SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Litigation Release No. 16063 / February 17, 1999 SECURITIES AND EXCHANGE COMMISSION v. ROBERT COCHRAN, ET AL., United States District Court for the Western District of Oklahoma, Case Number CIV-94-1477-A COMMISSION SETTLES MUNICIPAL BOND FRAUD CASE WITH ROBERT COCHRAN, JAMES PANNONE, SAKURA GLOBAL CAPITAL, INC. AND STEVEN STRAUSS The Securities and Exchange Commission announced settlements with Robert Cochran, James Pannone, Sakura Global Capital, Inc. and Steven Strauss with respect to alleged fraud in connection with the sale of municipal securities underwritten by Stifel, Nicolaus & Company, Inc. Cochran was a former executive vice president of Stifel, in charge of its Oklahoma public finance office. Pannone was a former vice president of Stifel. Sakura, a subsidiary of Sakura Bank, was engaged in the business of selling derivatives, including forward purchase agreements ("forwards"). Strauss was a managing director of Sakura. All of the defendants consented to the entry of injunctions prohibiting them from violating the antifraud provisions of the federal securities laws, and collectively they agreed to pay $430,000 in monetary penalties. The Complaint alleges that in a 1992 transaction for the Oklahoma Turnpike Authority, despite bond counsel's requirement that three competitive bids be obtained for the forward, Cochran and Pannone rigged the bidding to ensure Sakura's selection as the forward provider. The Complaint also alleges that Cochran and Pannone subsequently negotiated with Strauss a $6.593 million undisclosed brokerage fee to be paid by Sakura to Stifel, and that Pannone falsely described to the Turnpike Authority the bidding and negotiation process of the forward. The Complaint further alleges that the forward purchase agreement stated that Sakura did not intend to take any actions which would jeopardize the tax-exempt status of the bonds. The Complaint alleges that at the time Strauss executed the forward on behalf of Sakura, Sakura was planning to pay a $6.593 million brokerage fee to Stifel. The Complaint alleges that Sakura and Strauss knew or were reckless in not knowing that such a brokerage fee would jeopardize the tax-exempt status of the bonds. The Complaint also alleges that in a 1992 transaction for the Sisters of St. Mary's Health Care Obligated Group, despite bond counsel's requirement that three competitive bids be obtained for the forward, Pannone rigged the bidding to ensure Sakura's selection as the forward provider. The Complaint further alleges that at the request of bond counsel, Pannone, at Cochran’s direction, and Strauss provided certificates stating that Sakura would not make any payments, other than certain payments to the issuer, in connection with the forward. The Complaint alleges that Sakura made a $100,000 payment to Stifel and that Cochran and Pannone concealed the payment by booking it to a different transaction. The Complaint alleges that the $100,000 payment from Sakura to Stifel jeopardized the tax- exempt status of the bonds. Finally, the Complaint alleges that in a 1990 transaction for the Pottawatomie County Development Authority, Cochran recommended that the bond proceeds be invested in a guaranteed investment contract ("GIC"). The Complaint alleges that Cochran did not disclose to the issuer that Stifel received a payment of $87,220 in connection with the GIC. The Complaint alleges that this payment jeopardized the tax-exempt status of the bonds. Without admitting or denying the allegations in the Complaint, Pannone, Sakura and Strauss consented to the entry of injunctions prohibiting them from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Pannone further consented to the entry of injunctions prohibiting them from future violations of Section 15B(c)(1) of the Exchange Act and Rule G-17 of the Municipal Securities Rulemaking Board. Pannone, Sakura and Strauss also consented to the entry of final judgments ordering them to pay monetary penalties of $30,000, $250,000 and $50,000, respectively. In addition, Pannone consented to the entry of an administrative order suspending him from association with any broker, dealer or municipal securities dealer for twelve months. On January 28, 1999, the Court entered an order dismissing the Commission’s securities fraud claims against Cochran with respect to the Oklahoma Turnpike Authority and Pottawatomie County Development Authority transactions. Without admitting or denying the remaining allegations in the Complaint with respect to the Sisters of St. Mary’s transaction, Cochran consented to the entry of a final judgment enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, and Rule G-17 of the Municipal Securities Rulemaking Board, and ordering him to pay a monetary penalty of $100,000. The settlement with Cochran preserves the Commission’s ability to appeal the dismissal of the Oklahoma Turnpike Authority and Pottawatomie County Development Authority transactions. See also, Lit. Rel. No. 15630 (Jan. 29, 1998); Lit. Rel. No. 15569 (Nov. 24, 1997); Lit. Rel. No. 14644 (Sept. 20, 1995); and Lit. Rel. No. 14587 (Aug. 3, 1995).