Securities and Exchange Commission Suspends Trading in BBJ Environmental Technologies, Inc. for Failure to Make Required Periodic Filings
The Commission announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the Exchange Act), of trading of the securities of BBJ Environmental Technologies, Inc. (BBJ Technologies), of Tampa, Florida at 9:30 a.m. EST on Jan. 22, 2009, and terminating at 11:59 p.m. EST on Feb. 4, 2009.
The Commission temporarily suspended trading in the securities of BBJ Technologies because of questions that have been raised about the lack of current and accurate information concerning the securities of BBJ Technologies because it has not filed a periodic report since its 10-QSB/A for the quarterly period ending Sept. 30, 2004, filed on April 6, 2006.
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 the company.
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 suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not he has complied with the rule, he should not enter any quotation but immediately contact the staff in the Division of Market Regulation, Office of Interpretation and Guidance, at (202) 551-5760. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating to BBJ Technologies' securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. 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 contact Teresa J. Verges, Assistant Regional Director, Miami Regional Office of the Securities and Exchange Commission at (305) 982-6384. (Rel. 34-59271)
In the Matter of BBJ Environmental Technologies, Inc.
On January 22, the Commission instituted an administrative proceeding against BBJ Environmental Technologies, Inc. (BBJ Technologies) pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act). BBJ Technologies is a Nevada corporation headquartered in Tampa, Florida. The purpose of the proceeding is to determine whether the registration of BBJ Technologies' common stock should be suspended or revoked. The Division of Enforcement (Division) alleges that BBJ Technologies failed to comply with Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13, by not filing any periodic reports since April 6, 2006, when it filed an amended Form 10-QSB for the quarterly period ending Sept. 30, 2004.
A hearing will be scheduled to take evidence on the Division's allegations, to afford BBJ Technologies the opportunity to establish defenses to the allegations, and to determine whether the registration of BBJ Technologies' common stock should be suspended or revoked. (Rel. 34-59272; File No. 3-13346)
SEC v. Ross Owen Haugen
The Commission announced today that it filed a Complaint in the United States District Court for the Northern District of Georgia against Ross Owen Haugen (Haugen) alleging fraud in connection with sales of securities interests in four offerings identified as Coadum Capital Fund 1, LLC (Coadum 1), Coadum Capital Fund II, LP (Coadum II), Coadum Capital Fund III, LP (Coadum III) and Mansell Acquisition Company LP (MAC). Approximately $30 million was raised from investors in the four offerings from early 2006 through January 2008. The complaint alleges that defendant Haugen served as vice president of marketing for Coadum Advisors, Inc. (Coadum), who along with Mansell Capital Partners III, LLC (Mansell) conducted the offerings. The complaint alleges that Haugen was the primary salesman of securities sold in the fraudulent offerings. The Haugen matter is a companion case to SEC v. Coadum Advisors, Inc., et al., Civil Action File No. 1:08-CV-0011-ODE (N.D. Ga.), a civil action filed on an emergency basis in January 2008.
The instant complaint alleges that as vice president of sales and marketing for Coadum, Haugen directly solicited and sold more than 50% of the Coadum securities in the offerings. The private placement memoranda for the four offerings (PPMs), all of which made similar representations, described an investment objective involving "risk-controlled" strategies consisting of purchasing AA or better rated securities at one price, and simultaneously selling the securities at a higher price, generating a profit on the price difference, which Coadum and Mansell referred to as "commercial trading programs." The complaint also alleges that at least some investors were assured of from 3% to 6% (or in one investment 2.5 percent to 8 percent) return per month on their initial investments. The funds from the offerings were commingled in accounts controlled by Coadum or Mansell. Coadum and Mansell invested the majority of the funds through a Malta based "investment platform" which in turn invested the funds in related entities which never began operation or provided any returns. In the meantime, Coadum and Mansell falsely represented in monthly account statements to investors that the investors had been earning approximately four percent per month and that all or most of the investors' principal was in escrow. The complaint alleges that contrary to representations to investors, Coadum and Mansell "borrowed" approximately $3.4 million of, or against, the investors' funds and disbursed to apparently related parties approximately an additional $5 million. Haugen told investors, falsely, that their investment principal was risk free, insured and never left the escrow account or was otherwise guaranteed against loss. In fact, Haugen knew that investors' funds were being invested in off-shore trading programs. Trading profits were purportedly earned in a "non-recourse" margin account. Although the PPMs represented that no commissions would be paid on the investments, and that the promoters would be compensated based on a percentage of earnings, Haugen received substantial commissions from investor funds prior to earnings on those funds, which never occurred. The complaint also alleges that Haugen recruited other salesmen and received a portion of their commissions.
The Commission's complaint charges Haugen with violations of Section 17(a) of the Securities Act of 1933 (Securities Act) [15 U.S.C. § 77q(a)], and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] and seeks a permanent injunction, disgorgement, prejudgment interest and a civil penalty. SEC v. Ross Owen Haugen, Civil Action No. 09-cv-0129 (ND Ga.)] (LR-20859)
Former Centerpulse Head of Corporate Planning and Controlling Settles Fraud Charges With SEC
The Commission today announced that Stephan Husi, the former Head of Corporate Planning and Controlling of Centerpulse Ltd., agreed to settle the Commission's charges against him arising from his alleged involvement in the fraudulent inflation of Centerpulse's income in the third and fourth quarters of 2002. Without admitting or denying the Commission's allegations against him, Husi has consented to the entry of a final judgment in the Commission's litigation pending in the U.S. District Court for the District of Columbia. The final judgment, which is subject to approval by the Honorable John D. Bates, orders Husi to pay a $30,000 civil penalty, $14,216 in disgorgement, and $5,868 in prejudgment interest. The final judgment also bars Husi for five years from acting as an officer or director of any public company that has securities registered with, or is required to file reports with, the Commission, and permanently enjoins him from violating the antifraud and falsification of books and records provisions of the federal securities laws - Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 10b-5 and 13b2-1 - and from aiding and abetting violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws - Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B), and Exchange Act Rules 10b-5, 12b-20, 13a-1 and 13a-16.
As part of this settlement, and following the entry of the proposed final judgment against him, Husi (who holds a certificate as a Swiss Certified Expert for Accounting and Controlling) has consented, without admitting or denying the Commission's allegations against him, to the issuance of an administrative order pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after five years.
The Commission's complaint alleges that Husi, along with two other former Centerpulse executives, (1) fraudulently inflated Centerpulse's third quarter 2002 income by improperly deferring recognition of a $25 million expense, refusing to write down $3.4 million in costs associated with an impaired asset, and approving $3.6 million in improper reserve adjustments; and (2) fraudulently inflated Centerpulse's fourth quarter and fiscal 2002 income by refusing to increase a reserve to cover at least $18 million in liabilities, improperly using anticipated refund credits to offset another $5 million in expenses, and again refusing to write down $3.4 million in costs associated with an impaired asset.
The Commission previously reached a settlement in this litigation with Urs Kamber, Centerpulse's former Chief Financial Officer. See Litigation Release No. 20605 (May 30, 2008) / Accounting and Auditing Enforcement Release No. 2835 (May 30, 2008). The Commission also previously reached administrative settlements with Dennis L. Hynson, CPA, Christopher W. Kelford and Paula J. Norbom, CPA, the former vice presidents of finance for Centerpulse's three U.S. divisions, who consented to the entry of cease-and-desist orders relating to improper accounting decisions they made during the third quarter of 2002. See Administrative Proceeding No. 3-13047 / Accounting and Auditing Enforcement Release No. 2832 / Release No. 57889 (May 30, 2008); Administrative Proceeding No. 3-13048 / Accounting and Auditing Enforcement Release No. 2833 / Release No. 57890 (May 30, 2008); and Administrative Proceeding No. 3-13049 / Accounting and Auditing Enforcement Release No. 2834 / Release No. 57891 (May 30, 2008).
The Commission's litigation against Richard May, the former group vice president of finance, tax counsel and treasurer of Centerpulse USA Holding Company, is ongoing. See Litigation Release No. 20336 (Oct. 17, 2007) / Accounting and Auditing Enforcement Release No. 2741 (Oct. 17, 2007). [SEC v. Urs Kamber, Stephan Husi and Richard Jon May, Civil Action No. 1:07-CV-01867 (JDB) (D.D.C.)] (LR-20860; AAE Rel. 2919)
SEC Charges General Motors With Disclosure and Other Violations Related to its Pension Plans and its Accounting for Derivatives and other Contracts
The Commission today filed settled charges against General Motors Corporation (GM) relating to its disclosures concerning two pension accounting estimates, and its projected cash contributions to its pension plans, as well as errors in its accounting for derivatives and various other transactions. According to the SEC's complaint, filed in federal court in the District of Columbia, GM violated the issuer reporting, books-and-records, and internal controls provisions of the federal securities laws.
With regard to GM's pension plans, the complaint alleges that GM made material misstatements or omissions in its 2002 Form 10-K concerning the disclosure of two critical pension accounting estimates - its pension discount rate for 2002 and its expected return on pension assets for 2003.
According to the complaint, GM had stated publicly in an August 2002 pension conference call with analysts that it used a duration matched approach to select its discount rate, but failed to disclose in its 2002 Form 10-K that its use of a 6.75% discount rate was developed from a non-duration matched approach, which was materially higher than the rate developed from a duration matched model. In addition, the complaint alleges that with respect to the discount rate, GM maintained inadequate internal controls to provide reasonable assurance that transactions would be recorded as necessary to permit preparation of financial statements in compliance with generally accepted accounting principles, including a process for reviewing and adopting discount rate recommendations to provide reasonable assurance that the recommendation was developed in a reasoned and unbiased manner.
The complaint further alleges that since at least the mid-1980s, GM's expected return assumption had never been higher than its most recent 10 year average return. In its 2001 Form 10-K and during the August 2002 pension call, GM referred to its rolling 10 year historical average return of 10% or better as support for the reasonableness of its 10% expected return assumption. In its 2002 Form 10-K, GM did not state that its most recent 10 year average return was below its new assumption set at year-end. According to the complaint, if GM had used an expected return consistent with its 10 year historical average, it would have reduced its 2003 pre-tax earnings by $680 million.
The complaint also alleges that in that same 2002 Form 10-K and in three 10-Q filings, GM failed to disclose material information about the timing and amount of its projected cash contributions to its pension plans to avoid variable rate premiums to the Pension Benefit Guaranty Corporation (PBGC) and the impact such contributions might have on its liquidity and capital resources.
With regard to GM's other transactions, the SEC's complaint alleges that GM made material misstatements that included improperly accounting for a $97 million transaction involving the sale and repurchase of precious metals inventory in its 2000 Form 10-K; prematurely recognizing in its 2001 Form 10-K and Q3 2001 Form 10-Q a $100 million signing bonus it received for entering into a railroad shipping contract; and improperly accounting for two types of derivatives contracts - a Canadian dollar mirror hedge strategy and "normal purchase normal sale" arrangements of commodities - in its 2004 Form10-K. The complaint also alleges that GM maintained inadequate internal controls in these areas and maintained inaccurate books and records in connection with these transactions.
GM simultaneously settled the charges, without admitting or denying the allegations, by consenting to the entry of a final judgment permanently enjoining it from violating Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13a-13 thereunder. The settlement is subject to court approval.
The Commission notes the assistance of the PBGC.
The investigation is continuing as to others. [SEC v. General Motors Corporation, Civil Action No. 1:09-CV-00119) (PLF) D.D.C.] (LR-20861)
INVESTMENT COMPANY ACT RELEASES
Grail Advisors, LLC and Grail Advisors ETF Trust
An order has been issued on an application filed by Grail Advisors, LLC and Grail Advisors ETF Trust (formerly known as Grail Advisors' Alpha ETF Trust) to permit (a) series of certain open end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days after the tender of Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-28604 - January 16)
Citigroup Global Markets Inc., et al.
The Commission has issued an order to Citigroup Global Markets Inc., et al. (CGMI) under Section 9(c) of the Investment Company Act exempting applicants and any other company of which CGMI is or becomes an affiliated person from Section 9(a) of the Act with respect to an injunction entered by the U.S. District Court for the Southern District of New York on Dec. 23, 2008. (Rel. IC-28605 - January 16)
UBS Securities LLC, et al.
The Commission has issued an order to UBS Securities LLC, et al. (UBS Securities) under Section 9(c) of the Investment Company Act exempting applicants and any other company of which UBS Securities is or becomes an affiliated person from Section 9(a) of the Act with respect to an injunction entered by the U.S. District Court for the Southern District of New York on Dec. 23, 2008. (Rel. IC-28606 - January 16)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the BATS Exchange (SR-BATS-2009-001) to amend BATS Rule 11.9 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 January 26. (Rel. 34-59258)
A proposed rule change (SR-BX-2009-001) filed by NASDAQ OMX BX deferring operation of its listing standards for primary listings and consolidating into a single rule certain requirements for products traded on the exchange pursuant to unlisted trading privileges 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 January 26. (Rel. 34-59261)
A proposed rule change filed by NYSE Arca to amend or eliminate unnecessary rule text (SR-NYSEArca-2009-02) 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 January 26. (Rel. 34-59264)
A proposed rule change (SR-FINRA-2009-003) filed by Financial Industry Regulatory Authority to implement technical changes to the Code of Arbitration Procedure for Customer Disputes and Industry Disputes 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 January 26. (Rel. 34-59267)
Approval of Proposed Rule Changes
The Commission granted approval to a proposed rule change filed by the Boston Stock Exchange (SR-BSE-2008-36) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to delisting standards. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59265)
The Commission approved a proposed rule change to create the Nasdaq Market Pathfinders Service and establish fees for the Service, submitted under Rule 19b-4 by The NASDAQ Stock Market (SR-NASDAQ-2008-016). Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59266)
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