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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2009-32
February 19, 2009


Acting General Counsel Andrew Vollmer to Leave SEC

On February 18, the Securities and Exchange Commission announced that Andrew N. Vollmer, Acting General Counsel, plans to leave the Commission and return to the private sector.

Mr. Vollmer joined the SEC staff in July 2006 as Deputy General Counsel, and held that position until becoming Acting General Counsel in January 2009. As Deputy General Counsel for Litigation and Adjudication, he had responsibility within the Office of the General Counsel for enforcement matters, appellate cases, and adjudications.

He also was involved in a variety of Commission initiatives, such as:

  • The proposal and adoption of rules promoting investor protection by addressing the brokerage activities of banks.
  • The proposal and adoption of a rule to protect fund investors from fraudulent adviser conduct during the time of their investments.
  • Rules to provide investors with financial information on public companies using interactive data.
  • The SEC's memoranda of understanding with the Federal Reserve and the Commodity Futures Trading Commission.

"The Commission has benefited from Andy's commitment to investor protection, rigorous legal analysis, and concern for fairness," said SEC Chairman Mary Schapiro. "The nation's investors and markets are fortunate to have had his sound advice and judgment."

Mr. Vollmer said, "I am grateful for having had the opportunity to work with the careful and dedicated lawyers in the Office of the General Counsel, the Commissioners, and all of the committed professionals throughout the agency."

Before joining the SEC, Mr. Vollmer had been in private law practice. (Press Rel. 2009-28)

Robert Khuzami Named SEC Director of Enforcement

Securities and Exchange Commission Chairman Mary L. Schapiro announced today that former federal prosecutor Robert Khuzami has been named Director of the Division of Enforcement.

Previously, Mr. Khuzami served as a federal prosecutor for 11 years with the United States Attorney's Office for the Southern District of New York. As Chief of that Office's Securities and Commodities Fraud Task Force for three years, Mr. Khuzami prosecuted numerous complex securities and white-collar criminal matters, including those involving insider trading, Ponzi schemes, accounting and financial statement fraud, organized crime infiltration of the securities markets, and IPO and investment adviser fraud. Mr. Khuzami most recently served as General Counsel for the Americas at Deutsche Bank AG.

"I'm pleased to have Rob join the SEC in such an important role at this crucial time," said Chairman Schapiro. "As we work to improve investor confidence in the markets, our enforcement efforts are vital. Throughout his career, Rob has demonstrated an unwavering commitment to prosecuting wrongdoers and protecting citizens. As a former federal prosecutor, Rob is well-suited to lead the SEC's Division of Enforcement as we continue to crack down on those who would betray the trust of investors."

Mr. Khuzami said, "As head of the SEC's Division of Enforcement, the staff and I will relentlessly pursue and bring to justice those whose misconduct infects our markets, corrodes investor confidence and has caused so much financial suffering. I am honored to join Chairman Schapiro, the Commissioners and the dedicated SEC staff in this critical effort."

Under Mr. Khuzami's supervision, the Task Force brought numerous noteworthy securities fraud prosecutions. In U.S. v. Lino and related cases, more than 100 defendants were arrested in an undercover sting operation, which constituted the largest simultaneous arrest in a securities fraud case in Department of Justice history. Charges in the cases included racketeering, securities fraud, a scheme to defraud union pension plans, extortion, and the solicitation of murder. The case concerned the publicly traded securities of 19 companies and the private placements of 16 other companies. Those charged included 11 members and associates of all five New York City crime families.

In another case, U.S. v. Bennett, 11 defendants were convicted of running a Ponzi scheme for fraudulently selling more than $1.0 billion worth of equipment leases and related debt instruments to more than 12,000 investors. Defendant Patrick Bennett was sentenced to 30 years in prison.

During his tenure with the Task Force, Mr. Khuzami significantly increased coordination and joint prosecution of securities fraud cases in the New York City area, including among the New York County District Attorney, the U.S. Attorney's Office for the Eastern District of New York, and the New York State Attorney General, as well as the SEC and FINRA.

Mr. Khuzami also prosecuted the "Blind Sheik" Omar Ahmed Ali Abdel Rahman in what was then the largest terrorism trial in U.S. history. Following a 10-month trial, 10 defendants were convicted for operating an international terrorist organization responsible for, among other things, the 1993 bombing of the World Trade Center, the assassination of Meir Kahane (the founder of the Jewish Defense League), and planning the virtually simultaneous bombing attacks on the FBI's New York Headquarters, the Lincoln and Holland Tunnels and the United Nations Headquarters. Mr. Khuzami also supervised various aspects of the initial investigations in New York following the terrorist attacks of Sept. 11, 2001.

Mr. Khuzami has been awarded the Attorney General's Exceptional Service Award (1996), given for "extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation." He also has been awarded the Federal Law Enforcement Foundation's Federal Prosecutor Award (1997), and the Henry L. Stimson Award for Outstanding Public Service (2001).

Since 2004, Mr. Khuzami, 52, has been General Counsel for the Americas at Deutsche Bank. In that role, he has supervised more than 100 lawyers supporting the bank's various businesses in the Americas, and has overseen Americas-based litigation and regulatory enforcement actions. From 2002 to 2004, he served as Global Head of Litigation and Regulatory Investigations for the bank.

Mr. Khuzami served as a law clerk for the Honorable John R. Gibson of the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Mo. He received his J.D. from the Boston University School of Law, and graduated magna cum laude from the University of Rochester, where he was elected to Phi Beta Kappa. (Press Rel. 2009-31)


Greg Steven Kaplan, CPA Reinstated to Appear and Practice Before the Commission as an Accountant Responsible for the Preparation or Review of Financial Statements Required to be Filed with the Commission

Pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice, Greg Steven Kaplan, CPA has applied for and been granted reinstatement of his privilege to appear and practice before the Commission as an accountant responsible for the preparation or review of financial statements required to be filed with the Commission. Mr. Kaplan was suspended from appearing or practicing before the Commission on Oct. 21, 1996. His reinstatement is effective immediately. (Rel. 34-59422; AAE Rel. 2938; File No. 3-9171)

UBS Agrees to Pay $200 Million to Settle SEC Charges for Violating Registration Requirements

On February 18, the SEC filed an enforcement action against UBS AG, charging the firm with acting as an unregistered broker-dealer and investment adviser.

The SEC's complaint, filed in the U.S. District Court for the District of Columbia, alleges that UBS's conduct facilitated the ability of certain U.S. clients to maintain undisclosed accounts in Switzerland and other foreign countries, which enabled those clients to avoid paying taxes related to the assets in those accounts. UBS agreed to settle the SEC's charges by consenting to the issuance of a final judgment that permanently enjoins UBS and orders it to disgorge $200 million.

As alleged in the SEC's complaint, from at least 1999 through 2008, UBS acted as an unregistered broker-dealer and investment adviser to thousands of U.S. persons and offshore entities with United States citizens as beneficial owners. UBS had at least 11,000 to 14,000 of such clients and held billions of dollars of assets for them. The U.S. cross-border business provided UBS with revenues of $120 to $140 million per year.

The SEC also alleges that UBS conducted that cross-border business largely through client advisers located primarily in Switzerland, who were not associated with a registered broker-dealer or investment adviser. These client advisers traveled to the U.S., on average, two to three times per year on trips that generally varied in duration from one to three weeks. In many instances, the client advisers attended exclusive events such as art shows, yachting events, and sporting events that were often sponsored by UBS, for the purpose of soliciting and communicating with United States cross-border clients. UBS also used other U.S. jurisdictional means such as telephones, facsimiles, mail and e-mail to provide securities services to its U.S. cross-border clients.

The SEC further alleges that UBS was aware that it was required to be registered with the SEC. UBS took action to conceal its use of U.S. jurisdictional means to provide securities services. Among other things, client advisers typically traveled to the U.S. with encrypted laptop computers that they used to provide account-related information, to show marketing materials for securities products, and occasionally to communicate orders for securities transactions to UBS in Switzerland. Client advisers also received training on how to avoid detection by U.S. authorities of their activities in the U.S.

As charged in the SEC's complaint, as a result of its conduct, UBS violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. To settle these charges, UBS has consented to the entry of a final judgment that (1) permanently enjoins UBS from further violation of those provisions; (2) orders it to pay $200 million in disgorgement, to be paid together with an additional $180 million in disgorgement that will be paid as part of a settlement of a related criminal investigation; and (3) orders UBS to comply with its undertakings to terminate its U.S. cross-border business and to retain an independent consultant to conduct an examination of UBS's termination of the business.

In connection with a related criminal investigation, UBS has entered into a deferred prosecution agreement with the Department of Justice pursuant to which UBS will pay an additional $180 million in disgorgement, as well as $400 million in tax-related payments.

The SEC's investigation is ongoing. [SEC v. UBS AG, 1:09-cv-00316 (JR) (D.D.C. filed Feb. 18, 2009)] (LR-20905)

SEC Halts Ponzi Scheme Targeting Deaf Investors

On February 18, the Commission obtained a court order halting an alleged $4 million Ponzi scheme perpetrated by Hawaii-based Billion Coupons, Inc. (BCI) and its CEO Marvin R. Cooper. The Complaint alleges that BCI and Cooper raised $4.4 million from 125 investors since at least September 2007 and specifically targeted members of the Deaf community in the United States and Japan.

The Complaint, filed in federal court in Honolulu, Hawaii, alleges that BCI and Cooper represented to the investors that their funds would be invested in the foreign exchange (Forex) markets, that investors would receive returns of up to 25% compounded monthly from such trading, and that their investments were safe. According to the Complaint, BCI and Cooper actually used only a net $800,000 (cash deposits minus cash withdrawals) of investor funds for Forex trading, and they lost more than $750,000 from their Forex trading. The Complaint further alleges that BCI and Cooper failed to generate sufficient funds from their Forex trading to pay the promised returns and operated as a Ponzi scheme by paying returns to existing investors from funds contributed by new investors. The Complaint also alleges that Cooper misappropriated at least $1.4 million in investor funds to pay for a new home and other personal expenses.

The Complaint alleges that the defendants have violated the registration and antifraud provisions of the federal securities laws, 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 Rule 10b-5 thereunder. In its lawsuit, the Commission obtained an order temporarily enjoining BCI and Cooper from future violations of these provisions. The Commission also obtained an order: (1) freezing the assets of BCI and Cooper; (2) appointing a temporary receiver over BCI; (3) preventing the destruction of documents; (4) granting expedited discovery; and (5) requiring BCI and Cooper to provide accountings. The Commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against both defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for March 2, 2009, at 9:00 a.m. HST.

The Commodity Futures Trading Commission (CFTC) also filed an emergency action against BCI and Cooper, alleging violations of the antifraud provisions of the Commodity Exchange Act, and the State of Hawaii's Department of Commerce and Consumer Affairs (DCCA), Office of the Commissioner of Securities, issued a preliminary order to cease and desist against BCI and Cooper.

The Commission acknowledges the assistance of the Hawaii DCCA's Office of the Commissioner of Securities and the assistance of the CFTC in this matter. [SEC v. Billion Coupons, Inc. (aka Billion Coupons Investment) and Marvin R. Cooper, Civil Action No. CV 09-00068 JMS LEK (D. Haw.)] (LR-20906)


Wachovia Securities, LLC, et al.

The Commission has issued a temporary order to Wachovia Securities, LLC, et al. (Wachovia Securities) under Section 9(c) of the Investment Company Act with respect to an injunction issued by the U.S. District Court for the Northern District of Illinois on Feb. 17, 2009. The temporary order exempts applicants and companies of which Wachovia Securities is or becomes an affiliated person from the provisions of Section 9(a) of the Act until the Commission takes final action on an application for a permanent order. The Commission also has issued a notice giving interested persons until March 16, 2009, to request a hearing on the application filed by applicants for a permanent order under Section 9(c) of the Act. (Rel. IC-28618 - February 18)


Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-CBOE-2009-006) filed by the Chicago Board Options Exchange to amend CBOE rules relating to DPMs and LMMs 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 February 23. (Rel. 34-59406)

A proposed rule change filed by the National Securities Clearing Corporation (SR-NSCC-2009-01) to permit entities that are organized in a country other than the United States and that are not otherwise subject to U.S. federal or state regulation to be eligible to become Mutual Fund/Insurance Services Members, Fund Members, and Insurance Carrier/ Retirement Services Members has become effective pursuant to Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of February 23. (Rel. 34-59413)





Modified: 02/19/2009