SECURITIES EXCHANGE ACT OF 1934
Release No. 42245 / December 17, 1999
File No. 3-10120
|| ORDER INSTITUTING PUBLIC|
|In the Matter of||| PROCEEDINGS PURSUANT TO|
|ROBERT J. STRAUSS||| SECTION 15(b)(6) OF THE SECURITIES|
|| EXCHANGE ACT OF 1934, MAKING|
|| FINDINGS AND IMPOSING REMEDIAL|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") be, and they hereby are, instituted against Robert J. Strauss ("Strauss").
In anticipation of the institution of these administrative proceedings, respondent Strauss has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings herein, except that he admits (a) the jurisdiction of the Commission over him and over the subject matter of these proceedings, and (b) the entry of conviction set forth in paragraph III.C. and the entry of the injunction set forth in paragraph III.G., Strauss consents to the issuance by the Commission of this Order Instituting Public Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (the "Order").
On the basis of this Order and of the Offer of Settlement of Strauss, the Commission makes the following findings:
A. Strauss is a resident of Rome, Georgia, and was employed as the vice president of State Mutual Insurance Company ("State Mutual") from approximately June 21, 1982, until his termination on October 10, 1997. As part of his duties as vice president, Strauss was responsible for managing State Mutual's portfolio.
B. State Mutual is a mutual insurance company located in Rome, Georgia.
C. On February 2, 1999, Respondent Strauss, plead guilty to and was convicted of one count of fraud and one count of conspiracy to commit fraud before the United States District Court for the Northern District of Georgia, in United States v. Robert J. Strauss, Crim. Information No. 4:99-CR-HLM. On April 30, 1999, he was sentenced to a prison term of forty-eight months and ordered to make restitution in the amount of $9,772,258.09.
D. The counts of the criminal information to which Strauss plead guilty alleged, inter alia, that while a State Mutual vice president, he wire transferred in excess of $16 million of State Mutual funds from its bank account in Rome, Georgia to purchase securities for the benefit of himself and his co-schemers without State Mutual's knowledge about the purpose of these transfers and without its authorization and consent.
E. On November 16, 1999, the Commission filed a civil injunctive action against Strauss [SEC v. Robert Strauss, Civil Action No.1 99-CV-2965, (N.D. Ga)], alleging that Strauss violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
F. The Commission's complaint alleged that from April 1995 through August 1997, Respondent Strauss, fraudulently transferred in excess of $16 million of State Mutual funds to benefit himself and those acting in concert with him, without State Mutual's authorization and in contravention of its investment policies as follows: Strauss transferred approximately $1.8 million to purchase securities in his name; $2.6 million to purchase securities in State Mutual's name, which he then either transferred to his name or sold for his personal financial benefit; $1.4 million to invest in a partnership in a Utah based company; and $11 million to purchase virtually worthless securities issued by Utah based companies in State Mutual's name. The complaint further alleged that Strauss received kickbacks of approximately $3.2 million in money and/or stock for the unauthorized securities transactions and unauthorized transfers of money. Additionally, the complaint alleged that he concealed his unauthorized securities transactions and unauthorized transfers of money by, among other things, falsifying entries on State Mutual's books and records, falsifying reports to the State of Georgia regulatory authorities and making false representations to State Mutual's internal and independent auditors.
G. On November 24, 1999, the United States District Court for the Northern District of Georgia issued an order in the Commission's civil injunctive action against Strauss [Securities and Exchange Commission v. Robert J. Strauss, Civil Action No.1 99-CV-2965, (N.D. Ga)] that, inter alia , permanently enjoins Strauss from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and barring him from serving as an officer or director of a publicly held company.
H. On August 2, 1999, without admitting or denying any of the allegations contained in the Commission's complaint, except as to jurisdiction and venue which he admitted, Strauss consented to the entry of the above judgment of permanent injunction permanently enjoining him from violations of Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and barring him from serving as an officer or director of a publicly held company.
I. Strauss induced State Mutual to purchase securities issued by Utah based companies, which were penny stocks as defined in the Exchange Act and Rules promulgated thereunder.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept Strauss' Offer and accordingly,
It is hereby ordered, pursuant to Section 15(b)(6) of the Exchange Act, that Strauss be, and hereby is, barred from participating in an offering of penny stock, effective immediately.
By the Commission.
Jonathan G. Katz