Friday, May 10, 2013

SEC Litigation Releases: Week in Review

SEC Charges China-based Company and Former Chief Financial Officer in Fraudulent Scheme involving Non-Existent Computing Business, May 8, 2013, (Litigation Release No. 22698)

According to the SEC's complaint (PDF),  China-based company, Subaye Inc and its former CFO, James T. Crane, "misrepresented the company’s business and operations, deceived the company’s auditors, and misled investors about the company’s true status and revenues." The SEC alleges that the defendants claimed Subaye had over 1,400 sales and marketing employees in 2010, "with reported revenues of $39 million that fiscal year and projected revenues of more than $71 million for 2011," when in fact the company had "no verifiable revenues, few...real customers, and no infrastructure to support its claimed cloud computing business." Additionally, Crane allegedly falsified books and records to mislead outside auditors. Crane and his firm were sanctioned in 2011 by the PCAOB, and Crane was barred from "being associated with a registered accounting firm or being associated with any public company in an accounting or financial management capacity."  Crane allegedly violated this order by remaining as Subaye's CFO until March 2011.

The SEC has charged the defendants with violating various provisions of the securities laws and seeks permanent injunction, as well as payment of disgorgement, prejudgment interest, and penalties.

Court Enters Final Judgments Against Richard Verdiramo and Vincent L. Verdiramo, Esq., May 7, 2013, (Litigation Release No. 22697)

According to the SEC's complaint (PDF),  Richard Verdiramo, RECOV Energy Corp.'s former Chairman, CEO, President, and CFO, committed "fraud and violat[ed] the securities registration requirements based on his issuances of RECOV stock for his and his father’s personal benefit." His father, attorney Vincent L. Verdiramo, allegedly "facilitated the misconduct." Previously, the Court ordered the defendants to pay full disgorgement and suspended Vincent L. Verdiramo from appearing or practicing before the SEC as an attorney. An April 2013 judgment requires the defendants to pay over $1.06 million in additional disgorgement, prejudgment interest, and penalties. It also places a penny stock bar against Vincent L. Verdiramo.

Court Orders Former Hedge Fund Manager Gad Grieve and Firm to Pay Over $26 Million in Disgorgement and Penalties, May 3, 2013, (Litigation Release No. 22696)

Final judgments were entered against Grant Ivan Grieve and his Finvest advisory firms ordering them to pay over $26 million in disgorgement and civil penalties. The defendants allegedly "fabricated and disseminated false financial information for their Finvest Primer hedge fund that was 'certified' by a sham back-office administrator and phony auditing firm that Grieve himself created." Both defendants were charged with violating various sections of the Securities Act, Exchange Act, and Investment Advisors Act.

Securities and Exchange Commission v. Kevin J. Wilcox, Jennifer E. Thoennes, and Eric R. Nelson, May 3, 2013, (Litigation Release No. 22695)

Eric R. Nelson and Kevin J. Wilcox settled charges with the SEC and a default judgment was entered against Jennifer E. Thoennes, "arising from their alleged participation in a Ponzi scheme operated by Joseph Nelson." Eric R. Nelson and Wilcox have been permanently enjoined from future violations of the securities laws and have been ordered to pay almost $350,000 in disgorgement and prejudgment interest. However, all but payment of $23,230 has been waived due to the financial conditions of the defendants. A final judgment was entered last December, permanently enjoining Thoennes from future violations of the securities laws and ordering her to pay over $94,000 in disgorgement, prejudgment interest, and penalties.

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