Securities and Exchange Commission Suspends Trading in the Securities of Eight 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 Feb. 27, 2009, and terminating at 11:59 p.m. EDT on March 12, 2009.
The Commission temporarily suspended trading in the securities of these eight 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. 34-59466)
Statement from Chairman Schapiro on Proposed Budget for SEC
The following is a statement from SEC Chairman Mary L. Schapiro regarding the President's FY 2010 budget request for the SEC, which represents a 13 percent increase over its FY 2008 budget:
"The President's requested budget increase for the SEC would enable us to increase our staff and use new technology to pursue risk-based approaches that would better detect fraud and ensure stronger oversight of the nation's securities markets. We appreciate these additional resources that would help strengthen and reinvigorate the SEC and rededicate our commitment to the protection of investors." (Press Rel. 2009-37)
Closed Meeting - Thursday, March 5, 2009 - 2:00 p.m.
The subject matter of the closed meeting scheduled for Thursday, March 5, 2009, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; other matters relating to enforcement proceedings.
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.
In the Matter of James Michael Leonard, Esq.
On February 26, the Commission issued an Order of Forthwith Suspension Pursuant to Rule 102(e)(2) of the Commission's Rules of Practice forthwith suspending James Michael Leonard, Esq. from appearing or practicing before the Commission. The Commission's order finds that on Sept. 19, 2008, the United States District Court for the Eastern District of New York entered a judgment convicting Leonard of conspiracy and securities fraud. Leonard, an attorney who has appeared and practiced before the Commission, knowingly and willfully participated in fraudulent schemes to defraud investors by preparing and drafting offering materials for securities that contained untrue statements of material fact and omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading. (Rel. 34-59461; File No. 3 13383)
Commission Declares Decision as to Michael Lauer Final
The decision of an administrative law judge barring Michael Lauer from association with any investment adviser has become final. The law judge found that on Sept. 23, 2008, the United States District Court for the Southern District of Florida found that Lauer violated the antifraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. The district court also issued a permanent injunction prohibiting Lauer from continuing future violations of Securities Act Section 17(a), Exchange Act 10(b) and Rule 10b 5, and Investment Advisers Act Sections 206(1) and 206(2).
Lauer was one of three founders, sole manager, and principal owner of Lancer Management Group, LLC (Lancer), and Lancer Management Group II, LLC (Lancer II). Lancer controlled the operations and activities of Lancer and Lancer II (collectively, Lancer Management). Lancer was also the investment manager for Lancer Offshore, Inc. (Offshore), Omnifund, Ltd. (Omnifund), Viator Fund, Ltd. (Viator), and Orbiter Fund, Ltd. (Orbiter), hedge funds, and Lancer II was the general partner of Lancer Parnters, LP (Partners) (collectively, Funds).
From 1999 through 2002, the Funds raised more than $734 million. Lauer represented that the Funds were performing better than the major stock indexes during the bear market between 2000 and 2002. From 1999 through 2002, Lancer Management received more than $85 million in cash from the Funds, and Lauer personally received more than $53 million for himself from Lancer Management.
Lauer made numerous misrepresentations to investors through offering and marketing materials, and engaged in manipulative trading of investments in order to inflate the Funds' asset values and fraudulent pricing of investments. His misrepresentations and omissions included the Funds' portfolios' valuation, concentration, and true contents; Lauer's trading strategy; the safety and liquidity of the investments; Lauer's self dealing; the resignations of Partners' auditor and of an administrator for Offshore and Omnifund; and the manipulation of assets in the Funds' portfolios. (Rel. IA-2848; File No. 3 13265)
Commission Revokes Registration of Securities of Minex Resources, Inc. for Failure to Make Required Periodic Filings
On February 27, the Commission revoked the registration of each class of registered securities of Minex Resources, Inc. (MINX) 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, MINX 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 Minex Resources, 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 MINX's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against MINX in In the Matter of Minex Resources, Inc., et al., Administrative Proceeding File No. 3-13370.
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 Minex Resources, Inc., et al., Administrative Proceeding File No. 3-13370, Exchange Act Release No. 59398 (Feb. 12, 2009). (Rel. 34-59465; File No. 3-13370)
Commission Orders Hearings on Registration Suspension or Revocation Against Ten Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission today also instituted two separate 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 ten companies for failure to make required periodic filings with the Commission:
In the Matter of Core Technologies Pennsylvania, Inc., et al., Administrative Proceeding File No. 3-13384
In the Matter of Chemfix Technologies, Inc., et al., Administrative Proceeding File No. 3-13385
In each Order, the Division of Enforcement (Division) alleges that the respective respondents are delinquent in their required periodic filings with the Commission.
In each of these 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 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 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 each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-59467; File No. 3-13384; File No. 13385)
In the Matter of Daniel Baldwin, Jr.
On February 27, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Daniel Baldwin, Jr.
The Order finds that, on Feb. 10, 2009, a final judgment was entered by consent against Baldwin, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Nathan A. Chapman, Jr., et al., Civil Action Number 03-1877 (WDQ), in the United States District Court for the District of Maryland (Civil Action). The Order also finds that the Commission's complaint in the Civil Action alleges fraudulent conduct in connection with an effort to rescue the failing initial public offering of eChapman, Inc. eChapman, Inc. was the parent corporation of the broker-dealer with which Baldwin was associated. Specifically as to Baldwin, the Complaint alleges that Baldwin made unauthorized trades and placed initial public offering shares in at least 37 customer accounts. These customers included elderly investors and individuals who had specifically requested low-risk investments and who relied on Baldwin to make their investment decisions.
Based on the above, the Order hereby bars Baldwin from association with any broker or dealer. Baldwin consented to the issuance of the Order. (Rel. 34-59470; File No. 3-13386)
Final Judgment Entered Against Former Aspen Technology CFO Charged in Corporate Accounting Fraud
The Securities and Exchange Commission announced today that on February 25, the United States District Court for the District of Massachusetts entered a final judgment by consent against former Aspen Technology, Inc. (Aspen) Chief Financial Officer Lisa W. Zappala, the last remaining defendant in a case filed by the Commission in January 2007. The Commission's action charged Zappala with, among other things, securities fraud in connection with her participation in a revenue inflation scheme with two other senior officers of Aspen, a Cambridge, Massachusetts software company. Without admitting or denying the allegations in the Commission's complaint, Zappala consented to the entry of a final judgment enjoining her from violating the anti-fraud and other provisions of the securities laws and ordering her to pay a total of $145,000 in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
According to the Commission's complaint, Zappala and two other defendants caused Aspen to report inflated revenue in the company's publicly-filed financial statements and in press releases on at least six software transactions during fiscal years 1999 through 2002. The Complaint alleged that the three defendants caused Aspen to recognize revenue during the relevant period despite knowing that Aspen was prohibited from doing so under Generally Accepted Accounting Principles because contracts were not signed within the appropriate quarter and/or the earnings process was incomplete due to contingency arrangements which changed the terms of the customers' payment commitments under the contracts. The Complaint alleged that, as a result of the fraudulent scheme, Aspen overstated license revenue for its fiscal year ended June 30, 2000 by 5.5% and for the fiscal year ended June 30, 2001 by 9.3%. The Complaint further alleged that, as a result of prematurely recognized revenue from those earlier periods, license revenue for the fiscal years ended June 30, 2002, 2003, and 2004 was understated by 1.8%, 13.9%, and 4.0% respectively.
The final judgment imposed permanent injunctions prohibiting Zappala from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 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 Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. In addition, the final judgment ordered Zappala to pay a $75,000 civil penalty, $49,653 in disgorgement, and $20,347 in prejudgment interest, and barred Zappala from serving as an officer or director of any public company for two years. Zappala has also consented to the suspension of her privilege of appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after two years, in related administrative proceedings to be instituted after entry of the permanent injunctions. [SEC v. Lawrence B. Evans et al., Civil Action No. 07-CV-10027-JLT (D. Mass)] (LR-20916; AAE Rel. 2940)
SEC Seeks Emergency Relief to Stop Fraudulent Offering of Unregistered Securities
On February 26, the Commission charged Phillip R. Trujillo, of Windsor, Colorado, and his company, Wealth Management Resources, a Colorado LLC, with conducting a fraudulent offering of unregistered "units" in three Colorado LLCs, PTV 22, PTV 33, and PTV 44 (PTVs). The Commission alleged that Trujillo induced investors to invest over $5 million based on false representations regarding guaranteed monthly returns, and safety and liquidity of principal. The Commission also alleged that Trujillo continued to make these false representations to later investors after he had already failed to pay promised monthly returns and to refund principal upon the request of earlier investors. Trujillo allegedly induced later investors to invest an additional $1.7 million after defaulting on obligations to earlier investors.
The Commission's complaint alleges that the defendants violated 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. The Commission is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all defendants. The Commission is also seeking emergency relief in the form of a temporary restraining order, preliminary injunction, an order to provide an accounting, an asset freeze, expedited discovery and an order prohibiting the alteration or destruction of documents. SEC v. Phillip R. Trujillo, Wealth Management Resources, LLC, PTV 22, LLC, PTV 33, LLC, and PTV 44, LLC, Civ. No. 09-cv-00403-MSK-KMT (D. Colo.)] (LR-20917)
SEC Files Complaint Against Daren L. Palmer and Trigon Group, Inc. for Operating a $40 million Ponzi Scheme and Obtains Order Freezing Assets and Appointing a Receiver
The Securities and Exchange Commission filed a Complaint on February 26, in the United States District Court for the District of Idaho, alleging that Daren L. Palmer (Palmer), a resident of Idaho Falls, Idaho, and his investment business Trigon Group, Inc. (Trigon), a Nevada corporation, raised at least $40 million as part of a Ponzi scheme that has defrauded at least 55 investors. According to the Commission's Complaint, from at least 1996 until October 2008, Palmer and Trigon defrauded investors by representing that invested funds would be used in a riskless trading program that earned annual returns of 20 percent or more. The Complaint alleges that Palmer and Trigon sold securities in the form of promissory notes and investment contracts in unregistered transactions, and told investors that their principal would be invested in indexes, S&P 500 options or futures, currency futures and stocks in a way that would generate high returns with no risk. The Complaint alleges that, instead, Palmer and Trigon were using funds put into the program by later investors to pay fictitious returns to earlier investors in a classic Ponzi scheme. The Commission's Complaint further alleges that Palmer used investor funds to build a partially completed $12 million home in Idaho Falls, Idaho, to purchase snowmobiles, to pay himself compensation of $25,000 to $35,000 a month, and for other personal expenses. The Complaint also alleges that while Palmer told investors he was licensed to sell securities, he has never been licensed to sell securities and that neither Palmer nor Trigon is registered with the Commission in any capacity.
The Commission asked the court to order a preliminary injunction enjoining Palmer and Trigon from future violations of 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, and enjoining Palmer from future violations of Section 15(a) of the Exchange Act. In addition, on Feb. 26, 2009, the court signed an order freezing all assets of Palmer and Trigon and appointing a receiver in the matter.
The Commission acknowledges the assistance of the U.S. Commodities Futures Trading Commission, the Federal Bureau of Investigation, and the Idaho Department of Finance in bringing this action. [SEC v. Daren L. Palmer and Trigon Group, Inc., United States District Court for the District of Idaho (Civil Action No. CV 09-75-S-EJL)] (LR-20918)
INVESTMENT COMPANY ACT RELEASES
Orders of Deregistration Under the Investment Company Act
Orders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
(Order: Rel No. IC-28627)
(Order: Rel No. IC-28633)
Immediate Effectiveness of Proposed Rule Changes
The Commission issued a notice of immediate effectiveness of a proposed rule change (SR-NYSE-2009-14) and Amendment No. 1 thereto filed by New York Stock Exchange to amend the definition of "market letters" in NYSE Rule 472 (Communications with the Public). Publication is expected in the Federal Register during the week of March 2, 2009. (Rel. 34-59450)
The Commission issued a notice of immediate effectiveness of a proposed rule change (SR-NYSEALTR-2009-10) and Amendment No. 1 thereto filed by NYSE Alternext US, to amend the definition of "market letters" in Rule 472 - NYSE Alternext Equities (Communications with the Public). Publication is expected in the Federal Register during the week of March 2, 2009. (Rel. 34-59451)
A proposed rule change filed by NASDAQ OMX BX (SR-BX-2009-012) to modify fees for members using the NASDAQ OMX BX Equities System 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 March 2, 2009. (Rel. 34-59452)
A proposed rule change filed by NYSE Arca to adopt a policy relating to its treatment of trade reports that it determines to be inconsistent with the prevailing market (SR-NYSEArca-2009-09) 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 March 2, 2009. (Rel. 34-59453)
A proposed rule change by NYSE Alternext US (SR-NYSEALTR-2009-17) to delete certain rules governing the trading of listed options 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 March 2, 2009. (Rel. 34-59454)
A proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2009-013) to modify fees for members using the NASDAQ Market Center 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 March 2, 2009. (Rel. 34-59455)
A proposed rule change filed by the BATS Exchange (SR-BATS-2009-006) to amend BATS Rule 11.9, entitled "Orders and Modifiers" 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 March 2, 2009. (Rel. 34-59457)
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