Securities and Exchange Commission Suspends Trading in Eleven Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on May 21, 2009, and terminating at 11:59 p.m. EDT on June 4, 2009.
The Commission temporarily suspended trading in the securities of these eleven issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two 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 these companies.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies 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 these companies 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 the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-59952)
SEC Announces $843 Million Fair Fund Distribution to Harmed AIG Investors
On May 19, the Securities and Exchange Commission announced that a federal court has approved the distribution of more than $843 million to harmed investors in the American International Group, Inc. from a Fair Fund that the SEC established after the company's settlement of an SEC enforcement action for accounting fraud.
The AIG Fair Fund's court-appointed distribution agent estimates that checks will be mailed to more than 257,000 affected AIG investors within the next few months.
In the Fair Funds provisions of the Sarbanes-Oxley Act, Congress granted the SEC increased authority to help harmed investors by allowing both ill-gotten gains and civil money penalties to be distributed to them directly. Previously, only ill-gotten gains could be distributed to investors. The SEC has returned more than $5 billion in Fair Funds to investors since the 2002 passage of the Sarbanes-Oxley Act.
"The return of these funds to harmed investors is another example of our determined effort to protect investors from those who engage in corporate malfeasance," said James Clarkson, Acting Director of the SEC's New York Regional Office.
"The Commission continues to utilize the tools that Congress provided to ensure that funds are returned to harmed investors to the greatest extent possible," said Dick D'Anna, Director of the SEC's Office of Collections and Distributions.
The SEC charged AIG with accounting fraud on Feb. 9, 2006, alleging that the company materially falsified its financial statements from at least 2000 until 2005 through a variety of sham transactions and entities, and reported materially false and misleading information about its financial condition. The court entered a final judgment against AIG on Feb. 17, 2006, to which AIG consented without admitting or denying the allegations. Pursuant to the final judgment, AIG paid a total of $800 million ($700 million in disgorgement and $100 million in penalties). The U.S. District Court for the Southern District of New York entered an order on June 14, 2007, authorizing the Commission to establish a Fair Fund to include all of the funds paid by AIG.
Investor questions regarding the distribution should be directed to the distribution agent by:
(Press Rel. 2009-115)
Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies for Failure to Make Required Periodic Filings
On May 20, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-59950; File No. 3-13475)
Commission Orders Hearings on Registration Suspension or Revocation Against Eleven Companies for Failure to Make Required Periodic Filings
In conjunction with this today's suspension, the Commission today also instituted two separate public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eleven companies for failure to make required periodic filings with the Commission:
In the Matter of Nanosignal Corp., Inc. (n/k/a Nano Global, Inc.), et al., Administrative Proceeding File No. 3-13476
In the Matter of National Micronetics, Inc.., et al., Administrative Proceeding File No. 3-13477
In each Order, the Division of Enforcement (Division) alleges that the respective respondents are delinquent in their required periodic filings with the Commission.
In each of these proceedings, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-59953; File No. 3-13476)
Commission Revokes Registration of Securities of Allegiant Physician Services, Inc. for Failure to Make Required Periodic Filings
On May 21, the Commission revoked the registration of each class of registered securities of Allegiant Physician Services, Inc. (Allegiant) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, Allegiant consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Allegiant finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Allegiant's securities pursuant to Section 12(j) of the Exchange Act. This order settled the proceedings brought against Allegiant in In the Matter of Act Manufacturing, Inc., et al., Administrative Proceeding File No. 3-13452.
Brokers and dealers should be alert to the fact that Exchange Act 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 . . . .
For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Act Manufacturing, Inc., et al., Administrative Proceeding File No. 3-13452, Exchange Act Release No. 59801, April 21, 2009. (Rel. 34-59954; File No. 3-13452)
In the Matter of Matthew J. Browne
On May 21, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (the Order) in the above-referenced matter against Matthew J. Browne (Browne). The Order finds that on April 28, 2009, the Commission filed a complaint against Browne in SEC v. Browne (Civil Action No.4:09-cv-248), in the United States District Court for the Northern District of Oklahoma. The Order also finds that on May 6, 2009, the court entered an order permanently enjoining Browne, by consent, from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In addition, the Order finds that on May 6, 2009, Browne was ordered to pay $81,773 in disgorgement of ill-gotten gains from insider trading and $1,505.98 in prejudgment interest, and a civil money penalty in the amount of $81,773.
Based on the above, the Commission's Order suspends Browne from appearing or practicing before the Commission as an attorney with the right to request reinstatement after five years. (Rel. 34-59960; File No. 3-13480)
SEC Charges Registered Broker-Dealer, Its Unregistered Affiliate and Two Individuals In Fraudulent Scheme to Pay Off Fictitious Bonds With Tens of Millions in Unauthorized Trading
On May 20, the Securities and Exchange Commission filed a civil injunctive action charging Guillermo David Clamens, FTC Capital Markets, Inc., a registered broker-dealer he controls, (FTC), and Lina Lopez, an FTC employee, with a fraudulent scheme to engage in tens of millions of dollars of unauthorized securities trading through the accounts of two FTC customers. Clamens and Lopez defrauded FTC's customers in part to conceal their prior fraudulent sale of $50 million in non-existent notes to a Venezuelan bank through another Clamens-controlled entity, Emerging Markets. When the fictitious notes held by the Venezuelan bank purportedly came due in August 2008, Clamens misappropriated $50 million from FTC's customers to fund the redemption. In addition, the Complaint alleges that Emerging Markets is an unregistered broker-dealer.
The Complaint alleges that, in furtherance of their Ponzi-like scheme, defendant Clamens, assisted by defendant Lopez, knowingly caused FTC to make unauthorized purchases of securities for the two customer's FTC accounts, knowingly prepared and sent the customers false account statements that omitted the unauthorized securities trades and falsely listed holdings exclusively in short-term, low-risk, liquid investments of the type that the customers authorized FTC to make on its behalf but which were not made. In addition, Clamens and Lopez caused the Venezuelan bank to receive statements for its account falsely stating that it held the $50 million in (fictitious) notes. In addition, defendant Emerging Markets effected, or purported to effect, securities transactions for its own account and on behalf of numerous foreign investors, without having properly registered as a broker-dealer with the Commission or other appropriate authority. Emerging Markets thus has illegally acted as an unregistered broker-dealer.
As a result of this conduct, the Complaint alleges that defendants FTC, Emerging Markets, Clamens and Lopez violated Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; defendant FTC violated Section 15(c) of the Exchange Act; defendant Emerging Markets violated Section 15(a) of the Exchange Act; and defendants Clamens and Lopez aided and abetted FTC's violations of Exchange Act Section 15(c) and Emerging Markets' violations of Exchange Act Section 15(a). In its Complaint, the Commission seeks permanent injunctions, disgorgement and prejudgment interest and civil penalties against all defendants.
The Commission acknowledges the assistance of the United States Attorney for the Southern District of New York and the Financial Services Authority of the United Kingdom in this matter. [SEC v. FTC Capital Markets, Inc., FTC Emerging Markets, Inc. also d/b/a FTC Group, Guillermo David Clamens and Lina Lopez a/k/a Nazly Cucunuba Lopez, 09 Civ. 4755(PGG) (S.D.N.Y.)] (LR-21052)
SEC Charges Eight Participants in Penny Stock Manipulation Ring
The Securities and Exchange Commission announced today that it filed a complaint in the United States District Court for the District of Delaware against Pawel P. Dynkowski, Matthew W. Brown, Jacob Canceli, Gerard J. D'Amaro, Joseph Mangiapane Jr., Nathan M. Michaud, Marc J. Riviello and Adam S. Rosengard. The complaint alleges that in 2006 and 2007, Dynkowski, a Polish citizen who resided in the U.S., engaged in market manipulation schemes with at least four separate stocks: GH3 International, Inc., Asia Global Holdings, Inc., Playstar Corp., and Xtreme Motorsports of California, Inc. As alleged in the complaint, Dynkowski's co-defendants each participated in one or more of these schemes, which together generated more than $6.2 million in illicit profits.
The SEC's complaint alleges that these fraudulent schemes generally followed the same pattern: Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies in exchange for a portion of the proceeds. The companies put these shares in nominee accounts that Dynkowski and his accomplices controlled. The defendants pumped the market price of the stocks using wash sales, matched orders and other manipulative trading, often timed to coincide with false or touting press releases by the companies, to give the market the false impression that there was real demand for these stocks. After artificially inflating the market price of the stocks, Dynkowski and his accomplices then dumped the shares obtained from the issuers and divided the illicit proceeds.
The SEC's complaint further alleges that:
The SEC's complaint alleges that Dynkowski and Brown violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(d) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 13d-1 and 13d-2 thereunder; that Canceli, D'Amaro, Mangiapane, and Riviello violated Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; that Michaud violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; and that Rosengard violated Sections 5(a) and 5(c) of the Securities Act. The complaint seeks against each defendant a permanent injunction against future violations, disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties, and, as to certain defendants, orders barring them from participating in penny stock offerings.
The U.S. Attorney's Office for the District of Delaware also announced today felony criminal charges against Dynkowski, Brown, Canceli, D'Amaro, Mangiapane, and Riviello.
The SEC thanks the U.S. Attorney's Office for the District of Delaware; the Department of Homeland Security, Immigration and Customs Enforcement; the Internal Revenue Service - Criminal Investigations; and the Delaware State Police for their assistance in this matter.
The SEC's investigation is continuing. [SEC v. Pawel P. Dynkowski, Matthew W. Brown, Jacob Canceli, Gerard J. D'Amaro, Joseph Mangiapane Jr., Nathan M. Michaud, Marc J. Riviello and Adam S. Rosengard, Civil Action No. 09-361 (D. Del.)] (LR-21053)
SEC Charges Florida Trader with Fraud and Manipulation
The Securities and Exchange Commission today charged a trader from Fort Myers, Fla., with fraud for writing and disseminating a fake press release that, when reported in the media, caused a company's stock price to soar and allowed him to reap thousands of dollars in illicit profits.
The SEC alleges that Richard Karp created the phony press release as an announcement from WCI Communities, Inc., and he faxed it to media outlets in an effort to manipulate the stock price of the Florida-based luxury home building company, whose stock was traded on the New York Stock Exchange. The bogus press release falsely stated that WCI's board of directors received a buyout offer potentially worth $220 million. After this fake news was reported publicly by media outlets, WCI's share price increased dramatically and Karp quickly sold his shares to generate his illegal profits.
The SEC's complaint, filed in the U.S. District Court for the Middle District of Florida, alleges that Karp drafted and disseminated the bogus WCI press release so that he could sell his WCI stock at an inflated price. Karp had actively traded the stock of WCI throughout late 2007 and early 2008, and in early July he bought 42,000 shares of WCI for approximately $54,700. However, on July 14, WCI announced that it was no longer engaged in discussions with affiliates regarding alternative restructuring proposals.
The SEC alleges that Karp attempted to drive up WCI's share price by creating and faxing the bogus press release to Southwest Florida and national media outlets on a Saturday evening, July 19. The fake news was consequently reported by at least four Fort Myers media outlets. WCI's share price increased dramatically the following Monday morning, July 21. Karp sold his shares in pre-market trading that day, generating approximately $29,000 in illegal profits.
The SEC's complaint charges Karp with violating Section 17(a) of the Securities Act of 1933, Sections 9(a)(4) and 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest and the imposition of a financial penalty. [SEC V. Richard Karp, Case No. 2:09-cv-332-FTM-29DNF (M.D. Fla.)] (LR-21054)
SEC Obtains Asset Freeze of Wisconsin Investment Adviser Charged in Kickback Scheme
On May 20, the Securities and Exchange Commission filed an emergency civil action in the U.S. District Court of the Eastern District of Wisconsin charging Wealth Management LLC (Wealth Management), a registered investment adviser located in Appleton, Wisconsin, James Putman (Putman), Wealth Management's founder, majority owner, and Chief Executive Officer, and Simone Fevola (Fevola), Wealth Management's former President and Chief Investment Officer, with engaging in a kickback scheme and other fraudulent conduct involving six unregistered investment pools they managed.
The Commission's complaint alleges that Wealth Management is a financial planning firm for families and individuals and also serves as General Partner or Managing Member for the investment pools. The complaint alleges that Wealth Management, Putman, and Fevola caused clients to invest in the pools throughout the period of May 2003 through August 2008 and that Wealth Management claims currently to have approximately $102 million of its clients' assets invested in the pools. The complaint alleges that in 2006 and 2007, Putman and Fevola each accepted at least $1.24 million in undisclosed payments derived from certain investments made by the pools, while continuing to cause clients to invest in the pools. The complaint alleges that Wealth Management, Putman and Fevola have also breached their fiduciary duties and engaged in fraud by misrepresenting the safety and stability of the two largest pools, and by placing their clients into these investments even though they were unsuitable for some of their clients. The complaint alleges that the pools appear to have limited remaining assets and that it appears likely that the reported values of the pools are substantially overstated. The complaint alleges that Wealth Management and Putman have received and continue to receive management fees on the basis of these likely overvalued assets, and that Wealth Management and Putman have been providing redemptions to investors based on likely overstated valuations.
In an order dated May 20, the Honorable Judge William Greisbach entered a temporary restraining order enjoining Wealth Management and Putman from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)], the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder], and the Investment Advisers Act [Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8 thereunder], aiding and abetting of Wealth Management's violations of the antifraud provisions of the Exchange Act and the Advisers Act by Putman, and as to Wealth Management, violating Section 207 of the Advisers Act. Among other things, the Court also entered orders freezing the assets of Wealth Management and the investment pools and appointing a receiver over Wealth Management and the investment pools. [SEC v. Wealth Management LLC, James Putman, and Simone Fevola, Case No. 1:09-cv-506, USDC, E.D.Wis.] (LR-21055)
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