.com. The Court found that there was insufficient evidence presented at trial to "prove that defendants Chapman, Flanagan, and Ericksteen committed the violations alleged in the complaint." Previously, the Commission "obtained judgments against ten [other] defendants"  in connection with its original complaint.

SEC Charges Volt Information Sciences, Inc. and Two Former Officers with Securities Fraud, January 11, 2013, (Litigation Release No. 22589)

According to the complaints against Volt Information Sciences, Inc. and Volt's former Chief Financial Officer, Jack J. Egan, Jr. (open to PDF), Egan "participated in a scheme to materially overstate revenue" by over $7.55 million. In addition, Egan allegedly misled Volt's external auditors and "signed one or more certifications required by Section 302 of the Sarbanes Oxley Act that were false and misleading." The SEC also named Debra L. Hobbs, Volt's former chief financial officer, in its complaint against Volt. The complaint charges Egan with violating various provisions of the securities laws and seeks permanent enjoinment, an officer and director bar, and a civil monetary penalty against Egan. In response to the SEC's complaint, Volt and Hobb agreed to permanent enjoinments against violations of various sections of the securities laws and Volt undertook "significant remediation efforts."

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