Kathleen Griffin Named SEC's First Chief Compliance Officer
The Securities and Exchange Commission today announced that Kathleen M. Griffin has been named the agency's first Chief Compliance Officer - the latest in a series of measures undertaken to strengthen the SEC's internal compliance program.
The position was created to streamline and centralize oversight responsibility for employee securities transactions and financial disclosure reporting. Ms. Griffin, who has extensive experience in establishing and guiding compliance programs, will head a new compliance unit within the SEC's Office of Ethics Counsel.
"We have established a system of real-time financial reporting and we are fortunate to have a proven compliance professional like Kathleen on board to greatly strengthen our program," said William Lenox, the SEC's Ethics Counsel. "Kathleen will help assure that the hardworking SEC staff continues to adhere to the highest ethical standards."
Ms. Griffin said, "I'm honored to have been selected for this important position and I look forward to working with our compliance personnel and all employees to uphold the integrity of the SEC staff and our securities markets."
Oversight responsibility for ensuring staff compliance in this area was previously spread between two offices. Consolidating the compliance functions within one office is intended to eliminate the potential for any inefficiency or redundancy.
Ms. Griffin, 57, begins her new position this week and comes to the SEC from Putnam Investments, a global money management firm where she was Vice President, Senior Compliance Manager, and Deputy Code of Ethics Officer.
Among Ms. Griffin's other prior experience, she was Senior Vice President and Director of Compliance for Atlantic Trust Company, N.A., and Vice President and Principal of State Street Global Advisors. She earned her BA at the University of Massachusetts-Boston. (Press Rel. 2010-50)
SEC Charges Daimler AG With Global Bribery
The Securities and Exchange Commission today announced a settlement with Daimler AG for violations of the Foreign Corrupt Practices Act (FCPA), alleging that the Stuttgart, Germany-based automobile manufacturer engaged in a repeated and systematic practice of paying bribes to foreign government officials to secure business in Asia, Africa, Eastern Europe and the Middle East.
Daimler agreed to pay $91.4 million in disgorgement to settle the SEC's charges and pay $93.6 million in fines to settle charges in separate criminal proceedings announced today by the U.S. Department of Justice.
The SEC alleges that Daimler paid at least $56 million in improper payments over a period of more than 10 years. The payments involved more than 200 transactions in at least 22 countries. Daimler earned $1.9 billion in revenue and at least $90 million in illegal profits through these tainted sales transactions, which involved at least 6,300 commercial vehicles and 500 passenger cars. Daimler also paid kickbacks to Iraqi ministries in connection with direct and indirect sales of motor vehicles and spare parts under the United Nations Oil for Food Program.
"It is no exaggeration to describe corruption and bribe-paying at Daimler as a standard business practice," said Robert Khuzami, Director of the SEC's Division of Enforcement. "The financial and reputational costs incurred by Daimler as a result are a lesson that should be studied closely by all companies."
Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit, added, "The bribery was so pervasive in Daimler's decentralized corporate structure that it extended outside of the sales organization to internal audit, legal, and finance departments. These departments should have caught and stopped the illegal sales practices, but instead they permitted or were directly involved in the company's bribery practices."
The SEC's complaint, filed in U.S. District Court for the District of Columbia, alleges that Daimler used bribes to further government sales in such countries as Russia, China, Vietnam, Nigeria, Hungary, Latvia, Croatia, and Bosnia. Among other means, Daimler used dozens of ledger accounts, known internally as "interne Fremdkonten" or "internal third party accounts" to maintain credit balances for the benefit of government officials. These credit balances were controlled by Daimler subsidiaries or outside third parties, including foreign government officials or Daimler's dealers, distributors or other agents who were at times used as intermediaries to make payments to foreign government officials. The accounts were funded through several bogus pricing mechanisms, such as "price surcharges," "price inclusions," or excessive commissions. Daimler also used artificial discounts or rebates on sales contracts to effectuate bribes. In those instances, all or a portion of the discount was kicked back through a ledger account to a foreign government official, rather than credited to the purchasing government customer.
The SEC alleges that bribes also were made through phony sales intermediaries and corrupt business partners, as well as through the use of cash desks. Sales executives would obtain cash from the company in amounts as high as hundreds of thousands of dollars, enabling Daimler to obscure the purpose and recipients of the money paid to government officials.
According to the SEC's complaint, the bribery permeated several major business units and subsidiaries, was sanctioned by members of Daimler's management, and continued during the course of the SEC's investigation. Daimler's corrupt practices were authorized by or known to the former heads of Daimler's Overseas Sales and Commercial Vehicles departments, the former head of Daimler Export and Trade Finance (a subsidiary of Daimler Financial Services), and the former heads of Daimler subsidiaries in numerous foreign countries.
Daimler violated Section 30A of the Securities Exchange Act of 1934 by making illicit payments to foreign government officials in order to obtain or retain business. Daimler violated Section 13(b)(2)(B) of the Exchange Act by failing to have adequate internal controls to detect and prevent the payments, and it violated Section 13(b)(2)(A) of the Exchange Act by improperly recording the payments in its books and records.
Without admitting or denying the SEC's allegations, Daimler has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act. The court order also requires Daimler to comply with certain undertakings regarding its FCPA compliance program, including a provision that requires the company to retain an independent consultant for three years. Daimler cooperated with the ongoing investigation, conducted its own substantial internal investigation, and remediated problems as they were identified.
The SEC acknowledges the assistance of the U.S. Department of Justice's Fraud Section and the Federal Bureau of Investigation.
For more information about this enforcement action, contact: Cheryl J. Scarboro, Chief, Foreign Corrupt Practices Unit, SEC's Division of Enforcement, (202) 551-4403. (Press Rel. 2010-51)
Closed Meeting - Thursday, April 8, 2010 - 3:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, April 8, 2010, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; and other matters relating to enforcement proceedings.
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.
Schottenfeld Group LLC to Pay $1.2 Million to Settle Insider Trading Charges
The Commission announced today that on March 30, 2010, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a final judgment against Schottenfeld Group LLC in SEC v. Arthur J. Cutillo, et al., 09-CV-9208 (S.D.N.Y.), an insider trading case the Commission filed on Nov. 5, 2009. Schottenfeld Group, a New York limited liability company and registered broker-dealer based in New York, New York, consented to the entry of the final judgment.
The Commission's complaint charged Schottenfeld Group with violations of the antifraud provisions of the federal securities laws. The Commission alleged that, in 2007, Schottenfeld Group proprietary traders Zvi Goffer, David Plate, and Gautham Shankar illegally traded on material, nonpublic information concerning the proposed acquisitions of Avaya Inc., 3Com Corp., and/or Axcan Pharma, Inc. in Schottenfeld Group accounts.
Schottenfeld Group consented to the entry of a final judgment: (i) permanently enjoining it from future violations of Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5; (ii) ordering it to pay disgorgement of $742,415, representing its share of the illicit trading profits, together with prejudgment interest thereon in the amount of $96,199.17; and (iii) ordering it to pay a civil penalty of $371,207.50. In addition, as part of the settlement, Schottenfeld Group has agreed to cooperate in the Commission's investigation and to retain an independent consultant to review its controls and compliance mechanisms. [SEC v. Arthur J. Cutillo, et al., Civil Action No. 09-CV-9208 (S.D.N.Y.) (RJS)] (LR-21470)
SEC Charges Bay Area Man for Posing as Portfolio Manager in Multi-Million Dollar Hedge Fund Fraud
The Securities and Exchange Commission today sued a Bay Area man for posing as a "fund manager" in a bogus hedge fund scheme.
The SEC alleges that Stephen C. Bond of Walnut Creek, Calif., aided the scheme of Silicon Valley hedge fund manager Albert K. Hu from 2001 through 2008 while helping himself to nearly a million dollars. The SEC sued Hu in March 2009. That case remains pending. The SEC's complaint alleges that Bond attended investor meetings along with Hu to solicit investments in the "Asenqua" and "Fireside" hedge funds. According to the SEC, Bond was portrayed at these meetings and in written materials as the funds' portfolio manager. Bond's introduction was designed to reassure investors about the security and the legitimacy of the funds.
According to the SEC's complaint, Bond's apparent knowledge about the securities markets and role as the investment manager was significant to investors, who decided to invest after meeting with Hu and Bond and receiving documents describing Bond's involvement in the investment decisions of the funds. The SEC alleges that, in reality, Bond conducted no actual securities trading for the funds and never executed the complex trading strategies that he and Hu explained to investors. The SEC's complaint alleges that Bond personally received approximately $900,000 in the investment scheme for his role in helping Hu defraud investors.
The Commission's complaint, filed in federal district court for the Northern District of California, charges Bond with violations of the antifraud provisions of the federal securities laws. The SEC seeks a final judgment permanently enjoining Bond from future violations of the antifraud provisions of the federal securities laws and ordering him to pay financial penalties and disgorgement of ill-gotten gains. [SEC v. Stephen C. Bond, Civil Action No. 10-1358 HRL (N.D.Cal.)] (LR-21471)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NASDAQ OMX BX relating to the price improvement period (SR-BX-2010-022) 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 April 5. (Rel. 34-61805)
A proposed rule change filed by Financial Industry Regulatory Authority to modify FINRA/Nasdaq trade reporting securities transaction credit (SR-FINRA-2010-013) 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 April 5. (Rel. 34-61806)
A proposed rule change (SR-NYSEArca-2010-19) filed by NYSE Arca extending the pilot period to receive inbound routes of equities orders from Archipelago Securities LLC 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 April 5. (Rel. 34-61813)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (FINRA-2010-005) filed by the Financial Industry Regulatory Authority to repeal Incorporated NYSE Rule 405(4) (Common Sales Accounts). Publication is expected in the Federal Register during the week of April 5. (Rel. 34-61808)
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