Statement of Securities and Exchange Commission Regarding The Bear Stearns Companies
The Securities and Exchange Commission today issued the following statement regarding The Bear Stearns Companies:
"The Securities and Exchange Commission has been in close contact with the Department of the Treasury, the Federal Reserve, and the Federal Reserve Bank of New York during discussions concerning an agreement by J.P. Morgan Chase & Co. to provide a secured loan facility to The Bear Stearns Companies. We will continue to work closely together in a way that contributes to orderly and liquid markets." (Press Rel. 2008-43)
Commission Institutes Settled Administrative Proceedings against Jeffrey A. Richie
On March 13, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Jeffrey A. Richie (Richie), the former president and chief executive officer of Fortress Financial Group, Inc. (Fortress). The Order finds that on Feb. 25, 2008, a final judgment was entered by consent against Richie permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-9 thereunder, in the civil action.
The Order finds that the Commission's complaint alleged Richie was the president and chief executive officer of Fortress, which during the relevant period owned Fortress Financial Securities Corp., a registered broker-dealer, and Fortress Investment Advisers, Inc., a registered investment adviser. Richie held Series 6, 7, 24, 63 and 65 licenses. The Commission's complaint alleged that, from March 2000 to April 2001, Richie sold unregistered securities in Fortress and in connection with the offering, made materially false and misleading statements and omitted to disclose material information to investors. On Feb. 25, 2008, a final judgment was entered by consent against Respondent Richie permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-9 thereunder, in the civil action entitled SEC v. Jeffrey A. Richie and Fortress Financial Group, Inc., Civil Action Number EDCV 06-63-VAP (JCRx), in the United States District Court for the Central District of California.
Based on the above, the Order bars Richie from associating with any broker or dealer, and with any investment adviser, with the right to reapply for association after three years. Richie consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-57491; IA-2721; File No. 3-12990)
Commission Declares Initial Decision as to Trautman Wasserman & Company, Inc. and Samuel M. Wasserman Final
The Commission has declared final an initial decision of an administrative law judge with respect to Trautman Wasserman & Company, Inc. (TWCO) and Samuel M. Wasserman. The law judge found that TWCO violated Section 17(a) of the Securities Act of 1933, Sections10(b), 15(c), and 17(a) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-3, 10b-5 and 17a-3. TWCO was also found to have aided and abetted and caused violations of Rule 22c-1 of the Investment Company Act of 1940. Wasserman, a co-founder and chair of the Board of TWCO, was found by the law judge to have violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. The initial decision found that the violations resulted from a scheme to defraud investment companies by making false and misleading representations and omitting material information in connection with the purchase, sale, and exchange of mutual funds. The initial decision found that it was in the public interest to revoke TWCO's registration and to bar Wasserman from association with a broker or dealer or investment adviser in a supervisory position. The initial decision ordered that TWCO disgorge the amount of its assets not exceeding $9,040,000 and that Wasserman disgorge $25,000, plus prejudgment interest. The initial decision further ordered that TWCO pay a civil money penalty in the amount of $500,000. (Rel. 34-57493; File No. 3-12559)
Commission Revokes Registration of Securities of Aero Group, Inc. for Failure to Make Required Periodic Filings
On March 14, the Commission revoked the registration of each class of registered securities of Aero Group, Inc. (Aero Group) for failure to make required periodic filings with the Commission.
Without admitting or denying the findings in the order, except as to jurisdiction, which it admitted, Aero Group consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Aero Group, Inc. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of Aero Group's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Aero Group in In the Matter of Accent Color Sciences, Inc., et al., Administrative Proceeding File No. 3-12922.
Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:
No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .
For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Accent Color Sciences, Inc., et al., Administrative Proceeding File No. 3-12922, Exchange Act Release No. 57098 (Jan. 4, 2008). (Rel. 34-57495; File No. 3-12922)
SEC Settles Financial Fraud Charges Against Former Officers of Lason, Inc.
The Commission announced that on March 7, the Honorable Arthur J. Tarnow of the U.S. District Court for the Eastern District of Michigan, entered Final Judgments against Gary L. Monroe, William J. Rauwerdink, John R. Messinger, and Robert T. Bassman, the former CEO, CFO, COO and Controller, respectively, of Lason, Inc., a document management company based in Troy, Michigan. The Final Judgments permanently enjoin the defendants from violating the antifraud and record-keeping provisions of the federal securities laws and bar the defendants from serving as officers or directors of public companies. In addition, the Final Judgment against Bassman orders him to pay disgorgement and prejudgment interest of $240,761.70, payment of all but $35,000 of which is waived on the basis of his financial condition. The defendants consented to the entry of the Final Judgments without admitting or denying the Commission's allegations against them.
The Commission's complaint alleged that during 1998 and 1999, the defendants engaged in a fraudulent scheme to overstate Lason's earnings in order to meet or exceed Wall Street expectations. The scheme culminated in the third quarter of 1999, when Lason's earnings were overstated by approximately 65%.
According to the complaint:
In 2007, in a related criminal action, Monroe and Messinger pled guilty to making false statements to a federal agency (the Commission) and Rauwerdink pled guilty to conspiracy and making false statements to a federal agency. Monroe, Messinger and Rauwerdink were sentenced to 15 months, 12 months, and 45 months imprisonment respectively. In addition, Monroe and Messinger were ordered to pay restitution of $20 million, and Rauwerdink was ordered to pay restitution of $285 million.
In related administrative proceedings, Bassman consented to an order under Rule 102(e) of the Commission's Rules of Practice suspending him from appearing or practicing before the Commission as an accountant for three years based on the entry of an injunction against him, and the Commission suspended Rauwerdink forthwith based on his criminal conviction, pursuant to Rule 102(e)(2).
The Commission wishes to thank the U.S. Attorney's Office for the Eastern District of Michigan and the Federal Bureau of Investigation for their assistance in this matter. [SEC v. Monroe et al., Civil Action No. 03-71840 (E.D. Mich.)] (LR-20495; AAE Rel. 2799)
SEC Obtains Emergency Relief against Stock Promoters and Alleges Fraud and Registration Violations against Beverage Creations, Inc.
The Commission announced today that on March 13, it obtained emergency relief against stock promoters Ryan M. Reynolds, Jason Wynn, Carlton Fleming, and their companies Bellatalia, LP, Wynn Industries, LLC, and Thomas Wade Investments, LLC based on their roles in distributing the common stock of Beverage Creations, Inc. The Honorable A. Joe Fish of the United States District Court for the Northern District of Texas entered a temporary restraining order (TRO) that temporarily enjoins defendants from violating Section 5 of the Securities Act of 1933. The TRO also temporarily enjoins defendants Jason Wynn and Wynn Industries, LLC from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, the TRO freezes the promoter defendants' assets and temporarily prohibits them from participating in any offering of penny stock.
The SEC's lawsuit, filed on March 13, also names as a defendant Beverage Creations, Inc., a Minneapolis, Minnesota company, alleging fraud as well as violations of the registration provisions of the federal securities laws. According to the complaint, Beverage Creations sold stock to the promoter defendants and then took steps to facilitate the promoters' prompt resale of the stock to the public without full disclosure. The stock promoters allegedly engaged in manipulative trading to create demand and push the price of the stock up. In addition, the SEC alleges that Jason Wynn and Wynn Industries pumped Beverage Creations' stock through promotional mailers and spam e-mail. While Wynn Industries disclosed in the mailer that it received stock, it did not disclose that it intended to sell that stock into the artificially inflated market created by its own activities. The promoters sold their shares at a profit of at least $2.4 million. Finally, the SEC alleges that, in a press release on Feb. 21, 2008, Beverage Creations falsely disclaimed any relationship to Jason Wynn or Wynn Industries, even though it had sold more than $3 million shares of stock to Wynn Industries. The SEC alleges that, by these activities, all defendants violated Section 5 of the Securities Act, and Wynn, Wynn Industries, and Beverage Creations violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In addition to the emergency relief already obtained, the SEC is seeking preliminary and permanent injunctions and civil penalties against all defendants and disgorgement of ill-gotten gains and penny stock bars from the promoter defendants. Ryan M. Reynolds and Bellatalia LLC are defendants in a prior action filed by the SEC, Securities and Exchange Commission v. Offill, et al., No. 3:07cv1643-D in the United States District Court for the Northern District of Texas (Judge Sidney A. Fitzwater). [SEC v. Ryan M. Reynolds, et al., Case No. 3-08 CV-438-G (N.D. Tex.)](LR-20496)
Proposed Rule Changes
A proposed rule change (SR-CHX-2008-03) has been filed by the Chicago Stock Exchange to amend rules relating to fingerprinting. Publication is expected in the Federal Register during the week of March 17. (Rel.34-57479)
The Philadelphia Stock Exchange filed a proposed rule change, as modified by Amendment Nos. 1 and 2 thereto (SR-Phlx-2007-69) relating to obvious errors. Publication is expected in the Federal Register during the week of March 17. (Rel. 34-57482)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the Financial Industry Regulatory Authority (SR-FINRA-2008-008) to amend Rule 1013 (New Member Application and Interview) and the manner in which membership applicants submit their applications to FINRA has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 17. (Rel. 34-57480)
A proposed rule change (SR-Amex-2008-22) filed by the American Stock Exchange to widen the spread tolerances and effectively eliminate the momentum tolerances built into the Amex's AEMI system has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 17. (Rel. 34-57483)
A proposed rule change (SR-ISE-2008-11) filed by the International Securities Exchange relating to cross orders has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 17. (Rel. 34-57484)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval to a proposed rule change (SR-Amex-2008-04) submitted by the American Stock Exchange relating to the dissemination of the index value for Index-Linked Securities. Publication is expected in the Federal Register during the week of March 17. (Rel. 34-57485)
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