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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-235
December 5, 2008

COMMISSION ANNOUNCEMENTS

Egan-Jones Rating Company Registers With the SEC to Rate Two Additional Classes of Credit Ratings as an NRSRO

The Commission issued an order today granting the registration of two additional classes of credit ratings of Egan-Jones Rating Company, a nationally recognized statistical rating organization (NRSRO), under the Credit Rating Agency Reform Act of 2006. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59056)


ENFORCEMENT PROCEEDINGS

Marc Rabinowitz, CPA, Reinstated to Appear and Practice Before the Commission as an Accountant

Pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice, Marc Rabinowitz, CPA, has applied for and been granted reinstatement of his privilege to appear and practice before the Commission as an accountant. Mr. Rabinowitz was denied the privilege of appearing or practicing before the Commission on June 4, 2003. His reinstatement is effective immediately. (Rel. 34-59057; AAE Rel. 2905; File No. 3-11149)


Kenneth Wilchfort, CPA, Reinstated to Appear and Practice Before the Commission as an Accountant

Pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice, Kenneth Wilchfort, CPA, has applied for and been granted reinstatement of his privilege to appear and practice before the Commission as an accountant. Mr. Wilchfort was denied the privilege of appearing or practicing before the Commission on June 4, 2003. His reinstatement is effective immediately. (Rel. 34-59058; AAE Rel. 2906; File No. 3-11150)


In the Matter of Thomas J. Dudchik

An Administrative Law Judge has issued an Initial Decision in Thomas J. Dudchik, Administrative Proceeding No. 3-12943. The Initial Decision finds that Thomas J. Dudchik (Dudchik) and Rodney R. Schoemann (Schoemann) violated Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act). As a result of these violations, the Initial Decision, pursuant to Section 8A of the Securities Act, orders Dudchik and Schoemann to cease-and-desist from committing or causing any violations, or any future violations, of Sections 5(a) and 5(c) of the Securities Act. Additionally, Dudchik is ordered to pay disgorgement and prejudgment interest in the amount of $50,000, and Schoemann is ordered to pay disgorgement in the amount of $967,901 plus prejudgment interest as calculated by and in accordance with Rule 600 of the Securities and Exchange Commission's Rules of Practice. (Initial Decision No. 363; File No. 3-12943)


Birmingham Mayor and Friends Indicted for Bribery Scheme in Connection With Municipal Bond Deals

On December 1, the United States Attorney for the Northern District of Alabama filed criminal charges against Birmingham Mayor Larry Langford and his friends William Blount and Albert LaPierre. The 101-count indictment charges Langford, the former president of the County Commission of Jefferson County, Alabama (County Commission); Blount, chairman of Blount Parrish & Co, Inc., a broker-dealer based in Montgomery, Alabama; and registered lobbyist LaPierre with, among other charges, conspiracy, bribery, and money laundering in an alleged long-running bribery scheme related to Jefferson County bond transactions and swap agreements. According to the indictment, between 2002 and 2006, Langford used his position as president of the County Commission to generate $7.1 million in fees for Blount and Blount Parrish in connection with these Jefferson County financial transactions. Blount, in turn, paid LaPierre approximately $219,500. In return, the indictment alleges that Blount and LaPierre gave Langford approximately $235,000 in expensive clothes, jewelry and cash to pay off his personal debts as part of a conspiracy to funnel Jefferson County financial business to them. [United States of America v. Larry P. Langford, William B. Blount, and Albert W. LaPierre, (United States District Court for the Northern District of Alabama, Case No. 2:08-CR-00245-LSC-PWG)]

In April 2008, the SEC filed a civil action in the U.S. District Court for the Northern District of Alabama against Langford, Blount, Blount Parish and LaPierre. The SEC's complaint alleged that while Langford served as president of the County Commission, he accepted more than $156,000 in undisclosed cash and benefits over the course of two years from Blount in exchange for Blount Parrish participating in every Jefferson County municipal bond offering and security-based swap agreement transaction during 2003 and 2004, earning Blount Parrish over $6.7 million in fees. The complaint further alleged that Langford and Blount concealed the payment scheme by using their long-time friend, LaPierre as a conduit. The SEC's complaint requested, among other relief, an order enjoining the defendants from further violations of the antifraud provisions of the federal securities laws, disgorgement with prejudgment interest, and financial penalties. The SEC's action is pending. [U.S. v. Larry P. Langford, William B. Blount, and Albert W. LaPierre, (United States District Court for the Northern District of Alabama, Case No. 2:08-CR-00245-LSC-PWG] (LR-20821)


First Circuit Court of Appeals Reverses Lower Court's Dismissal of SEC Action Against Two Former Columbia Executives for Conduct Relating to Mutual Fund Market Timing Arrangements

The Commission announced that on December 3, the United States Court of Appeals for the First Circuit issued a ruling that allowed the SEC to proceed with its fraud action against James Tambone and Robert Hussey, former executives of Columbia Funds Distributor, Inc. (Columbia Distributor), the principal underwriter and distributor for a group of approximately 140 mutual funds in the Columbia mutual fund complex (Columbia Funds). The SEC had alleged in a civil injunctive action that from 1998 through 2003, Tambone and Hussey participated in a fraudulent scheme with Columbia Distributor and Columbia Management Advisors, Inc. (Columbia Advisors), the investment adviser to the funds, by secretly entering into or approving arrangements with at least eight preferred customers allowing them to engage in frequent short-term trading in certain Columbia Funds in contravention of the prospectuses that represented that the funds did not permit or were otherwise hostile to market timing or other short-term or excessive trading.

The First Circuit ruling reversed a decision by the District of Massachusetts that had dismissed the case in December 2006 on the ground that Tambone and Hussey could not be held primarily liable for false statements in the prospectuses because they did not make those statements. The First Circuit held that Tambone and Hussey could be held liable. In its decision, the First Circuit emphasized the unique role that underwriters play in the sale and distribution of mutual funds to the investing public and the reliance that the investing public places on them as a result. The First Circuit explained that Tambone and Hussey, as executives of Columbia Distributor, had a legal duty to confirm the accuracy and completeness of the prospectuses and other fund material that they distributed. By distributing the misleading prospectuses, the First Circuit reasoned, Tambone and Hussey made implied statements to potential investors that they had a reasonable basis for believing that the key statements in the prospectuses regarding market timing were accurate and complete.

The SEC first bought action against Tambone and Hussey on Feb. 9, 2005. The District Court dismissed that action without prejudice on Jan. 27, 2006. Thereafter, on May 19, 2006, the SEC filed a new complaint concerning the same conduct. The SEC's complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and aided and abetted Columbia Distributor's violations of Section 15(c)(1) of the Exchange Act, Columbia Advisors' violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and the Columbia entities' violations of Section 10(b) and Rule 10b-5 of the Exchange Act. The SEC is seeking an order permanently enjoining Tambone and Hussey from violating the antifraud and other provisions of the federal securities laws, requiring them to disgorge funds received through their violations of the securities laws, and imposing civil monetary penalties. Although the District Court dismissed this complaint on Dec. 29, 2006, the First Circuit, in its decision, remanded the case to the District Court for further proceedings.

In related proceedings, the SEC filed a civil injunctive action against Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc., in federal court in Massachusetts on Feb. 24, 2004. That action was later dismissed when the two Columbia entities agreed to settle charges through administrative proceedings that resulted in an Order issued by the SEC on Feb. 9, 2005 requiring, among other things, $140 million in disgorgement and penalties to be distributed to investors harmed by market timing activity at Columbia. The SEC is in the process of distributing those funds to investors. [SEC v. James Tambone and Robert Hussey (United States Court of Appeals (1st Cir.), No. 07-1384)] (LR-20822)


SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Changes

The Commission approved a proposed rule change (SR-DTC-2007-07) filed by The Depository Trust Company under Section 19(b)(1) of the Exchange Act to amend the applicant disqualification criteria contained in its rules. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59035)

The Commission approved a proposed rule change, as modified by Amendment No. 1 (SR-Amex-2008-70) submitted by the American Stock Exchange to revise its initial listing process to eliminate the current appeal process for initial listing decisions, add a new confidential pre-application eligibility review process, and upgrade its listing requirements by eliminating the alternative listing standards. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59050)


Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2008-089) to modify fees for members using the Nasdaq Options Market 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 December 8. (Rel. 34-59043)

A proposed rule change (SR-NYSEALTR-2008-09) filed by NYSE Alternext US (NYSE Alternext) to adopt a price list for equity transactions after the relocation of NYSE Alternext equities trading and to establish certain other fees 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 December 8. (Rel. 34-59045)

A proposed rule change filed by NYSE Arca to offer a new order type known as the Adding Liquidity Only order (SR-NYSEArca-2008-132) 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 December 8. (Rel. 34-59049)


Accelerated Approval of Proposed Rule Changes

The Commission granted accelerated approval of a proposed rule change (SR-NYSEArca-2008-123), as modified by Amendment No. 1 thereto, submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to the listing and trading of Trust Certificates. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59051)

The Commission granted accelerated approval of proposed rule changes (SR-OCC-2008-13 and SR-OCC-2008-14) filed by The Options Clearing Corporation under Section 19(b)(1) of the Exchange Act relating to iShares COMEX Gold Trust and iShares Silver Trust shares. Publication is expected in the Federal Register during the week of December 8. (Rel. 34-59054)


SECURITIES ACT REGISTRATIONS


RECENT 8K FILINGS

 

http://www.sec.gov/news/digest/2008/dig120508.htm


Modified: 12/05/2008