James Y. Lee Sanctioned
James Y. Lee has been ordered to cease and desist from violations of the registration provisions of the securities laws and to disgorge $2,866,375 of ill-gotten gains. From 2002 to 2005, Lee advised and guided several microcap issuers in raising millions of dollars by selling their common stock to the public in violation of the registration requirements of the federal securities laws and thereby caused violations of Sections 5(a) and 5(c) of the Securities Act of 1933. The sanctions were ordered in an administrative proceeding before an administrative law judge. (Rel. 33-8954; File No. 3-13123)
SEC Charges Former CEO in Two Fraudulent Schemes
On August 27, the Commission charged Jeffrey Fishman in connection with two fraudulent schemes in which he received approximately $1.6 million in illicit profits. Fishman is the former president and chief executive officer of One Liberty Properties, Inc. (OLP), a publicly traded New York based real estate investment trust. In one scheme, Fishman misappropriated hundreds of thousands of dollars from Medemil LLC (Medemil), a company Fishman created purportedly to invest in foreign currency options. In the second scheme, Fishman extracted undisclosed kickbacks from two OLP business partners.
The Commission's complaint, filed in the U.S. District Court for the Eastern District of New York, alleges that between 2001 and 2005, Fishman raised approximately $940,000 from seventeen individuals to invest in Medemil and misappropriated at least $609,000 of this amount to pay personal expenses and to gamble. The complaint further alleges that Fishman concealed his misappropriation of Medemil funds by deliberately falsifying account statements and other documents he provided to Medemil's investors and accountants. By 2005, all of the Medemil investors' funds had been dissipated as a result of Fishman's misconduct and through trading losses.
The complaint further alleges that in 2002 and 2003, Fishman received almost $1 million in undisclosed kickbacks from two of OLP's commercial partners in exchange for, among other things, more favorable terms in connection with business transactions involving OLP. Fishman never disclosed these payments and their relation to OLP's business transactions to OLP or to OLP's auditors. Consequently, OLP never disclosed these related party transactions in its financial statements, proxy statements, or registration statements filed with the Commission between 2002 and 2005.
The Commission's complaint charges Fishman with violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, and 13b2-2 thereunder, and with aiding and abetting violations by OLP of Sections 13(a), 13(b)(2)(B)(i), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 14a-9 thereunder.
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Eastern District of New York and the New York Office of the Federal Bureau of Investigation in this matter. [SEC v. Jeffrey Fishman, 08 Civ. 3509 (E.D.N.Y.) (SJF)] (LR-20691)
Court Imposes $10,000 Civil Penalty Against SEC Defendant in Market Manipulation Case
The Commission announced today that on Aug. 27, 2008, the Honorable Janet C. Hall, United States District Court Judge for the District of Connecticut, imposed a civil penalty of $10,000 against Sheldon A. Strauss of Cleveland, Ohio, a defendant in a previously-filed civil injunctive action involving a multi-faceted scheme to manipulate the stock price of Competitive Technologies, Inc., (CTT), a technology development company located in Fairfield, Connecticut. In addition, Judge Hall permanently enjoined Strauss from violating the antifraud provisions of the federal securities laws. These remedial penalties follow a Nov. 29, 2007 verdict for the Commission on all of its securities fraud charges against Strauss after a three-week jury trial in Bridgeport, Connecticut.
The Commission's complaint, filed against a total of eight defendants on Aug. 11, 2004, alleged that the defendants participated in a scheme to manipulate and inflate the price of CTT stock from at least July 1998 to June 2001. The complaint alleged that the defendants artificially raised and maintained the price of CTT's stock and created a false or misleading appearance with respect to the market for CTT stock through manipulative practices such as placing buy orders at or near the close of the market in order to inflate the reported closing price (marking the close), placing successive buy orders in small amounts at increasing prices (painting the tape), and using accounts they controlled or serviced to place pre-arranged buy and sell orders in virtually identical amounts (placing "matched trades").
The jury found Strauss liable for violating Sections 9(a) and 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. In addition, the jury found Strauss liable for aiding and abetting defendant and former registered representative Chauncey Steele's violations of Sections 9(a) and 10(b) of the Exchange Act. Steele previously settled the Commission's action against him in 2005. The jury was unable to reach verdicts on most of the charges against two remaining defendants: Richard A. Kwak, a registered representative formerly associated with a broker-dealer in San Diego, California and Stephen J. Wilson, a registered representative formerly associated with a broker-dealer in Media, Pennsylvania. The Commission expects to retry its case against defendant Wilson, currently scheduled to begin on September 29, 2008, and its case against defendant Kwak, which is expected to occur in early 2009.
The SEC also announced that on April 8, 2008, the Court determined that a bar from serving as an officer or director of any public company was not warranted against CTT's former CEO, defendant Frank R. McPike of Ridgefield, Connecticut. On Oct. 31, 2007, the Court entered a final judgment by consent against defendant McPike, enjoining him from violating Sections 9(a) and 10(b) of the Exchange Act and Rule 10b-5 thereunder and ordering him to pay a civil penalty of $60,000, but leaving the issue of an officer and director bar open.
For further information about the Commission's action in SEC v. Competitive Technologies, Inc., et al., see Litigation Release No. 18827 (Aug. 11, 2004), Litigation Release No. 19320 (Aug. 2, 2005), Exchange Act Release No. 56785 (Nov. 14, 2007), and Litigation Release No. 20388 (Dec. 7, 2007). [SEC v. Competitive Technologies, Inc., et. al., Civil Action No. 3:04 CV 1331 JCH (District of Connecticut)] (LR-20692)
Former ProVision Operation Systems, Inc. Chief Executive Officer, Robert Fletcher, Ordered to Pay More than $5 Million in Disgorgement and Penalties in Securities Fraud Action
On Aug. 14, 2008, Judge Alicemarie H. Stotler of the United States District Court for the Central District of California entered an order permanently enjoining Robert Thomas Fletcher III (Fletcher) from violating the antifraud and registration provisions of the federal securities laws. The order against Fletcher also requires him to disgorge $5,000,000, plus prejudgment interest, and pay a civil money penalty of $130,000.
The SEC's complaint charges that ProVision and Fletcher fraudulently raised millions of dollars from investors, and then Fletcher used the money for personal expenses and to support his lavish lifestyle, including purchasing jewelry and clothing, and for gambling. The complaint alleges that Fletcher was the chief executive officer, chairman and president of ProVision, a company that purportedly provided continuing education and support to investors through seminars and workshops focusing on real estate investing, stock investing and other wealth-building strategies. The Commission's complaint also alleges that while raising funds from investors, ProVision and Fletcher fraudulently represented that the company was successful and expanding. They allegedly made materially false or misleading statements about ProVision's business operations, profitability, and financial condition. According to the complaint, ProVision and Fletcher falsely claimed to own or control, or have the ability to acquire, yachts, real property, and millions of tons of a mineral substance called "humate," which they fraudulently claimed was worth $137,000,000.
On Aug. 14, 2008, Judge Stotler also entered an order permanently enjoining ProVision Operations Systems, Inc. (ProVision) from violating the antifraud and registration provisions of the federal securities laws.
The orders permanently enjoin Fletcher and ProVision from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 17(a), 5(a), and 5(c) of the Securities Act of 1933. ProVision agreed that, upon motion of the Commission, the Court will determine whether it is appropriate to order disgorgement and a civil penalty. Fletcher and ProVision consented to the entry of the orders without admitting or denying the allegations in the complaint. The SEC's action against remaining defendants James Stock and Lawrence Morris is also ongoing.
For Additional information, see Litigation Release No. 20301 (Sept. 27, 2007). [SEC v. ProVision Operation Systems, Inc., Robert T. Fletcher III, Richard C. Hill, James W. Stock, and Lawrence D. Morris, Civil Action No. 8-07-1130(C.D. Cal.)] (LR-20693)
INVESTMENT ADVISERS ACT RELEASES
Woodcock Financial Management Company, LLC
A notice has been issued giving interested persons until Sept. 23, 2008, to request a hearing on an application filed by Woodcock Financial Management Company, LLC for an order under Section 202(a)(11)(G) of the Investment Advisers Act. The order would declare Woodcock Financial Management Company, LLC to be a person not within the intent of Section 202(a)(11) of the Advisers Act, which defines the term "investment adviser." (Rel. IA-2772 - August 26)
INVESTMENT COMPANY ACT RELEASES
Goldman Sachs Trust, et al.
An order has been issued on an application filed by Goldman Sachs Trust, et al., under Section 12(d)(1)(J) of the Investment Company Act for an exemption from Sections 12(d)(1)(A) and (B) of the Act, and under Sections 6(c) and 17(b) of the Act for an exemption from Section 17(a) of the Act. The order permits certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies. (Rel. IC-28366 - August 26)
Javelin Exchange-Traded Trust
An order has been issued on an application filed by Javelin Exchange-Traded Trust, et al. The order permits: (a) certain registered open-end management investment companies and their series to issue shares that can be redeemed only in large aggregations; (b) secondary market transactions in shares of the series to occur at negotiated prices; (c) dealers to sell shares of the series to purchasers in the secondary market unaccompanied by a prospectus when prospectus delivery is not required by the Securities Act of 1933; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series; (e) certain series to pay redemption proceeds more than seven days after the tender of shares for redemption under certain circumstances; and (f) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire shares of the series. (Rel. IC-28367 - August 26)
DNP Select Income Fund Inc., et al.
An order has been issued on an application filed by DNP Select Income Fund Inc. and Duff & Phelps Investment Management Co. under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act, and Rule 19b-1 under the Act. The order permits certain registered closed-end management investment companies to make periodic distributions of long-term capital gains (i) with respect to their common stock as part of a managed distribution plan as frequently as twelve times each year, and (ii) with respect to their preferred stock as frequently as required by the terms of such preferred stock. (Rel. IC-28368 - August 26)
Proposed Rule Change
The Depository Trust Company filed a proposed rule change (SR-DTC-2008-08) pursuant to Section 19(b)(1) of the Act that would amend its Withdrawal-by-Transfer service to eliminate the ability of participants to receive physical certificates for securities positions withdrawn from participants' accounts at DTC when the issue of such securities is eligible and participating in the Direct Registration System. Publication is expected in the Federal Register during the week of September 1. (Rel. 34-58404)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-Phlx-2008-63) filed by the Philadelphia Stock Exchange relating to execution fees on the XLE Fee Schedule 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 September 1. (Rel. 34-58405)
A proposed rule change filed by Chicago Board Options Exchange, Incorporated (SR-CBOE-2008-87) relating to foreign members 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 September 1. (Rel. 34-58414)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-Phlx-2008-53) filed by the Philadelphia Stock Exchange. (n/k/a NASDAQ OMX PHLX, Inc.) (Phlx) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934. The rule change amends Phlx Rules 1024 (Conduct of Accounts for Options Trading), 1025 (Supervision of Accounts), 1027 (Discretionary Accounts), and 1049 (Communications to Customers) that govern a Phlx member's conduct of doing business with the public. Publication is expected in the Federal Register during the week of September 1. (Rel. 34-58410)
JOINT INDUSTRY PLAN RELEASES
Notice of Filing and Immediate Effectiveness of Proposed Amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information
The Options Price Reporting Authority filed a notice of filing and immediate effectiveness of a proposed amendment pursuant to Section 11A of the Securities Exchange Act of 1934 and Rule 608 thereunder (SR-OPRA-2008-03) to OPRA's Academic Waiver Policy. Publication is expected in the Federal Register during the week of September 1. (Rel. 34-58424)
SECURITIES ACT REGISTRATIONS
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