INVESTMENT ADVISERS ACT OF 1940
Release No. 2281 / August 26, 2004
INVESTMENT COMPANY ACT OF 1940
Release No. 26579 / August 26, 2004
Admin. Proc. File No. 3-11611
In the Matter of Garrett Van Wagoner and Van Wagoner Capital Management, Inc., Respondents. |
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ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 203(e), 203(f) AND 203(k) OF THE INVESTMENT ADVISERS ACT OF 1940 and SECTIONS 9(b) AND 9(f) OF THE INVESTMENT COMPANY ACT OF 1940 |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act") and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Investment Company Act") against Garrett Van Wagoner ("Van Wagoner") and Van Wagoner Capital Management, Inc. ("VWCM") (collectively "Respondents").
II.
In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the "Offers") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, Respondents consent to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Order"), as set forth below.
III.
On the basis of this Order and Respondents' Offers, the Commission finds that:
Summary
1. From 1999 through 2001, Van Wagoner and his investment advisory firm, VWCM, knowingly or recklessly misrepresented and omitted to state material facts regarding the Van Wagoner Funds (the "Funds"). Among other things, Van Wagoner and VWCM materially misrepresented the size, value of, and risk to shareholders from the Funds' investments in illiquid securities.
2. The Funds' disclosures to shareholders placed certain restrictions on the Funds' investments in illiquid securities, which included both private companies' securities and certain restricted public securities. The Funds' disclosures provided, among other things, that the Funds would not acquire illiquid securities if such purchases would cause more than 15 percent of any of the Funds' portfolios to be invested in illiquid securities.
3. Despite this, Van Wagoner and VWCM, which manages the Funds, continued to purchase new private securities for Funds that already had more than 15 percent of their assets in illiquid investments. This was so in spite of the unique risks inherent in private investments. As a result, Van Wagoner and VWCM misled the Funds' investors about the size of the Funds' illiquid investments, and thus the overall risks of the Funds' investments.
4. In addition, because the private company securities that the Funds purchased were not publicly traded, no market-quoted prices existed for them. Accordingly, the federal securities laws required the Funds' board of directors to "fair value" the private securities, and the Funds' board delegated to VWCM the duty to fair value the securities in accordance with policies adopted by the Funds' board. However, Van Wagoner and VWCM failed to do so. From December 2000 through the fall of 2001, Van Wagoner and VWCM knowingly or recklessly lowered the Funds' valuations for these private securities in an attempt to comply with the Funds' 15 percent limitation, causing the Funds to understate their net asset values. Each Fund's net asset value ("NAV") was the value of its assets minus its liabilities at the end of a given day, and the NAV was the basis of the price paid or received by shareholders who purchased or redeemed the Fund's shares.
5. Finally, Van Wagoner and VWCM failed to effectively oversee personal trading at the firm. Van Wagoner, who was the compliance officer, failed to adequately review the reports submitted by an employee of VWCM. The employee, through accounts in which she had an interest, traded in the same public equity securities the Funds traded and failed to report these trades. Van Wagoner also knew that a director of the Funds was investing in private securities in which the Funds were simultaneously investing. Those investments by the director were contrary to the rules against making such investments without prior Commission approval.
Respondents
6. Garrett Van Wagoner, 48, resides in San Francisco, California. He is the president, sole director, and owner of VWCM. He has also been the president, a director, and the primary portfolio manager of the Funds since their formation.
7. Van Wagoner Capital Management, Inc. is a San Francisco, California investment adviser, which has been registered with the Commission since 1995. Incorporated in Delaware, VWCM has been the manager of the Funds since their formation. VWCM also manages investments for hedge funds and other clients.
Other Relevant Entity
8. Van Wagoner Funds, Inc. (the "Funds"), incorporated in Maryland, is a diversified investment company, registered with the Commission since January 1, 1996. From January 1, 1998 through at least December 31, 2002, the Funds consisted of a series of five open-end, publicly sold funds, including the Emerging Growth Fund, the Micro-Cap Growth Fund, the Mid-Cap Growth Fund, the Post-Venture Fund and the Technology Fund.
Facts
9. From 1999 through 2001, Van Wagoner frequently invested for the Funds in private placements of convertible preferred stock issued by private companies. Van Wagoner's goal was to invest in technology companies that anticipated completing initial public offerings of their securities ("IPOs") within a year. He made significant efforts to compete for opportunities to invest in these companies by becoming knowledgeable about the markets for these securities.
10. These investments offered the potential for significant growth and high returns if the companies successfully completed IPOs. However, they also presented unique risks due to their illiquidity, which meant that the securities could not be quickly sold to raise money or to change the investment mix of one of the Funds. The private securities were also difficult to value, which could lead to the inaccurate valuation of these securities. The private companies sold their securities in unregistered offerings, mostly to venture capitalists. They could not be resold to the public until after the companies completed an IPO. Even after an IPO, the Funds' shares in the companies were frequently subject to agreements not to sell the securities for six months ("lock-up agreements"), and other restrictions.
11. Because there were no market quotations available for the private securities, they had to be "fair valued" based on policies adopted by the Funds' board of directors. Fair valuing these securities proved to be difficult and subjective. As described in the Funds' disclosures to shareholders, valuation was left to VWCM and carried out by Van Wagoner, subject to the oversight of the Funds' board of directors.
12. VWCM and Van Wagoner failed to manage these risks and caused misleading representations to be made about the Funds' investments in illiquid securities, in two ways. First, from mid-1999 through mid-2001, Van Wagoner understated the amount of the Funds' investment in illiquid securities by treating all publicly-traded securities subject to lock-up agreements owned by the Funds as liquid, and then continued to make new purchases of private placement securities, contrary to the representations in the Funds' disclosures to shareholders. Second, in late 2000 and during 2001, Van Wagoner reduced the valuations of groups of private securities without fair valuing them in accordance with the Funds' policies. These reductions in valuations caused the Funds to understate their NAVs.
Van Wagoner Understated the Funds' Investments in Illiquid Securities and Caused the Funds to Purchase New Private Securities Contrary to the Funds' Disclosures
13. To address the risks of investing in private and other illiquid securities, the Funds disclosed to shareholders certain limitations on the Funds' investments in illiquid securities. The limitations were set forth in the Funds' Statement of Additional Information ("SAI"), which was attached to annual filings from 1999 through 2002. The SAI established the maximum level of illiquid investments: "Each Fund may invest up to 15% of its net assets in illiquid securities (i.e., securities that cannot be disposed of within seven days in the normal course of business at approximately the amount at which the Fund has valued the securities)." The SAI further disclosed that: "If through the appreciation of illiquid securities or the depreciation of liquid securities, a Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid assets, including restricted securities which are not readily marketable, the Fund will take such steps as it deems advisable, if any, to reduce the percentage of such securities to 15% or less of the value of its net assets." The SAI further stated: "Each Fund may not: . . . Acquire illiquid securities if, as a result of such investments, more than fifteen percent (15%) of the Fund's net assets (taken at market value at the time of each investment) would be invested in illiquid securities." Although the Funds could have changed this second investment restriction against further purchases without shareholder approval, they did not. The board of directors did approve these purchases after they were made, but the Funds' disclosure on the 15 percent restriction was not amended.
14. During 1999 and 2000, several private companies in which the Funds had invested completed IPOs. After the IPOs, however, these companies' securities remained illiquid, because of "lock-up" agreements. These "lock-up" agreements committed the Funds to hold onto these securities for six months.
15. Despite these obstacles to their sale, Van Wagoner categorized all of these securities as liquid to the Funds' board in quarterly reports and to the Funds' shareholders in annual and semi-annual reports.1 The mischaracterization caused the Funds to significantly understate their investments in illiquid securities. In the annual and semi-annual shareholder reports filed from June 1999 through December 2001, Van Wagoner caused the Funds to report that no Fund had exceeded the 15 percent limitation on illiquid investments, when in fact one or more of the Funds had more than 15 percent of its assets in such investments at the time. These misstatements were important, because under the Funds' SAI any Fund that exceeded the 15 percent limitation could not make additional investments in private or other illiquid securities.
16. During 1999 and 2000, Van Wagoner caused the Funds to repeatedly purchase new private company securities (which were illiquid) while the Funds' illiquid portfolios exceeded 15 percent of net assets, contrary to the restrictions against such new investments in the Funds' SAI. The Funds exceeded the 15 percent limitation because Van Wagoner had not treated as illiquid those securities that were subject to lock-up agreements.
17. Further, during 2001, several of the Funds' illiquid portfolios again exceeded 15 percent of net assets, based on their investments in private securities and not based on mischaracterized investments in illiquid, post-IPO securities. Van Wagoner again caused those Funds to purchase new, private securities on nine occasions. These purchases were likewise prohibited by the disclosures in the Funds' SAI.
Van Wagoner Made Across-the-Board Devaluations of the Funds' Private Securities Without Fair Valuing the Securities
18. Because the Funds' private securities could not be valued based upon market quotations, they had to be "fair valued" in good faith, in accordance with the policy adopted by the Funds' board. Investment Company Act Section 2(a)(41)(B) and Rules 2a-4(a)(1) and 22c-1. The "fair value" of a security is the price that the Funds would reasonably expect to receive on a current sale of the security. See Accounting Series Release No. 118 (Oct. 21, 1969). Such valuations are incorporated into the daily, reported NAVs for the Funds.
19. The Funds' fair valuation policy established the original fair value of a private security as the cost to the Funds in purchasing it. Thereafter, under the Funds' policy, certain events at the company, such as another round of private financing, a completed IPO, or a merger, could require a change in the fair value. The policy also required VWCM to consider, on an ongoing basis, more subjective factors, such as "the operations of the issuer, change[s] in general market conditions," or other information that affected the "fundamentals" of each private investment. Such "fundamental" changes could warrant a change in the fair valuation of the Funds' investment in a private company.
20. VWCM was designated in the Funds' SAI as responsible for conducting the day-to-day fair valuations of securities, under the supervision of the Funds' board. Van Wagoner was the person at VWCM responsible for carrying out this duty. Correspondence between VWCM and the Funds' administrator reflected changes in the private securities' valuations. Changed valuations were also reflected, to a certain extent, in a report to the Funds' board and in "updates" regarding contacts between VWCM and the private companies prepared by VWCM's private equity analyst.
21. Until December 2000, Van Wagoner never changed the Funds' price of any private investment based on fundamentals. Until late 2000, changes in the Funds' private securities' valuations occurred only because of new rounds of private financing, an IPO, or a merger or sale of the private company. However, during 2000, the public equity markets, particularly for technology stocks, fell precipitously, leading to a nearly 50 percent decline in the overall value of the Funds.
22. On November 29, 2000, the largest of the Funds, Emerging Growth, reported for the first time that its private securities portfolio (which did not include other illiquid securities such as those in companies that had a recent IPO) exceeded 15 percent of its net assets. This was significant to VWCM, because VWCM interpreted the limitation on investments in illiquid securities in the Funds' SAI to apply only to private securities and to prohibit any further private investments by a Fund while it exceeded this limitation. VWCM was then negotiating and finalizing new private securities investments for the Funds.
23. On November 30, 2000, VWCM's private equity analyst stated in an e-mail to VWCM's chief financial officer: "i talked to [G]arrett [Van Wagoner] just now. he says that he is aware of the 15% issue and we will work on figuring out which companies are candidates for write-downs." The private equity analyst understood that one means VWCM might use to address the size of the private portfolios was to reduce valuations of private securities to shrink the portfolio below 15 percent. Within three trading days, Van Wagoner reduced the Funds' valuations of two private companies to zero. Until then, the Funds had priced those securities at their original cost, for a total carrying value to the Funds of $30.6 million. As a result of the changed valuations, the Funds' private portfolio shrank by $30.6 million.
24. Van Wagoner wrote down valuations of two more private investments to zero later in December 2000 when the private portfolio of the largest Fund and another Fund again exceeded 15 percent of net assets, and while new private security purchases were being negotiated or finalized.
25. VWCM's records created at the time, including the updates prepared by the private equity analyst, do not support the extreme devaluations. For instance, VWCM's updates prepared shortly after the write-downs to zero suggested positive progress at the companies, such as revenue in line with plans or lower-than-expected expenses. Also, among the private companies that were valued at zero were those that had assets such as cash that implied a fair value greater than zero, and companies completing merger or sale transactions that suggested valuations greater than zero and that should have been considered under the Funds' valuation policies. Since the Funds could reasonably have expected to receive more than zero in a current sale of the securities, they should not have been valued at zero.
26. In March 2001, Van Wagoner reduced valuations of private securities across the board, in an effort to shrink the Funds' entire private portfolio to avoid the 15 percent limitation. Between February 28, 2001 and March 16, 2001, Van Wagoner reduced the Funds' valuations of eight private companies to zero, which until that point had been carried at their original cost, for a total value of $54 million. In a series of e-mails to her husband in early March, the private equity analyst stated that she had suggested to Van Wagoner that a valuation other than zero would be more appropriate for several companies which he had just written down to zero. In response to the question, "How did [G]arrett take your suggestion?" the analyst replied: "said yes, we will be more careful going forward here. basically agreed with me, but he is focused on taking us down to 15% privates so will have to have combo of zeros and writedowns." Over the succeeding days, Van Wagoner wrote down the Funds' valuations of five private companies by approximately 75 percent, and another 10 other private companies by 50 percent. In all, the March write-downs reduced the Funds' carrying values of these assets by more than $130 million.
27. Information available at the time, and the records created at VWCM, again do not support the timing or level of the across-the-board write-downs in March 2001. Even among the companies whose valuations were reduced to zero, most had significant cash assets and had recently obtained, or were in the process of obtaining, new private rounds of financing, which provided objective evidence of fair values greater than zero. Indeed, later in 2001 and very early in 2002, VWCM increased the valuations of several private investments, including four of the companies whose securities Van Wagoner had reduced to zero in March. Similarly, VWCM's updates and other documentation within the firm did not suggest recent, negative information from the private companies that would have precipitated the large overnight declines in values, or that in a current sale the Funds would have expected to receive such values.
28. In the fall of 2001, VWCM again reduced the Funds' valuations of nearly all of the private securities that still had positive valuations, without fair valuing them. In all, VWCM wrote down by half the valuations for 20 private securities, which constituted 80 percent of the private companies that still had positive valuations in the portfolio. This series of write-downs began on August 31, after the Funds' private portfolio had again significantly exceeded 15 percent of net assets for weeks. In September and November, Van Wagoner repeated the write-downs of 7 of the 20 securities.
29. During the fall, the Funds' auditors had begun to prepare for the year-end audit and noted the absence of sufficient documentation to support the changes in valuations. In documents prepared by VWCM after the write-downs, however, reasons for the reduced valuations were used that did not comport with the actual timing or basis for the decision to change the fair valuations. For instance, in an e-mail sent on September 10, 2001, to another VWCM employee, VWCM's private equity analyst stated: "Garrett wanted me to coordinate with you in writing down by an additional 50% the following companies this week: Calient, Lynx, Nayna, and Bandwidth9." The valuations of each of the securities were reduced by 50 percent within four trading days after September 11, 2001, the date of the terrorist attacks in New York City and Washington, D.C. However, written explanations provided to the Funds' auditors and to the board after the fact cited the impact on the market of the September 11th terrorist attack as the principal reason for reducing the valuations of two of the companies.
30. In connection with their annual audit, Van Wagoner told the Funds' auditors that the Funds' 15 percent limitation on illiquid investments did not influence his decision to change valuations of private securities. He also represented to the Funds' board that avoidance of the 15 percent limit played no role.
VWCM and Van Wagoner Failed to Administer the Code of Ethics
31. Van Wagoner designated himself the compliance officer, in charge of administering the Code of Ethics adopted both by the Funds and by VWCM to prevent fraudulent or violative trading by personnel at VWCM and affiliates of the Funds who were aware of the Funds' trading. The Code of Ethics prohibited persons with knowledge about the Funds' trading from purchasing or selling securities that the Funds also held or contemplated purchasing. Consistent with the Commission's rules, the code also required access persons at VWCM and the Funds' directors to report quarterly any securities purchases and sales.
32. In this role, Van Wagoner was supposed to review the quarterly transaction reports submitted by employees of VWCM or by the Funds' directors, but he did not review those reports. One employee of VWCM engaged in prohibited trading in public securities, which she did not report for more than a year, but Van Wagoner did not detect her omissions since he did not review her reports. When ultimately alerted to her prohibited trading based on new reports she submitted, Van Wagoner did not cause the trading to be halted, and did not discipline the employee. Van Wagoner also was aware of purchases by a director of the Funds in the same private securities the Funds purchased at the same time, which purchases by the director were made contrary to the rules prohibiting such investments without prior Commission approval.
Legal Analysis
33. Sections 206(1) and 206(2) of the Advisers Act prohibit fraud by an investment adviser upon any client or prospective client. Investment advisers owe their clients, including investment company clients, a fiduciary duty. Transamerica Mortgage Advisers, Inc. v. Lewis, 444 U.S. 11, 17 (1979); SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 195-97 (1963). Misstatements or omissions of fact by an investment adviser violate this fiduciary duty and constitute fraud when they are material, that is, when a reasonable investor would consider them important in making an investment decision. Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988).
34. Van Wagoner's classification of illiquid securities as "liquid" was materially misleading. By understating the amount of the Funds' illiquid securities investments, Van Wagoner caused the Funds to understate the risks of investing in the Funds. Similarly, by causing the Funds to repeatedly purchase new private securities, contrary to the restrictions against such purchases when the Funds' illiquid portfolios were already greater than 15 percent of their net assets, Van Wagoner rendered the Funds' disclosures to shareholders materially false.
35. The knowing or reckless failure to fair value private securities that materially affects a fund's NAV constitutes fraud. "A reasonable investor would want to know that the prices used to value the Fund's securities were stale . . . and that . . . the Fund was mispricing some securities." In re Piper Capital Management, Inc., Exch. Act Rel. 48409 (Aug. 26, 2003). See also In re Robert F. Lynch, 46 S.E.C. 5 (Oct. 15, 1975) (available at 1975 WL 160406) (false valuations of restricted securities that materially impacted fund's NAV were fraudulent).
36. Rule 22c-1 under the Investment Company Act prohibits the sale or redemption of shares in a registered investment company "except at a price based on the current net asset value of such security which is next computed after receipt of a tender of such security for redemption or of an order to purchase or sell such security." "Value" as used in the rule is the value of the underlying securities. Where there are no market quotations, the "value" of a security is its "fair value as determined in good faith by the board of directors."
37. When Van Wagoner wrote down certain securities to zero and applied arbitrary discounts to groups of securities during December 2000, March 2001 and the fall of 2001, he failed to fair value the securities in good faith and caused understated NAVs to be reported. Van Wagoner also failed to follow the board's fair valuation policies, which did not permit the write-down in securities' valuations in an effort to shrink the entire portfolio. Van Wagoner also informed the Funds' board and its auditors that avoidance of the 15 percent limit played no part in the changed valuations, when the weight of the evidence suggests otherwise. The failure to fair value the underlying private securities caused the Funds to sell and redeem the securities they issued at prices other than prices based on the current NAVs of their securities.
38. Rule 17j-1(c)(2) under the Investment Company Act requires funds and investment advisers to use reasonable diligence and institute procedures reasonably necessary to prevent violations of the fund's or the investment adviser's code of ethics. Van Wagoner, who was the compliance officer, failed to administer the Code of Ethics, by the conduct described above, including his failure to review and detect prohibited investments by an employee of VWCM, and his awareness of a director's prohibited co-investments.
39. As a result of the conduct described above, VWCM willfully violated Sections 206(1) and 206(2) of the Advisers Act and Section 17(j) of the Investment Company Act and Rule 17j-1(c)(2) thereunder, and Van Wagoner willfully aided and abetted and caused VWCM's violations. As a further result of the above conduct, VWCM and Van Wagoner willfully aided and abetted and caused the Funds' violations of Investment Company Act Rule 22c-1.
Undertakings
40. Respondent Van Wagoner represents that he has submitted his resignation from the Board of Directors of the Van Wagoner Funds effective December 31, 2004, and that he undertakes:
a. To resign effective December 31, 2004, from his position as an officer of Van Wagoner Funds, Inc. (the "Funds"), and to neither serve nor act as officer or director of any registered investment company for a period of seven years from December 31, 2004; b. Not to serve, effective immediately, on the Pricing Committee of the Funds' Board of Directors; c. To abstain from being the person at Van Wagoner Capital Management, Inc. ("VWCM") who is responsible for making recommendations to the Funds' Pricing Committee about any valuation or pricing changes to private equities, for a period of seven years; d. To abstain from being the person at VWCM who is responsible for making recommendations to the Funds' Board of Directors about any determinations as to which securities are liquid or illiquid, for a period of seven years; e. To abstain from making any new private equity investments or any valuation changes of private equity investments for or on behalf of the Funds until after the new investments or valuation changes have been approved by the Funds' Pricing Committee; f. Not to transact any Fund business during the interim period while he remains an officer of the Funds without a second signatory; and g. To recommend to the Funds' Board of Directors that it add two independent directors not unacceptable to the staff of the Commission.41. Respondent VWCM undertakes:
a. To submit all future pricing changes regarding private equities and all future determinations of the liquidity or illiquidity of any securities to the Pricing Committee of the Board of Directors of the Van Wagoner Funds (the "Funds") in advance; b. To abstain from making any new private equity investments or any valuation changes of private equity investments for or on behalf of the Funds until after the new investments or valuation changes have been approved by the Funds' Pricing Committee; c. To hire, at its expense, an Independent Consultant not unacceptable to the Commission's staff to review the pricing and liquidity determinations for the next four quarters from the date of the Order and make a report with recommendations thereafter on VWCM's policies, procedures, and practices for pricing and liquidity determinations for private equity securities (the "Independent Consultant"); d. At the end of that review, to require the Independent Consultant to submit the report and recommendations to VWCM and to Helane L. Morrison of the Commission's San Francisco District Office, and to be bound to implement the final recommendations of the Independent Consultant, although VWCM may suggest alternative procedures to achieve the goals of any recommendations; and e. To require the Independent Consultant to enter into an agreement that provides that for the period of engagement and for a period of two years from completion of the engagement, the Independent Consultant shall not enter into any employment, consultant, attorney-client, auditing or other professional relationship with VWCM, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity. The agreement will also provide that the Independent Consultant will require that any firm with which he/she is affiliated or of which he/she is a member, and any person engaged to assist the Independent Consultant in performance of his/her duties under this Order shall not, without prior written consent of the San Francisco District Office of the United States Securities and Exchange Commission, enter into any employment, consultant, attorney-client, auditing or other professional relationship with VWCM, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of the engagement and for a period of two years after the engagement. In determining whether to accept the Offers, the Commission has considered the undertakings in paragraph 40.g., above.IV.
In view of the foregoing, the Commission deems it appropriate, and in the public interest to impose the sanctions agreed to in Respondents' Offers.
Accordingly, it is hereby ORDERED:
A. Pursuant to Sections 203(e) and 203(f) of the Advisers Act, that Respondents VWCM and Van Wagoner are censured;
B. Pursuant to Section 203(k) of the Advisers Act and 9(f) of the Investment Company Act, that Respondents VWCM and Van Wagoner cease and desist from committing or causing any violations and any future violations of Sections 206(1) and 206(2) of the Advisers Act and Section 17(j) of the Investment Company Act and Rules 17j-1(c)(2) and 22c-1 promulgated thereunder;
C. Respondents Van Wagoner and Van Wagoner Capital Management shall, within 12 months of the entry of this Order, jointly and severally pay a civil money penalty in the amount of $800,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Van Wagoner and VWCM as Respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Helane L. Morrison, District Administrator, San Francisco District Office, Securities and Exchange Commission, 44 Montgomery Street, Suite 1100, San Francisco, California, 94104.
D. Respondent Van Wagoner shall comply with the undertakings enumerated in Paragraphs 40.a. through 40.f., above, and Respondent VWCM shall comply with the undertakings enumerated in Paragraphs 41.a. through 41.e., above.
By the Commission.
Jonathan G. Katz
Secretary