In the Matter of F&C International, Inc., et al.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Six Respondents (Default Order) in F&C International, Inc., Administrative Proceeding No. 3-13427. The Order Instituting Proceedings (OIP) alleged that seven Respondents failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true as to six Respondents. It revokes the registrations of each class of registered securities of F&C International, Inc., The FAPA Insurance Co., FCS Laboratories, Inc., Federal Resources Corp., Filene's Basement Corp. (n/k/a FBC Distribution Corp.), and Film & Music Entertainment, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The Commission has previously accepted an Offer of Settlement from Farm Fish, Inc., the other Respondent named in the OIP. (Rel. 34-59938; File No. 3-13427)
SEC Halts Multi-Million Dollar Investment Scheme Run by a Purported Savings and Loan and its Principals
On May 13, the Securities and Exchange Commission charged two Northern California residents and two of their companies, one of which is a purported savings and loan association, with securities fraud in connection with a multi-level marketing scheme. The SEC obtained an emergency court order freezing their assets and halting the scheme.
The SEC alleges that Bich Quyen Nguyen, Johnny E. Johnson, and their entities, Sun Group and Sun Investment Savings and Loan, raised more than $9 million by promising guaranteed returns on high-yield instruments. The SEC had previously charged two other entities, Empire Capital Asset Management (ECAM), and Sun Empire, and two individuals, Delilah Proctor and Shauntel McCoy, for also participating in the multi-level marketing scheme. Instead, the amended complaint alleges that the defendants misused investor funds for their own personal use or sent money to other entities under their control.
According to the SEC's amended complaint, Nguyen solicited investors through Sun Group and Sun Investment Savings and Loan and encouraged club leaders to find investors who were unemployed or recently bankrupt. The Sun Investment Savings and Loan website offered certificates of deposit with returns as high as 19.30%. Johnson represented to prospective investors that they could double their investment with Sun Group and could earn "many times more than 10% returns." Both Nguyen and Johnson promised a full guarantee for the original investment and profit. In fact, according to the amended complaint, Sun Investment Savings and Loan is not a savings and loan at all. The amended complaint alleges that Sun Investment Savings and Loan does not exist at the purported business location alleged by defendants and was not authorized by the state to do business as a financial institution. Moreover, Sun Investment Savings and Loan has not been paying the promised returns to investors.
The SEC obtained an order (1) freezing the assets of Sun Group, Sun Investment Savings and Loan, Nguyen, and Johnson; (2) requiring accountings; (3) prohibiting the destruction of documents; and (4) granting expedited discovery; and (5) temporarily enjoining Sun Group, Sun Investment Savings and Loan, Nguyen, and Johnson from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. These orders were in addition to the previously-entered preliminary injunctions against Proctor, McCoy, ECAM, and Sun Empire in Securities and Exchange Commission v. Sun Empire LLC, et al., United States District Court for the Central District of California, Civil Action No. SACV 09-399 DOC (RNBx). A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for May 27, 2009 at 8:00 a.m. The SEC also seeks permanent injunctions, disgorgement, and civil penalties against Sun Group, Sun Investment Savings and Loan, Nguyen and Johnson.
The SEC acknowledges the assistance of the Federal Bureau of Investigation, the United States Attorney's Office, and the California Department of Financial Institutions. [SEC v. Sun Group, et al., United States District Court for the Central District of California, Civil Action No. SACV 09-399 DOC (RNBx)] (LR-21045)
Court Orders Disgorgement and Prejudgment Interest Against Defendant Michael Lauer
The Securities and Exchange Commission announced that on May 7, 2008, the United States District Court for the Southern District of Florida entered an order setting the disgorgement and prejudgment interest amounts against Defendant Michael Lauer. After an evidentiary hearing on Dec. 12, 2008, the Court ordered Lauer to disgorge all money he ultimately received, based on the fraudulent conduct he demonstrated in his hedge fund scheme. Specifically, the Court noted, to "hold otherwise would permit Defendant to profit from his wrongful conduct". [DE 2260 at p. 2] Accordingly, the Court ordered Lauer to pay $43,688,249.00 in disgorgement and $18,908,558.74 in prejudgment interest, for a total of $62,596,807.74. The Court also gave the Commission 30 days to recommend a specific civil money penalty.
Previously, on Sept. 23, 2008, the Court granted the Commission's motion for summary judgment against Lauer which permanently enjoined him from further violations of Sections 17(a)(1), (2) and (3) of the Securities Act of 1933; Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act), both individually and as a control person pursuant to Section 20(a) of the Exchange Act; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. [SEC v. Michael Lauer, et al., Case No. 03-80612-CIV-MARRA/JOHNSON (S.D. Fla.)] (LR-21046)
Court Enters Final Judgment of Permanent Injunction and Other Relief Against Defendant Anthony R. Russo
The Commission announced that on May 15, 2009 the Honorable William J. Zloch of the United States District Court for the Southern District of Florida entered a Final Judgment of Permanent Injunction and Other Relief against Anthony Russo, formerly Certified Services Inc.'s Chief Executive Officer and Chief Financial Officer.
The Final Judgment enjoins him from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 thereunder and from aiding and abetting Certified's violations of Section 13(a), 13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and Rule 13a-13 thereunder. In addition to injunctive relief, the Final Judgment permanently bars Russo from participating in the offering of any penny stock. The Final Judgment also orders him to pay disgorgement of $90,000, prejudgment interest of $2,491.88 and a civil money penalty of $90,000. Russo consented to entry of the final judgment without admitting or denying any of the allegations in the complaint and agreed to cooperate with the Commission.
On March 6, 2008, the Commission filed a civil injunctive action against Russo and others. The complaint charged Russo and others with financial fraud conducted in violation of the federal securities laws arising from their involvement with Certified. [SEC v. W. Anthony Huff, et al., Case No. 08-60315-CIV-ZLOCH (S.D. FL)] (LR-21047)
SEC Charges Massachusetts Company, Former COO, and Controller for Revenue Recognition Scheme
The Securities and Exchange Commission today filed a settled enforcement action against Apogee Technology, Inc., a publicly traded company based in Norwood, Massachusetts, David B. Meyers of Walpole, Massachusetts, Apogee's former Chief Operating Officer, and Annette Jaynes of Sharon, Massachusetts, Apogee's controller, in connection with a scheme to inflate Apogee's earnings in 2003 and 2004.
The Commission's complaint, filed in federal district court in Massachusetts, alleges that in connection with the scheme, Apogee filed materially misleading financial statements with the Commission that misstated its revenue by including sales transactions that contained terms making revenue recognition improper. According to the complaint, Meyers, as Apogee's COO, entered into arrangements with purchasers of Apogee's products containing terms hidden from the company's outside auditors that made it improper for Apogee to recognize revenue from the transactions at the time that it did, such as agreements allowing customers to return goods or pay nothing to Apogee unless they sold the products to end users. For example, the complaint alleges that when Apogee could not finalize a sale to one customer at the end of a quarter, Meyers approved a sham sale of the same product to a second customer. This second customer was simply holding the product until the sale to the first customer could be finalized later, and the second customer could return the product to Apogee and had no obligation to pay for the product until it was actually resold to the first customer. According to the complaint, Jaynes recorded transactions as revenue despite receiving documents containing the sales terms that precluded revenue recognition. As a result, Apogee materially overstated its quarterly and annual earnings by between 7% and 45% in its financial statements in the second and fourth quarters of 2003 and the first three quarters of 2004. Apogee restated these results in 2005.
Each of the defendants has agreed to settle this matter, without admitting or denying the allegations of the Commission's complaint. Apogee, Meyers and Jaynes agreed to the entry of a final judgment permanently enjoining them from variously violating or aiding and abetting violations of Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. Meyers and Jaynes will also be enjoined from violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder. The final judgment as to Meyers will hold him liable for disgorgement of $9,365 plus prejudgment interest of $3,701.91, representing his ill gotten gains from the sale of Apogee stock during the period of the fraud. However, under the terms of the judgment, disgorgement and prejudgment interest will be waived, and no penalty will be imposed as to Meyers, based on his financial condition. The final judgment as to Meyers will bar him from serving as an officer or director of a public company for five years. The final judgment as to Jaynes orders her to pay a penalty of $30,000. [SEC v. Apogee Technology, Inc., David B. Meyers and Annette Jaynes, Civil Action No. 09 cv 10286 (D. Mass.)] (LR-21048; AAE Rel. 2972)
Arizona Attorney Enjoined From Unregistered Sales of Securities
The Securities and Exchange Commission announced that on May 7, the Honorable Sidney A. Fitzwater of the United States District Court for the Northern District of Texas enjoined Arizona attorney, David B. Stocker, and Curtis-Case, Inc., a corporation he controlled, from violating Section 5(a) and (c) of the Securities Act of 1933 by offering or selling securities in unregistered securities offerings during 2004. The Commission alleged that Stocker and Curtis-Case acting as underwriters in unregistered distributions sold securities of six corporations when no registration statements were filed. The six companies were American Television & Film Company (ATFT), Ecogate, Inc. (ECGT), Media International Concepts, Inc. (MEIC), Vanquish Productions, Inc. (VQPI), Auction Mills, Inc. (AUML), and Custom Designed Compressor Systems, Inc. (CUPY). Stocker and Curtis-Case consented to the injunctions without admitting or denying the allegations. They were also barred from participating in the sale of penny stocks, and held liable jointly and severally for disgorgement and prejudgment interest totaling $1,186,733, which will be satisfied by entry of a restitution order against Stocker in the criminal case, U.S. v. David B. Stocker, case no. 1:09CR118 (E.D. Va. Mar. 11, 2009). Resolution of the claims against the other defendants has been stayed pending the outcome of a related criminal case. Stocker has also consented to resolve two other civil injunctive actions pending in federal district courts in Michigan and Arizona. For further information see (LR 20302, Sept. 27, 2007); [SEC v. Fisher, et al., No. 07-cv-12552 (E.D. Mich.)] (LR 20154, June 14, 2007); [SEC v. Stocker, et al., No. CIV-08-1475-PHX-FJM (D. Ariz.)] (LR 20681, Aug. 12, 2008) [U.S. v. Stocker, No. 1:09CR118 (E.D. Va.)] (LR 20944, Mar. 11, 2009). [SEC v. Phillip W. Offill, Jr., et al., Civil Action No. 07-CV-1643-D (N.D. Tex.)] (LR-21049)
Arizona Attorney Enjoined from Fraud in Corporate Hijacking Case
The Securities and Exchange Commission announced that on May 12, the United States District Court for the District of Arizona enjoined Arizona attorney, David B. Stocker, and his corporation, Carrera Capital, Inc., from violating the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and Section 17(a)(1) of the Securities Act of 1933, and the securities registration provisions of Section 5(a) and (c) of the Securities Act of 1933. The Commission alleged that during 2006, Stocker and Carrera Capital made false and misleading statements to acquire control of the securities of seven corporations that were previously traded publically and then sold the shares when no registration statements had been filed with the Commission. The seven companies were Avalon Stores, Inc. (AVNS), Westmark Group Holdings, Inc. (WGHI), Electronic Transmissions Corp. (ETSM), Accel International Corp. (ACLE), Access Developers, Inc. (AONE), Chemtrack Inc. (CMTR), and Computer Communications, Inc. (CCMM). Stocker and Carrera Capital consented to the injunctions without admitting or denying the allegations. They were also barred from participating in the sale of penny stocks, and held liable jointly for disgorgement and prejudgment interest totaling $680,604, which will be satisfied by a restitution order against Stocker in the criminal case, U.S. v. David B. Stocker, case no. 1:09CR118 (E.D. Va. filed March 11, 2009). Stocker has also consented to resolve two other civil injunctive actions pending in federal district courts in Michigan and Texas.
For further information see (LR 20681, Aug. 12, 2008); [SEC v. Fisher, et al., No. 07-cv-12552 (E.D. Mich.)] (LR 20154, (June 14, 2007); [SEC v. Offill, et al., No. 07-cv-1643 (N.D. Tex.)] (LR 20302, Sept. 27, 2007); [U.S. v. Stocker, No. 1:09CR118 (E.D. Va.)] (LR 20944, Mar. 11, 2009) [SEC v. David B. Stocker, et al., Civil Action No. CIV-08-1475-PHX-FJM, (D. Ariz.)] (LR-21050)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the NASDAQ OMX PHLX relating to the Order Entry Port fee (SR-Phlx-2009-43) 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 May 11. (Rel. 34-59925)
A proposed rule change filed by NYSE Arca regarding the minimum creation and redemption size applicable to the MacroShares Major Metro Housing Trusts (SR-NYSEArca-2009-43) has become immediately 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 May 11. (Rel. 34-59932)
A proposed rule change filed by BATS Exchange to amend BATS Rule 11.13, entitled "Order Execution," (SR-BATS-2009-013) 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 May 11. (Rel. 34-59934)
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