U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19564 / February 14, 2006
Securities and Exchange Commission v. Lori G. Addison, Civil Action No. 06 Civ. 1101 (PAC)
Former Portfolio Manager Settles SEC Fraud Claim
The U.S. Securities and Exchange Commission today filed a settled civil injunctive action in U.S. District Court for the Southern District of New York alleging that Lori G. Addison violated the federal securities laws when she fraudulently overstated to her employer, Allied Irish Banks, p.l.c., the value of its collateralized mortgage obligation (CMO) portfolio. From December 1999 through December 2001, Addison was a vice president at Allied Irish, where she managed the bank's CMO portfolio.
The Commission's Complaint alleges that from at least April 2001 to October 2001, Addison, with help from two sales representatives from registered brokerage firms, inflated the internally recorded value of the portfolio. At the end of each month, Allied Irish sought independent valuations of the securities in its CMO portfolio. In connection with that process, and before the valuations were reported back to Allied Irish, Addison would instruct the salesmen to provide inflated prices for each security reported on by their respective firms. In virtually all cases, the salesmen reported to Allied Irish the inflated CMO prices dictated by Addison, without disclosing her role in the process.
The Complaint further alleges that, on the strength of the purported profitability of Allied Irish's CMO portfolio, Addison was allowed increased capital to make further securities purchases. Ultimately, when the discrepancy between the actual and recorded value of the portfolio came to light, Allied Irish liquidated the portfolio at a substantial loss, ceased investing in CMOs, and terminated Addison's employment.
Without admitting or denying the allegations in the Commission's Complaint, Addison has consented to the entry of a final judgment enjoining her from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment also orders Addison to pay a $15,000 civil penalty.