Linda C. Thomsen to Testify
Linda C. Thomsen, Director of the Division of Enforcement, will testify before the U.S.-China Economic and Security Review Commission on Thursday, Feb. 7, 2008. Her testimony, which concerns Sovereign Wealth Funds and Public Disclosure, will be delivered at a hearing held in Room 562 of the Dirksen Senate Office Building at 10:00 a.m.
SEC Chairman Cox Announces Creation of New Office, Appointment of Leaders, to Expedite Distribution of Billions to Injured Investors
Securities and Exchange Commission Chairman Christopher Cox today announced the appointments of the top two leaders of the agency's newly created Office of Collections and Distributions.
Richard J. D'Anna, an experienced manager in the financial services industry, has joined the SEC as the first-ever director of the new office. Mr. D'Anna will use his considerable private sector experience in tracking and managing financial assets to expedite the distribution of more than $5 billion in SEC recoveries to injured investors.
At the same time, Lynn M. Powalski will become Deputy Director of the Office of Collections and Distributions. Ms. Powalski has been an Assistant Director and Assistant Chief Litigation Counsel for Collections and Distributions within the SEC's Division of Enforcement.
"The Commission's strong commitment to recovering money from wrongdoers and returning it to investors is amply demonstrated by the more than $2 billion we distributed last year," said Chairman Cox. "In 2008, we can do more. Dick and Lynn bring exactly the right skill-sets to their new positions, and they will make an excellent team to lead the SEC's efforts to get money back to defrauded investors as quickly and efficiently as possible."
The Sarbanes-Oxley Act passed by Congress in 2002 for the first time gave the SEC authority to distribute financial penalties paid by securities law violators directly to injured investors. Using this authority, the SEC already has distributed more than $3.5 billion. The new office is intended to further expedite the return of more than $5 billion in so-called Fair Funds to harmed investors, while cutting red tape and the costs of the distributions.
Mr. D'Anna said, "I am very excited to join the SEC in this capacity and look forward to working with the professional staff there to accomplish the important goals the Chairman has provided. I have every confidence we will be successful."
Ms. Powalski said, "I look forward to this new opportunity and to working with the Office's exceptional staff. We expect to build on the Commission's continued success in depriving securities law violators of illegally obtained funds and ensuring that the funds collected are returned to harmed investors as quickly as possible."
Prior to joining the SEC staff, Mr. D'Anna was Senior Vice President at 1st Bridgehouse Securities and a Senior Vice President and Consultant at FITS, Inc., operating from his base in Baltimore, Md. He was previously the Senior Operations Officer at Fiserv Securities in Philadelphia from 2004 to 2005, and served as Managing Director of Correspondent Clearing, Custody Operations, and Prime Brokerage Services at Deutsche Bank/Alex Brown in Baltimore from 1996 to 2002. Mr. D'Anna graduated from the U.S. Naval Academy in 1968 and served on active duty in the U.S. Navy during the Vietnam War as a Gunnery/Ordnance Officer. He later earned his MBA in Finance at New York University.
Ms. Powalski has worked in the SEC's Division of Enforcement since 2001. Her previous experience includes serving as a counsel in the Legal Division of the Federal Deposit Insurance Corporation (FDIC) and as a Special Assistant U.S. Attorney in the U.S. Attorney's Office for the Eastern District of Virginia (Alexandria Division). Ms. Powalski earned her B.A. in Political Science at William Smith College in Geneva, N.Y., and her J.D. from the Washington College of Law at The American University in Washington, D.C. (Press Rel. 2008-12)
RULES AND RELATED MATTERS
Commission Amends Rule 30-1; Delegation of Authority to Director of Division of Corporation Finance
The Commission amended Rule 30-1, Delegation of Authority to Director of Division of Corporation Finance, to add a new paragraph (e)(18), to permit the Director of the Division of Corporation Finance, under certain limited circumstances, to grant or deny exemptive relief pursuant to Section 36(a) of the Exchange Act from the requirement for registrants in connection with an annual meeting of security holders to furnish an annual report to security holders that contains audited financial statements as required by Exchange Act Rules 14a-3(b) and 14c-3(a). The Director of the Division of Corporation Finance may exercise this new authority when, among other things, the request for relief does not appear to the Director to present significant issues that have not been addressed previously or to raise questions of fact or policy indicating that the public interest or the interest of investors warrants that the Commission consider the matter and the applicant demonstrates that it is required to hold a meeting of security holders as a result of an action taken by one or more of the applicant's security holders pursuant to state law. The amendment will become effective upon publication in the Federal Register. (Rel. 34-57262)
In the Matter of Ritchie Capital Management LLC, Ritchie Multi-Strategy Global Trading Ltd., A.R. Thane Ritchie, Warren Louis DeMaio and Michael Mauriello
On February 5, the Commission issued settled orders finding that Ritchie Capital Management LLC, Ritchie Multi-Strategy Global Trading Ltd., A.R. Thane Ritchie, Warren Louis DeMaio and Michael Mauriello engaged in the late trading of mutual fund shares. Late trading is the illegal practice of transmitting, placing, confirming, or cancelling orders to purchase or redeem mutual fund shares after 4:00 p.m. ET on a given day to be filled at the fund's net asset value calculated that same day.
The Commission's Orders find that from January 2001 through September 2003, Ritchie Capital, a Chicago, Illinois-area hedge fund adviser, placed thousands of late trades in mutual fund shares and used post-4:00 p.m. news and market information to make its mutual fund trading decisions while receiving the same day's net asset value for the mutual funds traded.
The Commission's Order as to Ritchie Capital Management LLC, Ritchie Multi-Strategy Global Trading Ltd., A.R. Thane Ritchie and Warren Louis DeMaio requires that Ritchie Capital and the Ritchie Multi-Strategy fund pay disgorgement, jointly and severally, of $30 million, and prejudgment interest thereon of approximately $7.4 million. Ritchie Capital and Thane Ritchie will pay civil penalties, jointly and severally, totaling $2.5 million. DeMaio will pay $250,000 in civil penalties. These payments will be distributed to the affected mutual funds. The Commission's Order also requires that Ritchie Capital, the Ritchie Multi-Strategy fund, Thane Ritchie and Warren DeMaio cease and desist from committing or causing violations of the anti-fraud provisions and other provisions of the federal securities laws, and that Ritchie Capital be censured and comply with certain undertakings. The Order as to Mauriello requires that he cease and desist from committing or causing violations of Rule 22c-1 under the Investment Company Act.
All respondents consented to the Commission's Orders without admitting or denying the findings. The Commission's action was taken in coordination with the Office of the New York Attorney General. (Ritchie Capital Management LLC, et al. - Rels. 33-8890, 34-57271, IA-2701, IC-28142, File No. 3-12947; Michael Mauriello - IC-28141; File No. 3-12948)
Commission Bars Jeffrey L. Gibson Following Entry of Permanent Injunction
The Commission barred Jeffrey L. Gibson, a part owner and associated person of Gibson Gaither Wealth Management Advisors in Rossville, Georgia, from association with a broker or dealer or investment adviser following Gibson's consent to the entry of a permanent injunction against him by the United States District Court for the Northern District of Georgia. The Commission found that Gibson had been enjoined for fraud involving the misappropriation of funds from a private placement and that the public interest required that Gibson be barred. In imposing the bar, the Commission found that, as alleged in the underlying injunctive complaint, Gibson had misappropriated funds from his clients, attempted to conceal his actions, and sought to lull those whom he had defrauded. (Rels. 34-57266; IA-2700; File No. 3-12323)
Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies For Failure to Make Required Periodic Filings
On February 4, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-57267; File No. 3-12946)
Court Enters Final Judgment, By Consent, Against Thomas A. Skoulis and Peter M. Frankl
On January 23, U.S. District Judge Jeremy Fogel of the U.S. District Court for the Northern District of California entered Final Judgments as to Defendants Thomas A. Skoulis and Peter M. Frankl, based on their respective Consent to Final Judgment submitted by each of the to settle the Securities and Exchange Commission's case.
Each Final Judgment, to which each defendant consented without admitting or denying the Commission's allegations against him, provides that each defendant is enjoined from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13 thereunder. The Final Judgment as to Skoulis further orders that he is barred from acting as an officer or director of a public company for five years, that he pay a civil penalty in the amount of $30,000, and that he disgorge, with prejudgment interest, $23,623.37. The Final Judgment as to Frankl further orders that he pay a civil penalty in the amount of $25,000.
The Commission's complaint, filed in March 2006, alleges that both defendants Skoulis and Frankl entered into two undisclosed side arrangements, on behalf of Netopia, Inc., and caused the company to materially overstate its financial results during the quarterly periods when the transactions were recorded as revenue. [SEC v. Thomas A. Skoulis and Peter M. Frankl, Civil Action No. C-06-2239-JF, N.D. Cal.] (LR-20445)
Randy Cook, Former President of United Agri Products North American Operations, Settles SEC Litigation by Consenting to a Permanent Injunction and Agreeing to Pay $367,429.64 in Disgorgement and Penalties
The Commission today announced that on February 1, the Commission filed a Consent and proposed settled Final Judgment against Randy Cook, former President of North American Operations of United Agri Products (UAP), in SEC v. James Charles Blue, Randy Cook, and Victor Campbell, 07-cv-00095-REB-MEH (D. Colo. filed Jan. 16, 2007).
The Commission's complaint in this case alleged that Cook and his co-defendants, former UAP executives James Charles Blue and Victor Campbell, engaged in misconduct at UAP, a former subsidiary of ConAgra Foods, Inc., which resulted in the overstatement of UAP's operating results in 1999 and 2000. Specifically, the Complaint alleged that Cook participated in improper accounting practices at UAP, including: (1) the improper recognition of revenue from deferred delivery sales and associated rebates from UAP's suppliers; (2) the failure to record bad debt expenses when realized; and (3) the improper recognition of revenue from advance vendor rebates. As alleged, Cook's misconduct caused ConAgra, UAP's parent, to file materially false and misleading financial statements with the Commission in the company's annual reports for 1999 and 2000. According to the complaint, Cook obtained inflated bonus and other profit-based compensation as a result of his misconduct.
Cook, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a Final Judgment which would order Cook to pay $191,635 in disgorgement and prejudgment interest thereon in the amount of $140,794.64, together with a civil money penalty in the amount of $35,000. The proposed Final Judgment also will permanently enjoin him from violating the internal controls and books and records provisions of the federal securities laws (Sections 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 13b2-1), and from aiding and abetting violations of the reporting, books and records, and internal controls provisions of the Exchange Act (Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-1). The SEC has moved to dismiss with prejudice the charges against Cook for violating and aiding and abetting violations of Exchange Act Section 10(b) and Rule 10b-5 contingent on entry of the Final Judgment and Cook's compliance with its terms and conditions. The settlement is subject to the Court's approval.
Cook's co-defendants, James Charles Blue, the former President and Chief Operating Officer of ConAgra Agri Products Companies, and Victor Campbell, UAP's former Controller, previously agreed to settle the Commission's action without admitting or denying the allegations in the Complaint, and final judgments were entered as to them on Jan. 17, 2007. [SEC v. James Charles Blue, Randy Cook, and Victor Campbell, 07-cv-00095-REB-MEH (D. Colo.] (LR-20446; AAE Rel. 2780)
Commission Settles $24 million Insider Trading Case Against Four Hong Kong Residents Including David Li Kwok Po, A Former Board Member of Dow Jones
The Commission today announced settled insider trading charges against four Hong Kong residents for illegal tipping and trading in the securities of Dow Jones & Company, Inc. ("Dow Jones") in the weeks before the public disclosure on May 1, 2007 of an unsolicited $60 per share acquisition offer for Dow Jones (the "Offer") by News Corporation. The alleged tip originated with David Li Kwok Po ("David Li"), who served on the Dow Jones board of directors. David Li is the Chairman and Chief Executive Officer of the Bank of East Asia and a member of Hong Kong's Legislative Counsel and Executive Committee.
On May 8, 2007, the Commission filed an emergency action in the United States District Court for the Southern District of New York against Kan King Wong ("K.K. Wong") and Charlotte Ka On Wong Leung ("Charlotte Wong"), alleging that the husband-wife couple traded Dow Jones securities based on inside information. Specifically, the Wongs purchased approximately $15 million worth of Dow Jones securities in their account at Merrill Lynch and, after the Offer became public, made approximately $8.1 million in trading profits. The court entered a Temporary Restraining Order freezing those assets and imposing other relief. See LR-20106 (May 8, 2007). Today the Commission filed an amended complaint alleging that Dow Jones board member David Li tipped his close friend, Michael Leung Kai Hung ("Michael Leung"), before the Offer's public disclosure, and Michael Leung, with the Wongs' assistance, traded Dow Jones stock in their Merrill Lynch account. The Commission further alleged that K.K. Wong bought 2,000 Dow Jones shares in his TD-Ameritrade account and made approximately $40,000 in profits. Charlotte Wong is Michael Leung's daughter, and K.K. Wong is his son-in-law.
Without admitting or denying the Commission's allegations, David Li, Michael Leung, K.K. Wong and Charlotte Wong consented to the entry of court orders enjoining them from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering David Li to pay an $8.1 million civil penalty, Michael Leung to pay $8.1 million in disgorgement plus prejudgment interest and an $8.1 million penalty, and K.K. Wong to pay $40 thousand in disgorgement plus prejudgment interest and a $40 thousand civil penalty.
The Commission acknowledges the assistance of Merrill Lynch & Co. and the Hong Kong Securities and Futures Commission. [SEC v. Kan King Wong, Charlotte Ka On Wong Leung, Michael Leung Kai Hung and David Li Kwok Po, 07 Civ. 3628 (SAS) S.D.N.Y.] (LR-20447)
INVESTMENT COMPANY ACT RELEASES
PowerShares Capital Management LLC, et al.
A notice has been issued giving interested persons until February 26 to request a hearing on an application filed by PowerShares Capital Management LLC, et al. for an order to permit (a) series of certain open-end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (d) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-28140 - February 1)
Proposed Rule Changes
The International Securities Exchange filed a proposed rule change (SR-ISE-2007-76) and Amendment No. 1 thereto relating to voluntary professionals. Publication is expected in the Federal Register during the week of February 4. (Rel. 34-57255)
The Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2008-09) establishing a voluntary professional designation. Publication is expected in the Federal Register during the week of February 4. (Rel. 34-57256)
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