In the Matter of Wendy Brown
On May 12, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 as to Wendy Brown (Order). The Order is based on the entry of an injunction and final judgment against Wendy Brown and others, permanently enjoining them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, Sections 204, 206(1), 206(2) and 207 of the Advisers Act and Rules 204-1(a)(2) and 204-2(a)(8) thereunder. See Securities and Exchange Commission v. K.W. Brown, et al., Case No. 0:05-CV-80367.
Based on the above, the Order bars Wendy Brown from association with any broker, dealer, or investment adviser. Wendy Brown consented to the issuance of the Order without admitting or denying any of the findings in the Order, except she admitted the entry of the permanent injunction. (Rel. 34-57814; IA-2734; File No. 3-12923)
In the Matter of John A. Baldo
On May 12, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against John A. Baldo (Respondent). The Order finds that from July 2005 through January 2007, the Respondent held himself out as the owner of Freedom Financial, an unregistered investment adviser in Andover, Massachusetts. The Order further finds that on Jan. 24, 2008, the Respondent pled guilty in the United States District Court for the District of Massachusetts to federal securities fraud, mail fraud, and wire fraud in United States v. John A. Baldo, Criminal No. 07-10060-MLW. The Order further finds that the counts of the criminal indictment to which the Respondent pled guilty alleged, among other things, that the Respondent, by use of means and instrumentalities of interstate commerce, falsely represented that he would serve as an investment adviser exercising fiduciary responsibility with respect to client funds entrusted to him and thereafter misappropriated client funds.
Based on the above, the Order bars John A. Baldo from association with any investment adviser. The Respondent consented to the issuance of the Order without admitting or denying any of the findings therein. (Rel. IA-2735; File No. 3-13042)
In the Matter of Achieva Development Corp.
An Administrative Law Judge has found Acme Metals, Inc., Act International, Inc., and Advanced Interactive, Inc., in default in Achieva Development Corp. and revoked the registrations of each class of their securities based on findings that they violated Section 13(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 13a-1 and 13a-13 by failing to file required periodic reports with the Securities and Exchange Commission. (Rel. 34-57809; File No. 3-13002)
SEC Charges Trio of Fort Lauderdale-Area Doctors With Insider Trading
On May 12, the Commission filed a complaint in federal district court in Miami, Florida against Dr. Zachariah P. Zachariah (Zachariah), Dr. Mammen P. Zachariah (M. Zachariah), and Dr. Sheldon Nassberg, alleging that they engaged in illegal insider trading from which they reaped a total of more than a half-million dollars in profits from their illicit scheme. All three defendants reside and practice medicine in the Ft. Lauderdale, Florida area.
The SEC's complaint concerns illegal trading in the shares of two unrelated companies. In the first, the complaint alleges that Zachariah breached his fiduciary duty to IVAX and its shareholders only a few months after being appointed to serve as a company director. IVAX's then-chairman and CEO called Zachariah and other IVAX directors on July 6, 2005, after agreeing with the then-CEO of Teva Pharmaceuticals Ltd. on preliminary terms for Teva to acquire IVAX. Within minutes of that call, and even though IVAX was in a "blackout" period during which the company forbade officers and directors from trading in IVAX stock, Zachariah placed the first of four separate IVAX stock purchase orders that he made in his online brokerage account that day. Zachariah purchased 35,000 shares of IVAX stock at a cost of approximately $730,000.
The SEC further alleges that Zachariah later unlawfully tipped his brother, M. Zachariah, who purchased 2,000 shares of IVAX stock at a total cost of approximately $46,000 on the last trading day before IVAX announced on July 25, 2005, that Teva would acquire it.
According to the SEC's complaint, Zachariah's IVAX stock purchases were not the first time that he engaged in illegal trading while in possession of non-public information. He also misappropriated material, non-public information about Sarasota, Fla.-based Correctional Services Corporation, which operated correctional and detention facilities.
The SEC's complaint alleges that from May through July 2005, Zachariah bought over $200,000 worth of Correctional shares and his brother and close friend, Nassberg, each made multiple purchases of Correctional stock in the week leading up to a public announcement on July 14, 2005, by The GEO Group, Inc., that it would acquire Correctional. Zachariah, a GEO consultant, obtained material, non-public information about a GEO-Correctional deal either from his consulting relationship or from one or more of the GEO insiders with whom he had a familial or other close, personal relationship. Zachariah supplied the inside information to his brother and Nassberg, who purchased approximately $162,000 worth and $32,000 worth of Correctional stock, respectively.
The SEC alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks a judgment against all defendants providing for injunctions, disgorgement of their ill-gotten gains with prejudgment interest, and civil money penalties. The complaint also seeks an order prohibiting Zachariah from serving as an officer or director of a public company. [SEC v. Zachariah P. Zachariah, et al., Civil Action No. 08-60698-CIV-DIMITROULEAS/ROSENBAUM, USDC, S.D. Fla.] (LR-20564)
Former Hedge Fund Manager and Investment Adviser Settle Insider Trading Charges
The Commission announced today that on May 8, 2008, the Massachusetts federal district court entered final judgments by consent against the remaining defendants in an insider trading case arising out of Rhode Island-based Citizens Bank's May 4, 2004 announcement that it was acquiring Charter One Financial, Inc., a Cleveland-based bank. The settling parties are former hedge fund manager, Michael K.C. Tom of Waltham, Massachusetts, former Burlington, Massachusetts-based investment adviser, Global Time Capital Management, LLC, and former Burlington, Massachusetts-based hedge fund, GTC Growth Fund, L.P.
The Commission's complaint alleged that a then-Citizens employee conveyed certain material, non-public information relating to Citizens' planned acquisition to Global Time Capital Management portfolio manager Michael Tom, a former Citizens employee who ran the GTC Growth Fund. The complaint further alleged that between April 29, 2004, and May 4, 2004, Michael Tom purchased numerous Charter One call options, which increase in value with a rise in the stock price, for his personal account and for the GTC Growth Fund. In addition, Michael Tom traded Charter One securities prior to Citizens' announcement in a joint account he held with his wife and in accounts he managed for his wife and in-laws. Michael Tom also tipped his brother about Citizen's acquisition plan. According to the complaint, Michael Tom's illegal insider trading in Charter One securities resulted in total profits of approximately $743,505.
Michael Tom and Global Time Capital Management, without admitting or denying the allegations contained in the Commission's complaint, each consented to the entry of final judgments against them and permanent injunctions against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Michael Tom also agreed to pay disgorgement of $543,875.07 plus prejudgment interest of $107,381.63, and a civil money penalty of $150,000. Global Time Capital Management has agreed to pay a civil money penalty of $39,056.93. Relief defendant GTC Growth Fund has agreed to pay disgorgement of $189,868.39 plus prejudgment interest of $23,145.67.
Previously, on June 8, 2006, final judgments by consent were entered against three other defendants in this case. The final judgments against Michael Tom, Global Time Capital Management, and GTC Growth Fund end the Commission's litigation against all of the defendants.
For further information, please see Litigation Release Nos. 19404 (Sept. 25, 2005) and 19729 (June 15, 2006). [SEC v. Michael K.C. Tom, et al. (United States District Court for the District of Massachusetts, C.A. No. 05-CV-11966-NMG)] (LR-20565)
INVESTMENT COMPANY ACT RELEASES
Main Street Capital Corporation, et al.
A notice has been issued giving interested persons until June 2, 2008, to request a hearing on an application filed by Main Street Capital Corporation, et al. for an order to permit a business development company and its wholly-owned small business investment company to co-invest with certain affiliates in portfolio companies. (Rel. IC-28265 - May 8)
Proposed Rule Change
The Commission issued a notice of filing of a proposed rule change (SR-NYSEArca-2008-46) filed by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the listing and trading of shares of the NETS ISEQ 20 Index Fund (Ireland). Publication is expected in the Federal Register during the week of May 12. (Rel. 34-57805)
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