Friday, December 27, 2013

SEC Litigation Releases: Week in Review

SEC Charges Archer-Daniels-Midland Company with FCPA Violations, December 24, 2013, (Litigation Release No. 22900)

According to the complaint (PDF), Archer-Daniels-Midland Company failed to "prevent illicit payments made by foreign subsidiaries to Ukrainian government officials." The SEC found that "ADM's subsidiaries in Germany and Ukraine paid $21 million in bribes" and ADM made "approximately $33 million in illegal profits as a result of the bribery by its subsidiaries." ADM has agreed to be permanently enjoined from future violations of the securities laws and to pay over $36 million in disgorgement and prejudgment interest to settle the charges. Additionally, ADM is required to "report on its FCPA compliance efforts for a three-year period." The U.S. Department of Justice announced in a parallel action that a non-prosecution agreement had been reached with ADM. Additionally, criminal charges were announced against "an ADM subsidiary that has agreed to pay $17.8 million in criminal fines."

SEC Charges Former SAP Employee with Insider Trading, December 23, 2013, (Litigation Release No. 22899)

The SEC has charged David F. Marchand with insider trading  in the securities of SuccessFactors, Inc., Ariba, Inc., and SAP AG. According to the complaint, Marchand made over $43,000 in illegal profits from the trading. Marchand has consented to a final judgment that permanently enjoins him from future violations of the securities laws and orders him to pay almost $90,000 in disgorgement, prejudgment interest, and civil penalties.

SEC Charges Woman and Stepson for Involvement in Zeekrewards Pyramid and Ponzi Scheme; Parallel Criminal Charges and Plea Agreements Also Announced, December 23, 2013, (Litigation Release No. 22898)

According to the complaint (PDF), Dawn Wright-Olivares and Daniel Olivares perpetrated "the fraudulent unregistered offer and sale of securities through Rex Venture Group LLC d/b/a ZeekRewards.com, an internet-based combined Ponzi and pyramid scheme." Both defendants have agreed to settle the SEC's charges against them by consenting to permanent injunctions and agreeing to pay over $11.4 million combined in disgorgement and prejudgment interest. Criminal charges have been placed against both defendants and in "light of their anticipated incarceration, no civil penalty will be imposed."

SEC Obtains Final Judgment Against Yonghui Zhang in Global Education Insider Trading Case, December 23, 2013, (Litigation Release No. 22897)

A final judgment was entered against Yonghui Zhang, "the remaining defendant in an insider trading case involving the securities of...Global Education and Technology Group, Ltd." Eight defendants, including Zhang, were charged "with insider trading after they reaped more than $2.8 million in profits by trading in advance of a publicly announced merger between Global Education and...Pearson plc." Zhang has consented to a final judgment that enjoins him from future violations of the Exchange Act and orders him to pay over $80,000 in disgorgement and civil penalties. "The relief obtained concludes the litigation in SEC v. All Know Holdings Ltd, et al."

SEC Settles Civil Action Against Advanced Cell Technology, Inc. Concerning Its Illegal Unregistered Distributions of Stock - Relief Includes Payment of More Than $4 Million, December 23, 2013, (Litigation Release No. 22896)

The SEC settled a pending civil action against Advanced Cell Technology, Inc. this week. The action arose out "of Advanced Cell’s issuance of hundreds of millions of unregistered shares of common stock on thirteen separate occasions without qualifying for any exemption from registration." According to the SEC, "in or about early 2006, Mark A. Lefkowitz, a penny stock financier, developed an illegal strategy for penny stock issuers to pay off past due debts and also raise capital by issuing stock purportedly pursuant to the Section 3(a)(10) exemption." From 2008 to 2009, several entities "affiliated with Lefkowitz...purchased past due debts of Advanced Cell from various Advanced Cell debtholders." After a Lefkowitz Related Entity acquired each debt, Lefkowitz and William Caldwell IV (who was then the Chief Executive Officer of Advanced Cell) "agreed on the terms of a settlement, and the Lefkowitz Related Entity filed a lawsuit against Advanced Cell in a Florida state court purportedly to collect on the debt." According to the SEC, "in each instance, the Florida state court found the settlements to be fair and entered an order granting a Section 3(a)(10) exemption." The defendants, however, never allegedly "informed the Florida state court of the full terms and conditions of the settlements, thereby compromising the fairness hearings." Advanced Cell allegedly "issued a total of 260,115,983 shares of unrestricted common stock to settle the thirteen lawsuits filed against it by the Lefkowitz Related Entities." The settlement shares, "which had a total market value of approximately $9,230,000 as of the respective settlement dates, were issued to satisfy past due debts totaling approximately $1,110,000." The Lefkowitz Related Entities purportedly retained "a portion of the profits from the sale of the shares for themselves" and then "remitted $3.5 million to Advanced Cell."

The SEC has charged Advanced Cell with violating the Securities Act and Advanced Cell has agreed to permanent enjoinment from future violations of the Securities Act, and to pay over $4 million in disgorgement and prejudgment interest.

SEC Obtains Order of Permanent Injunctions Against Chicago-Area Investment Adviser and Its Owners for Fraud, December 23, 2013, (Litigation Release No. 22895)

Last week, permanent injunctions were entered against Patrick G. Rooney and his company Solaris Management, LLC. According to the SEC, "Rooney and Solaris radically changed the investment strategy of the Solaris Opportunity Fund LP, contrary to the Fund's offering documents and marketing materials, by becoming wholly invested in Positron Corp." Rooney, "who has been Chairman of Positron since 2004 and received salary and stock options from Positron since September 2005, misused the Fund's money by investing more than $3.6 million in Positron through both private transactions and market purchases." While these "investments benefited Positron and Rooney," they provided the "Fund with a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses." Rooney and Solaris have consented to a final judgment that enjoins them from future violations of the securities laws and have "agreed that the court would determine whether to impose penalties and disgorgement against them and whether Rooney should be prohibited from acting as an officer or director of a public company."

Court Enters Final Judgment of Permanent Injunction and Other Relief Against E-Monee.Com, Inc. and Estuardo Benavides, December 20, 2013, (Litigation Release No. 22894)

A final judgment was entered against  E-Monee.com, Inc. and Estuardo Benavides, that enjoins them from future violations of the Securities Act, orders Benavides to pay a $110,000 civil penalty, and bars Benavides from participating in an offering of penny stock. According to the SEC's original complaint, "E-Monee, its president Benavides, and one of its directors Robert B. Cook, fraudulently offered shares in E-Monee, while claiming the company owned Mexican bonds purportedly worth approximately $5 billion, and that E-Monee's shares would substantially increase in value." The bonds were in fact essentially worthless and "there was no valid basis for the claims by Benavides and Cook that E-Monee's shares would substantially increase in value."

SEC Charges Microsoft Senior Manager and Friend with Insider Trading in Advance of Company News, December 20, 2013, (Litigation Release No. 22893)

According to the SEC, Brian D. Jorgenson, along with his friend, Sean T. Stokke, traded on insider Microsoft information that Jorgenson learned "through his work in Microsoft's corporate finance and investments division." The duo allegedly made over $393,000 from the trading scheme. The SEC has charged the defendants with violating various provisions of the Exchange Act and "seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against Jorgenson and Stokke as well as an officer-and-director bar against Jorgenson."

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