In the Matter of Byron S. Rainner
An Administrative Law Judge has issued an Initial Decision in Byron S. Rainner, Administrative Proceeding No. 3-12828. The Initial Decision finds that Byron S. Rainner pled guilty to one count of wire fraud in violation of 18 U.S.C. § 1343 in the United States District Court for the Northern District of Georgia. The district court entered a judgment, sentencing Rainner to a prison term of thirty months, followed by three years of supervised probation, and ordering him to make restitution in the amount of $2,036,134. The Initial Decision concludes that, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, it is in the public interest to bar Byron S. Rainner from association with any broker, dealer, or investment adviser. ((Initial Decision No. 347; File No. 3-12828)
In the Matter of Hollinger, Inc.
On March 25, the Commission issued an Order Instituting Proceedings, Making Findings, and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Order) against Hollinger Inc. The Order finds that Hollinger Inc. is a publicly held Canadian corporation based in Toronto, Ontario, Canada. Hollinger Inc. is traded on the Toronto Stock Exchange and is a foreign private issuer registered with the Commission. Hollinger Inc. has two classes of shares registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act): Retractable Common Stock registered on June 21, 1999, and Series II Preference Shares registered on April 2, 1998. Hollinger Inc. has failed to comply with Section 13(a) of the Exchange Act and Rule 13a-1 thereunder while its Retractable Common Stock and Series II Preference Shares were registered with the Commission in that it has not filed an Annual Report on Form 20-F since June 27, 2003, amended on Sept. 17, 2003, for any fiscal period subsequent to its fiscal year ending Dec. 31, 2002.
Based on the above, the Order revokes the registration of each class of Hollinger Inc's securities registered pursuant to Section 12 of the Exchange Act. Hollinger Inc. consented to the issuance of the Order without admitting or denying any of the Commission's findings. (Rel. 34-57552; File No. 3-12997)
Commission Revokes Registration of Securities of Alabaster Corp. for Failure to Make Required Periodic Filings
On March 26, the Commission revoked the registration of each class of registered securities of Alabaster Corp. (Alabaster) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the order, except as to jurisdiction, which it admitted, Alabaster consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Alabaster Corp. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Alabaster's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Alabaster in the Matter of Aaro Broadband Wireless Communications, Inc., et al., Administrative Proceeding File No. 3-12985.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .
For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Aaro Broadband Wireless Communications, Inc., et al., Administrative Proceeding File No. 3-12985, Exchange Act Release No. 57453 (March 7, 2008). (Rel. 34-57554; File No. 3-12985)
District Court Enters Permanent Injunction by Consent against Inter Global Technologies, Inc. and Michael E. Tomayko
On Nov. 19, 2007, United States District Judge Ed Kinkaede entered an Interlocutory Judgment by Consent Granting Permanent Injunction and Other Equitable Relief As to Defendants Inter Global Technologies, Inc. and Michael E. Tomayko. Without admitting or denying the allegations in the Commission's complaint, the Defendants consented to entry of the Interlocutory Judgment prohibiting them from committing future violations of the antifraud and registration provisions of the federal securities laws. The Defendants further agreed that the Commission may file a future application with the Court to determine monetary relief in the form of disgorgement, plus prejudgment interest, and an appropriate civil penalty.
The complaint alleges that the Defendants, using fraudulent means, raised at least $14.5 million from at least 900 domestic and international investors from at least January 2004 until at least Fall 2006. The complaint accuses the Defendants of making numerous materially false and misleading misrepresentations and omissions about their alleged interests in licenses to build oil refineries in Indonesia and their efforts to finance those refineries. In addition, the Commission claims that the Defendants misappropriated millions of dollars of investor proceeds for personal uses or for purposes unrelated to the offering. [SEC v. Inter Global Technologies, Inc. and Michael E. Tomayko. (U.S.D.C., Northern District of Texas, Dallas Division, Civil Action No. 3-07 CV 1397 - K)] (LR-20509)
SEC v. Conrad Black, F. David Radler and Hollinger Inc.
The Commission announced on March 25, that it settled its federal district court action against Hollinger Inc., a Canadian corporation and the controlling shareholder of Sun-Times Media Group, Inc., formerly known as Hollinger International, Inc., pending in the United States District Court for the Northern District of Illinois.
On Nov. 15, 2004, the Commission filed its action against Hollinger Inc., Conrad M. Black, Hollinger International's former Chairman and CEO, and F. David Radler, Hollinger International's Deputy Chairman and COO, alleging that from approximately 1999 through 2003, the defendants engaged in a fraudulent and deceptive scheme to divert cash and assets from Hollinger International, Inc. (Hollinger International), through a series of related party transactions. The Commission's complaint alleges, among other things, that Black and Radler diverted to themselves, other corporate insiders and Hollinger Inc. approximately $85 million of the proceeds from Hollinger International's sale of newspaper publications through purported "non-competition" payments. The complaint further alleges that in order to perpetrate their fraudulent scheme, Black and Radler misled Hollinger International's Audit Committee and Board of Directors concerning the related party transactions and also misrepresented and omitted to state material facts regarding these transactions in Hollinger International's filings with the Commission and during shareholder meetings. The complaint also alleges that Hollinger Inc. made misstatements and omissions of material fact regarding the purported non-competition payments in its responses to Hollinger International's proxy questionnaires and in Hollinger Inc.'s filings with the Commission. Radler previously entered into a settlement with the Commission concerning the allegations against him in this case.
Hollinger Inc., without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment which permanently enjoins it from violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13a-16, 13b2-1, 14a-3 and 14a-9 thereunder. The Final Judgment also orders Hollinger Inc. to pay a total of $21,279,471.84 in disgorgement, representing $16,550,000 in alleged non-competition payments received by Hollinger Inc., plus prejudgment interest thereon in the amount of $4,729,471.84. The $21,279,471.84 paid to Hollinger International in satisfaction of the judgment against Hollinger, Inc. and Conrad Black in the action captioned Hollinger International, Inc. v. Black, et al., 844 A.2d 1022 (Del. Ch. C.A. No. 183-N), shall be credited dollar-for-dollar toward the disgorgement in this action. The settlement is subject to approval of U.S. District Judge William T. Hart. [SEC v. Conrad M. Black, F. David Radler and Hollinger, Inc., Civil Action No. 04C7377 (N.D. Ill.)] (LR-20510; AAE Rel. 2803)
Craig H. Reinhard Sentenced to More Than 12 Years in Prison for Mail Fraud and Making False Statements to the SEC for Ponzi Scheme that Preyed Mostly Upon Elderly Investors
The Commission announced today that, in a judgment entered on March 20, 2008, Craig H. Reinhard (Reinhard) was sentenced in the United States District Court for the Eastern District of Pennsylvania to 151 months (12 years and 7 months) in prison for mail fraud and 60 months (5 years) in prison for making false statements to the Commission. These sentences will run concurrently. This term of imprisonment will be followed by 3 years of supervised release. Reinhard also has been ordered to pay $3,305,023 in restitution to the aggrieved investors. The Court revoked Reinhard's bail and placed him in immediate custody to begin serving his prison sentence. Reinhard was the owner of the IDPM Group, Inc. (IDPM), a business formerly located in Allentown, Pennsylvania. IDPM was primarily a benefit counseling service and insurance agency.
Reinhard and his co-defendant Debra R. Bzik, who is scheduled to be sentenced in April, pled guilty to an information from the United States Attorney for the Eastern District of Pennsylvania, which charged that, from at least 1994 through February of 2006, they participated in a scheme to defraud investors, many of them elderly, of approximately $3,661,248 by selling fraudulent certificates of deposit. According to the information, investors were told that the certificates of deposit were insured by the Federal Deposit Insurance Corporation, when in fact, they were not. Reinhard and Bzik used money from sales to new investors to pay interest and principal to earlier investors, to fund operating expenses for their business, for salaries for themselves, for personal expenses, and to pay commissions to others who helped to sell these certificates.
On March 6, 2006, the Commission obtained a preliminary injunction halting this alleged ongoing Ponzi scheme being conducted by Reinhard and Bzik. [SEC v. Craig H. Reinhard, Debra R. Bzik, and The IDPM Group, Inc., Civil Action No. 06-997-CMR (E.D. Pa)]. The Commission's complaint charged IDPM, Reinhard and Bzik with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Without admitting or denying the allegations of the complaint, Reinhard, Bzik and IDPM consented to the entry of an order preliminarily enjoining them from engaging in the violations set forth above, partially freezing their assets, granting expedited discovery, prohibiting the alteration or destruction of documents, and ordering an accounting.
The Commission's proceeding remains pending, but has been stayed pending the disposition of the criminal proceedings. In addition to the emergency relief obtained, the Commission's complaint seeks from each defendant a permanent injunction, disgorgement with prejudgment interest, and a civil penalty. Additional information may be found at Litigation Release No. 19591. [U.S. v. IDPM Group, Inc., Craig H. Reinhard and Debra R. Bzik, 06-997 (E.D. Pa.)] (LR-20511)
INVESTMENT COMPANY ACT RELEASES
Patriot Capital Funding, Inc.
An order has been issued on an application filed by Patriot Capital Funding, Inc. (Patriot Capital) for an order under Section 6(c) of the Investment Company Act for an exemption from Sections 23(a), 23(b) and 63 of the Act, and under Sections 57(a)(4) and 57(i) of the Act and Rule 17d-1 under the Act permitting certain joint transactions otherwise prohibited by Section 57(a)(4) of the Act. The order permits Patriot Capital to issue restricted shares of its common stock under the terms of its employee compensation plan. (Rel. IC-28200 - March 25)
Immediate Effectiveness of Proposed Rule Changes
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-05) under Section 19(b)(3)(A) of the Securities Exchange Act to modify the description of OCC's pro rata assignment procedure with respect to flexibly structured foreign currency options. Publication is expected in the Federal Register during the week of March 24. (Rel. 34-57547)
A proposed rule change filed by the International Securities Exchange (SR-ISE-2008-30) regarding responses to special orders 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. 34-57550)
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