In the Matter of Craig J. Shaber
On April 8, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Craig J. Shaber. The Order finds that on November 2, 2007, a judgment was entered against Shaber permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) [15 U.S.C.§§ 77e(a), 77e(c) and 77q(a)] and Sections 10(b), 13(d) and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) [15 U.S.C. § 78j(b), 78m(d), and 78p(a)] and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13d-1, 16a-2 and 16a-3 promulgated thereunder [17 C.F.R. § 240.10b-5, § 240.12b-20, § 240.13a-1, § 240.13a-13, § 240.13d-1, § 240.16a-2 and § 240.16a-3], in the civil action captioned Securities and Exchange Commission v. Craig J. Shaber, et al., Civil Action No. 3:03-CV-2247 (G), in the United States District Court for the District of Texas, Dallas Division. Shaber was ordered to pay $200,000 in disgorgement relief.
The Commission's complaint alleged that from 1998 to 2002 Shaber, assisted by an associate, engaged in an elaborate scheme to manufacture and sell 18 public shell companies. To carry out the scheme, the Commission alleged that Shaber and his associate installed nominee officers and directors in dormant companies and caused the dormant companies to file false registration statements with the Commission and NASD, Inc. The Commission's complaint further alleged that Shaber concealed his beneficial ownership and control of the public shell companies in filings with the Commission and realized substantial benefits from the sale of his undisclosed beneficial interest in the entities.
Based on the above, the Order suspends Shaber from appearing or practicing before the Commission as an attorney for five years. Craig J. Shaber consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the Commission's jurisdiction over him, the subject matter of the proceedings, and the entry of the injunction against him, which are admitted. (Rel. 34-57635; File No. 3-13003)
The Commission Charges Five Former City of San Diego Officials for Fraud in Connection with City Municipal Securities Offerings
The Commission today charged Michael T. Uberuaga, the former San Diego City Manager, Edward P. Ryan, the former Auditor & Comptroller, Patricia Frazier, the former Deputy City Manager for Finance, Teresa A. Webster, the former Assistant Auditor & Comptroller, and Mary E. Vattimo, the former City Treasurer, with fraud in connection with the City's false and misleading financial statements in five 2002 and 2003 bond offerings.
According to the SEC's complaint, these five former officials knew that the city had been intentionally under-funding its pension obligations so that it could increase pension benefits but defer the costs. They were aware that the city would face severe difficulty funding its future pension and retiree health care obligations unless new revenues were obtained, pension and health care benefits were reduced, or city services were cut. They specifically knew that the city's unfunded liability to its pension plan was projected to dramatically increase, growing from $284 million at the beginning of fiscal year 2002 to an estimated $2 billion by 2009, and that the city's liability for retiree health care was another estimated $1.1 billion. The SEC's complaint alleges that the officials violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder by failing to disclose these and other material facts to rating agencies or to investors in bond offering documents and continuing disclosures. The complaint seeks a final judgment permanently enjoining the officials from further violations of the securities laws and ordering them to pay civil penalties.
The Commission's complaint, filed in federal district court in San Diego, alleges the following. Uberuaga signed the closing letter for one of the bond offerings, falsely certifying that it was accurate and did not contain any misleading statements. Ryan signed letters falsely representing that the city's audited financial statements included in the securities offerings were accurate. Frazier regularly reviewed and revised the false and misleading disclosure documents, and signed the closing letter for two of the five bond offerings. She falsely certified that the disclosures were accurate and did not contain any misleading statements. Additionally, she reviewed and made presentations to the rating agencies. Webster reviewed the city's financial statements that contained some of the false and misleading disclosures, and Vattimo participated in drafting the city's false and misleading disclosures. Additionally, Vattimo and Webster both knew that in 2003, the rating agencies had concerns about the city's growing pension obligations and that those obligations could negatively affect the city's credit rating. Nevertheless, they withheld material facts from the rating agencies.
The Commission previously entered an order sanctioning the City of San Diego for committing securities fraud by failing to disclose to the investing public important information about its pension and retiree health care obligations in the sale of its municipal bonds in 2002 and 2003. To settle the action, the city agreed to cease and desist from future securities fraud violations and to retain an independent consultant for three years to foster compliance with its disclosure obligations under the federal securities laws.
The Commission also previously filed a settled civil injunctive action against the outside auditors for the City of San Diego and its pension system, Thomas J. Saiz and Calderon, Jaham & Osborn, an accountancy corporation, for violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Saiz and Calderon, Jaham & Osborn consented to the entry of a final judgment permanently enjoining them from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordering Saiz to pay a civil penalty of $15,000. [SEC v. Michael T. Uberuaga, et al., Civil Action No. CV 08-0621 DMS (LSP) (S. D. Cal.)] (LR-20522)
Judgment of Permanent Injunction and other Relief Entered against Defendant Homeland Communications Corporation
The Commission announced that on Dec. 19, 2007, the United States District Court for the Southern District of Florida entered a Judgment of Permanent Injunction and Other Relief against Defendant Homeland Communications Corporation. The Judgment, entered by consent, enjoins the company from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Judgment also provides for disgorgement and the imposition of a civil penalty in amounts to be determined by the Court upon the Commission's motion.
The Commission commenced this action by filing its complaint on Sept. 5, 2007, against Homeland, Frances LaBarre and Joseph Yurkin, among others, alleging the defendants violated the registration and antifraud provisions of the federal securities laws. [SEC v. Homeland Communications Corporation, et al., Case No. 07-80802-CIV-MARRA/JOHNSON (S.D. Fla.)] (LR-20523)
Immediate Effectiveness of Proposed Rule Changes
The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2008-01) under Section 19(b)(1) of the Exchange Act, which proposed rule change became effective upon filing, to amend the rules with regard to the formula used within the stock borrow program. Publication is expected in the Federal Register during the week of April 7. (Rel. 34-57609)
A proposed rule change (SR-FINRA-2008-012) filed by the Financial Industry Regulatory Authority (f/k/a National Association of Securities Dealers, Inc.) relating to technical amendments to NYSE Incorporated Rule Interpretation 344/02 (Research Analysts and Supervisory Analysts) has become effective under Section 19(b)(3)(A). Publication is expected in the Federal Register during the week of April 7. (Rel. 34-57622)
A proposed rule change filed by NYSE Arca to amend the Schedule of Fees and Charges for Exchange Services that apply to orders submitted by ETP Holders (SR-NYSEArca-2008-38) 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 April 7. (Rel. 34-57624)
A proposed rule change filed by the American Stock Exchange relating to rebates to specialists for options transaction fees resulting from Linkage P/A Orders (SR-Amex-2008-28) 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 April 7. (Rel. 34-57625)
A proposed rule change and Amendment No. 1 thereto filed by the New York Stock Exchange (SR-NYSE-2008-19) to amend NYSE Rule 46 to permit the appointment of qualified Exchange employees to act as Floor Governors 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 April 7. (Rel. 34-57627)
Accelerated Approval of Proposed Rule Change
The Commission granted accelerated approval of a proposed rule change filed by NYSE Arca (SR-NYSEArca-2008-28) to trade pursuant to unlisted trading privileges shares of the Bear Stearns Current Yield Fund. Publication is expected in the Federal Register during the week of April 7. (Rel. 34-57626)
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