Monday, December 2, 2013

SEC Litigation Releases: Week in Review

SEC Charges Weatherford International with FCPA Violations, November 26, 2013, (Litigation Release No. 22880)

According to the complaint (PDF), oilfield services company Weatherford International violated the Foreign Corrupt Practices Act by "authorizing bribes and improper travel and entertainment for foreign officials in the Middle East and Africa to win business, including kickbacks in Iraq to obtain United Nations Oil-for-Food contracts." The company allegedly earned more than "$59.3 million in profits from business obtained through improper payments, and more than $30 million in profits from its improper sales to sanctioned countries." Weatherford has agreed to pay over $250 million to settle "the SEC’s charges and parallel actions by the Department of Justice’s Fraud Section, U.S. Attorney’s Office for the Southern District of Texas, Department of Commerce’s Bureau of Industry and Security, and Department of Treasury’s Office of Foreign Assets Control." Additionally, Weatherford as agreed to comply "with certain undertakings, including the retention of an independent compliance monitor for 18 months and self-reporting to the SEC staff for an additional 18 months."

District Court Denies Motion to Vacate Default Judgment Against Medical Software Company and Its CEO, November 25, 2013, (Litigation Release No. 22879)

Earlier this week, the Court denied "Aurelio Vuono’s motion to vacate the default judgments previously entered against MedLink International, Inc., a medical software company, and its CEO, Aurelio Vuono, also known as Ray Vuono." The defendants had previously been charged with filing an annual report that falsely stated MedLink's "audit had been completed and with defrauding a MedLink investor." The court found that "Vuono’s default was willful and that he had failed to present any meritorious defense to the Commission’s charges." Previously, a final judgment was entered against Vuono this May that ordered him to pay disgorgement, prejudgment interest, and civil penalties as well as barred him from penny stock offerings or serving as an officer or director of a company.

SEC Charges Alabama Based Defendants with Securities Fraud and Reporting Violations, November 25, 2013, (Litigation Release No. 22878)

According to the complaint (PDF), Charles H. Merchant and his company Southern USA Resources, Inc. filed "materially false reports with the Commission that misrepresented the value of the company’s land." Additionally, Merchant filed "certifications that contained false statements about the company’s internal controls and his understanding of those controls," and "Southern USA is currently delinquent with respect to its 2012 Form 10-K and its two most recent Forms 10-Q." The complaint charges the defendants with violating various sections of the Exchange Act. The SEC has "filed signed consents with the Court from the two defendants to proposed orders of permanent injunction and other ancillary relief."

Court Orders Massachusetts-Based Viking Financial Group, Inc. and Steven Palladino to Pay Over $9.8 Million, November 25, 2013, (Litigation Release No. 22877)

Court orders were entered against Steven Palladino and his company, Viking Financial Group, Inc., ordering them  to pay over $9.8 million in disgorgement and prejudgment interest as well as permanently enjoining them from future violations of the securities laws. Additionally, the Court "ordered that an asset freeze imposed in April 2013 remain in effect." This judgment is based on SEC charges that "since April 2011, Palladino and Viking falsely promised at least 33 investors that their money would be used to conduct the business of Viking - which was purportedly to make short-term, high interest loans to those unable to obtain traditional financing" - but instead was used "to make payments to earlier investors and to pay for the Palladino family's substantial personal expenses."

Criminal charges based on the same facts were also entered against the defendants earlier this March.

SEC Charges Gary C. Snisky with Offering Fraud, November 21, 2013, (Litigation Release No. 22876)

According to the complaint (PDF), Gary C. Snisky "recruited and trained a sales force that raised at least $3.8 million from more than 40 elderly investors...by promising guaranteed returns and safety of principal through a purported investment in" interests in Arete, LLC, "a purportedly safe alternative to an annuity that also allowed for withdrawal of principal." In reality, the representations made to investors were purportedly "false, as Snisky misappropriated approximately $2.8 million in investor funds, mostly in cash withdrawals, and used these funds to pay commissions to his salespeople and for his personal use."

The SEC has charged Snisky and Arete, LLC with violating various provisions of the securities laws and seeks "a permanent injunction, disgorgement plus prejudgment interest, a civil monetary penalty, and other relief against Snisky."

SEC Charges Certified Public Accountant with Violating Commission Suspension Order;
Seeks Disgorgement of Illicit Compensation Received During Suspending Period, November 21, 2013, (Litigation Release No. 22875)

According to the complaint (PDF), accountant R. Gordon Jones violated a May 4, 2001 Commission Order that suspended him from "appearing or practicing before the Commission as an accountant." Beginning in 2001 through the present, Jones allegedly "provided accounting and financial statement preparation work for public companies...through his company J&J Consultants, LLC." The SEC seeks a court order enforcing its 2001 Order, and "asks that the court order Jones to pay disgorgement, representing illicit compensation gained as a result of his engaging in work that was proscribed by the 2001 Order, together with prejudgment interest."

SEC Charges Another Tipper in the Galleon Insider Trading Scheme, November 21, 2013, (Litigation Release No. 22874)

Last week, the SEC charged "Sam Miri, who worked in the communications division at Marvell Technology Group" with tipping "confidential information about the company's financial performance to former Galleon Management portfolio manager Ali Far." Far then used this information to "trade Marvell securities on behalf of hedge funds that he founded after leaving Galleon." Far paid Miri a total of $10,000 in "exchange for the illegal tips." The SEC has charged Miri with violating the Exchange Act, and Miri has agreed to pay over $60,000 in disgorgement, prejudgment interest, and penalties to settle the charges. In addition, Miri has agreed to a five-year officer-and-director bar as well as permanent enjoinment from future violations of the securities laws.

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