SEC News Digest

COMMISSION ANNOUNCEMENTS

Commission Meetings

Following is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration.

Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting.

Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.

Open Meeting - Monday, July 20, 2009 - 2:00 p.m.

The subject matter of the July 20, 2009 Open Meeting will be:

The Commission will hear oral argument in an appeal by Joseph John VanCook from the decision of an administrative law judge. The law judge found that VanCook, a registered representative formerly associated with Pritchard Capital Partners, LLC, willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 by orchestrating a fraudulent scheme involving material misrepresentations to permit his clients to "late trade" shares of certain registered investment companies. The law judge also found that VanCook aided and abetted and willfully caused Pritchard Capital's clearing broker to violate Rule 22c-1 of the Investment Company Act of 1940. The law judge further found that VanCook aided and abetted and willfully caused Pritchard Capital to violate Exchange Act Section 17(a)(1) and Exchange Act Rule 17a-3(a)(6) for failing to make and keep current certain books and records. For these violations, the law judge barred VanCook from association with any broker or dealer or investment company, imposed a cease-and-desist order against him, ordered disgorgement of $538,565.70, plus prejudgment interest, and assessed a $100,000 third-tier civil money penalty.

Among the issues likely to be argued are whether VanCook's conduct was fraudulent, whether he aided and abetted and/or caused a violation of Rule 22c-1, whether he aided and abetted and/or caused his firm to fail to make and keep accurate books and records, and, if so, whether and to what extent sanctions should be imposed on him.

Open Meeting - Tuesday, July 21, 2009 - 10:00 a.m.

The subject matter of the July 21, 2009 Open Meeting will be:

The Commission will hear oral argument in an appeal by the Division of Enforcement from the decision of an administrative law judge in a proceeding brought pursuant to Commission Rule of Practice 102(e). The law judge found that the conduct of Kevin Hall, CPA and Rosemary Meyer, CPA, in connection with the fiscal year (FY) 1999 audit of the financial statements of U.S. Foodservice, Inc. (USF) and the interim review of USF's second quarter FY 2000 financial statements, was not improper under the Rule.

Among the issues likely to be argued are whether Hall and Meyer failed to exercise due professional care in the planning and performance of the audit, failed to obtain sufficient competent evidential matter to afford a reasonable basis for an opinion regarding the financial statements under audit, and failed to act in accordance with professional standards in connection with the interim review. The parties may also address whether and to what extent Hall and Meyer should be sanctioned if they are found to have engaged in improper professional conduct.

The Commission also will hear oral argument in an appeal by Gregory O. Trautman from the decision of an administrative law judge. The law judge found that Trautman, co-founder, president, and chief executive officer of Trautman Wasserman & Company, willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 by engaging in a scheme to defraud mutual funds and their shareholders through late trading and deceptive market timing. The law judge also found that Trautman willfully aided and abetted, and was a cause of, Trautman Wasserman & Company's violations of Exchange Act Section 15(c) and Exchange Act Rule 10b-3, and willfully aided and abetted, and was a cause of, Trautman Wasserman & Company's clearing firm's violations of Rule 22c-1 of the Investment Company Act of 1940. For these violations, the law judge barred Trautman from association with any broker or dealer, prohibited him from serving or acting in various capacities with respect to a registered investment company, imposed a cease-and-desist order, ordered disgorgement of $1,373,799.75, plus prejudgment interest, and assessed a $500,000 third-tier civil money penalty.

Among the issues likely to be argued are whether Trautman's conduct was fraudulent, whether he aided and abetted and/or caused a violation of Investment Company Act Rule 22c-1, whether he aided and abetted and/or caused his firm's violations, and, if so, whether and to what extent sanctions should be imposed on him.

Closed Meeting - Monday, July 20, 2009 - 3:00 p.m.

The subject matter of the Closed Meeting scheduled for Monday, July 20, 2009, will be: Post-argument discussions.

Closed Meeting - July 21, 2009 - 2:00 p.m.

The subject matter of the Closed Meeting scheduled for Tuesday, July 21, 2009, will be: Post-argument discussions; and Opinion.

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.

ENFORCEMENT PROCEEDINGS

Former NYSE Specialists Sanctioned

Former New York Stock Exchange (NYSE) specialists Donald R. Foley, II, Scott G. Hunt, Frank A. Delaney, IV, James V. Parolisi, Robert W. Luckow, Robert A. Johnson, Jr., Richard P. Volpe, and Robert A. Scavone, Jr., have been barred from association with a broker or dealer. The sanctions were imposed after a hearing before an administrative law judge. The charges concerned their trading, to the disadvantage of customer orders, on behalf of their firms' proprietary accounts. The law judge concluded that the trading violated NYSE rules pertaining to specialists, but cleared the former specialists of charges that they violated the antifraud provisions of the federal securities laws. The law judge also ordered the Division of Enforcement to request the Securities and Exchange Commission to order the NYSE to discipline any of the former specialists whom it has not disciplined of its own accord. (Initial Decision No. 381; File No. 3-11893)

In the Matter of Xentel Interactive, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Four Respondents (Default Order) in Xentel Interactive, Inc., Administrative Proceeding No. 3-13511. The Order Instituting Proceedings (OIP) alleged that five Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission). The Default Order finds these allegations to be true and revokes the registrations of each class of registered securities of Xentel Interactive, Inc., XXSYS Technologies, Inc., Yuma Gold Mines Ltd. (n/k/a Yuma Copper Corp.), and Zion Development Corp., pursuant to Section 12(j) of the Securities Exchange Act of 1934.

The Commission previously accepted an Offer of Settlement from Zomex Distribution, Inc., the other Respondent named in the OIP. Xentel Interactive, Inc., Exchange Act Release No. 60178 (June 26, 2009). (Rel. 34-60294; File No. 3-13511)

In the Matter of National Micronetics, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Five Respondents (Default Order) in National Micronetics, Inc., Administrative Proceeding No. 3-13477. The Order Instituting Proceedings (OIP) alleged that six Respondents failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission). The Default Order finds these allegations to be true as to five Respondents and revokes the registrations of each class of registered securities of National Micronetics, Inc., Network Access Solutions Corp., Network Plus Corp., NexGen Vision, Inc., and Noel Group, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934.

The Commission has previously accepted an Offer of Settlement from New York Regional Rail Corp., the other Respondent named in the OIP. (Rel. 34-60299; File No. 3-13477)

In the Matter of VoIP, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in VoIP, Inc., Administrative Proceeding No. 3-13440. The Order Instituting Proceedings alleged that VoIP, Inc., failed repeatedly to file required annual and quarterly reports while its securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true and it revokes the registration of each class of VoIP, Inc.'s, registered securities, pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-60300; File No. 3-13440)

In the Matter of Pegasus Wireless Corp.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in Pegasus Wireless Corp., Administrative Proceeding No. 3-13488. The Order Instituting Proceedings alleged that Pegasus Wireless Corporation failed repeatedly to file required annual and quarterly reports while its securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true and it revokes the registration of each class of the registered securities of Pegasus Wireless Corporation, pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-60301; File No. 3-13488)

Delinquent Filers' Stock Registrations Revoked

The registrations of the registered securities of Paivis Corp., Peabodys Coffee, Inc., Penge Corp., Phantom Entertainment, Inc., Phoenix Medical Technology, Inc., Phoenix Metals USA II, Inc., Phymed, Inc., Pico Products, Inc., and Piemonte Foods, Inc., have been revoked. Each had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, each 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 revocations were ordered in an administrative proceeding before an administrative law judge. (Rel. 34-60302; File No. 3-13527)

In the Matter of H-Entertainment, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Five Respondents (Default Order) in H-Entertainment, Inc., Administrative Proceeding No. 3-13503. The Order Instituting Proceedings alleged that H-Entertainment, Inc., Hamburger Hamlet Restaurants, Inc., Harvard International Technologies, Ltd., HealthCentral.com, Helian Health Group, Inc., and Hemisphere Development Corp. (n/k/a Hemisphere Energy Corp.) each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

The proceeding has ended as to Respondent Hemisphere Development Corp. (n/k/a Hemisphere Energy Corp.). H-Entertainment, Inc., Exchange Act Rel. No. 60229 (July 2, 2009).

The Default Order finds the allegations to be true as to the remaining five Respondents. It revokes the registrations of each class of registered securities of H-Entertainment, Inc., Hamburger Hamlet Restaurants, Inc., Harvard International Technologies, Ltd., HealthCentral.com, and Helian Health Group, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-60303; File No. 3-13503)

Alan Brian Baiocchi Sanctioned

Alan Brian Baiocchi (Baiocchi) has been barred from association with any broker or dealer. The sanction was ordered in an administrative proceeding before an administrative law judge, following his conviction for wire fraud in United States v. Baiocchi, 8:02-cr-00089-DOC (C.D. Cal. Nov. 23, 2005), aff'd, 2007 U.S. App. LEXIS 18494 (9th Cir. July 31, 2007).

The misconduct underlying Baiocchi's conviction involved the sale of investment interests in oil and gas programs through a telemarketing operation, Intro Technology Services, Inc., that Baiocchi controlled. He and others under his direction made false representations and material omissions in connection with the sale of the investment interests. (Initial Decision No. 382; File No. 3-13380)

SEC Charges Florida Con-Man With Stealing More Than $15 Million of Investor Funds for Luxury Purchases; SEC Obtains Temporary Restraining Order Freezing Assets

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Weston, Fla., resident who stole more than $15 million in investor funds to purchase a multi-million dollar home, luxury vehicles, and millions of dollars in jewelry and home furnishings.

The SEC alleges that Sean Nathan Healy promised investors that he would use their money to trade in securities and commodities futures on their behalf. Despite repeated assurances that his purported trading was earning excellent returns, Healy did not invest any of the money he received in securities or commodities futures and instead made personal purchases as well as Ponzi-like payments to investors he defrauded.

According to the SEC's complaint, filed in federal district court in Pennsylvania, Healy obtained most of the funds from a Pennsylvania resident who invested his own money as well as funds provided by his attorney and more than 40 of their friends, acquaintances and business associates. The SEC alleges that Healy stole investor funds to purchase a $2.4 million home and more than 10 luxury vehicles including Porsches, Lamborghinis, Ferraris, a Bentley, and a Lincoln limousine. Healy further spent investor money to lease 2,500 square feet of garage space to store the vehicles. He also purchased approximately $1.4 million worth of jewelry including an engagement ring for his wife, and approximately $2.3 million in home renovations, including a $500,000 home movie theater.

The SEC's complaint further alleges that when Healy was questioned about his trading, he provided falsified bank and trading records to the Pennsylvania resident and to the U.S. Attorney's Office for the Middle District of Pennsylvania.

The SEC's complaint charges Healy with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks entry of a court order of temporary and permanent injunction against Healy, as well as an order directing Healy and the relief defendants to disgorge ill-gotten gains, and directing Healy to pay prejudgment interest and civil penalties. The SEC also seeks an order freezing the assets of Healy and the assets of the relief defendants that are traceable to the fraud, and requiring Healy and the relief defendants to account for the ill-gotten investor funds they received, expediting discovery, preventing the destruction or alteration of documents, and the appointment of a temporary receiver to oversee the assets of the Healys and Sand Dollar.

The U.S. District Court for the Middle District of Pennsylvania granted the SEC's request for a temporary restraining order and asset freeze against Healy, his wife and Sand Dollar Investing Partners. The court also appointed a receiver to oversee Healy's assets and all the assets of the relief defendants that are traceable to the fraud.

The SEC appreciates the assistance of the U.S. Attorney for the Middle District of Pennsylvania, U.S. Postal Inspection Service, and Commodity Futures Trading Commission (CFTC). The CFTC simultaneously filed a related emergency action against Healy and the relief defendants named in SEC's enforcement action.

The SEC's investigation is continuing. [SEC v. Sean Nathan Healy, Defendant, and Shalese Rania Healy and Sand Dollar Investing Partners, LLC, Relief Defendants, Civil Action No. 1:09-CV-01330-CCC (M.D. Pa.) (Chambersburg)] (LR-21127)

Former Tyco Vice President Settles SEC Action for Role in Accounting Fraud

The Securities and Exchange Commission today announced that it filed a settled Final Judgment against Richard D. Power, a former Tyco International Ltd. (Tyco) Vice President, in the Commission's action against Power arising from his involvement in fraudulent accounting practices at Tyco. The Commission's complaint alleged that Power, at the time that Tyco merged with ADT Limited, devised a sham transaction that fraudulently inflated Tyco's operating income. The complaint also alleges that Power further inflated Tyco's operating income by engaging in fraudulent accounting practices in connection with several of the company's most significant acquisitions. The Final Judgment, which Power consented to without admitting or denying the Commission's allegations, permanently enjoins him from violating, or aiding and abetting violations of, the antifraud, periodic reporting, and books and records provisions of the federal securities laws, orders him to pay disgorgement of $425,000, and imposes a $100,000 civil penalty. [SEC v. Richard D. Power, Edward Federman, and Richard J. "Skip" Heger, Civil Action No. 06 CV 15343 (RWS), USDC, SDNY] (LR-21128)

Former Tyco Executives L. Dennis Kozlowski and Mark H. Swartz Settle SEC Fraud Action

The Securities and Exchange Commission today announced that it filed settled Final Judgments against L. Dennis Kozlowski, the former Chairman and Chief Executive Officer of Tyco International Ltd. (Tyco), and Mark H. Swartz, the former Chief Financial Officer of Tyco, in the Commission's action arising from their violations of the federal securities laws while officers of that company. As alleged in the complaint, Kozlowski and Swartz granted themselves undisclosed low interest and interest-free loans from Tyco that they regularly used for personal expenses and other unauthorized purposes. The Commission's complaint alleged that, from 1996 to 2002, Kozlowski and Swartz failed to disclose hundreds of millions of dollars of indebtedness, loan forgiveness, and related party transactions and caused Tyco to fail to disclose those items in its proxy statements and annual reports. The Final Judgments, which Kozlowski and Swartz consented to without admitting or denying the Commission's allegations, permanently enjoin Kozlowski and Swartz from violating, or aiding and abetting violations of, the antifraud, proxy statement, periodic reporting, books and records, and lying to auditors provisions of the federal securities laws and permanently bar each of them from serving as an officer or director of a public company. [SEC v. L. Dennis Kozlowski, Mark H. Swartz, and Mark A. Belnick, Civil Action No. 02 CV 7312 (RWS), USDC, SDNY] (LR-21129)

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