Friday, August 9, 2013

SEC Litigation Releases: Week in Review

SEC Obtains Asset Freeze and Other Relief in $4 Million Offering Fraud, August 8, 2013, (Litigation Release No. 22774)

According to the complaint (PDF), Steven B. Heinz and his company S.B. Heinz & Associates, Inc. orchestrated an offering fraud and $4 million Ponzi scheme since January of 2012. According to the complaint, "Heinz [paid] 'returns' to earlier investors using new investor funds, used investor funds for his own personal purposes and...S.B. Heinz used investor funds to pay business expenses, including the salary for its secretary and its office rent." The SEC obtained a temporary restraining order and emergency asset freeze against Heinz on August 8, 2013. The SEC has charged the defendants with violating sections of the Securities Act and Exchange Act, as well as the Investment Advisors Act, and seeks preliminary and permanent injunctions as well as disgorgement, prejudgment interest, and civil penalties. The complaint also names Heinz's wife, Susan K. Heinz, as a relief defendant and "seeks disgorgement and prejudgment interest from her."

SEC Charges Certified Public Accountant with Violating Commission Suspension Order;
Seeks Disgorgement of Illicit Compensation Received During Suspended Period, August 8, 2013, (Litigation Release No. 22773)

The SEC filed an application (PDF) against Michael H. Taber for his alleged violation of a 2004 Commission Order that "permanently suspended Taber from appearing or practicing before the Commission as an accountant." According to the SEC, Taber continued to work as an accountant from at least 2005 until 2010 after the order was issued. The SEC seeks "a district court order enforcing its 2004 Order suspending Taber from appearing or practicing before the Commission as an accountant, and asks that the court order him to pay $584,650.41 in disgorgement, representing illicit compensation gained as a result of his engaging in work that was proscribed by the 2004 Order" as well as order him to pay "prejudgment interest in the amount of $146,849.02."

SEC Charges Bank of America Entities with Material Misrepresentations and Omissions in Connection with an RMBS Offering, August 7, 2013, (Litigation Release No. 22772)

According to the complaint (PDF),  Bank of America, N.A., Banc of America Mortgage Securities, Inc., and Merrill Lynch, Pierce, Fenner & Smith, Inc. f/k/a Banc of America Securities LLC "made material misrepresentations and omissions in connection with the sale of residential mortgage-backed securities known as BOAMS 2008-A," failing to "disclose the disproportionate concentration of wholesale loans (72% by unpaid principal balance) underlying BOAMS 2008-A as compared to prior BOAMS offerings." The SEC has charged the Bank of America Entities with violating the antifraud provisions of the securities laws and seeks "a permanent injunction, disgorgement with prejudgment interest and civil monetary penalties."

SEC Charges Stock Promoters with Market Manipulation, August 6, 2013, (Litigation Release No. 22771)

According to the complaint (PDF), Cort Poyner and Mohammad Dolah "engaged in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Resource Group International, Inc. and Gold Rock Resources Inc." The SEC has charged the defendants with violating sections of the Exchange Act and Securities Act and seeks "permanent injunctive relief, disgorgement of ill-gotten gains, if any, plus pre-judgment interest, and civil penalties from Poyner and Dolah, a judgment prohibiting Dolah from participating in any offering of penny stock, and an order prohibiting Poyner from acquiring, disposing or promoting any penny stock."

SEC Charges Penny Stock CEO in International Boiler Room Scheme, August 5, 2013, (Litigation Release No. 22770)

According to the complaint (PDF), former iTrackr Systems CEO, John G. Rizzo, raised over $2 million from United Kingdom investors by "us[ing] offshore boiler rooms to solicit foreign investors as he attempted to evade registration requirements under the U.S. securities laws." Criminal charges have been announced against Rizzo in a parallel action. The SEC has charged Rizzo with violating sections of the Securities Act and Exchange Act and seeks disgorgement, prejudgment interest, financial penalties, officer-and-director and penny stock bars, and a permanent injunction against him.

Securities and Exchange Commission v. Chad C. McGinnis and Sergey Pugach, Defendants, and Bella Pugach, Relief Defendant, August 2, 2013, (Litigation Release No. 22769)

According to the complaint (PDF), a former Green Mountain Coffee Roasters systems administrator, Chad McGinnis traded on insider information before Green Mountain earnings announcements were made. He also tipped his friend, Sergey Pugach, who allegedly "illegally traded in his own account and his mother's trading account." The two gained over $7 million in alleged illicit profits from the trading. The complaint charges the defendants with violating sections of the Securities Act and Exchange Act and names Bella Pugach, Pugach's mother, as a relief defendant.

SEC Charges Two Traders in Spain with Insider Trading Ahead of BHP Acquisition Bid, August 2, 2013, (Litigation Release No. 22768)

On July 30, 2013, the SEC charged Cedric Cañas Maillard, a former executive advisor to Banco Santander's CEO, and his friend, Julio Marín Ugedo, with insider trading "based on non-public information about a proposed acquisition" of Potash Corporation "for which the Spanish investment bank was acting as an advisor." The SEC's "action against Cañas and Marín arises from its continuing investigation into suspicious Potash trading ahead of the Aug. 17, 2010, public announcement of BHP's acquisition bid. A former Banco Santander analyst agreed to pay more than $625,000 to settle insider trading charges by the SEC." The SEC has charged Cañas and Marín with violating sections of the Exchange Act and seeks disgorgement, prejudgment interest, financial penalties, and orders of permanent injunctions against the defendants.

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