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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2009-135
July 16, 2009


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 - Wednesday, July 22, 2009 - 2:00 p.m.

The subject matter of the Open Meeting will be:

The Commission will consider whether to propose a rule to address "pay to play" practices by investment advisers. The proposal is designed, among other things, to prohibit advisers from seeking to influence the award of advisory contracts by public entities through political contributions to or for those officials who are in a position to influence the awards.

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.

John R. Robinson Named Division of Corporation Finance Academic Accounting Fellow

Securities and Exchange Commission's Division of Corporation Finance today announced the selection of John R. Robinson as the Academic Accounting Fellow for a one-year term beginning next month.

"Each year, we look forward to the important contributions made by those participating in our Academic Accounting Fellow program. John's experience and perspective will be extremely valuable to us as we carry out our mission in the coming year," said Wayne Carnall, Chief Accountant in the Division of Corporation Finance.

Mr. Robinson is the C. Aubrey Smith Professor of Accounting in the McCombs School of Business at the University of Texas at Austin. He received his J.D. and Ph.D. in accounting from the University of Michigan. Prior to joining the faculty at Texas, he taught at the University of Kansas where he was The Arthur Young Faculty Scholar. Mr. Robinson teaches introductory taxation, corporate tax, taxation of partnerships, and tax planning. He conducts research in a broad variety of topics involving financial accounting, mergers and acquisitions, and the influence of regulation and taxes on financial structures and performance. His scholarly articles have appeared in Accounting Review, Journal of Finance, National Tax Journal, Journal of Law and Economics, Journal of the American Taxation Association, The Journal of the American Bar Association, and The Journal of Taxation. In addition, he has served as the editor of The Journal of the American Taxation Association and he was a co-author of two articles honored with the Association's Outstanding Manuscript Awards.

Academic Accounting Fellows in the Division of Corporation Finance serve as a research resource for the staff on current financial reporting and auditing issues. In addition, Academic Fellows work with the Division staff to address issues involving difficult and unusual accounting, auditing and financial reporting questions, participate in rulemaking projects, and review filings by public companies to identify significant accounting and disclosure problems.

Greg Burton, the outgoing Academic Accounting Fellow, is an Associate Professor of Accounting at Brigham Young University. While at the Commission, Mr. Burton worked on International Financial Reporting Standards (IFRS) issues, filing reviews, staff training, and assisted in addressing a number of policy initiatives.

"Greg served as a key member of our team and made significant contributions to the Division during his tenure," said Mr. Carnall. (Press Rel. 2009-162)


SEC Obtains Permanent Injunction Against Hedge Fund and Its Investment Adviser for Fraud in Minnesota

On July 13, the Securities and Exchange Commission obtained a permanent injunctive order in the U.S. District Court of Minnesota against Paramount Partners, LP (Paramount), a hedge fund, Crossroad Capital Management, LLC (Crossroad), Paramount's investment adviser, and John W. Lawton (Lawton), who ran Crossroad.

The Commission originally filed its action against the Defendants on February 18. The Commission's complaint alleged that Paramount had approximately 50 to 60 investors, who invested as much as $9 million. The complaint alleged that Lawton and Crossroad engaged in a fraud in which they misrepresented Paramount's assets and returns to investors. For example, the complaint alleged that in January 2009, defendants sent account statements to investors that reflected investments totaling about $17 million as of December 31. The complaint alleged that, in fact, Paramount only had about $5.3 million of assets in its accounts at that time. The complaint further alleged that as of February 13, Paramount's assets amounted to less than $2 million, and the defendants withdrew $900,000 in January.

In the order dated July 13, the Honorable Judge Ann Montgomery entered a permanent injunction against Paramount, Crossroad, and Lawton from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. Defendants consented to the Order without admitting or denying the allegations in the Complaint. [SEC v. John W. Lawton, Paramount Partners, LP, and Crossroad Capital Management, LLC Civil Case No. 09-368 ADM/AJB, USDC, D. Minn.)] (LR-21135)

SEC Obtains Permanent Injunction Against Former First Banks Officer

The Securities and Exchange Commission announced today that it obtained an order of permanent injunction (Order) against Mark T. Turkcan, a former officer of First Banks, Inc., in the Commission's action against him in the United States District Court for the Eastern District of Missouri. The Commission alleges that Turkcan defrauded investors by engaging in a scheme to misstate the net income of First Banks from at least 1990 through April 2008. Without admitting or denying the allegations in the complaint, Turkcan consented to the entry of the Order, which, among other things, permanently enjoins him from violating, or aiding and abetting violations of, the antifraud, periodic reporting, books and records, internal controls, and lying to auditors provisions of the federal securities laws and permanently bars him from serving as an officer or director of a public company.

Previously, the honorable Judge Donald J. Stohr in United States v. Mark Turkcan, 4:08CR428 (DJS) (E.D. Mo.), in connection with the scheme alleged in the Commission's action, sentenced Turkcan to a prison term of one year and one day and ordered him to pay restitution of nearly $25 million in connection with his pleading guilty to one felony count of misapplication of bank funds. The criminal case was prosecuted by the United States Attorney's Office for the Eastern District of Missouri. [SEC v. Mark T. Turkcan, Civil Action 4:09-cv-00204-(CEJ) ED Mo.)] (LR-21136; AAE Rel. 3011)

SEC Charges Two Former Finance Executives of Newpark Resources, Inc. and Principal of Key Newpark Vendor in Fraudulent Accounting Scheme

The Securities and Exchange Commission filed a civil action against two former finance executives of Newpark Resources, Inc. (Newpark), an oil and gas company based in Houston, Texas, as well as the principal of Quality Mat Company, a Newpark vendor, for violations of the federal securities laws. According to the Complaint, Matthew W. Hardey, a former Chief Financial Officer for Newpark, and L. Cyrus DeBlanc, a former Chief Financial Officer for Newpark subsidiary Soloco LLC, conspired with Quality Mat president Joe E. Penland to engage in a fraudulent accounting scheme that allowed Newpark in fiscal year 2003 to avoid writing off approximately $4.2 million in aging debt. As a result, Newpark reported approximately $500,000 of net income instead of a significant loss for that fiscal year.

The Commission's Complaint alleges that, in 2002 and 2003, Newpark recognized $4.2 million in revenue based on sales of its primary product - industrial mats used to lay temporary roads at drilling sites - to Quality Mat and another vendor, Easy Frac. The Complaint claims that neither vendor had made any payment on the sales through the end of 2003, and that Hardey, DeBlanc and Penland devised and executed a scheme to funnel money to Quality Mat and Easy Frac through sham transactions that would then allow the vendors to pay their debts to Newpark.

According to the Complaint, one of the sham transactions took place in 2004 and involved Dura-Base Nevada, LLC and Dura-Base de Mexico, two Newpark subsidiaries created to begin mat rentals in Mexico. The Complaint asserts that Newpark purchased the entire initial inventory of mats for the Dura-Base business from Quality Mat, and that the decision to purchase the approximately 6,175 mats from Quality Mat was a pretext meant to give the appearance of a legitimate business transaction to Newpark's repurchase, at the original sales price, of 1,500 mats sold to Quality Mat in 2002 and 600 mats sold to Easy Frac in 2003. The Complaint claims that, in an attempt to perpetuate the pretext, Hardey also misled Newpark's auditors about the basis for buying the Dura-Base inventory from Quality Mat by falsely claiming that Quality Mat had contractual rights in Mexico that Newpark would have to buy in order for the Dura-Base venture to go forward. According to the Complaint, this ruse was necessary to allow Newpark to buy back the mats at the original sales price without suffering any adverse accounting consequences. Under this scheme, Newpark could account for the repurchases as if they had taken place at Newpark's manufacturing cost, but still pay Quality Mat the original purchase price for the mats by assigning the difference in value to the intangible asset allegedly created by the repurchase of Quality Mat's contract rights.

The Complaint alleges that the other sham transaction, which took place during 2004 and 2005, involved Quality Mat sending fictitious invoices to Newpark purportedly for bulk lumber sales. According to the Complaint, in early 2004, Penland agreed to convert Quality Mat's outstanding debt from the 2002 sales to notes receivable. One of the notes required monthly payments of $52,409, which Quality Mat began making in March 2004. Between May 2004 and July 2005, the bulk lumber invoices, which were sent monthly, averaged $52,409, but there were no purchase orders or delivery tickets backing up the alleged sale. The Complaint alleges that Hardey, DeBlanc and Penland devised this scheme to provide Quality Mat with funds to continue making payments on this note, thus allowing Newpark to keep the debt on its books.

The Complaint alleges that Hardey and DeBlanc each: violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rule 10b-5; violated the falsification of accounting records and circumvention of internal controls provision of the Exchange Act, Section 13(b)(5), and Exchange Act Rule 13b2-1; and aided and abetted Cardinal's violations of the reporting, record-keeping, and internal controls provisions of the Exchange Act, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13. The Complaint also alleges that Hardey and DeBlanc misled Newpark's auditor in violation of Exchange Act Rule 13b2-2 and that Hardey signed officer certifications to Newpark's periodic filings in violation of Exchange Act Rule 13a-14. The Complaint alleges that Penland aided and abetted violations of Section 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and directly violated Exchange Act Rule 13b2-2.

The Complaint asks the Court to enter permanent injunctions and to levy civil monetary penalties against all defendants. The Complaint also asks that the Court permanently prohibit Hardey and DeBlanc from acting as officers or directors of a public company pursuant to Section 20(e) of the Securities Act and Section 21(d)(2) of the Exchange Act. The Commission acknowledges the cooperation of Newpark in its investigation. [SEC v. Matthew W. Hardey, L. Cyrus DeBlanc and Joe E. Penland, Civil Action No. 09-cv-4414 (E.D. La.)] (LR-21137; AAE Rel. 3012)





Modified: 07/16/2009