Closed Meeting - Thursday, June 3, 2010 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, June 3, 2010, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; a regulatory matter regarding a financial institution; 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.
Commission Institutes Administrative Proceedings Against Joseph Milanowski, Former President and COO of USA Commercial Mortgage Company, DBA USA Capital
On May 27, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) (the Order) against Joseph Milanowski, a resident of Henderson, Nevada. Milanowski served as the President and COO of USA Commercial Mortgage Company, dba USA Capital (USA Capital), a mortgage broker based in Las Vegas, Nevada from 1998 to April 2006 and as a director from 1998 to March 2007. Milanowski was also the owner and the sole manager of USA Investment Partners, LLC (USAIP). USAIP was the manager of USA Capital Realty Advisors, LLC, which, in turn, managed USA Capital Diversified Trust Deed Fund (Diversified Fund).
The Order was based on the entry of a judgment of permanent injunction by a U.S. District Court against Milanowski in a civil action entitled: SEC v. Joseph Milanowski Civil Action No. CV 08-0511 KJD-PAL filed in the U.S. District Court for the District of Nevada (Las Vegas Division).
The Division of Enforcement alleges in the Order that on April 14, 2010, the U.S. District Court entered an Amended Final Judgment of Permanent Injunction, Disgorgement, Civil Penalty and Officer and Director Bar against Milanowski which enjoined Milanowski from future violations of Sections 5 and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. The Court awarded equitable disgorgement and a civil penalty against Milanowski. The Court further permanently barred Milanowski, pursuant to Section 21(d)(2) of the Exchange Act, from acting as an officer or director of a public company.
According to the Order, the District Court found from May 2000 to September 27, 2005, the Diversified Fund raised $150 million, net of redemptions, from 1,900 investors. Although the Fund stopped sales to new investors in the fourth quarter of 2004, the Fund allowed members to reinvest their distributions in the Fund until September 27, 2005, when USA Capital announced that it was liquidating the Fund.
The district court granted the Commission's Motion for Summary Judgment against Milanowski and found that the sales of the Diversified Fund's share were unregistered and that no applicable exemption from registration was available for their sale. The District Court found that Milanowski made three principal representations to investors in the Diversified Fund. First, he represented to his investors in the Fund that all loans would be secured by first deeds of trust on real property. Second, he represented that the Fund would make no loans to its Manager, USA Capital Realty Advisors, LLC, Milanowski himself or to any affiliate of either. Third, Milanowski represented that once the Fund had over $100 million in assets (which occurred in early 2003) the Fund would (a) not make any loan in excess of $20 million, (b) not make any loan that would exceed 15% of its then total outstanding loans; and (c) have no more than 25% of its outstanding loans made to a single borrower or affiliate of that borrower. The District Court found that each of these misrepresentations was material.
A hearing will be scheduled before an Administrative Law Judge to determine whether the Division's allegations in the Order are true, to provide respondent an opportunity to dispute the allegations, and to determine what sanctions, if any, are appropriate and in the public interest. The Commission directed that an administrative law judge issue an initial decision in this matter within 210 days from the date of service of the Order pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. For further information see LR-20536. (Rel. 34-62189; File No. 3-13914)
In the Matter of Gabriel Paredes
On May 28, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Gabriel Paredes (Paredes). The Order finds that on April 21, 2010, Paredes consented to the entry of final judgment enjoining him from violations Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and from aiding and abetting future violations of Section 17(a) of the Exchange Act and Rules 17a-3(a)(6) and 17a-3(a)(17) thereunder.
Based on the above, the Order suspends Paredes from association with any broker or dealer for a period of 90 days. Paredes consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-62191; File No. 3-13915)
SEC Charges Blake Williams, Derek Lopez, and Related Entities With Microcap Stock Fraud
On May 27, 2010, the Securities and Exchange Commission filed a complaint against Blake Williams of Dallas, Texas, and registered representative Derek Lopez, of Torrance, California, and numerous entities that they controlled, alleging that they committed securities fraud by manipulating the markets of numerous microcap stocks from 2006 to 2008. The Commission alleges that the defendants sold stock in unregistered offerings and that their subsequent manipulation led to artificially high prices and volume, which allowed the defendants and others to sell their holdings for substantial gains. The complaint also alleges that Williams acted as an unregistered broker-dealer when he solicited purchases of stock and traded on behalf of investors who bought stock from him.
As a result of their conduct, Williams and Lopez, in a separate criminal matter, were indicted on one count of conspiracy to commit securities fraud and seven counts of securities fraud in the United States District Court for the Northern District of Texas.
The Commission's investigation is ongoing. The Commission appreciates the cooperation of the Fraud Section of the Department of Justice's Criminal Division and the Federal Bureau of Investigation, which conducted a separate parallel investigation. [SEC v. Blake G. Williams, TBeck Capital, Inc., Warren Street Investments, Inc., Victoria Financial Consultants, LLC, BGW Enterprises, Inc., Emerging Resources, Inc., Valek Investments, Inc., Derek Lopez, and Da Big Kahuna, LLC, Civil Action No. 3:10-cv-1068 (N.D. Tex.)] (LR-21539)
INVESTMENT COMPANY ACT RELEASES
Orders of Deregistration Under the Investment Company Act
Orders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
(Rel. IC-29263 - May 26)
Hercules Technology Growth Capital, Inc.
A notice has been issued giving interested persons until June 21, 2010, to request a hearing on an application filed by Hercules Technology Growth Capital, Inc. (Company) for an order under Section 23(c)(3) of the Investment Company Act for an exemption from Section 23(c) of the Act. The order would amend prior orders that permit the Company to issue restricted shares of its common stock and to issue stock options to the Company's executive officers, employee directors, and other key employees and non-employee directors under the terms of its employee and director compensation plans (Plans). The amended order would permit the Company, pursuant to amended Plans, to engage in certain transactions that may constitute purchases by the Company of its own securities within the meaning of Section 23(c) of the Act. (Rel. IC-29287 - May 26)
Immediate Effectiveness of Approval of Proposed Rule Changes
A proposed rule change (SR-CBOE-2010-045) filed by the Chicago Board Options Exchange relating to the establishment of a Post-Demutualization Trading Permit Application Fee 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 May 31. (Rel. 34-62148)
A proposed rule change filed by the New York Stock Exchange to amend the Exchange Price List (SR-NYSE-2010-36) 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 May 31. (Rel. 34-62159)
A proposed rule change filed by the Chicago Board Options Exchange to permit CBOE to open Short Term Option Series on Thursdays (SR-CBOE-2010-048) 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 May 31. (Rel. 34-62170)
A proposed rule change filed by The NASDAQ Stock Market (SR-NASDAQ-2010-063) relating to routing fees 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 May 31. (Rel. 34-62176)
Proposed Rule Change
The Commission issued notice of a proposed rule change submitted by the Municipal Securities Rulemaking Board (SR-MSRB-2010-03) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to amendments to the continuing disclosure service of the MSRB's Electronic Municipal Market Access System (EMMA(R)). Publication is expected in the Federal Register during the week of May 31. (Rel. 34-62175)
Approval of Proposed Rule Changes
The Commission approved a proposed rule change filed by the Municipal Securities Rulemaking Board (SR-MSRB-2009-09) under Section 19(b)(2) of the Securities Exchange Act of 1934, as modified by Amendment Nos. 1 and 2, relating to Rule G-32, on Disclosures in Connection with Primary Offerings, Form G-32, and the Primary Market Disclosure and Primary Market Subscription Services of the MSRB's Electronic Municipal Market Access System (EMMA(R)). Publication is expected in the Federal Register during the week of May 31. (Rel. 34-62182)
The Commission approved a proposed rule change filed by the Municipal Securities Rulemaking Board (SR-MSRB-2009-10) under Section 19(b)(2) of the Securities Exchange Act of 1934, as modified by Amendment Nos. 1 and 2, relating to additional voluntary submissions by issuers to the MSRB's Electronic Municipal Market Access System (EMMA(R)). Publication is expected in the Federal Register during the week of May 31. (Rel. 34-62183)
SECURITIES ACT REGISTRATIONS
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