Securities and Exchange Commission Suspends Trading in the Securities of Global 1 Investment Holdings Corporation
The United States Securities and Exchange Commission today announced the temporary suspension of trading in the securities of Global 1 Investment Holdings Corporation (GOIH) (Global), commencing at 9:30 a.m. EST on Feb. 2, 2009, and terminating at 11:59 p.m. EST on Feb. 13, 2009.
The Commission temporarily suspended trading in Global's securities due to a lack of current and accurate information concerning the securities, because Global is delinquent in filing periodic reports with the Commission and because of questions regarding the accuracy and completeness of Global's representations to investors and prospective investors in Global's public filings with the Commission and Global's publicly-available press releases. 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 Global.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspension, no quotation may be entered relating to Global's securities 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 Global's securities that have been subject to a trading suspension until such time as the broker or dealer 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 Assistant Regional Director M. Graham Loomis, Atlanta Regional Office, at (404) 842-7622, or by e-mail at LoomisM@sec.gov. (Rel. 34-59333)
Robert Colby, Deputy Director of Trading and Markets Division, to Leave SEC After 27 Years Of Service
The Securities and Exchange Commission announced today that Robert L.D. Colby, Deputy Director of the Division of Trading and Markets, will leave the agency in February to join the law firm of Davis Polk & Wardwell in its Washington, D.C. office.
Since coming to the Commission 27 years ago, Mr. Colby has helped lead the development and implementation of investor protection policies, rules and interpretations governing broker-dealers, securities markets, clearance and settlement systems, and transfer agents.
"I've had the honor and privilege of knowing and working with Bob Colby for more than 20 years and I've always appreciated and admired his keen intellect and expertise, and his sincere dedication to public service and investor protection," said SEC Chairman Mary Schapiro. "While we will greatly miss him and wish he would stay, Bob's legacy will long remain a vibrant part of the Commission and its work on behalf of investors."
Erik Sirri, Director of the SEC's Division of Trading and Markets, added, "For more than 27 years, Bob Colby has brought expertise, wisdom, and leadership to the work of the Division. In so many ways, we have all relied on Bob's judgment and guidance, and his departure will leave a gap in the Division that will be tremendously difficult to fill."
Mr. Colby said, "I have been truly fortunate for more than a quarter-century to serve at an agency dedicated to the interests of investors and the capital markets. I have worked with, and learned from, brilliant securities professionals who were committed to the public interest. I am proud of the work of the Division over the years, and believe it has made the securities markets safer for investors. I will miss this important work, as well as my friends and colleagues at the SEC."
Mr. Colby joined the SEC staff in 1981 as a Staff Attorney in the Division, and he was promoted to Chief Counsel in 1986 and Deputy Director in 1993. He served as Acting Director of the Division of Market Regulation from August 2005 to September 2006.
Mr. Colby has directed or participated in all of the major actions of the Division in the last decade and a half, including the major equity market changes of Regulation NMS, Regulation ATS, the Order Handling Rules and the Execution Quality Rule. Mr. Colby also helped lead efforts to implement Regulation R's bank broker exemptions; Rule 15a-6's exemption of foreign broker-dealers; the securities research analyst settlement and rules; changes to net capital rules; the short sale rules; and the credit rating agency rules. He worked closely with other financial agencies in the President's Working Group on Financial Markets, and coordinated closely with the Federal Reserve Board, Federal Reserve Bank of New York, Treasury Department, and CFTC in the recent market crises and many prior occasions.
In 2000, Mr. Colby received the Distinguished Government Executive Award (the highest government-wide award for Senior Executives), and in 1998 he received the Meritorious Government Executive Award. In 1998, Mr. Colby also received the SEC's Distinguished Service Award. Over the years, Mr. Colby received the SEC's Capital Markets Award, Chairman's Award for Excellence, Law and Policy Award, and Supervisory Excellence Award. He graduated with a B.A with highest honors from Bowdoin College, and a J.D with honors from Harvard Law School. (Press Rel. 2009-14)
Securities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Due to Global 1 Investment Holdings Corporation's Failure to Make Required Periodic Filings
On February 2, the Commission instituted public administrative proceedings against Global 1 Investment Holdings Corporation (GOIH) (Global) to determine whether the registration of each class of the company's securities should be revoked or suspended for a period not exceeding twelve months due to Global's failure to file required periodic reports.
The Division of Enforcement (Division) alleges, in its Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Order), that Global is delinquent in its required periodic filings with the Commission.
In the proceedings 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 respondent Global 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 12b-25, 13a-1 and 13a-13, are true. The judge will then determine whether registration pursuant to Exchange Act Section 12 of Global's securities should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in the proceedings issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-59334; File No. 3-13359)
Initial Decision Barring Douglas G. Frederick Declared Final
The decision of an administrative law judge barring Douglas G. Frederick from associating with any broker or dealer has become final. The initial decision found that, on March 17, 2008, the United States District Court for the Southern District Court of California permanently enjoined Frederick from violations of Sections 15(a) and 10(b) of the Exchange Act and Exchange Act Rule 10b-5. See SEC v. Tuco Trading, LLC, Civil Action No. 08 CV 00400 DMS (BLM) (S.D. Cal. Mar.17, 2008). The initial decision determined that it was in the public interest to bar Frederick from association with any broker or dealer. (Rel. 34-59338; File No. 3-12966)
James N. Stanard, Former CEO of RenaissanceRe Holdings Ltd., Held Liable for Accounting Fraud
The Commission announced that on Jan. 27, 2009, the Hon. Gerard E. Lynch of the U.S. District Court for the Southern District of New York issued an opinion and order, in a case filed by the Commission against James N. Stanard, the former chief executive officer of reinsurer RenaissanceRe Holdings Ltd. (RenRe). The court held that Stanard was liable for securities fraud; making false or misleading statements to auditors; providing false officer certifications; and violating and aiding and abetting violations of reporting, books-and-records, and internal controls provisions of the securities laws.
The Commission charged Stanard and other defendants with fraud in connection with a sham transaction that fraudulently deferred more than $26 million of RenRe's earnings from 2001 to later periods. With Stanard's knowledge, RenRe fraudulently accounted for the sham transaction as "reinsurance," and, as a result, RenRe materially understated income in 2001 and materially overstated income in 2002.
The court ruled in favor of the Commission on all of its claims, finding that Stanard "wanted to engage in a transaction that would have a particular balance sheet effect, without economic reality;" that "he knew the transaction was being structured in a way … that would obscure its significance from the auditors;" that he "knew the facts, and he knew the [applicable accounting] rule, and he knew that the facts did not square with the rule;" and that "[a]ccordingly, he acted with knowledge that RenRe's earnings would be falsely stated." The court also found that "Stanard damaged his credibility by claiming repeatedly at trial that this was intended as a reinsurance transaction, when in fact it was intended only to have an accounting effect, and not to constitute true insurance against risk."
The court found that Stanard violated Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 13a-14, 13b2-1, and 13b2-2. The court also found that Stanard aided and abetted violations of Exchange Act Sections 13(a) and 13(b)(2) and Rules 12b-20, 13a-1, and 13a-13. The court permanently enjoined Stanard from violating or aiding and abetting violations of all these provisions of the securities laws. The court also imposed a civil penalty of $100,000, but denied the Commission's request for an officer and director bar.
The Commission previously settled its claims against defendants Michael W. Cash and Martin J. Merritt and, in a related action, against RenRe. [SEC v. James N. Standard, et al., 06 Civ. 7736 (GEL) (S.D.N.Y.)] (LR-20875)
Final Judgment Entered Against Former Officer of Lumenis, Ltd. Charged in Fraudulent Scheme to Inflate Revenue
The Commission announced today that a final judgment by consent was entered on Sept. 9, 2008, by the United States District Court for the Southern District of New York against Kevin Morano, the former Chief Financial Officer of Lumenis, Ltd., in a previously-filed action alleging that Morano participated in a series of fraudulent transactions that resulted in the publication of materially false financial statements by Lumenis in 2002 and 2003. The final judgment against Morano, of Pennington, New Jersey, permanently enjoins Morano from violating the antifraud and other provisions of the federal securities laws and orders him to pay a $55,000 civil penalty. More recently, on Jan. 15, 2009, the Court determined not to enter an order barring Morano from serving as an officer or director of a publicly traded company.
The Commission's complaint, filed on April 26, 2006, alleged that from at least late 2001 through early 2003, Morano and other defendants engaged in a fraudulent scheme to inflate revenue and misrepresent other important financial metrics so as to deceive investors as to the company's true financial condition. According to the complaint, the scheme involved the improper recognition of a series of sales transactions that resulted in Lumenis' publication of materially false and misleading financial statements in six consecutive financial reporting periods, starting with those for the year ended Dec. 31, 2001. The complaint alleged that Morano allowed Lumenis to recognize revenue and profits from a number of the improper transactions while knowingly or recklessly disregarding the various conditions that should have precluded recognition.
The final judgment enjoined Morano from violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting future 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-11, and 13a-13 thereunder. The final judgment also imposed a civil penalty against Morano in the amount of $55,000. Morano consented to the entry of the final judgment without admitting or denying the allegations of the complaint. In addition, on Sept. 29, 2008, the Commission issued an Order suspending Morano from appearing or practicing before the Commission as an accountant for five years based on the Court's entry of an order enjoining Morano from violating federal securities laws.
Morano was the last remaining defendant in this matter, and the settlement with him concludes the Commission's case. Morano's two co-defendants (Lumenis and its former Chief Operating Officer, Sagi Genger) previously agreed to settle SEC charges against them. Judgments by consent were entered against them on May 2, 2006. In addition, the Commission previously issued an Order finding that an audit partner at Lumenis' former auditor engaged in improper professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission's Rules of Practice and suspended him from appearing and practicing before the Commission as an accountant for three years. Finally, the Commission issued an order on April 26, 2006 revoking the registration of Lumenis' securities. [SEC v. Lumenis Ltd., Sagi A. Genger and Kevin Morano (United States District Court for the Southern District of New York, Civil Action No. 06-3225-LAK)] (LR-20876; AAE Rel. 2929)
Court Enters Final Judgment Setting Disgorgement and Prejudgment Interest Against Stanley B. Wasser
The Securities and Exchange Commission announced that on January 21, the Honorable Daniel T.K. Hurley, United States District Court for the Southern District of Florida, entered a Final Judgment setting disgorgement and civil penalty against Stanley B. Wasser. The Final Judgment, entered by Wasser's consent, orders him to pay $387,841 in disgorgement and $33,074 in prejudgment interest. Based on Wasser's sworn statement of financial condition and other documents submitted, the Court waived all prejudgment interest and all but $64,500 of disgorgement, and did not impose a civil penalty. The order also provided for a payment plan beginning ten days after entry of the Final Judgment.
Previously, on Aug. 23, 2004, Wasser consented to the entry of a judgment permanently enjoining him from violating Sections 5(a), 5(c), 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) and Rule 10b-5 of the Securities Exchange Act of 1934. In addition, he is barred from participating in any offering of a penny stock.
For more information on earlier actions in this case, see LR-18348 (Sept. 12, 2003); LR-18810 (July 29, 2004); LR-18866 (Sept. 2, 2004); LR-18946 (Oct. 27, 2004); LR-18947 (Oct. 27, 2004); LR-18948 (Oct. 27, 2004); LR-18949 (Oct. 27, 2004); LR-19604 (March 9, 2006). [SEC v. Vector Medical Technologies, Inc., Michael H. Salit, James P. Farnell, Michael J. Farnell, David A. Zimmerman, and Stanley Wasser, Case No. 03-80858-CIV-HURLEY/LYNCH in the United States District Court for the Southern District of Florida] (LR-20877)
Commission Charges Forest Resources Management Corp. with Fraud
On February 2, the Commission filed a complaint in the United States District Court for the Southern District of New York alleging that Forest Resources Management Corp. (Forest), Chaim Justman (Justman), William J. Reilly (Reilly), and Pinchus Gold (Gold) defrauded investors, and reaped approximately $800,000 in unlawful profits by fraudulently procuring unlegended, purportedly free-trading shares of Forest stock, and then selling these shares to the investing public after Forest's false and misleading material misrepresentations and omissions about its business operations artificially increased demand for that stock.
The Commission alleges that Forest is and was a public shell company that at all relevant times had no income or assets. From June through October 2006, Reilly, Justman and Gold acted together to make material misrepresentations to Forest's transfer agent that provided false justification for the transfer agent to issue millions of restricted shares to Justman, Reilly, Gold, their nominees and others without the required restrictive legend. Justman, Reilly, Gold and their nominees were thus free to, and did, place these unlegended shares in brokerage accounts they controlled, and sold many of these shares in the open market, falsely holding them out to the public as free-trading shares, when in fact the shares were restricted stock. A registration statement was never in effect for these transactions in Forest's stock
The Commission further alleges that Justman, Reilly and Gold sold more than a million shares of the improperly unlegended shares to the investing public, after Forest, Justman, and Reilly began issuing a series of false statements to the investing public regarding Forest's assets and commercial prospects. For example, Forest, through Justman and Reilly, misrepresented in a filing with the Commission and in press releases that Forest, based on a share exchange agreement that it had purportedly entered into with a company called Opus Management Group, Ltd., held valuable timber properties in Central and South America. These statements were false because Forest had not entered into any signed agreement with Opus, and because Opus had not direct or indirect ownership of timber properties.
Reilly is a New York City attorney living in Boca Raton, Florida. Justman and Gold both live in Brooklyn, New York.
The Commission's complaint charges Forest, Justman, Reilly, and Gold with violations of Sections 5(a) and 5(c) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a) and 77e(c), and with violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 77j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. [SEC v. Forest Resources Management Corp., et al., Civil Action 09 Civ. 903 (JSR) (SDNY)] (LR-20878)
INVESTMENT COMPANY ACT RELEASES
Notices of Deregistration under the Investment Company Act
For the month of January 2009, a notice has been issued giving interested persons until Feb. 24, 2009, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
The Shepherd Street Funds, Inc. [File No. 811-8883]
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change (SR-NASDAQ-2009-003) filed by the NASDAQ Stock Market to modify Nasdaq's listing requirements related to the distribution of annual reports 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 February 2. (Rel. 34-59318)
A proposed rule change filed by NASDAQ OMX BX to adopt a policy relating to its treatment of trade reports that it determines to be inconsistent with the prevailing market (SR-BX-2009-002) 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 February 2. (Rel. 34-59323)
A proposed rule change filed by the New York Stock Exchange (SR-NYSE-2009-09) implementing an equity transaction fee for shares executed on or through the New York Block Exchange 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 February 2. (Rel. 34-59327)
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