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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-134
July 11, 2008

ENFORCEMENT PROCEEDINGS

Commission Revokes Registration of Securities of National Fruit and Vegetable Technology Corp. for Failure to Make Required Periodic Filings

On July 11, the Commission revoked the registration of each class of registered securities of National Fruit and Vegetable Technology Corp. (National Fruit) 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, National Fruit 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 National Fruit and Vegetable Technology 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 National Fruit's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against National Fruit in In the Matter of National Fruit and Vegetable Technology Corp., et al., Administrative Proceeding File No. 3-13080.

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 National Fruit and Vegetable Technology Corp., et al., Administrative Proceeding File No. 3-13080, Exchange Act Release No. 58009 (June 24, 2008). (Rel. 34-58141; File No. 3-13080)


Ralph Gregory Gibbs Sentenced to More Than Five Years in Prison for Mail Fraud in Connection With a Nationwide Ponzi Scheme

The Commission announced today that, in a judgment entered on July 2, 2008, Ralph Gregory Gibbs was sentenced in the United States District Court for the Eastern District of Virginia to 63 months (5 years and 3 months) in prison following his guilty plea to mail fraud. In support of his plea, Gibbs admitted that he engaged in a scheme to defraud numerous investors through a nationwide Foreign Currency Market (FOREX) Ponzi scheme.

On March 19, 2008, Gibbs pled guilty to mail fraud and the Commission filed a settled civil injunctive action in the U.S. District Court for the Eastern District of Virginia against Gibbs for operating a Ponzi scheme. S.E.C. v. Ralph Gregory Gibbs, Civil Action No. 3:08 CV 174 (E.D. Va.). The Commission's 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 liquidated their retirement savings or obtained home equity loans to invest the money with Gibbs.

Simultaneous with the filing of the Commission's Complaint, and without admitting or denying the Commission's allegations, Gibbs consented to the entry of: a final judgment permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; ordering him 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; and not imposing a civil penalty based upon Gibbs' representations in his sworn statement of financial condition; and an order appointing a receiver to assume control of the constructive trust for liquidation and ultimate distribution to the injured investors. On March 27, 2008, the Court entered the Final Judgment and ordered the appointment of the receiver. For further information, please see Litigation Rel. No. 20503 (March 19, 2008). [U.S. v. Ralph Gregory Gibbs, Criminal No. 3:08CR100 (E.D. Va.)] (LR-20641)


SEC Settles Securities Fraud Case With El Paso Corporation, Its Subsidiaries, And Several Former Employees

On July 11, the Commission filed a civil action against El Paso Corporation (El Paso), its subsidiaries El Paso CGP Company LLC (CGP) and El Paso Exploration & Production Co. (EPPH), and several former employees alleging that they inflated, or participated in the inflation of, the companies' proved natural gas and oil reserves in violation of the federal securities laws. The complaint names Rodney D. Erskine, the former president of El Paso's Exploration and Production Business Segment, Randy L. Bartley, the former senior vice president of El Paso's Exploration and Production Business Segment, and Steven L. Hochstein, John D. Perry, and Bryan T. Simmons, former vice presidents of El Paso's Exploration and Production Business Segment. According to the complaint, the defendants violated the antifraud provisions of the federal securities laws. The Commissions also alleges that El Paso, CGP, and EPPH violated, and Erskine, Bartley, Hochstein, Simmons, and Perry aided and abetted violations of, the reporting, books and records, and internal controls provisions of the Exchange Act. All defendants have agreed to settle the charges against them, without admitting or denying the Commission's allegations.

In 2004, El Paso restated its financial statements for years 1999 through 2002, and for the first nine months of 2003, reducing its previously reported proved natural gas and oil reserves at December 31, 2002, 2001, and 2000 by 2.2 trillion cubic feet equivalent of natural gas (TCFe), 3.3 TCFe, and 3.3 TCFe, respectively, and materially reducing its previously reported standardized measures of future cash flows. The total cumulative impact of the restatements reduced El Paso's stockholders' equity as of September 30, 2003 by $1.7 billion. CGP and EPPH also restated their previously issued financial statements to correct their material overstatements of proved natural gas and oil reserves, standardized measures of future cash flows, and capitalized costs relating to their natural gas and oil producing activities. The Commission's complaint alleges that, between 1998 and the quarter ended September 30, 2003, El Paso and its subsidiaries, with the assistance of the individual defendants, inflated its proved natural gas and oil reserves, overstated its standardized measure of future cash flows, and overstated its capitalized costs relating to its natural gas and oil producing activities.

Specifically, the Commission alleges that El Paso violated Section 17(a)(2) of the Securities Act, and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. El Paso consented to a judgment that permanently enjoins it from future violations of these provisions.

The Commission alleges that CGP violated Section 17(a) of the Securities Act, and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. CGP consented to a judgment that permanently enjoins it from future violations of these provisions.

The Commission alleges that EPPH violated Section 17(a) of the Securities Act, and Sections 10(b), 13(b)(2)(A), 13(b)(2)(B), and 15(d) of the Exchange Act and Rules 10b-5, 12b-20, 15d-1, and 15d-13 thereunder. EPPH consented to a judgment that permanently enjoins it from future violations of these provisions.

The Commission alleges that Erskine and Bartley violated Section 17(a)(2) of the Securities Act, and Exchange Act Rules 13b2-1 and 13b2-2, and aided and abetted: i) El Paso and CGP's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; and ii) EPPH's violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. Erskine and Bartley consented to judgments that permanently enjoin them from future violations of these provisions and order them to pay civil penalties of $75,000 and $40,000, respectively.

The Commission alleges that Hochstein violated Section 17(a) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aided and abetted: i) El Paso and CGP's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; and ii) EPPH's violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. Hochstein consented to a judgment that permanently enjoins him from future violations of these provisions and orders him to pay a $40,000 civil penalty.

The Commission alleges that Perry violated Section 17(a) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aided and abetted: i) El Paso and CGP's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; and ii) EPPH's violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder, and iii) CGP and EPPH's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Perry consented to a judgment that permanently enjoins him from future violations of these provisions and orders him to pay a $40,000 civil penalty.

The Commission alleges that Simmons violated Section 17(a) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aided and abetted El Paso and CGP's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder. Simmons consented to a judgment that permanently enjoins him from future violations of these provisions and orders him to pay a $40,000 civil penalty. [SEC v. El Paso Corporation, et. al., Civil Action No. 4:08-CV-02191, USDC, SDTX, Houston Division] (LR-20642; AAE Rel. 2844)


SELF-REGULATORY ORGANIZATIONS

Proposed Rule Changes

The Depository Trust Company filed a proposed rule change (SR-DTC-2007-07) under Section 19(b)(1) of the Exchange Act that would amend the applicant disqualification criteria contained in its rules. Publication is expected in the Federal Register during the week of July 14. (34-58122)

A proposed rule change (SR-FINRA-2008-031) has been filed by the Financial Industry Regulatory Authority regarding a proposal to amend the arbitration Uniform Submission Agreement and related rules. Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58124)

The Fixed Income Clearing Corporation filed a proposed rule change (SR-FICC-2007-04) under Section 19(b)(1) of the Securities Exchange Act. The proposed rule change would amend FICC's Government Securities Division's and Mortgage Backed Securities Division's rules concerning applicant disqualification criteria. Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58128)

A proposed rule change (SR-ISE-2008-21) has been filed by the International Securities Exchange regarding a proposal to require members to integrate the responsibility for supervision of their public customer options business into their overall supervisory and compliance programs. In addition, the proposal would require members to strengthen their supervisory procedures and internal controls as related to their public customer options business. Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58129)

The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2008-025) pursuant to Section 19(b)(1) of the Securities Exchange Act and Rule 19b-4 thereunder that proposes to move current NASD Rule 2790 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings) to the Consolidated FINRA Rulebook as FINRA Rule 5130 as well as proposing minor technical changes to the rule text. Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58134)

A proposed rule change (SR-CBOE-2007-30) has been filed by the Chicago Board Options Exchange regarding a proposal to amend CBOE Rule 9.21 (Communications to Customers). Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58138)


Immediate Effectiveness of Proposed Rule Changes

The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2008-04), which became effective upon filing pursuant to Section 19(b)(3)(A) of the Exchange Act, that amends membership rules and use of mutual fund services to allow an investment manager in a managed account program to access mutual fund services without money settlement. Publication is expected in the Federal Register during the week of July 14. (Rel. 34-58126)

A proposed rule change filed by the NASDAQ Stock Market regarding routing to affiliated exchanges (SR-NASDAQ-2008-061) 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 July 14. (Rel. 34-58135)

A proposed rule change (SR-BSE-2008-41) filed by the Boston Stock Exchange relating to options based on shares of the SPDR® Gold Trust 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 July 14. (Rel. 34-58136)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2008/dig071108.htm


Modified: 07/11/2008