Friday, July 12, 2013

SEC Litigation Releases: Week in Review

Serial Fraudster Matthew J. Gagnon Sentenced to Five Years in Prison, July 11, 2013, (Litigation Release No. 22749)

This week Matthew J. Gagnon was sentenced to "five years of incarceration followed by three years of supervised release and ordered...to pay over $4.4 million in restitution to his victims." Gagnon had pleaded guilty to "one count of criminal securities fraud for promoting a securities offering without fully disclosing the amount of his compensation in connection with his promotion of the $72 million Legisi Ponzi scheme in 2006 and 2007." The criminal charges came from "the same facts that were the subject of a civil injunctive action that the Commission filed against Gagnon" in May of 2010.

SEC Obtains Final Judgments Against Martin C. Hartmann III and Laura Ann Tordy, July 11, 2013, (Litigation Release No. 22748)

Final judgments were entered against Martin C. Hartmann III and Laura Ann Tordy for their alleged involvement in Agape World, Inc., "an offering fraud and Ponzi scheme that raised $415 million" from investors. The final judgment permanently enjoins the defendants from violating sections of the Exchange Act and Securities Act and orders them to pay over $10 million combined in disgorgement, prejudgment interest, and penalties.

SEC Freezes Assets of Insider Traders in Onyx Pharmaceuticals, July 9, 2013, (Litigation Release No. 22747)

According to the complaint (PDF), unknown traders potentially used insider information regarding Onyx Pharmaceuticals, Inc.'s rejection of an acquisition offer from Amgen, Inc. to reap almost "$4.6 million in...profits." The SEC claims that the traders "took risky bets that Onyx’s stock price would increase by purchasing call options...three trading days before the announcement." An emergency court order was obtained by the SEC to freeze "the traders’ assets related to the Onyx call options transactions and [prohibit] the traders from destroying any evidence." The SEC has charged the traders with violating sections of the Exchange Act and seeks disgorgement, interest, financial penalties, and permanent enjoinments from future violations.

SEC Obtains Final Judgment Against Miami Attorney Stewart A. Merkin, July 9, 2013, (Litigation Release No. 22746)

A final judgment was entered last week against Stewart A. Merkin, an attorney who allegedly "wrote letters falsely stating that his client, StratoComm Corporation, was not under investigation for violations of the securities laws." The SEC alleged that "Merkin knew that his statements were false because, at the time that he wrote each letter, he was representing StratoComm and several individuals in the Commission’s investigation into the company’s activities." Additionally, Merkin allegedly "authorized his letters to be posted on the website maintained by Pink Sheets LLC (currently OTC Markets Group Inc.) for viewing by the investing public." Merkin consented to the final judgment that orders him to pay $125,000 in disgorgement, prejudgment interest, and a civil penalty, and imposes a permanent injunction against future violations of the Exchange Act. Additionally, Merkin has been barred from "from participating in an offering of penny stock."

Canadian Court Enforces U.S. Judgment Award in Market Manipulation Case Against William Todd Peever and Phillip James Curtis, July 8, 2013, (Litigation Release No. 22745)

On June 20, 2013, "Canada granted summary judgment in favor of the Commission to recognize and enforce judgments previously entered in...New York against William Todd Peever and Phillip James Curtis, both of whom are Canadian citizens residing in British Columbia." The U.S. judgments hold "Peever and Curtis jointly and severally liable for $2,894,537.48 in disgorgement and $1,611,998.18 in prejudgment interest for their respective roles in a fraudulent scheme to manipulate the stock price of SHEP Technologies, Inc. f/k/a Inside Holdings Inc."

Securities and Exchange Commission v. John Fowler, Jeffrey Fowler, and Julianne Chalmers, July 8, 2013, (Litigation Release No. 22744)

Last week an enforcement action was filed against John Fowler, "a convicted felon," as well as his son, "Jeffrey Fowler, a former Florida public school teacher, and Julianne Chalmers." According to the SEC, "from January 2011 through November 2011, John Fowler and Jeffrey Fowler raised approximately $4.3 million...through a Ponzi scheme disguised as a gold futures investment program." Chalmers allegedly acted as an unregistered broker-dealer and sold unregistered securities by soliciting "investors to invest in the gold futures program by purchasing promissory notes.  "The enforcement action charges the defendants with violating various sections of the securities laws. John and Jeffrey Fowler have consented to the "entry of judgments, which would enjoin them from" future violations. "These judgments are subject to court approval. The SEC is seeking a permanent injunction, disgorgement, and financial penalties against Chalmers."

A parallel  investigation was conducted by the U.S. Attorney's Office and resulted in felony convictions against John Fowler and Jeffrey Fowler.

Criminal Charges Filed Against Massachusetts Investment Adviser for Defrauding Investors, July 8, 2013, (Litigation Release No. 22743)

Last week a criminal Information was filed against Jeffrey A. Liskov, which charged Liskov with "willfully violating Section 206 of the Investment Advisers Act of 1940." The SEC previously charged Liskov and his advisory firm, EagleEye Asset Management, LLC, with "defrauding advisory clients in connection with foreign currency exchange investments." The forex investments allegedly "resulted in client losses totaling nearly $4 million, while EagleEye and Liskov came away with over $300,000 in performance fees, in addition to other management fees they collected from clients." The SEC charged Liskov and EagleEye with violating sections of the securities laws and ordered them to pay over $1 million combined in disgorgement, prejudgment interest, and penalties.

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