Monday, August 10, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Charges Houston-Area Businessman in Ponzi Scheme
August 3, 2015 (Litigation Release No. 158)
Frederick Alan Voight, owner of F.A. Voight & Associates LP and DayStar Funding LP, has been charged with defrauding investors while operating a $114 million Ponzi scheme. As Ponzi scheme’s tend to go, Voight’s scheme was caught after he could not find enough new money to pay previous investors his promised 42% annual return rate. Recently, Voight raised $13.8 million that he promised to invest in InterCore Inc., a startup developing a “Driver Alertness Detection System” intended to prevent accidents from drowsy driving. Voight promised investors that InterCore was about to install the technology into several million trucks and buses, which would more than pay a 42% return. However, as Voight also served on InterCore’s board, he knew that the company was facing serious financial problems. Voight has agreed to settle SEC’s claims of securities fraud and conducting unregistered securities offerings.

SEC Adopts Registration Rules for Security-Based Swap Dealers and Major Security-Based Swap Participants
August 5, 2015 (Litigation Release No. 159)
The new rules set in place by the SEC covers all aspects of registration for security-based swap dealers and major swap participants. Registrant’s must now provide and maintain extensive information sets for both dealers and participants. The new rules also require senior officers to make certifications about the new registrant’s policies and procedures for compliance with the federal securities laws when the register. These new rules are a significant milestone in the SEC’s implementation of Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act.

SEC Adopts Rule for Pay Ratio Disclosure
August 5, 2015 (Litigation Release No. 160)
As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC instituted a rule that requires public companies to disclose the ratio of compensation between its CEO and its median employee. Companies will be required to disclose the pay ratios for the first fiscal year starting on or after January 1, 2017. This rule will not apply to smaller reporting companies, emerging growth companies, foreign private issuers, MJDS filers, or registered investment companies. Furthermore, the rule grants companies flexibility in how they acquire their statistics. Companies can select their own methodology for calculating the median employee’s compensation, as long as it meets the rule’s requirements, and they are allowed to exclude non-U.S. employees from countries where data privacy laws make the companies unable to comply with the rule.

Miller Energy Resources, Former CFO, Current COO Charged with Accounting Fraud
August 6, 2015 (Litigation Release No. 161)
Miller Energy Resources, their former CFO Paul Boyd, and their current COO David Hall have been charged with fraud after inflating the values of Miller Energy’s oil and gas properties in Alaska. Back in 2009, Miller Energy purchased Alaskan properties for $2.25 million. The company later reported the properties’ value at $480 million, overstating their value by more than $400 million. The inflated valuation turned a penny-stock company into a company that eventually traded on the New York Stock Exchange. Paul Boyd allegedly relied on a reserve report that did not accurately reflect the properties’ fair value and double-counted $110 million of fixed assets. Hall allegedly intentionally understated expense numbers in one report and altered a second report to make it look like it was an independent party’s value estimate. The case is still ongoing and will be scheduled for a public hearing.


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