Friday, June 28, 2013

SEC Litigation Releases: Week in Review

Court Enters Final Judgments Against JBI, Inc. and Former Officer in Accounting Fraud Case, June 27, 2013, (Litigation Release No. 22735)

Final judgments were entered against JBI, Inc. and John W. Bordynuik, "two defendants in a fraud action filed by the Commission in 2012." In its original complaint (PDF), the SEC alleged that JBI, Bordynuik (JBI's former CEO) and Ronald Baldwin Jr. (JBI's former CFO) engaged in a scheme that allowed JBI to state "materially false and inaccurate financial information on its financial statements." JBI and Bordynuik have consented to final judgments that permanently enjoin them from future violations of the Exchange Act and Securities Act and order them to pay $160,000 combined in civil monetary penalties. The final judgment against Bordynuik also places a five year officer or director bar against him.  The case against Baldwin remains pending.

Securities and Exchange Commission v. Matthew C. Devlin, et al., June 27, 2013, (Litigation Release No. 22734)

Orders were entered dismissing all claims against relief defendants Lee H. Corbin, Maria T. Checa and Checa International, Inc. in the action Securities and Exchange Commission v. Matthew C. Devlin, et al. The SEC's original complaint alleged that these defendants received illegal gains from "a long-running insider trading scheme orchestrated by Jamil Bouchareb and Daniel Corbin." The court orders "were based upon stipulations of dismissal with the relief defendants who no longer possess any illegal gains" from the scheme.

SEC Charges Medical Imaging Device Company and its CEO with Fraud, June 26, 2013, (Litigation Release No. 22733)

According to the complaint (PDF), Imaging3, Inc. and its founder, Dean Janes, misled investors "about the Federal and Drug Administration's view of the company's medical imaging device." In November 2010, Janes held a conference call with investors after the FDA had denied clearance for the company to market this scanner for the third time. Janes allegedly "told investors that the FDA's issues were 'not substantive' and largely 'administrative,'" when in fact, the FDA's "concerns were 'safety-related.'" The SEC has charged the defendants with violating sections of the Exchange Act and seeks "to bar them from future violations of federal securities laws, require them to pay civil monetary penalties, and bar Janes from serving as a public company officer or director."

SEC Files Charges in Investment Scheme Involving Company Promoting Purported Alzheimer's Treatment, June 21, 2013, (Litigation Release No. 22732)

According to the complaint (PDF), Your Best Memories International Inc. and its president, Robert Hurd, misled "investors in Your Best Memories about how their funds would be used and [made] misleading statements that one of the products touted to investors had received approval from the U.S. Food and Drug Administration as a treatment for Alzheimer's Disease." Additionally, Your Best Memories allegedly raised almost $1.2 million in an unregistered offering of securities. Kenneth Gross has been charged with "selling Your Best Memories stock without being registered as a broker-dealer." While investors had been told their funds would mainly be used to "fund the development and marketing of Moving Pictures' memory enhancing products," only 17% of these funds were "forwarded to Moving Pictures for their intended purposes." The SEC has alleged that Hurd "funneled at least 37% of investor funds to himself, by transferring money to another of his companies, Smokey Canyon Financial, Inc., or simply by making cash withdrawals of investor funds." Additionally, Hurd and Your Best Memories also used investor fund to allegedly make Ponzi payments.

The SEC has charged Hurd, Your Best Memories, and Gross with violating sections of the Securities Act and Exchange Act and seeks permanent injunctions, and payment of disgorgement with prejudgment interest and civil penalties. The complaint also names Smokey Canyon as a relief defendant and seeks disgorgement and prejudgment interest against it.

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