SEC Suspends Trading In The Stock Of National Lampoon, Inc. and Advatech Corporation
The U.S. Securities and Exchange Commission announced the temporary suspension of trading of the securities of the following issuers, commencing at 9:30 a.m. EST on Dec. 15, 2008, and terminating at 11:59 p.m. EST on Dec. 29, 2008:
The Commission temporarily suspended trading in the securities of the foregoing companies due to a lack of current and accurate information concerning the securities of the companies. 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 these companies.
Further, 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 suspensions, no quotation may be entered unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not it has complied with the rule, it should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, it should refrain from entering quotations relating to the securities of these companies until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation that is in violation of the rule, the Commission will consider the need for prompt enforcement action. (Rel. 34-59099)
Closed Meeting - Monday, December 15, 2008 - 2:30 p.m.
The subject matter of the closed meeting held on Monday, December 15, was: a matter relating to enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.
Delinquent Filer's Stock Registration Revoked
The registration of the securities of Respondent Markland Technologies, Inc., has been revoked. It had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, it violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocation was ordered in an administrative proceeding before an administrative law judge. (Initial Decision No. 364; File No. 3-13147)
In the Matter of Michael W. Crow and Robert David Fuchs
On December 12, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Michael W. Crow (Crow) and Robert David Fuchs (Fuchs). In the Order, the Division of Enforcement (Division) alleges that a final judgment ordering a permanent injunction was entered against Crow and Fuchs in the civil action entitled Securities and Exchange Commission v. Michael W. Crow, et al., Civil Action No. 07 Civ. 3814 (CM), in the United States District Court for the Southern District of New York.
The Division alleges that, following a bench trial, the Honorable Colleen McMahon issued a decision finding that Crow and Fuchs aided and abetted violations of Sections 15(a), 15(b)(1) and 15(b)(7) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 15b3-1 and 15b7-1 thereunder and that Fuchs aided and abetted violations of Section 17(a) of the Exchange Act and Rule 17a-3(a)(12) thereunder. Judge McMahon also found that Fuchs offered fabricated evidence and gave false and incredible testimony and that Crow perjured himself at trial. Judge McMahon further found that Crow and Fuchs engaged in egregious conduct, with scienter, and took steps to cover up their actions.
The Division further alleges that, on Nov. 13, 2008, the court entered a final judgment (Judgment) against Crow and Fuchs, among others, that permanently enjoins Crow from aiding and abetting violations of Sections 15(a), 15(b)(1) and 15(b)(7) of the Exchange Act and Rules 15b3-1 and 15b7-1 thereunder; and permanently enjoins Fuchs from aiding and abetting violations of Sections 15(a), 15(b)(1), 15(b)(7) and 17(a) of the Exchange Act and Rules 15b3-1, 15b7-1 and 17a-3(a)(12) thereunder. The Judgment further ordered that: (1) Crow and another defendant disgorge, with joint and several liability, ill-gotten gains of $1,562,337, plus prejudgment interest in the amount of $437,415.87, for a total of $1,999,752.87; (2) Fuchs disgorge ill-gotten gains of $221,000, plus prejudgment interest of $61,874.95, for a total of $282,874.95; and (3) Crow, Fuchs, and other defendants disgorge, with joint and several liability, ill-gotten gains of $3,903,474, plus prejudgment interest of $1,092,877, for a total of $4,996,351. The Judgment further ordered Crow and Fuchs to pay penalties of $250,000 and $125,000, respectively.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Crow and Fuchs an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions against Crow and Fuchs are appropriate and in the public interest pursuant to the Exchange Act and the Investment Advisers Act. The Commission directed that an administrative law judge issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings. (Rel. 34-59094; IA-2821; File No. 3-13309)
Revocation of Registration of Securities of NeoTactix Corporation
The Commission announced the revocation of the registration of the securities of NeoTactix Coporation (NeoTactix), of Irvine, California, registered with the Commission pursuant to Section 12 of the Exchange Act, on Dec. 11, 2008, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act).
In its Order revoking the registration of securities of NeoTactix registered with the Commission pursuant to Section 12 of the Exchange Act, the Commission found the following: NeoTactix is a Nevada corporation located in Irvine, California that provided business development guidance and services for small businesses; the company ceased operations in or about May 2008; the common stock of NeoTactix has been registered with the Commission under Exchange Act Section 12(g) since Aug. 21, 2001; the Commission issued an order on March 20, 2008, suspending trading in the securities of NeoTactix under Exchange Act Section 12(k); prior to the suspension, the company's common stock was quoted on the Over-the-Counter Bulletin Board and the Pink Sheets; NeoTactix failed to comply with Exchange Act Section 13(a) and Rules 13a-1, 13a-14 and 13a-15 thereunder in that it failed to make disclosures in its Form 10-K for the fiscal year ended Dec. 31, 2007, filed with the Commission on April 11, 2008, concerning its internal control over financial reporting, as required by Items 601(b)(31) and 308T of Regulation S-K; NeoTactix failed to comply with Exchange Act Section 13(a) and Rule 13a-13 thereunder in that it has not filed any periodic or quarterly reports on Form 10-Q for any fiscal period subsequent to its fiscal quarter ended Sept. 30, 2007; and NeoTactix failed to comply with Exchange Act Section 13(a) and Rule 13a-11 thereunder in that it failed to file a current report on Form 8-K disclosing the resignation of two directors, which occurred in or about May 2008.
The Commission cautions broker 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 the company.
Further, brokers and dealers should be alert to the fact that, 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 pursuant to the preceding sentence.
Without admitting or denying the findings in the Order Instituting Proceedings, Making Findings, and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934, NeoTactix consented to the entry of an order finding that it had violated Exchange Act Section 13(a) and Rules 13a-1, 13a-11, 13a-13, 13a-14, and 13a-15, and revoking the registration of each class of NeoTactix's securities registered with the Commission pursuant to Section 12 of the Exchange Act. (Rel. 34-59100; File No. 3-13310)
SEC Recovers More Than $1.9 Million in Disgorgement and More Than $3.9 Million in Civil Penalties in Fraudulent Scheme Targeting Senior Citizens.
On December 11, the Honorable Nicholas Garaufis of the United States District Court for the Eastern District of New York entered final judgments against defendants One Wall Street, Inc. (One Wall Street), formerly of Hicksville, New York, Donte C. Jarvis, of Wheatley Heights, New York, Willis "Bill" White III, formerly of West Hempstead, New York, and Cecil Baptiste, also known as John Latorri (Baptiste), formerly of Queens Village, New York (collectively, the "defendants"). The Court enjoined the defendants from future violations of the registration provisions of Sec. 5(a) and 5(c) of the Securities Act of 1933 and of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered each of them to pay disgorgement, prejudgment interest and a substantial civil monetary penalty. Further, the Court entered a final judgment against relief defendant La Shondra Hatter, Jarvis' wife, also of Wheatley Heights, New York, ordering her to pay disgorgement. On Oct. 24, 2007, the Court had entered default judgments against each of these parties and reserved ruling on the Commission's motions for disgorgement, prejudgment interest and civil monetary penalties pending the recommendations of Magistrate Judge Arlene Rosario Lindsay for a determination of the amounts of each claim. In entering the final judgments, the Court adopted Judge Lindsay's recommendations, dated Sept. 4, 2008.
The judgments order the disgorgement of the ill-gotten gains obtained by the defendants from at least 64 investors, many of whom were senior citizens, and at least one of whom lost a significant part of his life savings as a result of defendants' fraud. Considering the defendant's significant fraudulent conduct, the Court also imposed third-tier civil penalties on each of them and barred each of them from further violations of the registration and anti-fraud provisions of the federal securities laws.
The Commission's complaint alleged that One Wall Street, Jarvis, White, and Baptiste sold unregistered shares of One Wall Street to investors through numerous oral and written false and misleading statements. These defendants, together with Alan Brown, against whom a final judgment was entered in January 2008, raised at least $1.925 million from the investing public.
Judge Garaufis ordered that: (i) One Wall Street and Jarvis disgorge $1,925,620, together with prejudgment interest of $526,379.03, and pay a civil penalty of $1,925,620; (ii) White disgorge $1,000, together with prejudgment interest of $275.94, and pay a civil penalty of $30,000; and (iii) Baptiste disgorge $198,619.08, together with prejudgment interest of $47,895.44, and pay a civil penalty of $198,619.08. Judge Garaufis further ordered the relief defendant Hatter to disgorge the $166,570.80 she received from Jarvis, together with prejudgment interest of $32,122.07. [SEC v.One Wall Street, Inc., Donte C. Jarvis, Alan Brown, Willis "Bill" White III, and Cecil Baptiste, also known as John Latorri, 06 Civ. 4217 (NGG)(ARL) (E.D.N.Y.)] (LR-20826)
Former Standard & Poor's Financial Ratings Services Senior Analyst Settles Insider Trading Action; Tippees Also Settle
The Commission announced today that on Oct. 24, 2008, the Honorable Laura Taylor Swain, of the United States District Court for the Southern District of New York, entered a final judgment against Carl Loizzi (Loizzi), having previously, on Feb. 26, 2008, entered final judgments against Rick A. Marano and William Marano, in SEC v. Rick A. Marano, William Marano and Carl Loizzi, (Civil Action No. 04 CV 5828 (LTS) (S.D.N.Y.)). The final judgments resolve the Commission's claims against the defendants in the Commission's civil complaint filed on July 27, 2004. The Commission's insider trading action charged that, on two separate occasions, Rick A. Marano, a former senior analyst in the Life Insurance Group at Standard & Poor's Financial Rating Services (S&P), misappropriated material, non-public information obtained through his employment regarding proposed business transactions and tipped that information to his brother, William Marano, and Loizzi, a friend and former business partner of William Marano's. In total, the unlawful trading produced profits of over $1,100,000.
Without admitting or denying the allegations of the complaint, Rick Marano, William Marano and Loizzi each consented to the entry of a final judgment that permanently enjoins them from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 10b-5. The final judgments against Rick Marano and Loizzi require them to pay disgorgement of $45,000 and $305,000, respectively. The final judgments waive the remaining disgorgement and do not impose civil penalties based upon the defendants' sworn representations regarding their financial condition.
The complaint alleged that, in late April 2000, through his employment at S&P, Rick Marano misappropriated material, non-public information regarding a potential acquisition of ReliaStar Financial Corporation (ReliaStar) by ING Groep and, on or about April 27, 2000, tipped that information to William Marano and/or Loizzi. The complaint further alleged that defendants then purchased ReliaStar call option contracts (Loizzi also purchased ReliaStar common stock). The complaint charged that after the proposed acquisition was announced, Loizzi, William Marano and Rick Marano reaped trading profits of approximately $596,000, $200,000 and $83,000, respectively, on their sales of ReliaStar securities. The complaint further alleged that approximately one year later, Rick Marano again misappropriated material, non-public information regarding a potential acquisition of American General Corporation (AGC) by American International Group and tipped William Marano and/or Loizzi, who then purchased AGC call option contracts on April 3, 2001. Finally, the complaint charged that after the proposed acquisition was announced, Loizzi and William Marano reaped trading profits of approximately $253,000 and $20,000, respectively, on the sale of their AGC options.
In parallel criminal proceedings brought by the United States Attorney's Office for the Southern District of New York, Rick Marano, William Marano and Loizzi entered guilty pleas. Rick Marano was sentenced to a prison term of 15 months and fined $5,000, William Marano was sentenced to 24 months probation and fined $1,000 and Loizzi was sentenced to 36 months probation and fined $3,000. For further information, please see Litigation Release No. 18799 (July 27, 2004). [SEC v. Rick A. Marano, William Marano and Carl Loizzi, Civil Action No. 04 CV 5828 (S.D.N.Y.)] (LR-20827)
SEC Sues National Lampoon, Inc. And Others For Wide-Ranging Market Manipulation Schemes
Daniel S. Laikin, National Lampoon's CEO, Charged with Paying Kickbacks in Exchange for Manipulating the Market for National Lampoon's Stock
The Commission announced that, on December 15, it charged seven individuals and two corporations with engaging in three separate fraudulent schemes to manipulate the market for publicly traded securities through the payment of prearranged kickbacks. The defendants include National Lampoon, Inc. and its CEO, Daniel S. Laikin, as well as stock promoters, a consultant, and an officer of another company. The United States Attorney for the Eastern District of Pennsylvania today separately announced criminal charges involving the same conduct.
The Commission's actions, filed in federal district court in Philadelphia, allege that, in each case, individuals who controlled the stock of a public company arranged with corrupt promoters and others to generate purchases of the company's stock in exchange for cash kickbacks. In each case, a witness secretly cooperating with the government (the CW) was paid a kickback to make purchases in the stock. The goal of the manipulators was to create the appearance of market interest, induce public purchases of the stock, and ultimately increase the stock's trading price. For example, the Commission alleges that Daniel Laikin and another defendant paid at least $68,000 in cash kickbacks for the purchase of National Lampoon stock in order to artificially inflate the stock price.
The Commission's complaints allege as follows:
SEC v. National Lampoon, Inc. et al.
Defendants: National Lampoon, Inc., headquartered in Los Angeles, California, is a media and entertainment company that develops, produces and distributes media projects including feature films, television programming, online and interactive entertainment, home video, and book publishing. The company produced such widely known films as National Lampoon's Animal House, and the National Lampoon Vacation series. National Lampoon's common stock is registered with the Commission and is listed on the NYSE Alternext, formerly the American Stock Exchange (AMEX). Daniel S. Laikin, of Los Angeles, California, has been the Chief Executive Officer of National Lampoon since 2005. Laikin controls approximately 40 percent of the voting stock of National Lampoon. Dennis S. Barsky, of Las Vegas, Nevada, is a consultant to National Lampoon, and a significant stockholder. Eduardo Rodriguez, of Livingston, New Jersey, is a stock promoter. Tim Dougherty, of Webster, New York, is a stock promoter and principal of OTC Advisors, Inc., a stock promotion company.
The Commission's complaint alleges that, from at least March 2008 through June 2008, Laikin, Barsky, Rodriguez and Dougherty engaged in a fraudulent scheme to manipulate the market for the common stock of National Lampoon. Specifically, Laikin, along with Barsky, paid kickbacks in exchange for generating or causing purchases of National Lampoon stock to Rodriguez, a corrupt stock promoter, and the CW, whom Laikin, Barsky and Rodriguez believed had connections to corrupt registered representatives. As part of this scheme, Dougherty generated purchases of National Lampoon stock in exchange for a portion of the kickbacks. Dougherty made his purchases over the course of a number of days and used various accounts to give the false impression of a steady demand for the stock.
The complaint alleges that Laikin and Barsky paid at least $68,000 that went to Rodriguez, Dougherty, and the CW to cause the purchase of at least 87,500 shares of National Lampoon stock. Through these efforts, Laikin and Barsky sought to artificially push National Lampoon's stock price from under $2 per share to at least $5 per share, in part, to keep the company's stock price above the minimum listing requirements of the AMEX, and to increase National Lampoon's ability to enter into possible "strategic partnerships" and acquisitions. In addition to paying others to purchase the stock, Laikin shared confidential financial information regarding National Lampoon, non-public news releases, and confidential shareholder lists, and coordinated the release of news with the illegal purchases in the stock. Barsky helped direct the purchases and facilitated the kickback payments. National Lampoon and Laikin also made materially misleading statements in a tender offer.
The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Sections 9(a)(2), 10(b) and 13(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13e-4 thereunder. The complaint seeks permanent injunctions against all defendants, disgorgement of ill-gotten gains, together with prejudgment interest, and civil penalties, from the individual defendants, and an officer and director bar against Laikin.
SEC v. Advatech Corporation, et al.
Defendant Advatech Corporation is headquartered in West Palm Beach, Florida. It describes itself as an early stage biotechnology company engaged in research and development for the commercialization of products for non-invasive therapeutic medicine. Advatech's securities trade on the grey market. Grey market stocks have no market makers, and are not listed, traded or quoted on any stock exchange, or the over-the-counter bulletin board. However, customers may trade through brokers on an unsolicited basis, and trading data is publicly available throughout the trading day. Defendant Richard J. Margulies, of Edison, New Jersey, is Advatech's Chief Financial Officer and a member of its board of directors. Margulies owns and/or controls a significant portion of Advatech stock either directly or through nominees.
The Commission's complaint alleges that, from at least May 2008 through June 2008, Margulies engaged in a fraudulent scheme to manipulate the market for Advatech's common stock. In furtherance of the scheme, Margulies arranged to pay a 20 percent kickback to Rodriguez and the CW for purchases of Advatech stock. Before Rodriguez and the CW made the illegal purchases, Margulies provided them with shareholder lists, confidential information about the company, and non-public press releases. Margulies coordinated the release of news with the purchases, said that he wanted to increase Advatech's stock price from approximately $0.30 to $2.00 per share, and instructed Rodriguez and the CW that they should "move [the stock] up nice and slow, so it doesn't look like we're a bunch of idiots."
The complaint alleges that, to effectuate his scheme, Margulies paid at least $1,040 in kickbacks as partial payments to the CW in exchange for purchases of at least 5,000 shares of Advatech stock on June 17 and 18, 2008.
The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks permanent injunctions against Advatech and Margulies, and disgorgement of ill-gotten gains, together with prejudgment interest, civil penalties, and a penny stock bar against Margulies.
SEC v. Alex Kanakaris, et al.
Defendants Alex Kanakaris, of Newport Beach, California, and Richard Epstein, of Parkland, Florida, are stock promoters who are significant investors in the stock of SwedishVegas, Inc., headquartered in Arcadia, California, whose stated business plan is to "launch a series of themed eateries with an extensive beer and wine menu and reasonably priced lunches, dinners and appetizers." Until July 23, 2008, when the Commission suspended trading in its stock, SwedishVegas common stock was quoted on an inter-dealer electronic quotation and trading system in the over-the-counter securities market which is operated by Pink OTC Markets, Inc., commonly known as the "Pink Sheets."
The Commission's complaint alleges that, from at least June through July 2008, Kanakaris and Epstein engaged in a fraudulent scheme to manipulate the market for the common stock of SwedishVegas. Specifically, the defendants paid a kickback to Rodriguez, a corrupt stock promoter, and the CW, whom they believed had connections to corrupt stockbrokers, to buy Swedish Vegas stock in an effort to create the appearance of market interest, induce public purchases of stock, and ultimately increase the stock's trading price. At one point, Kanakaris told Rodriguez and the CW that he wanted them to buy as much stock as possible in order to make the stock price "fly."
The complaint further alleges that, in accordance with their scheme, Kanakaris and Epstein paid at least $15,000 to Rodriguez and the CW in exchange for completed purchases of at least 125,000 shares of SwedishVegas stock on July 22, 2008. After this initial stock purchase, actually made with FBI funds, the Commission suspended trading in the stock.
The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains, together with prejudgment interest, civil penalties, and penny stock bars from the defendants.
In addition to the enforcement actions, the Commission today entered an order suspending trading in the securities of National Lampoon, Inc. and Advatech Corporation for a ten day period commencing 9:30 a.m. December 15, 2008.
The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation (FBI). [SEC v. National Lampoon, Inc., et al., Civil Action No. 08-5790 (PBT) (E.D. Pa.); SEC v. Advatech Corporation, et al., Civil Action No. 08-5788 (SD) (E.D. Pa.); SEC v. Alex Kanakaris, et al., Civil Action No. 08-5789 (JP)(E.D. Pa.)] (LR-20828)
SEC Files Settled Foreign Corrupt Practices Act Charges Against Siemens AG for Engaging in Worldwide Bribery with Total Disgorgement and Criminal Fines of Over $1.6 Billion
The Commission filed a settled enforcement action on December 12, in the U.S. District Court for the District of Columbia charging Siemens Aktiengesellschaft (Siemens), a Munich, Germany-based manufacturer of industrial and consumer products, with violations of the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). Siemens has offered to pay a total of $1.6 billion in disgorgement and fines, which is the largest amount a company has ever paid to resolve corruption-related charges. Siemens has agreed to pay $350 million in disgorgement to the SEC. In related actions, Siemens will pay a $450 million criminal fine to the U.S. Department of Justice and a fine of €395 million (approximately $569 million) to the Office of the Prosecutor General in Munich, Germany. Siemens previously paid a fine of €201 million (approximately $285 million) to the Munich Prosecutor in October 2007.
The SEC's complaint alleges that:
Between March 12, 2001 and Sept. 30, 2007, Siemens violated the FCPA by engaging in a widespread and systematic practice of paying bribes to foreign government officials to obtain business. Siemens created elaborate payment schemes to conceal the nature of its corrupt payments, and the company's inadequate internal controls allowed the conduct to flourish. The misconduct involved employees at all levels, including former senior management, and revealed a corporate culture long at odds with the FCPA.
During this period, Siemens made thousands of payments to third parties in ways that obscured the purpose for, and the ultimate recipients of, the money. At least 4,283 of those payments, totaling approximately $1.4 billion, were used to bribe government officials in return for business to Siemens around the world. Among others, Siemens paid bribes on transactions to design and build metro transit lines in Venezuela; metro trains and signaling devices in China; power plants in Israel; high voltage transmission lines in China; mobile telephone networks in Bangladesh; telecommunications projects in Nigeria; national identity cards in Argentina; medical devices in Vietnam, China, and Russia; traffic control systems in Russia; refineries in Mexico; and mobile communications networks in Vietnam. Siemens also paid kickbacks to Iraqi ministries in connection with sales of power stations and equipment to Iraq under the United Nations Oil for Food Program. Siemens earned over $1.1 billion in profits on these transactions.
An additional approximately 1,185 separate payments to third parties totaling approximately $391 million were not properly controlled and were used, at least in part, for illicit purposes, including commercial bribery and embezzlement.
From 1999 to 2003, Siemens' Managing Board or "Vorstand" was ineffective in implementing controls to address constraints imposed by Germany's 1999 adoption of the Organization for Economic Cooperation and Development (OECD) anti-bribery convention that outlawed foreign bribery. The Vorstand was also ineffective in meeting the U.S. regulatory and anti-bribery requirements that Siemens was subject to following its March 12, 2001, listing on the New York Stock Exchange. Despite knowledge of bribery at two of its largest groups - Communications and Power Generation - the company's tone at the top was inconsistent with an effective FCPA compliance program and created a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company. Employees obtained large amounts of cash from cash desks, which were sometimes transported in suitcases across international borders for bribery. Authorizations for payments were placed on post-it notes and later removed to eradicate any permanent record. Siemens used numerous slush funds, off-books accounts maintained at unconsolidated entities, and a system of business consultants and intermediaries to facilitate the corrupt payments.
Siemens failed to implement adequate internal controls to detect and prevent violations of the FCPA. Elaborate payment mechanisms were used to conceal the fact that bribe payments were made around the globe to obtain business. False invoices and payment documentation was created to make payments to business consultants under false business consultant agreements that identified services that were never intended to be rendered. Illicit payments were falsely recorded as expenses for management fees, consulting fees, supply contracts, room preparation fees, and commissions. Siemens inflated U.N. contracts, signed side agreements with Iraqi ministries that were not disclosed to the U.N., and recorded the ASSF payments as legitimate commissions despite U.N., U.S., and international sanctions against such payments.
In November 2006, Siemens' current management began to implement reforms to the company's internal controls. These reforms substantially reduced, but did not entirely eliminate, corrupt payments. All but $27.5 million of the corrupt payments occurred before November 15, 2006. The company conducted a massive internal investigation and implemented an amnesty program to its employees to gather information.
Siemens violated Section 30A of the Securities Exchange Act of 1934 (Exchange Act) by making illicit payments to foreign government officials in order to obtain or retain business. Siemens violated Section 13(b)(2)(B) of the Exchange Act by failing to have adequate internal controls to detect and prevent the payments. Siemens violated Section 13(b)(2)(A) of the Exchange Act by improperly recording the payments in its books.
Without admitting or denying the Commission's allegations, Siemens has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; ordering it to pay $350 million in disgorgement of wrongful profits, which does not include profits factored into Munich's fine; and ordering it to comply with certain undertakings regarding its FCPA compliance program, including an independent monitor for a period of four years. On Dec. 15, 2008, the court entered the final judgment. Since being approached by SEC staff, Siemens has cooperated fully with the ongoing investigation, and the SEC considered the remedial acts promptly undertaken by Siemens. Siemens' massive internal investigation and lower level employee amnesty program was essential in gathering facts regarding the full extent of Siemens' FCPA violations.
The SEC acknowledges assistance from the U.S. Department of Justice, Fraud Section; the U.S. Attorney's Office for District of Columbia, Fraud and Public Corruption Section; the Federal Bureau of Investigation; the Internal Revenue Service; the Office of the Prosecutor General in Munich, Germany; the U.K. Financial Services Authority; and the Hong Kong Securities and Futures Commission. [SEC v. Siemens Aktiengesellschaft, Civil Action No. 08 CV 02167 (D.D.C.)] (LR-20829; AAE Rel. 2911)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change as modified by Amendment No. 1 thereto filed by the International Securities Exchange (SR-ISE-2008-92) relating to cancellation 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 15. (Rel. 34-59072)
A proposed rule change filed by the Chicago Board Options Exchange relating to fees on the CBOE Stock Exchange (SR-CBOE-2008-122) 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 December 15. (Rel. 34-59073)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-127) amending Rule 104T to make a technical amendment to delete language relating to orders received by NYSE Systems and DMM yielding; clarifying the duration of the provisions of Rule 104T; making technical amendments to rule 98 and Rule 123E to update rule references for DMM net capital requirements; rescinding paragraph (g) of Rule 123; and making conforming changes to certain rules to replace the term "specialist" with "DMM" 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 15. (Rel. 34-59077)
A proposed rule change (SR-NASDAQ-2008-093) filed by the NASDAQ Stock Market to modify the bid price required for initial listing on the Nasdaq Global and Global Select Markets from $5 to $4 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 15. (Rel. 34-59087)
Proposed Rule Change
The Depository Trust Company filed a proposed rule change (SR-DTC-2008-13) under Section 19(b)(1) of the Securities Exchange Act of 1934. The proposed rule change would eliminate the SRO Requirement as a condition of DTC-eligibility for securities that are eligible for resale under Rule 144A under the Securities Act of 1933. Publication is expected in the Federal Register during the week of December 15. (Rel. 34-59088)
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