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U.S. SECURITIES AND EXCHANGE COMMISSION

Lit. Release No. 23775 / March 10, 2017

Accounting and Auditing Enforcement Release No. 3861 / March 10, 2017

Securities and Exchange Commission v. Nasir N. Shakouri, Robert S. Torino, Bronson L. Quon, John S. Hong and Jonathan K. Skarie, 17-cv-01929 (C.D. Cal. March 10, 2017)

Executives Charged With Manipulating Company's Accounting Systems To Steal Money

The Securities and Exchange Commission today charged two former executives at a credit card processing company with masterminding a fraudulent scheme to steal millions of dollars through phony expense reimbursements, inflated invoices, and other improper accounting tactics.

The SEC's complaint alleges that iPayment's then-senior vice president of sales and marketing Nasir N. Shakouri and then-executive vice president and chief operating officer Robert S. Torino routinely reimbursed themselves for payments that were never actually made to third-party vendors using their personal credit cards. They also allegedly conspired with vendors to inflate invoices and receive kickbacks from the overpayments, and claimed improper commissions and bonuses related to other corporate funds they improperly diverted in various ways.

The SEC's complaint also charges three other iPayment executives - Bronson L. Quon, John S. Hong, and Jonathan K. Skarie - with participating in the scheme and helping Shakouri and Torino falsify books and records to hide the thefts of corporate funds. Quon, Hong, and Skarie were allegedly rewarded for their assistance with misappropriated iPayment funds.

In a parallel action, the U.S. Attorney's Office for the Central District of California today announced criminal charges against Shakouri and Torino.

The SEC's complaint charges: (i) Shakouri and Torino with violating Sections 17(a)(1) and (3) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5(a) and (c), 13b2-1 and 13b2-2 thereunder, and with aiding and abetting violations of Section 17(a)(2) of the Securities Act, Sections 10(b), 13(b)(2)(A) and (B) and 15(d) of the Exchange Act and Rules 10b-5(b), 12b-20 and 15d-1 thereunder, in violation of Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act; (ii) Quon with violating Sections 17(a)(1) and (3) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5(a), (b) and (c), 13b2-1 and 13b2-2 thereunder, and with aiding and abetting violations of Section 17(a)(2) of the Securities Act, Sections 13(b)(2)(A) and (B) and 15(d) of the Exchange Act and Rules 12b-20 and 15d-1 thereunder, in violation of Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act; and (iii) Hong and Skarie with violating Sections 17(a)(1) and (3) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5(a) and (c) and 13b2-1 thereunder, and with aiding and abetting violations of Section 17(a)(2) of the Securities Act, Sections 10(b), 13(b)(2)(A) and 15(d) of the Exchange Act and Rules 10b-5(b), 12b-20 and 15d-1 thereunder, in violation of Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains plus interest, civil monetary penalties, and officer-and-director bars against all defendants.

The SEC's investigation has been conducted by Kristin M. Pauley, Melissa A. Coppola, Maureen P. King, Roseann Daniello, Diego Brucculeri, Richard Hong, Nicholas Pilgrim, Scott B. York, and Valerie A. Szczepanik in the New York office. The litigation will be led by Mr. Hong and Ms. Pauley along with John Bulgozdy, who works in the Los Angeles office. The case is being supervised by Mr. Wadhwa. The SEC appreciates the assistance of the U.S. Attorney's Office for the Central District of California, the Federal Bureau of Investigation, and the Internal Revenue Service.

SEC Complaint

 

https://www.sec.gov/litigation/litreleases/2017/lr23775.htm


Modified: 03/10/2017