Friday, February 14, 2014

SEC Litigation Releases: Week in Review

SEC Charges James Y. Lee for Defrauding His Advisory Clients, February 14, 2014, (Litigation Release No. 22927)

According to the complaint (PDF), James Y. Lee defrauded his advisory clients in several ways including "charg[ing] some clients fees...based on false performance and conceal[ing] from them that they had actually incurred realized losses," failing to disclose information about his background including"a criminal conviction for embezzlement and an SEC cease-and-desist order for his role in illegal unregistered penny stock offerings," and misleading "clients about his promise to share in realized losses and the risks of his options trading strategy."  The SEC has charged Lee with violating the antifraud provisions of the securities laws and seeks "a permanent injunction as well as disgorgement, prejudgment interest and civil penalties." The complaint also names "several relief defendants including Lee's girlfriend, his son and his close business associate as well as their respective companies."

In a related matter, cease-and-desist proceedings were settled against Ronald E. Huxtable II, for his alleged role in aiding and abetting Lee in charging "certain clients fees for the month of February 2011 based on false performance and conceal[ing] the fact that they had actually incurred net realized losses for that month."

Court Enters Judgments Against All Defendants in Insider Trading Action, February 12, 2014, (Litigation Release No. 22926)

A final judgment was entered against David J. Weishaus in the SEC's insider trading case, SEC v. Thomas C. Conradt, et al. The court had previously entered judgments against Thomas C. Conradt and Trent Martin. According to the SEC, the defendants illegally traded on "material nonpublic information about International Business Machines Corporation's 2009 acquisition of SPSS Inc." The final judgment against Weishaus permanently enjoins him from future violations of the securities laws and orders him to pay over $475,000 in disgorgement, prejudgment interest, and a civil penalty. The final judgments against Conradt and Martin order them to pay over $11,000 combined in disgorgement and prejudgment interest. Furthermore, the SEC has permanently suspended the defendants from "association with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent" and has barred them "from participating in any offering of a penny stock." Conradt has also been suspended "from appearing or practicing before the Commission as an attorney."

SEC Wins Jury Trial Against Connecticut-Based Fund Manager Who Facilitated Petters Ponzi Scheme, February 11, 2014, (Litigation Release No. 22925)

A jury found Marlon M. Quan and his firms Stewardship Investment Advisors LLC, Acorn Capital Group LLC and ACG II LLC "liable for securities fraud in connection with a multi-billion dollar Ponzi scheme operated by...Thomas Petters." The SEC seeks permanent injunction against the defendants as well as disgorgement, prejudgment interest, and financial penalties.

SEC Concludes Its Case Against Former Siemens Executives Charged with Bribery in Argentina, Obtaining Judgments over $1.8 Million, February 10, 2014, (Litigation Release No. 22923)

Final judgments were entered against former Siemens Argentina CFO, Andres Truppel, and former Heads of Major Projects at Siemens Aktiengesellschaft, Ulrich Bock and Stephan Signer, for "their role in a decade long bribery scheme at Siemens and its regional company in Argentina." The SEC alleges that "between 2001 and 2007, the defendants paid bribes to senior government officials in Argentina to retain a $1 billion contract to produce national identity cards for Argentine citizens." The final judgments entered against the defendants enjoin them from future violations of the securities laws and order them to pay over $1.5 million in disgorgement, prejudgment interest, and penalties. These final judgments conclude the SEC's case.

Previously, a final judgment was entered against "Uriel Sharef, a former officer and board member of Siemens, for his role in the long standing bribery scheme." The final judgment "enjoined him from violating the anti-bribery and related books and records and internal controls provisions of the FCPA, and ordered him to pay a $275,000 civil penalty."  Bernd Regendantz "settled with the Commission when the complaint was filed, and allegations against Herbert Steffen and Carlos Sergi were dismissed."

SEC Obtains $9.5 Million Money Judgment Against Onyx Capital Advisors, LLC, Roy Dixon, Jr. and Michael A. Farr, February 7, 2014, (Litigation Release No. 22922)

A final judgment was entered against Onyx Capital Advisors, LLC and Roy Dixon, Jr. for allegedly "rais[ing] $23.8 million from three public pension funds for a start-up private equity fund and then illegally [withdrawing] money invested by the pension funds to cover personal and other business expenses." Dixon's friend, Michael A. Farr, was also charged for allegedly "assisting Dixon in the scheme." The final judgment against Dixon and Onyx Capital Advisors permanently enjoins them from future violations of the securities laws, orders them to pay over $3.1 million in disgorgement plus pay prejudgment interest and orders them to pay over $3.1 million in a civil penalty. The judgment against Farr permanently enjoins him from aiding and abetting future violations of the securities laws and orders him to pay over $2.3 million in disgorgement and to pay a $1 million civil penalty.

Securities and Exchange Commission v. Hao He a/k/a Jimmy He, February 7, 2014, (Litigation Release No. 22921)

Last week, the SEC filed insider trading charges against Hao He a/k/a Jimmy He "alleging He purchased short-term put option contracts in the securities of Sina Corporation" based on material nonpublic information He obtained "concerning Sina's upcoming, negative, future earnings guidance." According to the SEC, He gained almost $170,000 in illicit profits. He has consented to a final judgment that permanently enjoins him from future violations of the Exchange Act and orders him to pay over $345,000 in disgorgement, prejudgment interest, and a financial penalty.

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