Friday, March 14, 2014

SEC Litigation Releases: Week in Review

SEC Files Subpoena Enforcement Action Against Charles Riel III for Failure to Produce Documents and Appear for Testimony in Investigation of Reinvest LLC Securities, March 14, 2014, (Litigation Release No. 22943)

The SEC has filed a subpoena enforcement action against Charles Riel III a/k/a Chuck Riel and REinvest LLC. The SEC previously served Riel and REinvest "with document subpoenas in January 2014" and a subpoena for Riel to "appear for sworn testimony in February 2014." According to the SEC, Riel and REinvest failed to produce any documents and Riel failed to appear for testimony. The SEC is investigating "whether Riel, REinvest, and others are violating anti-fraud or other provisions of the federal securities laws in connection with an investment marketed by REinvest."

SEC Charges CR Intrinsic Analyst with Insider Trading, March 13, 2014, (Litigation Release No. 22942)

According to the complaint (PDF), Ronald N. Dennis, a former analyst at an affiliate of hedge fund advisory firm S.A.C. Capital Advisors, received insider tips from Jesse Tortora, who was then an analyst at Diamondback Capital, and Matthew Teeple, an analyst at a San Francisco-based hedge fund advisory firm, regarding impending announcements at Dell Inc. and Foundry Networks. Dennis then allegedly used this information to enable hedge funds to illegally trade and gain over $700,000 in illicit profits combined.

Dennis has agreed to a final judgment that permanently enjoins him from future violations of the securities laws, orders him to pay over $200,000 in disgorgement, prejudgment interest, and penalties, and bars him from the securities industry.

SEC Files Settled Securities Fraud Charges Against Alexander H.G. Mascioli and His Purported Hedge Fund, North Street Capital, LP, March 13, 2014, (Litigation Release No. 22941)

According to the complaint (PDF), Alexander H.G. Mascioli and "his alter-ego, purported hedge fund, North Street Capital, LP, ... made a fraudulent May 2012 offer to acquire all outstanding shares of Winnebago Industries, Inc.'s common stock." This alleged fraudulent offer caused WGO's stock price and trading volume to increase significantly.

The defendants have consented to a final judgment that permanently enjoins them from future violations of the securities laws, orders them to pay, jointly and severally, a $100,000 penalty, and imposes a permanent officer-and-director bar against Mascioli.

SEC Obtains Settlements in Penny Stock "Shell Packaging" Case, March 12, 2014, (Litigation Release No. 22940)

According to the complaint (PDF), Belmont Partners, LLC, "a Virginia-based 'shell packaging' company and its CEO," Joseph Meuse, facilitated "a penny stock scheme." The defendants have agreed to be permanently enjoined from violating the Exchange Act and Securities Act and have agreed to pay $224,500. Additionally, Meuse has agreed to a penny stock bar and a 5 year-minimum officer-and-director bar. Thomas Russo, who was named as a relief defendant, has agreed to pay $70,075.

Former Owner of a Massachusetts-Based Trading Company Pleads Guilty to Multi-Million Dollar Fraud Scheme, March 12, 2014, (Litigation Release No. 22939)

Last week, Craig A. Karlis, the former owner of Boston Trading and Research, LLC, "pled guilty to charges stemming from his role in an investment scheme that defrauded more than 1,000 investors out of more than $30 million." His sentencing is scheduled for June 2, 2014. Ahmet Devrim Akyil, his business partner, was charged with 10 counts of wire fraud. According to the US Attorney's Office, Akyil left the US for Turkey in 2009.

In October 2010, the SEC filed "a civil injunctive action...against BTR, and its principals Ahmet Devrim Akyil and Craig Karlis for fraudulently raising millions of dollars from investors in a purported foreign currency (Forex) trading venture." The SEC's pending complaint alleges that the defendants violated the Securities Act and the Exchange Act and it seeks "the entry of a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and the imposition of civil monetary penalties."

Seven Defendants Settle SEC Fraud Charges in "Pay to Play" Case Involving New York State Common Retirement Fund, March 10, 2014, (Litigation Release No. 22938)

Final judgments were entered against seven defendants "in the pending enforcement action arising from the 'pay-to-play' scheme involving the New York State's Common Retirement Fund." Beginning in 2009, the SEC filed "securities fraud and related charges against several participants in the scheme, including Henry Morris, the top political advisor to former New York State Comptroller Alan Hevesi, and David Loglisci, formerly the Deputy Comptroller and the Common Fund's Chief Investment Officer." According to the SEC, "Morris and Loglisci orchestrated a scheme to extract sham finder fees and other payments and benefits from investment management firms seeking to do business with the Common Fund." In total, the SEC charged seventeen defendants. The civil action "had been stayed pending the outcome of the New York Attorney General's Office's parallel criminal action against some of the defendants charged by the Commission." The SEC issued administrative orders in addition to the judgments entered in the court action that impose "remedial sanctions against Morris, Loglisici, and Julio Ramirez (a former broker who facilitated certain of the payments made to Morris)."

Morris, "who previously pled guilty to parallel criminal charges and was sentenced to a multi-year prison term and ordered to forfeit $19 million in fees, consented to entry of a judgment" that permanently enjoins him from future violations of the securities laws, bars him from the securities industry, bars him from participating in penny stock offerings, and bars him from appearing or practicing before the SEC as an attorney.

Loglisci, "who also pled guilty to parallel criminal charges and was sentenced to a term of conditional discharge due to his cooperation with law enforcement authorities, consented to entry of a judgment" that permanently enjoins him from future violations of the securities laws and bars him from appearing or practicing before the SEC as an attorney.

Ramirez, "who also pled guilty to parallel criminal charges and was sentenced to a term of conditional discharge due to his cooperation with law enforcement authorities and ordered to forfeit $289,875 in fees," consented to a final judgment that permanently enjoins him from violating various provisions the securities laws, bars him from the securities industry, and bars him from participating in a penny stock offering, "subject to a right to reapply after three years."

Nosemote LLC and Pantigo Emerging LLC, "two shell companies through which payments to Morris were funneled," have consented to a final judgment that permanently enjoins them from future violations of the securities laws.

Tuscany Enterprises LLC and W Investment Strategies LLC, "two entities previously associated with defendant Barrett Wissman, against whom a consent judgment was previously entered imposing permanent injunctive relief," consented to a final judgment that permanently enjoins them from future violations of the securities laws and orders them to pay over $3.4 million in disgorgement and prejudgment interest.

The SEC's claims against Saul Meyer remain pending.

Jury in Cleveland Finds Brothers Engaged in Insider Trading, March 7, 2014, (Litigation Release No. 22937)

Last week, a jury found that Andrew W. Jacobs, and his brother Leslie J. Jacobs II, were guilty of insider trading "in connection with the December 2009 tender offer for Chattem Inc." The jury found that the defendants violated the Exchange Act. "In its complaint, the SEC sought permanent injunctions, disgorgement with prejudgment interest, and civil monetary penalties" against the brothers, as well as "an officer and director bar against A. Jacobs."

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