Friday, May 24, 2013

SEC Litigation Releases: Week in Review

SEC Charges Atlanta-Area Registered Representative and Registered Investment Adviser Representative with Securities Fraud, May 23, 2013, (Litigation Release No. 22706)

According to the complaint (PDF), since at least 2008 Blake Richards, "a registered representative of a broker dealer, misappropriated at least $2 million from at least seven investors." Allegedly, the "majority of the misappropriated funds constituted retirement savings and/or life insurance proceeds from deceased spouses." An order was issued that "temporarily restrained Richards from further securities laws violations, froze Richards’s assets, prevented the destruction of documents, and expedited discovery." The SEC has charged Richards with violating various provisions of the Securities Act and Exchange Act and seeks permanent injunction, disgorgement, prejudgment interest, and civil penalties.

SEC Charges Director's Brother, and His Friend and His Relative, with Insider Trading in Shares of a Medical Professional Liability Insurer, May 22, 2013, (Litigation Release No. 22705)

According to the complaint (PDF), John A. Stilwell along with his friend, Dr. Michael C. Moore, and sister-in-law, Jillian M. Murphy, traded on insider information that Stilwell gained from his brother, an American Physicians Capital, Inc. director. The insider information involved ACAP's possible acquisition by The Doctors Company. Moore and Murphy allegedly each tipped another person. In total, the four tippees made almost $62,000 in illicit profits. The defendants agreed to settle charges by agreeing to a final judgment that permanently enjoins them future violations of the Exchange Act, as well as orders them to pay disgorgement, prejudgment interest, and financial penalties.

Securities and Exchange Commission v. Ren Hu, May 20, 2013, (Litigation Release No. 22704)

A final judgment was entered against China Yingxia's former chief financial officer, Ren Hu. Hu allegedly made "fraudulent representations in Sarbanes-Oxley certifications" and failed to "implement internal controls, aided and abetted China Yingxia's failure to do so, and made materially misleading statements to auditors concerning such controls and potential fraud by the CEO." The final judgment imposes a permanent injunction against Hu from future violations of the Exchange Act and also "imposes a 3-year officer and director bar against Hu but does not include any civil monetary penalty based on Hu's financial condition."

SEC Charges Chicago-Area Father and Son Conducting Cherry-Picking Scheme At Investment Firm, May 17, 2013, (Litigation Release No. 22703)

According to the complaint (PDF), father-and-son duo, Charles J. Dushek and Charles S. Dushek, along with their investment advisory firm, Capital Management Associates, Inc., (CMA) defrauded "CMA clients in a cherry picking scheme that garnered the Dusheks nearly $2 million in illicit profits." The scheme went on for 17 quarters and caused at least one of "Dushek Sr.’s personal accounts [to] increase...in value by almost 25,000 percent." The SEC has charged the defendants with violating various provisions of the securities laws and seeks permanent injunctions, civil penalties, disgorgement, and prejudgment interest. Additionally, Margaret Dushek was named as a relief defendant.

SEC Charges Resident in the Atlanta Area and His Firm with Fraud in Connection with Prime Bank Scheme, May 17, 2013, (Litigation Release No. 22702)

According to the complaint (PDF), Robert Fowler and his company, US Capital Funding Series II Trust 1, defrauded " investors in a 'prime bank' investment scheme." Last August, the defendants allegedly "raised at least $350,000 from investors by falsely promising high profits for investing in standby letters of credit or bank guarantees that would purportedly grant the investors loans, the proceeds of which would be invested for a significant profit." These funds were misappropriated by Fowler and US Capital  for "personal and business use." According to the SEC, Fowler preyed on "foreign-born small business owners with little or no experience in finance or investing." The SEC has charged Fowler and US Capital with violating the antifraud provisions of the securities laws and seeks "permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties."

Final Judgments Entered Against Connecticut-Based Investment Adviser and His Firm Charged with Fraud for Stealing Investor Funds, May 16, 2013, (Litigation Release No. 22701)

Final judgments were entered against Stephen B. Blankenship and his investment advisory firm, Deer Hill Financial Group, LLC for allegedly engaging in a scheme that defrauded investors of at least $600,000. The final judgment enjoins the defendants from future violations of the securities laws. Additionally, the SEC has "barred Blankenship from working in the securities industry."

Criminal charges arose from the same alleged misconduct and on December 5, 2012 Blankenship was sentenced "to forty-one months imprisonment plus three years of supervised release and ordered...to pay a fine of $7,500 and restitution in the amount of $607,516.81."

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