Friday, January 17, 2014

SEC Litigation Releases: Week in Review

SEC Charges Former Senior Executives of Public Company Subsidiary with Falsifying Financial Records and Circumventing Internal Controls, January 15, 2014, (Litigation Release No. 22906)

This week, the SEC announced charges against Christopher Hohol and Brian Poshak, "formerly the senior vice president for operations and the controller, respectively, of Veolia Special Services, a fourth-tier United States subsidiary of Veolia Environnement S.A." According to the SEC, the defendants falsified "books, records, and accounts and circumvent[ed] internal controls in order to overstate Special Services’ earnings before taxes over a period of at least three years." This illicit behavior caused Special Services to overstate its EBT by about $64 million. This then resulted in "Hohol and Poshak receiv[ing] $136,000 and $28,000, respectively, in ill-gotten bonus payments that were triggered by the inflated financial performance of Special Services."

The defendants have consented to a final judgment that permanently enjoins them from future violations of the Exchange Act and orders them to pay over $135,000 in disgorgement and prejudgment interest combined.

Former Stockbroker Ordered to Pay $5.6 Million for Insider Trader in Burger King Stock, January 14, 2014, (Litigation Release No. 22905)

A final judgment was entered this week against Waldyr Da Silva Prado Neto who "misappropriated material nonpublic information from his customer and used it to trade Burger King Holding, Inc.'s securities and tip others before the company's September 2, 2010 announcement that it was being acquired by a New York private equity firm." According to the SEC, Prado made $175,000 in illicit profits from his illegal trading. The final judgment permanently enjoins Prado from future violations of the Exchange Act and orders him to pay over $5.6 million in disgorgement, prejudgment interest, and penalties.

Court Enters Final Judgment Against Officer, Broker and Relief Defendant Broker-Dealer in Settlement of Insider Trading Charges, January 14, 2014, (Litigation Release No. 22904)

Final judgments were entered against Mack D. Murrell and Charles W. Adams, as well as relief defendant Raymond James Financial Services, Inc., for their involvement in an insider trading scheme involving The Dow Chemical Company's securities. The judgments permanently enjoin Murrell and Adams from violating the Exchange Act and order them to pay over $444,000 in disgorgement, prejudgment interest, and civil penalties. A director and officer bar was placed against Murrell. Relief defendant Raymond James was ordered to pay over $382,000 in disgorgement and prejudgment interest. David A. Teekell was also charged for his alleged involvement in the scheme and previously settled the SEC's charges.

District Court Enters Default Judgment Against Defendant Claudio Osorio, Judgment of Permanent Injunction Against Defendant Innovida Holdings LLC., Judgment of Permanent Injunction and Other Relief Against Defendant Craig Toll and Order Dismissing Case, January 13, 2014, (Litigation Release No. 22903)

Last November, a judgment was entered against Craig Toll that permanently enjoins him from future violations of the securities laws and places a director and officer bar against him. Additionally, the judge ordered Toll's "disgorgement, prejudgment interest and civil penalty be dismissed as Toll was convicted in a parallel criminal case, sentenced to four years in prison, and ordered to pay restitution."

Previously, a permanent injunction and officer/director bar were placed against Claudio Osorio for his alleged violations of the same securities laws. "On November 22, 2013, the Commission dismissed its civil penalty and disgorgement claims against Osorio because of his prison sentence and restitution order in the parallel criminal case."  Additionally, "the Court dismissed disgorgement and civil penalty claims against Defendant InnoVida Holdings because it is under the control of a bankruptcy trustee."


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