Shira Pavis Minton Named SEC Ethics Counsel
The Securities and Exchange Commission announced today that Shira Pavis Minton has been named as the Commission's Ethics Counsel in the Office of the General Counsel.
Ms. Minton will provide advice and counsel to Commission employees on all ethical issues, and coordinate and manage the agency's ethics and compliance program.
Ms. Minton, 42, joins the Commission after serving as the Deputy Assistant General Counsel for Ethics at the Department of Treasury, where she managed the ethics program for the Department as well as overseeing the ethics programs at all Treasury bureaus including the Internal Revenue Service, U.S. Mint, Bureau of Engraving and Printing, and Office of the Comptroller of the Currency. Ms. Minton also spent nine years at the Federal Trade Commission as an Associate General Counsel and Alternate Designated Agency Ethics Official.
"The Commission's mission starts with an uncompromising commitment to the highest ethical standards," said SEC General Counsel David Becker. "Shira's outstanding career in public service has been built around that very commitment. We are fortunate that Shira will contribute her talents and experience to serving investors."
Ms. Minton said, "I am honored to have the opportunity to join the SEC and its team of talented and dedicated professionals. I look forward to working with our ethics and compliance staff and all SEC employees to uphold the integrity of the SEC staff and our securities markets."
Ms. Minton, who will also serve as the SEC's Designated Agency Ethics Official, earned her JD from Harvard Law School where she graduated cum laude, and her BA in philosophy from Binghamton University. (Press Rel. 2010-142)
Office of the Chief Accountant Names Academic Fellows
The Securities and Exchange Commission's Office of the Chief Accountant today announced the selection of Shawn Davis and Saurav Dutta as Academic Accounting Fellows for one-year terms beginning this summer.
Academic Accounting Fellows serve as research resources for SEC staff by interpreting and communicating research materials as they relate to the agency. In addition, Academic Accounting Fellows have been assigned to ongoing projects in the Chief Accountant's office that include rulemaking, serving as a liaison with the professional accounting standards-setting bodies, and consulting with registrants on accounting, auditing, independence and reporting matters.
"The experience that Shawn and Saurav bring as fellows from academia is a great benefit to our Office of the Chief Accountant, but more importantly, their knowledge and perspective will benefit U.S. investors," said James Kroeker, the SEC's Chief Accountant.
Ms. Davis is a Visiting Assistant Professor in the Practice of Accounting at Emory University, where she teaches both financial accounting and managerial accounting to undergraduate and graduate students. She earned her Ph.D. from Washington University, MBA and MAS from the University of Illinois at Urbana-Champaign, and her BBA from Jackson State University. Her research primarily focuses on how auditing judgment and decision-making affects financial decisions and markets, and has been presented at national and international conferences. Her dissertation examining the disclosure of auditors' materiality judgments won the 2005 Outstanding Dissertation in Auditing Award from the American Accounting Association.
Ms. Davis is the recipient of several research grants, including grants from KPMG and PricewaterhouseCoopers. She served as an academic researcher for the American Accounting Association Auditing Section's Research Synthesis Program to examine the auditor's reporting model. Ms. Davis research employs a variety of methods including experimental economics, decision cases and field experiments, and her work has been published in Accounting Horizons, Behavioral Research in Accounting, and New Zealand Economic Papers. Additionally, she has appeared as a guest speaker for several professional practice conferences and workshops.
Mr. Dutta is an Associate Professor and former Chair of the Department of Accounting and Business Law at the University at Albany-SUNY, New York. He received his B.Tech. in Aeronautical Engineering from the Indian Institute of Technology, Bombay and his Ph.D. in Accounting from the University of Kansas. He is a Certified Management Accountant (CMA) and received the Robert Beyer Silver Medal for the second highest total score on the CMA examination in 1989. He was also awarded the National Talent Search Scholarship in 1979 by the Government of India. He has held academic positions at Rutgers University and the City University of New York- Baruch College.
Mr. Dutta has published extensively in the field of accounting and auditing in various national and international journals. While his earlier work focused on audit quality, risk and materiality, his more recent work is in the area of sustainability, triple-bottom line reporting and forensic accounting. He also has frequently consulted on complex accounting and auditing issues related to derivatives and hedge accounting, mergers and acquisitions, and statistical verification of claims for some of the largest corporate settlements in the U.S.
Ms. Shawn Davis and Mr. Saurav Dutta will replace the current Academic Accounting Fellows. Jack Krogstad will return to the Creighton University, and Nancy Mangold will return to the California State University, East Bay. (Press Rel. 2010-143)
Closed Meeting - Thursday, August 12, 2010 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, Aug. 12, 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.
Commission Dismisses Proceedings Against BCI Telecom Holding, Inc.
The Commission has granted a motion to dismiss proceedings against BCI Telecom Holding, Inc. that had been instituted pursuant to Securities Exchange Act Section 12(j). The order instituting proceedings alleged that BCI had a class of securities registered under the Exchange Act and was delinquent in its periodic reporting requirements. BCI contacted the Division of Enforcement after proceedings were instituted to clarify that its securities were not registered and that it had been confused with its corporate affiliate, Bell Canada International, Inc., which had mistakenly used, in its Commission filings, a numerical identifier assigned to BCI. The Commission concluded that, because BCI had no securities registered under the Exchange Act and because revocation or suspension of registration were the only remedies available in an action brought under Exchange Act Section 12(j), it was appropriate to grant the motion and dismiss the proceeding. (Rel. 34-62649; File No. 3-13888)
In the Matter American Energy Services, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Five Respondents (Default Order) in American Energy Services, Inc., Administrative Proceeding No. 3-13940. The Order Instituting Proceedings (OIP) alleged that nine 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. It revokes the registrations of each class of registered securities of Dynacore Patent Litigation Trust, Earth Sciences, Inc., Empiric Energy, Inc., Reliance Acceptance Group, Inc., and Vegas Equity International Corp., pursuant to Section 12(j) of the Securities Exchange Act of 1934.
The Commission has previously accepted settlement offers from American Energy Services, Inc., Future Carz, Inc., NBI, Inc., and Noble Group Holdings, Inc. (f/k/a Leasing Solutions, Inc., and Le Bon Table Brand Foods Corp.), the other four Respondents named in the OIP. (Rel. 34-62652; File No. 3-13940)
Commission Sustains PCAOB Disciplinary Action Against James P. Gately, CPA, and Gately & Associates, LLC
The Commission has sustained Public Company Accounting Oversight Board (PCAOB) disciplinary action against James P. Gately, CPA, and Gately & Associates, LLC, a registered public accounting firm. PCAOB found that Gately recklessly failed to cooperate with an inspection required under the Sarbanes-Oxley Act of 2002 and PCAOB rules. PCAOB permanently barred Gately from associating with any registered public accounting firm and permanently revoked the firm's registration. The Commission sustained PCAOB's findings and concluded that, under the circumstances of the case, the revocation of registration and bar "are appropriate to protect the public interest in securing regulatory oversight over the activities of registered accounting firms." (Rel. 34-62656; File No. 3 13535)
In the Matter of Janus Capital Management LLC
The United States Securities and Exchange Commission has accepted an amended offer of settlement from Janus Capital Management LLC (JCM) and issued an order modifying JCM's undertakings that were part of the Commission's order of Aug. 18, 2004. The modifications to the 2004 order relieve JCM of its obligations to continue to: (1) undertake periodic compliance reviews; (2) establish and maintain an internal compliance controls committee; and (3) hold a shareholder's meeting at which the Board of Trustees for each registered investment company is elected not less than every fifth calendar year. All other provisions of the 2004 order remain in effect. (Rels. IA-3065; IC-29377; File No. 3-11590)
SEC Files Amended Complaint and Settlement Agreements in Harman Hoax Tender Offer Case; Agreements Include Full Disgorgement of $6.2 Million in Profits
The Commission announced today that it has reached settlements in its pending federal civil court action against the late Hazem Al-Braikan, a Kuwaiti financial advisor, and Al-Raya Investment Company that will return all ill-gotten profits. Al-Braikan was sued by the SEC last July for engaging in an illicit scheme to profit by issuing hoax takeover announcements for Harman International Industries, Inc. and another company. The SEC's emergency action, filed three days after the trading in Harman occurred, froze millions of dollars in profits before they could be sent overseas. Before the settlements are final, they must be approved by U.S. District Court Judge Naomi Reice Buchwald, who is presiding over this action. The Commission also filed an Amended Complaint which provides additional details about the hoax scheme and names KIPCO Asset Management Company (KAMCO), formerly a defendant, as a relief defendant. The SEC submitted to the court a stipulation and proposed order requesting that United Gulf Bank be dismissed from the action.
The SEC's Amended Complaint alleges that in July 2009, Al-Braikan drafted and issued a bogus press release claiming that a non-existent private investment group in Saudi Arabia planned to acquire Harman International through a tender offer. According to the allegations in the Amended Complaint, Al-Braikan fabricated the press release over the weekend of July 18-19, 2009, scouring the internet for an appropriate graphic logo for his fictional entity and preparing various drafts of the hoax release, which he then faxed or emailed to various news organizations in the U.S. and abroad. He also made dozens of calls to various media outlets in the U.S. and abroad in an attempt to convince them to pick up the story. On the morning of Monday, July 20, a U.S. Internet news website posted the false announcement, which claimed that an entity called "Arabian Peninsula Group" was planning to make a public tender offer for Harman stock at $49.50 a share. At the time, Harman International's common stock was trading at about $25 per share. The false announcement led to a pre-market trading surge that drove Harman International's stock up by nearly 40%. After Harman International repudiated the announcement an hour later, the company's share price dropped precipitously, closing the day at $20.86, more than twenty percent lower than the prior trading day's close. The Amended Complaint also alleges that Al-Braikan perpetrated a similar hoax using Textron Inc. in April 2009, contacting media outlets about an alleged "scoop" regarding an upcoming takeover bid for Textron by a Middle Eastern company. In actuality, no such deal existed.
The Amended Complaint alleges that Al-Braikan profited by amassing large positions in Harman and Textron stock and Harman options in accounts that he controlled during the days and weeks before he created and released the false tender offer announcements. He then sold those positions at prices inflated by the false information, reaping profits for himself and others. Al-Braikan traded in accounts in his own name and that of Al-Raya, as well as accounts for himself and others at KAMCO. He also recommended the stocks to others, who bought and sold on his recommendation. Profits on the two hoaxes totaled more than $6.2 million.
All of the parties have agreed to settle this action and give back all profits gained as a result of the illicit conduct.
If approved by the Court, these final judgments ordering total disgorgement of $6,228,728.51, as well as a $300,000 penalty against Al-Raya, will conclude the Commission's litigation. [SEC v. Al-Raya Investment Company and Waleed Khalid Al-Braikan as Representative of the Heirs of Hazem Khalid Al-Braikan, et al., Civil Action No. 1:09-CV-6533 (NRB) (S.D.N.Y.)] (LR-21613A)
SEC Charges Boiler-Room Operators in Fraudulent $11 Million Green Energy Investment Scheme
The Securities and Exchange Commission today charged two California boiler-room operators and four salesmen for conducting a fraudulent green energy investment scheme. The SEC's complaint names as defendants, boiler-room operators Joseph R. Porche, age 51, of Aliso Viejo, CA, and Larry R. Crowder, age 53, of Newport Coast, CA; and salesmen Konrad C. Kafarski, age 40, of Trabuco Canyon, CA, Carlton L. Williams, age 51, of Coto de Caza, CA, Gary K. Juncker, age 47, of Rancho Santa Margarita, CA, and Dale J. Engelhardt, age 46, of San Clemente, CA.
The SEC's complaint, filed in U.S. District Court in Santa Ana, alleges that between early 2008 to February 2009, Kensington Resources, Inc., through its principals, Porche and Crowder, and its salespeople, raised $11 million from approximately 200 investors nationwide selling unregistered shares of American Environmental Energy, Inc. (AEEI) common stock. The SEC's complaint alleges that Porche, Crowder, and Kafarski falsely disclosed to investors that payments of sales commissions were limited to 10% of the funds raised, when, in reality, 25% of the funds raised were paid to salesmen and sales managers. The complaint further alleges that these defendants misrepresented how the funds raised would be used, telling investors that 80% of the funds raised would be used by AEEI to conduct its green energy business. In reality, most of the funds raised were kept by Porche and Crowder to fund their lavish lifestyles and only $315,000 of the $11 million raised went to AEEI.
The SEC's complaint alleges that all of the named defendants violated the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. The complaint also alleges that Porche, Crowder, and Kafarski violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further alleges that all of the named defendants violated the broker-dealer registration requirement of Section 15(a) of the Exchange Act. Crowder also violated his previous bar from association with a broker or dealer in violation of Section 15(b)(6)(B)(i) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and penny stock bars against each of the defendants.
Crowder and Engelhardt are repeat securities law offenders. In 1998, the SEC charged Crowder and Engelhardt with, among other things, violations of the antifraud provisions of the federal securities laws in connection with another offering fraud. Crowder and Engelhardt were enjoined from future violations of those provisions. Crowder was permanently barred from associating with any broker or dealer, and Engelhardt was suspended for one year from associating with any broker or dealer. [SEC v. Joseph R. Porche, et al., United States District Court for the Central District of California, Civil Action No. SACV 10-01165 DOC (RNBx)] (LR-21614)
SEC Files Settled Charges Against David P. Turner and Ousama M. Naaman for Engaging in Bribery
The Securities and Exchange Commission filed a settled enforcement action on August 5, 2010, in the U.S. District Court for the District of Columbia, charging David P. Turner, a former Business Director at Innospec, Inc., and Ousama M. Naaman, Innospec's agent in Iraq, with violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to numerous government officials to obtain and retain business.
The SEC's complaint alleges that:
Turner and Naaman engaged in widespread bribery of Iraqi government officials to obtain contracts under the United Nations Oil for Food Program, and in order to continue selling Tetra Ethyl Lean (TEL) to Iraq after the Oil for Food Program ended. Turner also violated the FCPA by paying bribes to Indonesian officials to sell TEL to Indonesian state owned oil companies.
From 2000 to 2008, Innospec, Inc., a manufacturer and distributor of fuel additives and specialty chemicals, routinely paid bribes to government officials in Iraq and Indonesia to sell TEL. The bribery activities in Iraq began with Innospec's participation in the United Nations ("UN") Oil for Food Program in 2001, and extended all the way until at least 2008. Turner, the Business Director of Innospec's TEL group, and Naaman, Innospec's agent, both actively participated in the bribery and kickback schemes in Iraq. Innospec also paid bribes to government officials in Indonesia beginning as early as 2000, and continued until 2005, when Indonesia's need for TEL ended. Turner actively participated in the bribery scheme in Indonesia. In all, Innospec made illicit payments of over $6.3 million and promised an additional $2.8 million in illicit payments to Iraqi ministries and government officials as well as Indonesian government officials. The contracts that Innospec obtained in exchange for the bribes were worth approximately $176 million.
Naaman paid kickbacks to Iraq on Innospec's behalf so that Innospec could obtain five Oil-for-Food Program contracts for the sale of TEL to the Iraqi Ministry of Oil and its component oil refineries. Naaman aided Innospec in obtaining the Oil for Food contracts by paying kickbacks equaling 10 percent of the contract value on three of the contracts. When the Oil-for-Food Program ended shortly before Innospec was to pay promised kickbacks on the two remaining contracts, Innospec kept the promised payments as part of its profit. When Innospec's internal auditors questioned Turner about the nature of the commission payments that were made to Naaman under the U.N. Oil for Food Program, Turner made false statements to the auditors and concealed the fact that the commission payments to Naaman included kickbacks to the Iraqi government in return for Oil for Food contracts.
After the Oil for Food Program ended in late 2003, Turner and Naaman paid bribes to Iraqi officials in order to secure TEL business contracts from Iraq. Turner and senior officials at Innospec directed and approved the bribery payments. From at least 2004 through 2008, Innospec made payments totaling approximately $1,610,327 and promised an additional $884,480. In one e-mail, Naaman informed management, including Turner, that Iraqi officials were demanding a 2% kickback related to one TEL order. Naaman also stated: "We are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards." In his response to the e-mail, Turner confirmed that the requested kickback would be paid through an additional 2% "commission" to Naaman.
Turner and senior officials at Innospec also directed Naaman to pay a bribe of $155,000 to Iraqi officials to ensure the failure of a 2006 field trial test of MMT, a fuel product manufactured by a competitor of Innospec. Turner and other Innospec officials also authorized payments, through Naaman, to fund lavish trips for Iraqi officials, including the seven-day honeymoon of one official. Innospec officials and Turner also arranged for Naaman to pay thousands of dollars in cash to Iraqi officials for "pocket money" on trips funded by Innospec.
Turner and senior officials at Innospec authorized and directed the payment of bribes to Indonesian government officials to win contracts for Innospec. More than $2.8 million in bribes was funneled through an Indonesian agent. One scheme involved bribes paid annually to a senior official at BP Migas, another scheme involved "special commissions" paid to a Swiss account; and another involved a "one off" payment of $300,000. On another occasion, a Managing Director of Innospec informed Turner that Innospec had provided payments to its Indonesian Agent to fund the purchase of a Mercedes for a Pertamina official.
Without admitting or denying the SEC's allegations, Turner and Naaman have consented to the entry of final judgments that permanently enjoin them from violating Exchange Act Sections 30A and 13(b)(5) and Rule 13b2-1 thereunder, and from aiding and abetting Innospec's violations of Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B), and as to Turner, from violating Rule 13b2-2. Turner will also disgorge $40,000. No civil penalty was imposed based on, among other things, Turner's extensive and ongoing cooperation in the investigation. Naaman will disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038, which will be deemed satisfied by a criminal order requiring Naaman to pay a criminal fine that is at least equal to the civil penalty amount. After his extradition to the United States, Naaman cooperated.
The SEC appreciates the assistance of the DOJ's Fraud Section, the Federal Bureau of Investigation, and the United Kingdom Serious Fraud Office in this matter. [SEC v. David P. Turner and Ousama M. Naaman., 1:10-CV-01309 (D.D.C.) (RMC)] (LR-21615)
In the Matter of Navistar International Corporation, Daniel C. Ustian, Robert C. Lannert, Thomas M. Akers, Jr., James W. McIntosh, James J. Stanaway, Ernest A. Stinsa, Michael J. Schultz
In the Matter of Mark T. Schwetschenau
Navistar Settles With Commission Over Certain Restated 2002-2005 Financial Results
On Aug. 5, 2010, the United States Securities and Exchange Commission issued a cease-and-desist order against Navistar International Corporation (Navistar), CEO Daniel C. Ustian (Ustian), former CFO Robert C. Lannert (Lannert), Thomas M. Akers, Jr. (Akers), James W. McIntosh (McIntosh), James J. Stanaway (Stanaway), Ernest A. Stinsa (Stinsa) and Michael J. Schultz (Schultz). Each Respondent consented to the issuance of the Order without admitting or denying the Commission's findings as part of a global settlement.
The Order finds that at times from 2001 through 2005, Navistar overstated its pre-tax income by a total of approximately $137 million as the result of various instances of misconduct. Fraud by certain individuals at a Wisconsin foundry and in connection with certain vendor rebates and vendor tooling transactions accounted for approximately $58 million of that total. The remaining approximately $79 million resulted from improper accounting for certain warranty reserves and deferred expenses.
More specifically, the Order finds, among other things, that:
Based on the above, the Order directs Navistar to cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder and Ustian, Navistar's CEO, and Lannert, Navistar's former CFO, to cease and desist from causing any violations and any future violations of Section 13(b)(2)(B) of the Exchange Act.
Ustian and Lannert also agreed to comply with the forfeiture provisions of Section 304(a) of the Sarbanes-Oxley Act of 2002. Ustian consented to tender to the Company shares of Navistar common stock currently owned by Ustian in the amount of $1,320,000 and Lannert consented to pay $1,049,503 to the Company. Those dollar amounts reflect monetary bonuses that each received during the restatement period.
Additionally, the Order directs McIntosh to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and from causing any violations and any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; Akers, Schultz and Stanaway to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and from causing any violations and any future violations of Section 13(b)(2)(A) of the Exchange Act; and Stinsa to cease and desist from committing or causing any violations and any future violations of Exchange Act Rule 13b2-1 and from causing any violations and any future violations of Section 13(b)(2)(A) of the Exchange Act.
The Commission filed a parallel civil action in the United States District Court for the Northern District of Illinois against Akers, McIntosh, Stanaway, Stinsa and Schultz, in which each consented to pay civil penalties as follows: Akers - $100,000; McIntosh - $150,000; Stanaway - $50,000; and Stinsa - $25,000. A civil penalty was not imposed against Schultz because of a demonstrated inability to pay. These individuals consented to the filing of this complaint without admitting or denying its allegations. Securities and Exchange Commission v. James W. McIntosh, et al., Civil Action No. 10-cv-4903 (N.D. Ill.) (Aug. 4, 2010).
Additionally, on Aug. 5, 2010, the Commission issued a separate settled order concerning Navistar's former Controller, Mark T. Schwetschenau. The Order directs Schwetschenau to cease and desist from causing any violations and any future violations of Sections 13(a) and 13(b)(2)(B) of the Exchange Act. The Order also denies him the privilege of appearing or practicing before the Commission with the right to request reinstatement after one year pursuant to Section 102(e)(1)(ii) of the Commission's Rules of Practice.
The Commission filed a parallel civil action in the United States District Court for the Northern District of Illinois against Schwetschenau in which he consented to pay $37,500 in civil penalties. Schwetschenau neither admitted nor denied the Commission's findings and allegations. [SEC v. James W. McIntosh, et al., Civil Action No. 10-cv-4903 (N.D. Ill.); SEC v. Mark T. Schwetschenau, Civil Action No. 10-cv-4904 (N.D. Ill.)] (LR-21616); In the Matter of Navistar International Corporation, et al. - (Rels. 33-9132; 34-62653; AAE Rel. 3165; File No. 3-13994); In the Matter of Mark T. Schwetschenau - (Rel. 34-62654; AAE Rel. 3166; File No. 3-13995)
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