SEC News Digest

COMMISSION ANNOUNCEMENTS

Securities and Exchange Commission Suspends Trading in Seven Issuers for Failure to Make Required Periodic Filings

The Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on Sept. 15, 2008, and terminating at 11:59 p.m. EDT on Sept. 26, 2008.

• B.B. Walker Co. (WLKBQ)
• Bellatrix International, Inc. (BLLX)
• Belmont Resources, Inc. (BEAAF)
• Beres Industries, Inc. (BERS)
• Best Products Co., Inc. (BESOQ)
• Bethlehem Corp. (BEHP)
• Bogue Electric Manufacturing Co. (n/k/a Bogue International, Inc.) (BGUE)

The Commission temporarily suspended trading in the securities of these seven issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.

Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of these companies that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities a nd Exc hange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need f or prompt enforcement action.

If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-58539)

Statement of U.S. Securities and Exchange Commission

On September 12, the U.S. Securities and Exchange Commission issued the following statement:

Senior representatives of major financial institutions are meeting at the Federal Reserve Bank of New York Friday evening to discuss recent market conditions. Also participating in the meeting are Treasury Secretary Henry M. Paulson, Jr., U.S. Securities and Exchange Commission Chairman Christopher Cox, and Federal Reserve Bank of New York President Timothy F. Geithner. (Press Rel. 2008-196)

Statement Regarding Recent Market Events and Lehman Brothers (Updated)

The decision by Lehman Brothers Holdings Inc. to file for protection under Chapter 11 of the bankruptcy laws is expected to lead to the winding down of Lehman Brothers Inc., its U.S. regulated broker-dealer, outside of bankruptcy. The accounts of Lehman's U.S. retail securities customers are with the broker-dealer. In cases such as this, Lehman Brothers' customers will benefit from their extensive protections under SEC rules, including segregation of customer securities and cash as well as insurance by the Securities Investor Protection Corporation. These safeguards are designed to ensure that a broker-dealer's customers will be protected.

In the weeks ahead, SEC staff who have been on-site at the U.S. broker-dealer will remain in place to oversee the orderly transfer of customer assets to one or more SIPC-insured brokerage firms. The holding company bankruptcy filing does not affect in any way the SIPC protection applicable to the firm's customers.

The SEC is also coordinating with overseas regulators to protect Lehman's customers and to maintain orderly markets.
"For several days, we have worked closely with regulators around the world including the FSA in the United Kingdom, the BaFin in Germany, and the FSA in Japan, as well as our counterparts in other markets around the world, to coordinate our actions in the interest of orderly markets," said SEC Chairman Christopher Cox. "In doing so we have also worked closely with the Treasury and the Federal Reserve and market participants. We are committed to using our regulatory and supervisory authorities to reduce the potential for dislocations from Lehman's unwinding, and to maintain the smooth functioning of the financial markets."
In furtherance of these objectives, the SEC is focused on ensuring that customers of the U.S. broker-dealer, which is not part of the bankruptcy filing, remain protected through, among other means, enforcing continued compliance with the SEC net capital and customer asset protection rules, and with SEC requirements that the U.S. broker-dealer conduct its affairs so as to minimize the effect of the holding company's bankruptcy on customers, and that it ensure access to customer cash and securities.

In the meantime, Lehman Brothers Holdings Inc. will continue to operate while the bankruptcy process facilitates the reconciliation of claims and the realization of value from its assets in an orderly fashion.
Customers of Lehman Brothers Inc. may contact the SEC's Office of Investor Education and Advocacy for individual assistance at help@sec.gov. (Press Rel. 2008-198)

SEC Launches Voluntary Online Filing System for Form D to Reduce Burden on Smaller Companies

Securities and Exchange Commission today began accepting filings of Form D through the Internet as part of the agency's overall efforts to reduce unnecessary paper filings and regulatory burdens, particularly for smaller companies.

The new rules providing for online filing and simplification of Form D notices were approved by Commission at the end of last year. Form D filings are made mostly by smaller companies, and notify the SEC of sales of securities in private and certain other non-registered offerings of securities. Many states also require Form D notice filings.

"With electronic filing, the information available in Form D filings will now be far more accessible to all users," said John White, Director of the Division of Corporation Finance. "We look forward to hearing from voluntary filers over the next six months about their experiences as we prepare to move to the mandatory system next spring."

The SEC's new Form D online filing system features simplified and updated information requirements and is voluntary until March 16, 2009. Companies and funds required to file Form D notices may continue to file them on paper until that date, following either the old or new information requirements. Guidance on the Form D filing process with the new system as well as more information about filing and amending a Form D notice are available on the SEC Web site.

 Form D filers are encouraged to use the voluntary system and inform SEC staff about their experiences. The SEC staff expects adjustments will be made to the system to increase its utility and user-friendliness before the online filing of Form D becomes mandatory. Filers can report their experiences to the SEC's Office of Small Business Policy in its Division of Corporation Finance at (202) 551-3460 or smallbusiness@SEC.gov.

The SEC staff is continuing to work with the North American Securities Administrators Association (NASAA) to link its Form D filing system with a system built by state securities regulators that would accept state Form D filings. No timetable has been adopted for linking the two systems. (Press Rel. 2008-199)

ENFORCEMENT PROCEEDINGS

In the Matter of Mark David Shapiro

On September 12, 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 (the Order) in the above-referenced matter against Mark David Shapiro (Shapiro). The Order finds that, on Sept. 15, 2005, the Commission filed a complaint against Shapiro in SEC v. Mark David Shapiro, et al. (Civil Action No. 4:05-CV-00364), in the United States District Court for the Eastern District of Texas, Sherman Division. It also finds that, on August 15, 2008, the Court entered an order permanently enjoining Shapiro, by consent, fr om fut ure violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. Shapiro was also ordered to pay a $135,000 civil money penalty.

Based on the above, the Order suspends Shapiro from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after three years from the date of the entry of the Order. Shapiro consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the entry of the order of permanent injunction against him. (34-58534; AAE Rel. 2876; File No. 3-13190)

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies for Failure to Make Required Periodic Filings

On September 12, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:

• Nicole Industries, Inc.
• Outer Banks Investments, Inc.
• Point Arena Group, Inc.
• Russian Athena, Inc.
• Skyframes, Inc. (n/k/a Helsinki Scientific, Inc.) (CIK No. 919602)
• Skyframes, Inc. (CIK No. 1097900)
• Sonoma Marine Technologies, Inc.

In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an init ial de cision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58535; File No. 3-13191)

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Nine Public Companies for Failure to Make Required Periodic Filings

On September 12, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of nine companies for failure to make required periodic filings with the Commission:

• Curecom.com, Inc.
• Edlam Acquisition Corp.
• Five Star Broadband Wireless, Inc.
• LeBlanc & Associates, Inc.
• New River Investments, Inc.
• Olympus International, Inc.
• Provence Capital Corp.
• Vertical Solutions, Inc.
• Waistech International, Inc.

In this Order, the Division of Enforcement (Division) alleges that the nine issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an i nitial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58537; File No. 3-13192)

Commission Revokes Registration of Securities of SunBank Resorts International, Inc. (f/k/a Kaufman & Hurtz, Inc.) for Failure to Make Required Periodic Filings

On September 15, the Commission revoked the registration of each class of registered securities of SunBank Resorts International, Inc. (f/k/a Kaufman & Hurtz, Inc.) (SunBank Resorts) 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, SunBank Resorts 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 SunBank Resorts International, Inc. (f/k/a Kaufman & Hurtz, 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 SunBank Resorts's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against SunBank Resorts in In the Matter of Struthers Industries, Inc., et al., Administrative Proceeding File No. 3-13154.

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 Struthers Industries, Inc., et al., Administrative Proceeding File No. 3-13154, Exchange Act Release No. 58447 (Sept. 2). (Rel. 34-58538; File No. 3-13154)

Commission Orders Hearings on Registration Suspension or Revocation Against Seven Companies for Failure to Make Required Periodic Filings

In conjunction with today's trading suspension, the Commission today also instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of seven companies for failure to make required periodic filings with the Commission:

In the Matter of B.B. Walker Co., et al., Administrative Proceeding File No. 3-13193

• B.B. Walker Co. (WLKBQ)
• Bellatrix International, Inc. (BLLX)
• Belmont Resources, Inc. (BEAAF)
• Beres Industries, Inc. (BERS)
• Best Products Co., Inc. (BESOQ)
• Bethlehem Corp. (BEHP)
• Bogue Electric Manufacturing Co. (n/k/a Bogue International, Inc.) (BGUE)

In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decisi on not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58540; File No. 3-13193)

Commission Revokes Registration of Securities of Reorganized Sale OKWD, Inc. for Failure to Make Required Periodic Filings

On September 15, the Commission revoked the registration of each class of registered securities of Reorganized Sale OKWD, Inc. (Reorganized Sale) 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, Reorganized Sale 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 Reorganized Sale OKWD, 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 Reorganized Sale's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against Reorganized Sale in In the Matter of Atomic Burrito, et al., Administrative Proceeding File No. 3-13138.

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 Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Atomic Burrito, et al., Administrative Proceeding File No. 3-13138, Exchange Act Release No. 58382 (August 19, 2008). (Rel. 34-58541; File No. 3-13138)

In the Matter of Mark J.P. Boucher

On September 15, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Mark J.P. Boucher. The Order finds that the Commission filed a complaint against Boucher in SEC v. Mark J.P. Boucher, et al. (Civil Action No. C 08-4088-MEJ) in the United States District Court for the Northern District of California. On September 4, 2008, the court entered a final judgment against Boucher, by consent, permanently enjoining him from future violations of Sections 17(a) and 17(b) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

Based on the above, the Order bars Mark J.P. Boucher from association with any investment adviser, with the right to reapply for association after five years. Boucher consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. IA-2776; File No. 3-13195)

In the Matter of Karting International, Inc

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Karting International, Inc., Administrative Proceeding No. 3-13105. The Order Instituting Proceedings alleged that Karting International, Inc., KDGsports.com, Inc., Keystone Mortgage Fund, Keystone Mortgage Fund II, and KwikWeb.com, Inc., each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

The Default Order finds these allegations to be true and revokes the registrations of each class of registered securities of all five Respondents pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-58542; File No. 3-13105)

Delinquent Filer's Stock Registration Revoked

The registration of the stock of Respondent World Container Corp. has been revoked. It had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, it violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocation was ordered in an administrative proceeding before an administrative law judge. (Rel. 34-58543; File No. 3-13133)

In the Matter of Mark A. Peterson (CPA)

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Four Public Companies for Failure to Make Required Periodic Filings

Today the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of four companies for failure to make required periodic filings with the Commission:

• Webservices Innovations, Ltd.
• Westar Financial Services, Inc.
• Winsor & Eton Golf Concepts, Inc.
• Wiskers Acquisition Corp.

In this Order, the Division of Enforcement (Division) alleges that the four issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58545; File No. 3-13196)

SEC Files Enforcement Action Against Recidivist Stock Salesman

On September 12, the Commission filed a civil injunctive action in federal district court for the Southern District of Florida against Larry W. Kerschenbaum for violating a 2004 Commission administrative order prohibiting him from selling penny stocks. The Commission's complaint alleges Kerschenbaum violated the order by soliciting investors to purchase shares in a now defunct Fort Lauderdale-based penny stock company.

According to the complaint, in June 2004, an Administrative Law Judge entered an order by default against Kerschenbaum barring him from participating in any offering of penny stock. The judge imposed the bar against Kerschenbaum based on his 2003 conviction for conspiring to commit securities fraud by agreeing to bribe brokers to artificially increase the stock price of a public company.

The Commission's complaint alleges that after the penny stock bar was issued, Kerschenbaum accepted employment with Great Cities Media, Inc. (Great Cities), a company purportedly in the business of producing high-definition television shows. It further alleges that, throughout 2005, Great Cities conducted a private offering of its common stock which was a penny stock. According to the complaint, Kerschenbaum participated in the offering in contravention of the penny stock bar by soliciting investors to buy the Great Cities' securities.

The complaint alleges that, in January 2008, after a five-day hearing, another District Court Judge within the Southern District of Florida revoked Kerschenbaum's probation, which included a provision prohibiting him from selling securities. The Court found that Kerschenbaum violated the terms of his probation by being part of a team that solicited investors in Great Cities from at least January to December 2005. In addition to revoking his probation, the Court sentenced Kerschenbaum to twenty-one months in prison.

The Commission's complaint charges Kerschenbaum with violating Section 15(b)(6)(B)(i) of the Securities Exchange Act of 1934. The complaint seeks a permanent injunction, a judicial penny stock bar, disgorgement and a civil money penalty against Kerschenbaum. [SEC v. Larry W. Kerschenbaum, Case No. 08-61452-CIV-ALTONAGA/BROWN (S.D. Fla.](LR-20714)

SEC Charges American Italian Pasta and Senior Executives with Accounting Fraud

The Commission today filed several actions charging Kansas City-based American Italian Pasta Company (AIPC), and its senior executives with securities fraud and other violations of the federal securities laws. The Commission's complaints allege that, from its fiscal year 2002 through the second quarter of its fiscal year 2004, AIPC, AIPC's former chief executive officer Timothy S. Webster, former chief financial officer Warren B. Schmidgall, and former executive vice president of corporate development and strategy David E. Watson, engaged in a fraudulent scheme to mislead the investing public about the growth of the company's earnings and to increase artificially the company's stock price. According to the Commission's complaints, the fraudulent accounting and other errors arising from inadequate internal controls, resulted in the overstatement of AIPC's pre-tax income for the relevant period by approximately $59 million, or 66 percent.

In a related criminal action, the U.S. Attorney's Office for the Western District of Missouri announced today that it resolved its investigation of AIPC and that Webster and Schmidgall both pled guilty to one count of conspiracy to commit wire fraud for their roles in concealing AIPC's true financial condition and filing materially false reports with the Commission. [United States v. Timothy S. Webster, 08-00259-01-Cr-W-DGK (W.D. Mo.); United States v. Warren B. Schmidgall, No. 08-00260-01-Cr-W-DW.] AIPC agreed to resolve the criminal investigation of the company by paying a $7.5 million monetary penalty.

The Commission's complaints, filed in federal district court in the Western District of Missouri, allege that Webster, Schmidgall, and Watson engaged in a variety of fraudulent accounting from AIPC's fiscal year 2002 through the second quarter of its fiscal year 2004 to inflate AIPC's reported earnings. This caused period costs to be fraudulently capitalized in order to meet AIPC's external targets. The Commission further alleges that AIPC and its former executives manipulated AIPC's trade promotion accounting; failed to write off obsolete or missing spare parts; structured fraudulent round-tripping of cash transactions; and recorded false receivables.

The Commission additionally charged AIPC's former controller Stephanie S. Ruskey in a civil action in federal court. The Commission alleges that Ruskey knew or was reckless in not knowing that AIPC's quarterly and annual financial statements were misleading, and alleges that she signed representation letters to AIPC's auditor that falsely stated that the financial statements were prepared in accordance with generally accepted accounting principles.

Without admitting or denying the allegations in the Commission's complaints, AIPC, Webster, and Ruskey agreed to settle the matters. AIPC consented to a final judgment enjoining it from violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13.
Webster consented to a final judgment enjoining him from violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13, imposing disgorgement of $751,978, plus prejudgment interest of $32,610; imposing a $250,000 civil money penalty; and barring him from serving as an officer or director of a public company.

Ruskey consented to a final judgment enjoining her from violations of Rule 13b2-1 and 13b2-2 under the Exchange Act, and for her aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13, and imposing a $25,000 civil money penalty.

The Commission's case against Schmidgall and Watson is ongoing.

The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Western District of Missouri and the Kansas City Field Office of the Federal Bureau of Investigation. [SEC v. American Italian Pasta Company, Civil Action No. 4:08-CV-00675 (W.D. Mo.); SEC v. Timothy S. Webster, Civil Action No. 4:08-CV-00674 (W.D. Mo.); SEC v. Warren B. Schmidgall and David E. Watson, Civil Action No. 4:08-CV-00677 (W.D. Mo.); SEC v. Stephanie S. Ruskey, Civil Action No. 4:08-CV-00676 (W.D. Mo.)] (LR-20715; AAE Rel. 2877)

SEC Obtains Permanent Injunction Against Stock Based Loan Operators

The Securities and Exchange Commission today announced that On September 11 U.S. District Judge Edmund A. Sargus, Jr. permanently enjoined Michael S. Spillan and his wife, Melissa K. Spillan, from future violations of the antifraud provisions of the Securities Exchange Act of 1934. The Spillans are former principals of One Equity Corporation, Triangle Equities Group, Inc., Victory Management Group, Inc. and Dafcan Finance, Inc. (the One Equity Companies). The Court shall set the amount of disgorgement and civil penalties owed by the Spillans at a future date upon motion of the Commission. The Spillans consented to the entry of the judgments without admitting or denying the allegations in the Commission's complaint.

The Commission's complaint, filed on July 10, 2008, alleges that, since at least 2004, the Spillans and the One Equity Companies raised approximately $70 million from 125 borrowers by holding themselves out as stock based lenders, underwriters or administrators. According to the complaint, the defendants raised the money by inducing borrowers to transfer ownership of millions of shares of publicly traded stock to them as collateral for purported non-recourse loans. The defendants promised to return the shares to borrowers who repaid their loans. In fact, the defendants generally sold all of the stock received from borrowers in order to fund each loan. Unbeknownst to borrowers, after funding each loan, the Spillans did not set aside any cash reserves to repurchase and return shares to borrowers who repaid their loans. Instead, they used all of the money to pay expenses, including over $1 million in salaries and benefits to themselves.

On July 17, 2008, the Court entered preliminarily injunctions against Michael and Melissa Spillan and appointed a receiver over the One Equity Companies. On August 25, the Court expanded the receiver's authority to include the Spillans' personal bank accounts. [SEC v. One Equity Corp., et al., Civil Action No. 08-CV-667 USDC, S.D. Ohio(LR-20716)

SEC Announces $7.2 Million Settlement With Former KB Home Chairman And CEO for Stock Option Backdating and Self-Dealing

The Commission today filed settled civil fraud charges against Bruce E. Karatz, the former chairman and CEO of Los Angeles homebuilder KB Home, Inc., for his participation in a multi-year scheme to backdate stock options to himself and other KB Home officers and employees.

The Commission's complaint, filed in federal court in Los Angeles, alleges that from at least 1999 through 2005, Karatz enriched himself and others at KB Home by using hindsight to pick advantageous grant dates for KB Home's annual stock option grants. On many occasions, the grant dates coincided with dates of low monthly closing prices for the company's common stock. In addition, the complaint alleges that Karatz continued to use hindsight for stock option grant dates even after the Sarbanes-Oxley Act of 2002 imposed stricter reporting requirements on officers of public companies. The complaint also alleges that, because of the backdating scheme, KB Home filed periodic reports and proxy statements with the SEC that inaccurately stated that KB Home granted options at fair-market-value on the date of the grant. Karatz received backdated annual stock option awards amounting to 2,860,000 shares of KB Home stock and profited more than $6 million from exercising many of these options.

Karatz agreed to settle the Commission's charges without admitting or denying the allegations in the complaint. Under the settlement, Karatz consented to the entry of an order that (i) permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1, 14a-9, and 16a-3 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; (ii) requires him to pay $6,714,819.27 in disgorgement and interest and a civil penalty of $480,000; and (iii) bars him from serving as an officer or director of a public company for five years.

[SEC v. Bruce E. Karatz, United States District Court for the Central District of California, Civil Action No. CV 08-06012 AHM (FFMx)] (LR-20717; AAE Rel. 2879)

Judgment Entered Against British Trader Charged With Insider Trading; Trader Agrees to Pay Almost $3.9 Million

On September 12, the Hon. Dana M. Sabraw of the United States District Court for the Southern District of California entered a final judgment against Taher Suterwalla, a resident of the United Kingdom, in the insider trading case pending against him. The case concerned allegations that Suterwalla profited illegally when, in the weeks leading up to the July 14, 2006 announcement that Petco Animal Supplies, Inc. ("Petco") had agreed to be purchased by two private equity firms, he purchased and sold Petco call options and spread bets on the price of Petco securities. Without admitting or denying the allegations of the Commission's complaint, Suterwalla agreed to disgorge $3,082,520 in profits gained as a result of the conduct alleged in the complaint, with prejudgment interest thereon in the amount of $327,367.90, and to pay a civil penalty in the amount of $484,100. In addition, Suterwalla consented to the entry of an order that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

On July 18, 2006, pursuant to the Commission's emergency request, the Court entered a temporary restraining order freezing proceeds from sales by certain then-unknown purchasers of call options for Petco common stock. On August 1, 2007, the Commission filed an amended complaint charging Suterwalla with insider trading in the securities of Petco, and on November 2, 2007, the Commission filed a second amended complaint which contained additional details about the alleged fraudulent transactions and which added allegations that Suterwalla had destroyed relevant evidence. The second amended complaint alleged that in the three weeks preceding Petco's July 2006 announcement, Suterwalla purchased Petco call options from a Swiss financial institution, which filled Suterwalla's orders by purchasing Petco call options in the United States. The second amended complaint further alleged that Suterwalla purchased from brokerage houses in the United Kingdom certain derivative instruments known as spread bets, which caused the spread bet brokers to purchase Petco common stock and options in the United States.

The Commission acknowledges the Chicago Board Options Exchange, the United Kingdom Financial Services Authority, the Swiss Federal Banking Commission, and the Ontario Securities Commission for their assistance in this matter. [SEC  v. TAHER SUTERWALLA, No. 06-CV-1446 DMS (LSP) (S.D. Cal.)] (LR-20718)

INVESTMENT COMPANY RELEASES

Rafferty Asset Management, LLC, et al.

A notice has been issued giving interested persons until October 3, 2008, to request a hearing on an application filed by Rafferty Asset Management, LLC and Direxion Shares ETF Trust for an order to permit (a) an open-end management investment company and its series to issue shares that can be redeemed only in large aggregations; (b) secondary market transactions in shares of the series to occur at negotiated prices; (c) dealers to sell the series' shares to purchasers in the secondary market unaccompanied by a prospectus when prospectus delivery is not required by the Securities Act of 1933, (d) certain series to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption and; (e) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of large aggregations of shares. (IC-28379 - September 12, 2008)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-CBOE-2008-92) filed by the Chicago Board Options Exchange relating to Hybrid Electronic Quoting Fee has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected to be made in the Federal Register during the week of September 15. (Rel. 34-58513)

A proposed rule change (SR-Amex-2008-69) filed by the American Stock Exchange relating to the listing and trading of options on Section 107 securities has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58516)

A proposed rule change (SR-CBOE-2008-84) filed by the Chicago Board Options Exchange to amend Rule 8.3A pertaining to class quoting limits has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected to be made in the Federal Register during the week of September 15. (Rel. 34-58519)

A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2008-83) to resume the operation of NYSE Rule 123D(3) with respect to trading in the securities of Fannie Mae and Freddie Mac 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 September 15. (Rel. 34-58522)

Accelerated Approval of Proposed Rule Changes

The Commission has issued a notice of filing and order granting accelerated approval of a proposed rule change filed by NYSE Arca (SR-NYSEArca-2008-93) to list and trade the iShares Lehman Agency Bond Fund. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58502)

The Commission granted accelerated approval of a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2008-85), through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to the listing and trading of shares of the PowerShares Active U.S. Real Estate Fund. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58512)

Proposed Rule Change

Pursuant to Rule 19b-4 of the Securities Exchange Act of 1934, BATS Exchange has filed a proposed rule change (SR-BATS-2008-002) to amend BATS Rule 11.5 to provide for Modified Directed Intermarket Sweep Orders, a new order type. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58521)

Approval of Proposed Rule Changes

The Commission granted approval to a proposed rule change (SR-NASDAQ-2008-025) submitted by the NASDAQ Stock Market to establish a system for the purchase of Equity Value Indicator securities. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58509)

The Commission approved a proposed rule change (File No. SR-FINRA-2008-039) submitted by the Financial Industry Regulatory Authority to adopt new FINRA Rules 5190 and 6470 in the Consolidated FINRA Rulebook, amend NASD Rules 4200A, 4619A, and 6540, delete Incorporated NYSE Rule 392 and adopt NASD Rule 2710 (Corporate Financing Rule - Underwriter Terms and Arrangements) except for paragraphs (b)(10) and (11) as FINRA Rule 5110 in the Consolidated FINRA Rulebook with technical changes to the rule text. Publication is expected in the Federal Register during the week of September 22. (Rel. No. 34-58514)

The Commission approved a proposed rule change (SR-NYSE-2008-61) submitted by the New York Stock Exchange to amend NYSE Rule 104(e) (Dealings by Specialists) to modify the conditions governing the specialists' use of the price improvement trading message pursuant to NYSE Rule 104(b)(i)(H). Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58517)

The Commission approved a proposed rule change submitted by the Financial Industry Regulatory Authority pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 (SR-FINRA-2008-040) to Eliminate the Requirement to Report Yield to TRACE and for FINRA to Calculate and Disseminate a Standard Yield. Publication is expected in the Federal Register during the week of September 15. (Rel. 34-58520)

Proposed Minor Rule Violation Plan

BATS Exchange filed with the Securities and Exchange Commission a proposed Minor Rule Violation Plan (File No. 4-568) pursuant to Section 19(d)(1) under the Securities Exchange Act of 1934. Publication is expected to be made in the Federal Register during the week of September 15. (Rel. 34-58485)

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http://www.sec.gov/news/digest/2008/dig091508.htm