Securities and Exchange Commission Suspends Trading in Continental Beverage and Nutrition, Inc. for Failure to Make Required Periodic and Other Filings
The Commission announced the temporary suspension of trading in the securities of Continental Beverage and Nutrition, Inc. (Continental) commencing at 9:30 a.m. EDT on Sept. 3, 2008, and terminating at 11:59 p.m. EDT on Sept. 16, 2008.
The Commission temporarily suspended trading in the securities of Continental due to a lack of current and accurate information about the company because it has not filed periodic and other reports with the Commission in over one and a half years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
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 Continental.
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 relating to the securities of the subject company unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of Continental that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to Elaine C. Greenberg, Associate Regional Director of the Philadelphia Regional Office at (215) 597-3100. (Rel. 34-58452)
Commission Orders Hearings on Registration Suspension or Revocation against Continental Beverage and Nutrition, Inc. for Failure to Make Required Periodic and Other Filings
In conjunction with today's trading suspension, the Commission today also instituted a public administrative proceeding to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of Continental Beverage and Nutrition, Inc. (Continental) for failure to make required periodic and other filings with the Commission.
In the Order, the Division of Enforcement (Division) alleges that Continental is delinquent in its required periodic filings with the Commission.
In these proceedings, instituted pursuant to Section 12(j) of the Exchange Act, a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondent to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11 and 13a-13 thereunder, are true. The judge in the proceedings will then determine whether the registration pursuant to Section 12 of the Exchange Act of the securities of Continental should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge issue an initial decision not later than 120 days from the date of service of the Order. (Rel. 34-58453; File No. 3-13158)
Tracinda Corporation Settles Charges Concerning the Sale of General Motors Shares
On September 3, the Commission announced the institution of proceedings against Tracinda Corporation for violations of the reporting provisions of Section 13(d) of the Securities Exchange Act of 1934 concerning its plan and proposal to sell General Motors shares in 2006. Simultaneously with the institution of the proceedings, Tracinda, without admitting or denying the findings in the order, consented to the entry of an SEC cease-and-desist order.
According to the order, on Nov. 16, 2006, Kirk Kerkorian, the sole shareholder and director of Tracinda, met with his advisors to discuss Tracinda's significant investment in GM. In that meeting, Tracinda's key advisor expressed his view that the price of GM stock would likely fall in the future. This led to a discussion as to whether Tracinda should sell half (28 million shares) of its GM holdings.
The order further finds that, on Nov. 20, 2006, Tracinda offered to sell 28 million shares of GM stock to a broker-dealer. That firm was willing to buy 28 million shares, but only at a significant discount to the then-current market price. Tracinda was not willing to sell at that price at that time but requested a bid on 14 million shares. The price was higher for 14 million shares and Tracinda executed the transaction that day. Subsequently, on Nov. 28, 2006, Tracinda sold an additional 14 million shares of GM to another broker-dealer.
On Nov. 22, 2006, Tracinda filed an amendment to its Schedule 13D announcing the sale of 14 million shares of GM stock. In that filing, Tracinda did not disclose that it had a plan to sell half of the GM shares it owned or that it had made a proposal to sell 28 million GM shares. Tracinda violated Section 13(d)(2) of the Exchange Act and Rule 13d-2(a) thereunder, because the amendment that was filed did not disclose the plan and proposal to sell 28 million shares of GM stock and no other amendment was promptly filed to disclose this material change to a previously filed Schedule 13D. Further, that amendment was materially misleading and violated Exchange Act Rule 12b-20 because it stated that Tracinda might purchase or sell more GM stock, when there was only a remote possibility that it would buy any GM stock at that time. (Rel. 34-58451; File No. 3-13157)
SEC Charges Two Wall Street Brokers in $1 Billion Subprime-Related Auction Rate Securities Fraud
On September 3, the Commission filed securities fraud charges in the United States District Court for the Southern District of New York against Julian Tzolov and Eric Butler, two Wall Street brokers, for defrauding their customers when making more than $1 billion in unauthorized purchases of subprime-related auction rate securities. The SEC's Division of Enforcement in 2007 formed a subprime working group, which is aggressively investigating possible fraud, market manipulation, and breaches of fiduciary duty that may have contributed to the recent turmoil in the credit markets.
The Commission's complaint alleges that Julian Tzolov and Eric Butler misled customers into believing that auction rate securities being purchased in their accounts were backed by federally guaranteed student loans and were a safe and liquid alternative to bank deposits or money market funds. Instead, the securities that Tzolov and Butler purchased for their customers were backed by subprime mortgages, collateralized debt obligations (CDOs), and other non-student loan collateral.
The complaint also alleges that Tzolov and Butler, while employed at Credit Suisse in New York, deceived foreign corporate customers in short-term cash management accounts by sending or directing their sales assistants to send e-mail confirmations in which the terms "St. Loan" or "Education" were added to the names of non-student loan securities purchased for the customers. Tzolov and Butler also routinely deleted references to "CDO" or "Mortgage" from the names of the securities in these e-mails. As a result, the complaint alleges that customers were stuck holding more than $800 million in illiquid securities after auctions for auction rate securities began to fail in August 2007. Those holdings have since significantly declined in value.
The Commission's complaint charges Tzolov and Butler with securities fraud in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains, if any, plus prejudgment interest on a joint and several basis, and civil money penalties.
The Commission acknowledges assistance provided by the U.S. Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation in this matter. The Commission's investigation is continuing. [SEC v. Julian T. Tzolov and Eric S. Butler, Case No. 08 Civ. 7699 (SAS) (S.D.N.Y.)] (LR-20698)
SEC v. Donald D. LaBarre
The Commission announced that on Aug. 29, 2008, it filed a civil injunctive action against Donald D. LaBarre (LaBarre) stemming from his role in the fraudulent securities offering scheme involving Homeland Communications Corporation, a purported telecommunications company that he allegedly ran and operated. On Sept. 5, 2007, the SEC filed an emergency civil injunctive action to halt an ongoing securities offering fraud perpetrated by Homeland, Frances LaBarre, the company's reported president and LaBarre's wife, and Joseph Yurkin, Homeland's vice president of Investor Relations (See SEC v. Homeland Communications Corporation, et al. Case No. 07-80802-CIV-MARRA/JOHNSON (S.D. Fla.)). The court appointed a Receiver over Homeland and the SEC froze nearly $1.1 million in investor funds. In late 2007, the court permanently enjoined Homeland, Frances LaBarre, and Yurkin by consent from committing future violations of the federal securities laws.
The SEC's complaint against LaBarre, also filed in the Southern District of Florida, chronicles LaBarre's lengthy securities disciplinary history and alleges that from at least May 2005 through September 2007, he orchestrated Homeland's securities offering scheme that raised at least $3.8 million from approximately 250 investors. According to the SEC's complaint, directly, or by virtue of controlling Homeland, LaBarre made material misrepresentations and omissions in connection with the Homeland offering concerning: (1) promises of an upcoming Homeland initial public offering (IPO) and the involvement of well-known investment banks in that IPO; (2) Homeland's assets and acquisitions; (3) its purported ownership of FCC licenses; and (4) its regulatory history. The complaint also alleges that LaBarre diverted to himself, his family members, and companies he and his family owned or controlled about $3.2 million of the approximately $3.8 million in Homeland investor funds. The SEC's complaint alleges that LaBarre personally solicited several investors to buy securities that Homeland issued and distributed Homeland's private placement memorandum and offering materials to at least one investor that contained numerous misrepresentations.
The SEC's complaint alleges that LaBarre violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil penalty. The complaint also seeks an order directing LaBarre to repatriate assets held outside the United States. [SEC v. Donald D. LaBarre, Case No. 08-80959-CIV-HURLEY/HOPKINS (S.D. Fla.)] (LR-20699)
INVESTMENT COMPANY ACT RELEASES
PIMCO Municipal Income Fund, et al.
A notice has been issued giving interested persons until Sept. 26, 2008, to request a hearing on an application filed by PIMCO Municipal Income Fund, et al. for an order under Section 6(c) of the Investment Company Act granting an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order would permit certain registered closed-end management investment companies to make a greater number of capital gains distributions to holders of shares of their auction market preferred stock than is permitted by Section 19(b) of the Act and Rule 19b-1 under the Act to the extent necessary to comply with Internal Revenue Ruling 89-81 under the Internal Revenue Code of 1986. (Rel. IC-28370 - August 29)
John Hancock Income Securities Trust, et al.
A notice has been issued giving interested persons until Sept. 23, 2008, to request a hearing on an application filed by John Hancock Income Securities Trust, et al. 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 would permit 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-28372 - August 29)
Proposed Rule Change
The Depository Trust Company filed a proposed rule change (SR-DTC-2008-11) under Section 19(b)(1) of the Securities Exchange Act of 1934. The proposed rule change would implement a new service, the "Security Holder Tracking Service," that would allow issuers, either themselves or through an issuer-designated administrator, to track and limit the number of beneficial owners for an individual CUSIP. Publication is expected in the Federal Register during the week of September 1. (Rel. 34-58436)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-96) submitted by NYSE Arca to establish NYSE Arca Realtime Reference Prices Service. Publication is expected in the Federal Register during the week of September 1. (Rel. 34-58444)
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