Securities and Exchange Commission Suspends Trading in the Securities of Two Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EST on Nov. 20, 2008, and terminating at 11:59 p.m. EST on Dec. 4, 2008.
The Commission temporarily suspended trading in the securities of these two 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 and Exchange 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 for 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. 34-58981)
General Counsel Brian Cartwright Leaving SEC to Return to Private Sector
The Securities and Exchange Commission announced today that its General Counsel, Brian G. Cartwright, has informed the Commission that he plans to return to the private sector. During his tenure, he helped shape the Commission's major policy and regulatory initiatives and counseled the Commission on virtually every matter that came before it, including enforcement actions, rulemakings, appellate briefs and adjudications.
"Brian has been an extraordinary leader of the SEC over the last three years," said SEC Chairman Christopher Cox. "From the mergers of the NYSE and Euronext and NASDAQ-OMX to the creation of FINRA, the complete overhaul of executive compensation disclosure, the replacement of EDGAR with IDEA, and, more recently - in the cauldron of the credit crisis - the consideration of tough new rules on credit rating agencies, a strict ban on naked short selling, and a plan for new transparency of credit default swaps, Brian has been indispensable. Above all, he has helped the SEC set enforcement records, with over $50 billion in pending settlements for the benefit of investors. As the economy has faced historic challenges, Brian has helped shape the SEC's actions to reassure investors and stabilize the markets. He has rendered outstanding public service, and the nation's investors and markets are fortunate to have had the benefit of his wisdom and good judgment."
Mr. Cartwright said, "It has been a great privilege to have served alongside the many dedicated and talented staff members throughout the agency. I owe an eternal debt of gratitude to Chairman Cox for honoring me with the opportunity to serve in this capacity. I want particularly to express my profound appreciation to the exceptional lawyers who have served with me in the Office of the General Counsel - their boundless enthusiasm, unparalleled professionalism and unceasing devotion to the rule of law have inspired me on a daily basis."
To help assure continuity, Mr. Cartwright will remain with the Commission for a period of time, during which he will not entertain private sector employment opportunities so that he may continue to serve the Commission on the full range of matters before it.
Mr. Cartwright, 61, became General Counsel on Jan. 23, 2006. Before that, he was a partner in the international law firm of Latham & Watkins, where he had served as Global Chair of the firm's practice representing public companies and as a member of the firm's Executive Committee. He began his legal career in 1980 after earning a J.D. from Harvard Law School, where he was President of the Harvard Law Review and winner of the Sears Prize. He served as law clerk to Justice Sandra Day O'Connor of the United States Supreme Court, and prior to that, as law clerk to U.S. Court of Appeals Judge Malcolm R. Wilkey of the D.C. Circuit.
Mr. Cartwright's previous career was as an astrophysicist. Following his graduation from Yale University in 1967, he earned a Ph.D. in Physics from the University of Chicago in 1971. From 1973 to 1977 he was a Research Physicist at the Department of Physics and Space Sciences Laboratory of the University of California, Berkeley. (Press Rel. 2008-277)
Change in the Meeting: Deletion of an Item
The following item was not considered during the closed meeting on Thursday, Nov. 20, 2008: consideration of amicus participation.
At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.
Commission Orders Hearings on Registration Suspension or Revocation Against Eight 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 eight companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the eight 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. 34-58982; File No.3-13294)
In the Matter of John R. Blot (a/k/a Victor Morgan)
In the Matter of Leslie A. James (a/k/a Les James and Daryl McKinney)
On November 20, the Commission issued two respective Orders Making Findings and Imposing Remedial Sanctions against John R. Blot (a/k/a Victor Morgan) (Blot) and Leslies A. James (a/k/a Les James and Daryl McKinney) (James) pursuant to their offers of settlement in the respective administrative proceedings instituted against them on Sept. 8, 2008. The Orders find that Blot and James each pled guilty to a criminal conviction in federal district court based on their activities with respect to unregistered broker-dealer Blue Square Management, Inc. (Blue Square) and to a criminal conviction in New York state court based on their activities with respect to unregistered broker-dealer Westwood Holdings, Inc. (Westwood).
The Orders find that, according to the federal criminal information to which they pled guilty, Blot held himself out as an initial cold-caller and James held himself out as a stock trader at Blue Square from approximately January 2001 through March 2004. Using various aliases, Blot and James allegedly contacted potential investors across the country, represented that they worked for Blue Square and solicited investments in the securities of an entirely fictitious ATM management company.
The Orders also find that, according to the respective New York state complaints to which they pled guilty, Blot and James both held themselves out as employees of Westwood and solicited investments mainly in the stock of another fictitious ATM-related company. According to the complaints, approximately 90 people sent approximately $1.2 million to Westwood from December 2003 through January 2005 to purchase what they thought were legitimate stocks but which were actually stocks in fictitious companies or fake stocks in real companies.
Based on the above, the Orders bar Blot and James from association with any broker or dealer, and the Order against Blot also bars him from association with any investment adviser (Blot was associated with an investment adviser during the alleged fraud). Blot and James consented to the issuance of the respective Orders without admitting or denying any of their findings, except they admitted to the entry of the criminal convictions. (In the Matter of John R. Blot - Rel. 34-58986; IA-2808; File No. 3-13169; In the Matter of Leslie A. James - Rel. 34-58987; File No. 3-13167)
Defendant in SEC Enforcement Action Sentenced to Over 16 Years in Prison on Related Criminal Charges for Defrauding Investors in a Prime Bank Scheme
The Commission announced that on Nov. 18, 2008, the federal court in the Western District of Missouri sentenced Jack A. Calvin, of Ozark, Missouri, on criminal charges relating to his operation of a "Prime Bank" securities fraud scheme. The sentence ordered Calvin to serve 200 months in prison, to be followed by three years of supervised release, and to pay a special assessment fine in the amount of $2,083,736.41 and a mandatory special assessment of $100.
Calvin was criminally indicted on Jan. 24, 2007, by a federal grand jury convened by the United States Attorney for the Western District of Missouri. The three-count indictment alleged, among other things, that between January 1999 and March 2002, Calvin defrauded approximately 115 investors of more than $2.8 million by offering and selling securities in a purported trading program called Growth Benefit Systems (GBS) that was completely fictitious. The indictment also alleged that Calvin solicited investors by, among other things, telling them that their funds would be pooled to purchase "Prime Bank" instruments that would be traded by top-rated banks and promising returns as high as 20% per month. In fact, according to the indictment, the GBS trading program never existed and Calvin's representations to investors were therefore false. On Nov. 14, 2007, Calvin entered a guilty plea to one count of securities fraud.
The Commission had previously filed a civil injunctive action against Calvin on March 31, 2003, in the U.S. District Court in Massachusetts alleging many of the same facts charged in the criminal action. On Dec. 3, 2003, the Commission obtained a default judgment against Calvin finding him liable for securities fraud and ordering him to pay a total of $6,114,283. [U.S. v. Jack A. Calvin, 07-03002-01-CR-S-RED (W.D.Mo.); SEC v. Jack Calvin, et al., 03-10586-(MEL) (D. Mass.)] (LR-20815)
Offshore Hacker Permanently Enjoined From Future Violations of the Federal Securities Laws
The Commission today announced that on Nov. 19, 2008, Thirugnanam Ramanathan, a native of Chennai, India, and legal resident of Malaysia, consented to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In a related criminal action, Ramanathan was sentenced to a two year prison sentence followed by three years of supervised release and an order requiring him to pay $362,247 in restitution. Based on the sanctions imposed in the criminal proceedings, the defendant was not ordered to pay disgorgement or a civil penalty.
In January 2007, Ramanathan was indicted by a federal grand jury in Omaha along with his brother Chockalingam Ramanathan and Jaisankar Marimuthu, also residents of Chennai. Marimuthu and Chockalingam Ramanathan were charged with one count of conspiracy, eight counts of computer fraud, six counts of wire fraud, two counts of securities fraud and six counts of aggravated identity theft. On May 25, 2007, Thirugnanam Ramanathan was arrested in Hong Kong and extradited to the United States. On July 2, 2008, Ramanathan pleaded guilty to one count of conspiracy to commit wire fraud, securities fraud, computer fraud and aggravated identity theft. Marimuthu is currently being detained in a Hong Kong prison awaiting extradition to the U.S. following his conviction there on similar offenses but related instead to the Hong Kong stock market. Chockalingam Ramanathan remains at large.
On March 12, 2007, the SEC filed a complaint in the United States District Court for the District of Nebraska charging all three Indian nationals with participating in a fraudulent scheme to manipulate the prices of at least fourteen securities through the unauthorized use of other people's online brokerage accounts.
The Commission's complaint alleges that, between July and November 2006, Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords. Prior to intruding into these accounts, the Defendants acquired positions in the securities of at least thirteen issuers and options on shares of another issuer. Then, without the account holders' knowledge, and using the victims' own accounts and funds, the Defendants placed scores of unauthorized buy orders at above-market prices. After these unauthorized buy orders were placed, the Defendants sold the positions held in their own accounts at the artificially inflated prices netting unlawful trading profits of at least $121,500. These transactions created the appearance of legitimate trading activity and pumped up the share price of the fourteen securities. [SEC v. Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan, Civil Action No. 8:07CV94 (D. Neb.)] (LR-20816A)
Proposed Rule Changes
The NYSE Arca filed a proposed rule change (SR-NYSEArca-2008-118) amending its Schedule of Fees and Charges for Exchange Services. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58945)
The Philadelphia Stock Exchange filed a proposed rule change (SR-Phlx-2008-79) under Section 19(b)(1) of the Securities Exchange Act of 1934 to reduce the exposure time for option limit orders from three seconds to one second. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58949)
Approval of Proposed Rule Change
The Commission approved a proposed rule change (SR-NYSEArca-2008-105) submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to listing certain Derivative Products pursuant to continued listing criteria. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58948)
Accelerated Approval of Proposed Rule Changes
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-124) filed by NYSE Arca relating to listing shares of iShares Silver Trust. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58956)
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-127) submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., relating to the listing and trading of units of the United States Oil Fund, United States Heating Oil Fund, United States Gasoline Fund, United States 12 Month Oil Fund, United States 12 Month Natural Gas Fund, and the United States Natural Gas Fund. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58965)
The Commission granted accelerated approval to a proposed rule change (SR-NYSEArca-2008-111) submitted by NYSE Arca to amend NYSE Arca Equities Rule 5.2(j)(6)(v) in order to add the CBOE Volatility Index® (VIX®) futures (VIX Futures) to the definition of futures reference asset. Publication is expected in the Federal Register during the week of November 24. (Rel. 34-58968)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-CHX-2008-15) filed by the Chicago Stock Exchange relating to Participant fees and assessments 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 November 24. (Rel. 34-58966)
A proposed rule change (SR-NYSEArca-2008-129) filed by NYSE Arca amending its Schedule of Fees and Charges for Exchange Services that apply to Mid-Point Passive Liquidity 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 November 24. (Rel. 34-58967)
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