SEC Suspends Trading in the Securities of Neotactix Corporation, Graystone Park Enterprises, Inc. and Younger America, Inc.
On March 20, as part of its Anti-Spam Initiative, the Securities and Exchange Commission ordered the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on March 20, 2008, and terminating at 11:59 p.m. EDT on April 3, 2008:
The Commission ordered these trading suspensions because of questions that have arisen regarding the adequacy and accuracy of publicly disseminated information concerning among other things: (1) the companies' current financial condition, (2) the companies' management, (3) the companies' business operations, and/or (4) stock promoting activity.
The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the companies.
Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not it has complied with the rule, it should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5760. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, it should refrain from entering quotations relating to the securities of the companies listed above until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation that is in violation of the rule, the Commission will consider the need for prompt enforcement action.
The SEC's Office of Investor Education and Assistance has information for investors and members of the general public on topics directly related to this action by the SEC. See http://www.sec.gov/investor/35tradingsuspensions.htm for a compilation of helpful links.
SEC Files Settled Fraud Charges Against West Virginia Man Who Operated a Nationwide $21 Million Ponzi Scheme
The Commission today announced the filing of a settled civil injunctive action in the United States District Court for the Eastern District of Virginia against Ralph Gregory Gibbs, a resident of New Haven, West Virginia, who operated an offering fraud and "Ponzi" scheme. The complaint alleges that since at least April 2005 through February 2007, Gibbs, doing business as Golden Summit Group, raised approximately $21 million from at least 150 investors in at least 25 states through the offer and sale of securities. Based on Gibbs' promises that they would receive large returns on their investments and guaranteed returns of their principal, a significant number of the investors, many of whom were elderly, retired or otherwise living on limited incomes, liquidated their retirement savings or obtained home equity loans to invest the money with Gibbs.
Simultaneous with the filing of the Commission's action, the U.S Attorney's Office for the Eastern District of Virginia, announced that Gibbs pleaded guilty to criminal charges related to this conduct.
The Commission's complaint further alleges that in exchange for their investments in Golden Summit Group, Gibbs promised to pay investors interest of 3-5% monthly (up to 60% annually) and guaranteed that investors would not lose their principal. Gibbs further represented that, due to his unique trading expertise, he could generate these exceptional returns by pooling investor funds and subsequently using those funds to trade currencies on the Foreign Exchange Market (Forex). Gibbs, however, from the outset, operated a Ponzi scheme, which effectively created the illusion for investors that they were investing in a profitable trading program rather than a fraudulent scheme. As part of this scheme, Gibbs made numerous material misrepresentations and omissions to investors concerning, among other things, the nature of the purported investment, the risks of investing, the use of the investors' proceeds, the source of the investors' returns, and his current and previous trading performance.
The Commission's complaint also alleges that of the approximately $21 million he raised from investors, Gibbs deposited only approximately $8.1 million into his Forex trading account, where he subsequently lost over $6.3 million of investor funds through his trading of currencies. To conceal these losses, Gibbs used the cash flow generated from new investments, approximately $7.5 million, to pay existing investors the returns that he promised them. He also misappropriated over $2.9 million of investor money to pay for his own personal expenses, including $1.14 million for a new, custom-built home. As a result of this conduct, the complaint alleges that Gibbs violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.
Simultaneous with the filing of the complaint, and without admitting or denying the Commission's allegations, Gibbs consented to the entry of a final judgment, subject to the Court's approval: permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; ordering Gibbs to pay disgorgement, plus prejudgment interest thereon, totaling $21,421,418; but based upon Gibbs' representations in his sworn statement of financial condition, waiving payment of all but the monies and assets Gibbs placed into a constructive trust for investors, namely $4,142,493 in cash, plus accumulated interest, two real estate properties and certain personal property; not imposing a civil penalty based upon his sworn representations in his statement of financial condition; and ordering the appointment of a receiver to assume control of the constructive trust for liquidation and ultimate distribution to the injured investors.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Virginia, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the West Virginia State Auditor's Office, and the U.S. Commodity Futures Trading Commission.
The Commission has provided information warning investors about High Yield and other offering frauds. See: http://www.sec.gov/investor/pubs/investorfraud.htm. [SEC v. Ralph Gregory Gibbs, Civil Action No. 3:08 CV 174(E.D.VA.)] (LR-20503)
SEC Files Settled Books and Records and Internal Controls Charges against AB Volvo for Improper Payments to Iraq under the U.N. Oil for Food Program - - Company Agrees to Pay Over $12.6 Million in Civil Penalties, Disgorgement of Profits, and Interest
The Commission today filed Foreign Corrupt Practices Act books and records and internal controls charges against AB Volvo in the U.S. District Court for the District of Columbia. AB Volvo is a Swedish company that provides commercial transport solutions, including trucks, buses and construction equipment. The Commission's complaint alleges that from 1999 through 2003, two of AB Volvo's subsidiaries and their agents and distributors made approximately $6,206,331 in kickback payments, and authorized additional payments of $2,388,419 in connection with their sales of humanitarian goods to Iraq under the United Nations Oil for Food Program (the Program). The kickbacks were characterized as "after-sales service fees" (ASSFs), but no bona fide services were performed. One of Volvo's subsidiaries also made other types of illicit payments to Iraq. The Program was intended to provide humanitarian relief for the Iraqi population, which faced severe hardship under international trade sanctions. The Program allowed the Iraqi government to purchase humanitarian goods through a U.N. escrow account. The kickbacks paid by AB Volvo's subsidiaries diverted funds out of the escrow account and into Iraqi-controlled accounts at banks in Jordan.
According to the Commission's Complaint:
Between November 2000 and July 2001, AB Volvo's subsidiary, Renault Trucks SAS, entered into at least eighteen contracts under the Program to supply trucks. Renault Trucks then sub-contracted commercial bodybuilders to outfit the trucks with trailers or superstructures, commonly referred to as "bodies," to tailor the trucks to the Iraqi ministries' specifications. In order to mask its payment of ASSFs, Renault Trucks devised a scheme in which the bodybuilders facilitated the ASSF payments to Iraq. The bodybuilders added the cost of the ASSF into their bodybuilding costs and submitted the total cost to Renault Trucks for payment. The bodybuilders then passed the ASSF payments to Iraq. Internal documents discuss the fact that had Renault Trucks made the payments in its own name, "we would have been caught red-handed." One bodybuilder signed side letters to pay the ASSF on Renault's behalf, and agreed to send Renault an invoice for the ASSF so that Renault would have paperwork to cover the scheme. ASSFs of $5,103,941 were paid, and another $1,255,922 was authorized but not paid.
Prior to Iraq's imposition of ASSF payments, one of AB Volvo's subsidiaries was paying kickbacks to obtain business. From October 1999 to July 2000, Volvo Construction Equipment International (VCEI) entered into four contracts under the Program in which more than $103,000 in kickbacks were paid to Iraqi ministries. On two contracts, illicit payments between 5% and 11.27% of the contract value were paid. An internal VCEI document discussed the extra trips VCEI staff had to make to Iraq in order to make the payments, and the possibility of having to give more than just payments. On one contract, VCEI documents indicate that VCEI gave its Jordanian Agent a total of $15,950 as "the commitment to the third party whom support us and VOLVO to gain orders in the said ministry." In addition, VCEI internal documents show that $19,000 was given to the Jordanian Agent to purchase a car for the Ministry of Interior. VCEI did not disclose the payments or the car to the U.N.
After Iraq began imposing ASSFs, VCEI or its distributors entered into five additional contracts. VCEI employees learned of the demands for ASSF payments when VCEI employees visited Iraq in November 2000. In an internal memorandum discussing the trip, the employees noted that the ASSF demand "appears to be a clear violation of the UN Embargo Rules that we are expected to participate in." In an e-mail, VCEI personnel discussed the need for handling the ASSF payments with "utmost discretion." On the first contract, VCEI inflated the U.N. contract price by ten percent, but did not disclose the ASSF to the U.N. VCEI then entered into a backdated agency agreement with its Jordanian Agent, who invoiced VCEI for its commission on the sale, including reimbursement of the ASSF payment. VCEI changed its method of doing business for future contracts in an effort to distance itself from the ASSF payments. VCEI made the Jordanian Agent its distributor, which allowed the Jordanian Agent to purchase vehicles directly from VCEI, and in turn sell directly to the U.N. at inflated prices. Thus, VCEI was no longer the party named on the U.N. contracts, but rather, the Jordanian Agent was the named party. With VCEI's knowledge, the Jordanian Agent made ASSF payments on these contracts. The Jordanian Agent did not have the infrastructure that normally would have been required by VCEI for its distributors, and VCEI did not enter into any written distributorship agreement. VCEI sold its products at a price that ensured the Jordanian Agent would have enough "spread" to enable the agent to make the ASSF payments. According to a U.N. report of an interview of the Jordanian Agent, the agent admitted that he personally paid kickbacks on behalf of VCEI. VCEI also used a Tunisian distributor to facilitate additional sales of its products to Iraq, and reduced its prices to the distributor to enable the distributor to make the ASSF payments. In total, VCEI or its distributors authorized more than $2.2 million in ASSF payments.
AB Volvo either knew or was reckless in not knowing that illicit payments were either offered or paid in connection with these transactions. AB Volvo failed to maintain an adequate system of internal controls to detect and prevent the payments and its accounting for these transactions failed properly to record the nature of the payments. AB Volvo, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, ordering it to disgorge $7,299,208, in profits plus $1,303,441 in pre-judgment interest, and to pay a civil penalty of $4,000,000. AB Volvo will also pay a $7,000,000 penalty pursuant to a deferred prosecution agreement with the U.S. Department of Justice, Fraud Section. Volvo is not the company that currently makes the "Volvo" brand car.
The Commission considered remedial acts promptly undertaken by AB Volvo and the cooperation the company afforded the Commission staff in its investigation. The Commission acknowledges the assistance of the Department of Justice, Fraud Section and the United Nations Independent Inquiry Committee. [SEC v. AB Volvo, Civil Action No. 08 CV 00473 (D.D.C.) (JB)] (LR-20504)
INVESTMENT COMPANY ACT RELEASES
American Family Life Insurance Company, et al.
A notice has been issued giving interested persons until April 15, 2008, to request a hearing on an application filed by American Family Life Insurance Company, et al. requesting an order pursuant to Section 26(c) of the Investment Company Act to permit the substitution of shares of certain registered management investment companies with shares of certain other registered management investment companies. (Rel. IC-28197 - March 19)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-CBOE-2008-28) filed by the Chicago Board Options Exchange to make clean-up changes by amending certain rules has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57487)
A proposed rule change filed by the Chicago Board Options Exchange to extend two pilot programs (SR-CBOE-2008-29) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57519)
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-02) under Section 19(b)(3)(A) of the Securities Exchange Act, which became effective upon filing with the Commission, to amend the terms "settlement price" and "final settlement price" as applied to futures contracts cleared by OCC for the purpose of improving the definitions and for establishing consistent usage. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57520)
A proposed rule change filed by NYSE Arca (SR-NYSEArca-2008-27) deleting NYSE Arca Rule 6.88 - Pacific Options Exchange Trading System has become immediately effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57521)
A proposed rule change (SR-NYSEArca-2008-30) filed by NYSE Arca to amend Rule 6.37B pertaining to Market Maker quotations has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57522)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-16) relating to Rule 15 (Pre-Opening Indications) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57523)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval to a proposed rule change (SR-Amex-2008-05), as modified by Amendment No. 1 thereto, submitted by the American Stock Exchange under Section 19(b)(1) of the Securities Exchange Act of 1934 relating to smaller reporting companies. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57524)
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