Friday, January 31, 2014

SEC Litigation Releases: Week in Review

Court Enters Final Judgment Against Broker in Settlement of Claims Arising from Fraudulent Misrepresentations and the Misappropriation of Funds, January 30, 2014, (Litigation Release No. 22914)

A final judgment was entered this week against David L. Rothman based on charges that "Rothman,...who was the Vice President and minority owner of Rothman Securities, Inc....creat[ed] and issu[ed] false account statements to certain elderly and unsophisticated investor/clients that materially overstated the value of their investment accounts." Furthermore, Rothman allegedly misappropriated investor funds, using a substantial portion of them "for his personal benefit." The final judgment permanently enjoins him from future violations of the Securities Act and Exchange Act and orders him to pay over $500,000 in disgorgement.

SEC Charges Chicago-Based Accountant with Insider Trading in Wife's Account, January 29, 2014, (Litigation Release No. 22913)

According to the complaint (PDF), Steven M. Dombrowski, a C.P.A. and former Director of Corporate Audit at Allscripts Healthcare Solutions, Inc., used insider information to trade in Allscripts securities through his wife's account. His alleged illicit trading resulted in over $285,000 in profit. The SEC has charged Dombrowski with violating sections of the Exchange Act and Securities Act and seeks permanent enjoinment from future violations, disgorgement, prejudgment interest, and civil penalties. The SEC's complaint names Lisa Fox, Dombrowski's wife, as a relief defendant, and seeks disgorgement plus prejudgment interest from her. In a parallel action, criminal charges were announced against Dombrowski.

Court Enters Judgment Against Three Wall Street Brokers for Defrauding Customers, January 28, 2014, (Litigation Release No. 22912)

Judgments were entered against Marek Leszczynski, Benjamin Chouchane, and Henry Condron in the SEC’s fraud case, SEC v. Leszczynski, at al. The judgment permanently enjoins the defendants from future violations of the securities laws and orders them to pay over $4.1 million in disgorgement and prejudgment interest. The SEC previously charged these brokers "with illegally overcharging customers $18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades."

SEC, Joined by Deloitte China, Files a Motion to Dismiss Without Prejudice the Subpoena Enforcement Action, January 27, 2014, (Litigation Release No. 22911)

The SEC filed "a joint motion with Deloitte Touche Tohmatsu CPA Ltd. to dismiss without prejudice" the September 2011 subpoena enforcement action that the SEC filed against DTTC. The subpoena was issued "in connection with the SEC’s investigation into possible fraud by DTTC’s former audit client, China-based Longtop Financial Technologies Limited." DTTC "had argued that it was prohibited under Chinese law from producing the requested documents, which are located in China, to the SEC." The SEC recently received many of the documents it had called for and has received the cooperation of the China Securities Regulatory Commission. In light of the documents produced and the CSRC's cooperation, "the SEC, at present, does not believe that there is a need for judicial relief with respect to the subpoena."

Former Executive of Massachusetts-Based Company Sentenced in Insider Trading Case, January 27, 2014, (Litigation Release No. 22910)

Last week, Joseph M. Tocci was sentenced to one year probation, as well as a $100 fine, and ordered to pay disgorgement, prejudgment interest, and civil penalties for his "insider trading in the securities of...American Superconductor Corporation." Previously, a final judgment was entered against him permanently enjoining him from future violations of the securities laws and ordering him to pay over $170,000 in disgorgement, prejudgment interest, and civil penalties.

Massachusetts Resident Steven Palladino Sentenced to 10-12 Years in Prison for Role in Multi-Million Dollar Ponzi Scheme, January 24, 2014, (Litigation Release No. 22909)

Last week, Steven Palladino was sentenced in a criminal action to serve 10-12 years in prison, "followed by a probationary period of five years, and to pay restitution to victims, for crimes that he committed in connection with a Ponzi scheme perpetrated through" his company,Viking Financial Group, Inc. Palladino pled guilty to "criminal charges that included conspiracy, being an open and notorious thief, larceny, and larceny from elderly person(s)" and Viking "pled guilty to related charges and was sentenced to a probationary period of five years and ordered to pay restitution to victims." A further hearing has been set for March to determine the amount of restitution to be paid. These charges stem from an SEC action filed in April 2013.


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