Friday, December 19, 2014

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Charges Massachusetts-Based Scientific Instruments Manufacturer with FCPA Violations Rules
December 15, 2014 (Litigation Release No. 280)
The SEC charged Bruker Corporation approximately $2.4 million for violating the Foreign Corrupt Practices Act (FCPA). Bruker Corporation had insufficient internal controls which lead to approximately $230,000 in improper payments to various Chinese government officials. The improper payments enabled Bruker to realize approximately $1.7 million in profits from sales contracts. Bruker Corporation settled the SEC’s charges by paying $1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty.

SEC Charges New Orleans-Based Energy Company and Executives With Fraudulent Stock Manipulation
December 15, 2014 (Litigation Release No. 281)
The SEC charged Treaty Energy Corporation and executives Blackburn, Reid, Gwyn, Mulshine, and Schlesinger for securities fraud and violations of the registration and reporting violations of the federal securities laws. The Treaty Energy Corporation and executives orchestrated a stock trading scheme which involved deceptive claims of striking oil in Belize and illegally distributing restricted shares to the public. By manipulating the price of the company’s stock, they illicitly obtained at least $3.5 million in profits. Investors were misled by claims of a low-risk working interest and a yield return of 111.42 percent over a 10-year period, but in actuality, these claims were baseless since the well was only producing marginal amounts of oil. Furthermore, executives concealed that Blackburn, a convicted felon of federal income tax evasion, was controlling the company.

SEC Announces Charges Against Owner of Equity Research Firm Accused of Manipulative Trading
December 16, 2014 (Litigation Release No. 282)
The SEC has announced charges against Pollack and his firm Montgomery Street Research LLC for engaging in wash trading. Pollack had organized at least 100 wash trades within about a one-year period; these wash trades consisted of simultaneously purchasing and selling publicly traded stock within 90 seconds of each other with identical prices and quantities. The SEC alleges that Pollack and his firm had violated federal securities laws by failing to register with the SEC before acting as brokers on behalf of the company; more than $2.5 million from 11 investors has been raised from this manipulative trading scheme. Remedial actions, if any, are to be decided proceeding the public hearing.

SEC Announces Charges in Alleged Gold Mining Investment Scheme
December 16, 2014 (Litigation Release No. 283)
The SEC has announced charges against Michael Crow, Alexandre Clug, and their Miami based companies. The SEC alleges that Crow and Clug raised capital for two companies, Aurum Mining LLC and PanAm Terra Inc, by deliberately misinforming their investors. It is alleged that Aurum Mining, through false claims of “quick-to-production” mines, raised $3.9 million, of which none was returned to investors. PanAm Terra raised $400,000 to be invested in South American farmland, which the SEC alleges was never used to purchase land. Other details of the companies were not disclosed to investors such as Crow’s personal bankruptcy and bar by the SEC from working in the securities industry. A public hearing will be scheduled.

SEC Imposes Sanctions Against Hong Kong-Based Firm and Two Accountants for Audit Failures
December 17, 2014 (Litigation Release No. 284)
Today, Hong Kong based audit firm, Baker Tilly Hong Kong Limited, was sanctioned by the SEC for improper practices in their auditing of China North East Petroleum Holdings Limited, a company which the SEC has charged with fraud. Baker Tilly, its director Andrew Ross and former director Helena Kwok, have been found by the SEC to have ignored discrepancies between China North East Petroleum’s internal accounting records and their year-end 2009 financial statements. All three have agreed to settle with the SEC through monetary penalties and temporary professional restrictions.

SEC Charges Avon With FCPA Violations
December 17, 2014 (Litigation Release No. 285)
The SEC has charged Avon Products Inc. for failing to have adequate internal controls which led to having inaccurate books and false records of payments, violating the Foreign Corrupt Practices Act. The SEC alleged that $8 million worth of cash payments was made by Avon’s subsidiary in China in order to access a direct selling business license. In order to retain the license and keep a respective corporate image, the company made various improper payments which included paid travel for Chinese government officials as well as luxurious gifts and merchandise. Avon settled the SEC charges by paying the aggregate settlement amount of around $135 million while also agreeing to retain an independent monitor to review its FCPA compliance program for 18 months.

SEC Names Deputy Directors in the Division of Trading and Markets
December 17, 2014 (Litigation Release No. 286)
The SEC has announced that Gary Barnett and Gary Goldsholle will be named as deputy directors in the Division of Trading and Markets, succeeding former directors James Burns and John Ramsay. Barnett will be assigned to responsibilities of the Office of Broker-Dealer Finances as well as the Office of Derivatives Policy and Trading. Goldsholle will be assigned to the responsibilities of overseeing the Chief Counsel, Clearance and Settlement, and Market Supervision offices. Barnett has served the SEC as the director of the Division of Swap Dealer and Intermediary oversight at the Commodity Futures Trading Commission since August 2011. Goldsholle has been the general counsel of the Municipal Securities Rulemaking Board since 2012.

SEC Charges Staten Island-Based Firm With Operating Boiler Room Scheme Targeting Seniors
December 18, 2014 (Litigation Release No. 287)
The SEC has charged Premier Links Inc. along with its president Dwayne Malloy, and two sales representatives Chris Damon and Thierry Ruffin for operating a boiler room scheme that targeted vulnerable seniors. Malloy, Damon, and Ruffin had fraudulently obtained approximately $9 million from targeting more than 300 older investors through cold-calling sales tactics. The older investors’ obtained money was going to other entities controlled by Premier Links Inc. rather than being used for purchasing shares (IPOs) for these investors. The SEC has placed charges on Premier Links, Malloy, Damon, and Ruffin for violating antifraud provisions as well as selling securities without an SEC filed registration. Financial penalties are being placed, and actions are being taken in efforts of ordering the Premier Links to pay back the illegal profits.

SEC Proposes Amendments to Implement JOBS Act Mandate for Exchange Act Registration Requirements
December 18, 2014 (Litigation Release No. 288)
In compliance with the Jumpstart Our Business Startups Act, the SEC has put forth a series of amendments to its registration process. The proposed amendments to the Exchange Act include changing definitions and threshold levels in relation to registration, termination and suspension.

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