Friday, June 7, 2013

SEC Litigation Releases: Week in Review

Final Judgments Entered Against Former Nicor Senior Officers Kathleen Halloran and George Behrens, June 5, 2013, (Litigation Release No. 22715)

Final judgments were entered against Kathleen Halloran and George Behrens, former CFO and former Treasurer of Nicor, Inc. respectively, for allegedly overstating "Nicor's financial, among other things, making or authorizing false and misleading statements about Nicor's performance in multiple filings with the Commission." The SEC charged the defendants with violating various sections of the Securities Act. Halloran and Behrens consented to the final judgments, which order them to pay over $400,000 combined in disgorgement and prejudgment interest. 

In 2010 a final judgment was previously entered by the court against another defendant, "Thomas Fisher, Nicor's former Chief Executive Officer."

SEC Charges Penny Stock Company and CEO for Illegal Stock Offering and Insider Trading, June 5, 2013, (Litigation Release No. 22714)

According to the complaint (PDF), "Laidlaw Energy Group and its CEO, Michael B. Bartoszek, sold more than two billion shares of Laidlaw's common deep discounts from the market price." Laidlaw allegedly did not "register this stock offering with the SEC, and no exemptions from registration were applicable." Furthermore, Bartoszek allegedly "knew that the purchasers were dumping the shares into the market usually within days or weeks of the purchases to make hundreds of thousands of dollars in profits." In June 2011, the SEC suspended trading in Laidlaw stock. Bartoszek and Laidlaw have been charged with violating various sections of the Exchange Act and Securities Act. The SEC seeks payment of disgorgement, interest, and financial penalties and injunctive relief against both defendants as well as a penny stock and officer and director bars against Bartoszek.

Securities and Exchange Commission v. Thomas Rubin, Christopher Scott, et al., June 3, 2013, (Litigation Release No. 22713)

According to the complaint (PDF), Thomas Rubin, Westcap Securities, Inc.'s former CEO, and Christopher Scott, Westcap Securities, Inc.'s former CCO, engaged in "a continuing series of schemes with others to conduct unlawful unregistered offerings and/or fraudulently manipulate the market for the common stock of four microcap companies." The complaint also charges Rubin and Scott with selling stock in unregistered offerings through their "respective related entities, BGLR Enterprises, LLC and E-Info Solutions, LLC." The final judgments impose permanent injunctions against all of the defendants as well as order Scott to pay almost $200,000 in disgorgement, penalties, and prejudgment interest. The court will determine "if and to what amount monetary relief will be ordered against Rubin." Additionally, the court entered "ten-year penny stock bars against Rubin and BGLR Enterprises, along with five-year penny stock bars against Scott and E-Info Solutions as well as a five-year officer and director bar against Scott."

SEC Charges Cincinnati Resident and Delaware Firm with Offering Fraud, June 3, 2013, (Litigation Release No. 22712)

According to the complaint (PDF), Detroit Memorial Partners, LLC and its managing member, Mark Morrow, engaged in a scheme in which DMP issued "approximately $19 million in fraudulent promissory notes and...[sold] $4.5 million in equity interests." Furthermore, DMP allegedly made "material misrepresentations and omissions to investors who purchased the promissory notes and equity interests." The defendants told investors that funds would be used to "acquire and manage cemeteries" but funds were allegedly used "to fund Morrow's personal equity interest in DMP, for high risk trading in securities and to pay interest owed to other DMP note holders." Angelo Alleca, a business-associate of Morrow's, sold the notes through his investment advisory firm, Summit Capital. The SEC seeks injunction against the defendants, as well as payment of disgorgement, civil penalties, and interest.

Alleca and Summit are the subjects of another lawsuit, SEC v. Alleca, that charges "them with operating a massive Ponzi scheme." 

SEC Charges Fortune 200 Company for Accounting Deficiencies, June 3, 2013, (Litigation Release No. 22711)

According to the complaint (PDF), PACCAR, "a Fortune 200 company that designs, manufactures, and distributes trucks and related aftermarket parts," failed to maintain effective internal accounting controls that "kept the company from adhering to various accounting rules." PACCAR and its subsidiary, PACCAR Financial Corp, "failed to provide complete information about their respective loan and lease portfolios, and PACCAR overstated some loan and lease originations and collections at two foreign subsidiaries in its statement of cash flows." Additionally, the complaint alleges that PACCAR "made inaccurate statements to the SEC's Division of Corporation Finance regarding its processes for calculating the specific reserves on its impaired receivables."

PACCAR has been charged with violating sections of the Exchange Act, and has agreed to the entry of a permanent injunction as well as agreed to pay a $225,000 penalty to settle the charges.

SEC Charges Atlanta Attorney with Converting Investor Funds, May 31, 2013, (Litigation Release No. 22710)

According to the complaint (PDF), Robert A. Gist and Gist, Kennedy & Associates, Inc. defrauded "at least 32 customers out of at least $5.4 million while acting as an unregistered broker from approximately 2003 to the present." The SEC alleges that Gist "used the funds for his personal expenses, for the payment of purported dividends and proceeds from securities sales that he falsely claimed to have purchased on behalf of his customers, and for the operation of a company that he controlled until early 2013 known as ENCAP Technologies, LLC." Gist allegedly created false account statements that he then gave to his customers. Gist and Gist Kennedy agreed to settle the charges by consenting to an order that permanently enjoins them from future violations of the Exchange Act, holds them "jointly and severally liable for $5.4 million in disgorgement plus prejudgment interest, impos[es] civil penalties to be determined upon motion of the Commission, freez[es] the Defendants’ assets, and provid[es] other relief." ENCAP has been named as a relief defendant and the complaint seeks "disgorgement from it of unjust enrichment in the amount of at least $2.2 million plus prejudgment interest."

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