SEC Warns Investors of Phony Web Site Targeting Madoff Fraud Victims
The Securities and Exchange Commission is alerting investors about a Web site that falsely claims to have recovered $1.3 billion in funds hidden by convicted Ponzi schemer Bernard Madoff in Malaysia. The site asks Madoff victims to submit information to verify that they are on a refund list - a ploy commonly used by con artists to further rip off financial fraud victims.
The phony Web site claims to be home to the "International Security Investor Protection Corporation" - a fictitious entity. The "ISIPC" Web site bears a certain likeness to the Securities Investor Protection Corporation's (SIPC) Web site, mimicking its look, feel, and content in an attempt to achieve an aura of authenticity with Madoff victims. The "ISPIC" Web site claims to partner with several governments including the United States, and links to actual government Web sites to signify an affiliation. "ISIPC" also falsely claims to be sponsored by the United Nations, the International Monetary Fund, and the World Bank.
"Investors who lose money in widely publicized schemes are often targeted by con artists looking to cash in on the victim's desire to recover losses," said Lori Schock, Director of the SEC's Office of Investor Education and Advocacy. "Victims of fraudulent schemes should be aware that such refund schemes commonly exist, and can be perpetrated through copycat Web sites that appear similar to those of actual regulators or other organizations."
The SEC's investor alert is available at: http://www.sec.gov/investor/alerts/sipcscamalert.htm (Press Rel. 2010-38)
In the Matter of Tostel Corp.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in Tostel Corp., Administrative Proceeding No. 3-13775. The Order Instituting Proceedings alleged that Tostel Corp. 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 revokes the registration of each class of registered securities of Tostel Corp., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61678; File No. 3-13775)
In the Matter of Big Sky Energy Corp.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Big Sky Energy Corp., Administrative Proceeding No. 3-13758. The Order Instituting Proceedings alleged that eight 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. It revokes the registrations of each class of registered securities of Big Sky Energy Corp., Biomedical Waste Systems, Inc., Biometrics Security Technology, Inc., Biosys, Inc., Bolder Technologies Corp., Boyds Wheels, Inc., Breakaway Solutions, Inc., and BRE-X Minerals, Ltd., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61679; File No. 3-13758)
SEC Settles Civil Fraud Injunctive Action Against Former McKesson Corporation Attorney
The Securities and Exchange Commission announced that, on March 1, 2010, the United States District Court for the Northern District of California entered a final judgment against Jay Lapine, the former General Counsel of HBO and Company (HBOC) and of the health care technology unit of its successor, McKesson Corporation (then known as McKesson HBOC, Inc.). The court enjoined Lapine from future violations of the antifraud and other securities laws noted below and from serving as an officer or director of any public reporting company for a period of five years. The court also ordered Lapine to pay a $60,000 civil penalty.
The judgment was the result of a settlement in which Lapine, without admitting or denying the allegations in the Commission's complaint, consented to entry of the judgment against him. The complaint alleged that Lapine, together with other senior executives, participated in a long-running fraudulent scheme to inflate the revenue and net income of HBOC and then McKesson HBOC. As part of this scheme, Lapine took part in negotiating two large backdated transactions with side agreements containing cancellation contingencies that enabled the companies to recognize revenue in earlier reporting periods in violation of Generally Accepted Accounting Principles. The fraud enabled HBOC and McKesson HBOC to report falsely in press releases and in periodic reports HBOC filed with the Commission that the companies were having an unbroken run of financial success and had continually exceeded analysts' expectations.
The final judgment against Lapine permanently enjoins him from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 12b-20, 13a-13 and 13b2-1 thereunder, and imposed the other remedies noted above. Lapine was acquitted on Nov. 19, 2009 of criminal charges related to the fraud at HBOC and McKesson HBOC. [SEC v. Jay Lapine, Case No. C-01-3650 WHA (N.D. Cal.)] (LR-21444; AAE Rel. 3119)
SEC Halts $20 Million Ponzi Scheme Preying on Retirees Attending Estate Planning Seminars
On March 9, 2010, the Securities and Exchange Commission obtained an emergency court order to shut down a Ponzi scheme targeting retirees in California and Illinois by inviting them to estate planning seminars and later coaxing them to buy promissory notes for purported Turkish investments.
The SEC alleges that USA Retirement Management Services (USARMS) and managing partners Francois E. Durmaz and Robert C. Pribilski mass-mailed promotional materials to prospective investors and invited them to estate planning seminars held at country clubs and banquet halls. They gained retirees' confidence in follow-up meetings and portrayed themselves as educated and experienced in foreign investments specifically tailored to the needs of seniors. Durmaz and Pribilski then pitched what they represented as safe, guaranteed investments in "Turkish Eurobonds" through the purchase of USARMS promissory notes that would earn annual returns between 8 and 11 percent.
The SEC alleges that USARMS raised at least $20 million from more than 120 investors, but did not actually invest the money in Turkish Eurobonds as promised. Instead, returns were paid to earlier investors with funds received from new investors in Ponzi-like fashion. Durmaz and Pribilski further misused investor funds to finance their other businesses and purchase such things as luxury automobiles, homes, vacations, and web-based pornography. They also wired investor money into bank accounts belonging to individuals living in Turkey who are named as relief defendants in the SEC's case.
USARMS and its securities are not registered with the SEC. USARMS is incorporated in Illinois and has offices in Los Angeles; Irvine, Calif.; and Oakbrook Terrace, Ill. Durmaz resides in Los Angeles and Streamwood, Ill., and Pribilski resides in Lisle, Ill. Neither of them is registered with the SEC in any capacity nor do they hold any securities licenses.
The SEC's complaint charges all defendants with violations of the registration provisions of Section 5(a) and 5(c) of the Securities Act of 1933 (Securities Act) and of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also charges defendants Durmaz and Pribilski with violations of the broker-dealer registration provisions of Section 15(a) of the Exchange Act.
The Honorable George H. Wu, U.S. District Judge for the Central District of California, granted the SEC's request for emergency relief for investors, including an order temporarily enjoining defendants from future violations of the antifraud provisions and freezing their assets. Judge Wu also granted the SEC's request for emergency relief against relief defendants Sibel Ince, Marlali Gayrimenkul Yatirimlari, Mehmet Karakus, Marlali Property Investment Company, LLC, and Gulen Enterprises, Inc. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for March 23, 2010, at 9:00 a.m. PT. [SEC v. Francois E. Durmaz (aka Mahmut E. Durmaz), Robert C. Pribilski, USA Retirement Management Services (aka USA Financial Management Services, Inc.), Defendants, and Sibel Ince, Mehmet Karakus, Marlali Gayrimenkul Yatirimlari, Marlali Investment Company, LLC, Gulen Enterprises, Inc., Relief Defendants, Civil Action No. CV 10-01689 GW (AJWx) (C.D. Cal.)] (LR-21445)
SEC Charges Broker With Defrauding Institutional Customer of Over $3.3 Million
The Securities and Exchange Commission today announced that it has charged a stock broker with a fraudulent scheme to divert millions of dollars in trading profits from a large institutional customer of the broker to another of the broker's customers.
The complaint, filed on March 9, 2010, in federal court in Manhattan, alleges that Jose O. Vianna, Jr., a former registered representative at a New York based broker-dealer named Maxim Group LLC (Maxim), diverted profitable trades from the account of a large Spanish bank, referred to in the Complaint as Customer A, to the account of Creswell Equities, Inc. (Creswell), a British Virgin Islands company. The Commission's complaint alleges that over $3.3 million in trading profits were diverted from Customer A to Creswell.
The complaint alleges that 57 times between July 2007 and March 2008, Vianna simultaneously entered orders in the accounts of Customer A and Creswell to trade the same amounts of the same stock. Each time, he placed a buy order in one customer's account and a sell order in the other customer's account. When the market moved to make Customer A's trade profitable and Creswell's trade unprofitable, Vianna improperly misused his access to Maxim's order management system to divert Customer A's profitable trade to Creswell and Creswell's unprofitable trade to Customer A by changing Maxim's records to inaccurately reflect the account for which the orders were entered. However, when the market moved so that Creswell's trade was profitable and Customer A's unprofitable, Vianna let the trades remain as originally entered.
The Commission's complaint charges Vianna with securities fraud in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and also charges Vianna with aiding and abetting violations by Maxim of the books and records requirements of Section 17(a) of the Securities Exchange Act of 1934, and Rule 17a-3. The Commission seeks permanent injunctive relief from Vianna, as well as disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties.
The Commission's complaint also charges Creswell as a relief defendant, and seeks disgorgement of Creswell's illicit profits, plus prejudgment interest. On March 9, 2010, the Court entered an order temporarily freezing Creswell's assets pending a hearing on the Commission's application to freeze Creswell's assets for the duration of the action.
The Commission acknowledges assistance provided by the Spanish Comision Nacional del Mercado de Valores and by the Swiss Financial Market Supervisory Authority. [SEC v. Jose O. Vianna, Jr. and Creswell Equities, Inc., Case No. 10 Civ. 1842 (GBD) (S.D.N.Y.)] (LR-21446)
INVESTMENT COMPANY ACT RELEASES
Lincoln Investment Advisors Corporation and Lincoln Variable Insurance Products Trust
A notice has been issued giving interested persons until March 30, 2010, to request a hearing on an application filed by Lincoln Investment Advisors Corporation and Lincoln Variable Insurance Products Trust for an order exempting them from Section 15(a) of the Investment Company Act and Rule 18f-2 under the Act. The order would permit the applicants to enter into and materially amend subadvisory agreements without shareholder approval and would grant relief from certain disclosure requirements. (Rel. IC-29170 - March 9)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2010-027) relating to pricing for option orders routed to away markets 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 March 8. (Rel. 34-61666)
A proposed rule change filed by The NASDAQ Stock Market to modify routing of orders from NASDAQ Options Market to an affiliated exchange (SR-NASDAQ-2010-028) 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 March 8. (Rel. 34-61668)
A proposed rule change filed by NYSE Amex to increase the monthly ATP fee for all options Market Makers and to reduce the per-contract transaction fee for non-directed options Market Makers (SR-NYSEAmex-2010-19) 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 March 8. (Rel. 34-61670)
A proposed rule change (SR-CHX-2010-05) filed by the Chicago Stock Exchange to increase the provide credit for transactions involving issues priced less than one dollar 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 March 8. (Rel. 34-61671)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2010-16) to adopt a reservation fee for Next Generation Trading Floor booth space 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 March 8. (Rel. 34-61672)
A proposed rule change filed by The Options Clearing Corporation (SR-OCC-2010-02) to amend the definition of "adjustment increment" applicable to stock futures has become effective pursuant to Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 8. (Rel. 34-61673)
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