SEC Announces Distribution of $60 Million Fair Fund to MBIA Investors Harmed by Accounting Fraud
The Securities and Exchange Commission today announced the distribution of the $60 million Fair Fund created as part of a settled SEC enforcement action against MBIA Inc. in 2007.
The funds were distributed to approximately 20,000 investors who purchased MBIA's securities from Sept. 11, 1998, through Nov. 22, 2004.
The Sarbanes-Oxley Act of 2002 gave the SEC authority to increase the amount of money returned to injured investors by allowing civil penalties to be included in Fair Fund distributions. Prior to SOX, only disgorgement could be returned to investors.
"The SEC has returned more than $4 billion in Fair Funds to investors since the 2002 passage of the Sarbanes-Oxley Act," said Scott Friestad, Deputy Director of the SEC's Division of Enforcement. "The MBIA Fair Fund is the latest example of our continuing commitment to returning disgorgement and penalties to investors harmed by violations of the securities laws."
James Clarkson, Acting Regional Director of the SEC's New York Regional Office, added, "Returning money to harmed investors is an important part of our function as the investor's advocate, and Fair Fund distributions will continue to be a foremost priority for the Commission."
In its settlement with the SEC, MBIA agreed to pay a penalty of $50 million for distribution through a Fair Fund. The Fair Fund also includes MBIA's payment of $10 million in disgorgement and restitution under an Assurance of Discontinuance entered into by the Office of the Attorney General of the State of New York and MBIA.
Investors can obtain additional information about the distribution process by visiting the Fair Fund Website: www.MBIAfairfundsettlement.com. (Press Rel. 2009-69)
Closed Meeting - Thursday, April 2, 2009 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, April 2, 2009 will be: institution of an injunctive action; institution and settlement of administrative proceedings of an enforcement nature; adjudicatory matters; and 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.
Securities and Exchange Commission Settles With Defendant in Delphi Accounting Fraud Case
The Securities and Exchange Commission announced that on March 26, 2009, it settled pending charges against Judith Kudla, the former Director of Finance in the information technology (IT) department of Delphi Corporation (Delphi).
Kudla consented to the entry of an injunction from future violations of 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 and 13b2-1 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 and13a-1 thereunder. Kudla also consented to pay a $30,000 civil money penalty. In settling the Commission's claims, Kudla neither admitted not denied the Commission's allegations. In addition, separately, without admitting or denying the Commission's findings, Kudla consented to the institution of administrative proceedings pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending her from appearing or practicing before the Commission as an accountant, with a right to apply for reinstatement after three years, based on the entry of the injunction.
The Commission's complaint against Kudla alleged that as a result of her participation in a fraudulent scheme, Delphi filed materially false and misleading financial statements in the company's 2001 Form 10-K. According to the Complaint, Delphi improperly recorded a $20 million payment from an IT company in December 2001, made in connection with a new contract between the IT company and Delphi. The scheme in which Kudla participated was one of four schemes alleged in the Commission's complaint.
The Commission's litigation as to remaining defendants continues. [SEC v. Delphi Corporation, Judith Kudla, et al., 06-CV-14891-AC-SDP (E.D. Mich.)] (LR-20975; AAE Rel. 2955); (Rel. 34-59637; File No. 3-13416; AAE Rel. 2954)
In the Matter of Gary Alan Tanaka
On March 27, 2009, the Commission settled an administrative proceeding previously instituted against Gary Alan Tanaka (Tanaka). In an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 203(f) of the Investment Advisers Act (Order) instituted on March 27, 2009, the Commission imposed, by consent, a bar against Tanaka from association with any investment adviser pursuant to Section 203(f) of the Advisers Act. The Commission imposed the sanction based on Tanaka's Nov. 19, 2008 criminal conviction, when a jury found Tanaka guilty of 1 count of securities fraud; 1 count of investment adviser fraud; and 1 count of conspiracy to commit securities fraud, investment adviser fraud, wire fraud, mail fraud and money laundering before the United States District Court for the Southern District of New York, in U.S. v. Alberto William Vilar and Gary Alan Tanaka, S3 05 Cr. 621 (RJS).
The Commission's Order included findings that during the relevant period, Tanaka was a person associated with an investment adviser. In addition, the counts of the criminal indictment to which Tanaka was found guilty alleged that Tanaka engaged in a scheme to defraud that involved (a) misappropriation of millions of dollars of investor assets and (b) misrepresentation to investors of how their money was being invested.
In view of these findings, the Commission found it appropriate and in the public interest to impose a bar from association with any investment adviser against Tanaka. Tanaka consented to the entry of the Order without admitting or denying the findings contained in the Order.
For more information about earlier developments in this matter, please see Litigation Release Number 19245 / June 2, 2005; Litigation Release Number 19470 / Nov. 17, 2005. (Rel. IA-2859A; File No. 3-13345)
In the Matter of Michael L. Silver
The Commission today announced that, based on the entry of an injunction on Feb. 24, 2009, in a civil injunctive action previously filed by the Commission, it issued an Order barring Michael L. Silver from association with any broker, dealer or investment adviser, with a right to reapply after three years. Silver, age 37, of Woodcliff, New Jersey, is a former registered representative of Prudential Securities, Inc. The Commission filed its complaint against Silver and three other former Prudential Securities registered representatives in August 2006. The Commission's complaint alleged that, from at least January 2001 until September 2003, Silver defrauded mutual fund companies and the funds' shareholders in order to engage in market timing trades on behalf of four hedge fund customers through the use of multiple customer account numbers and financial adviser numbers.
Silver consented to the issuance of the Commission's Order without admitting or denying its findings. (Rels. 34-59639; IA-2860; File No. 3-13417)
In the Matter of Brian P. Corbett
The Commission today announced that, based on the entry of an injunction on Feb. 24, 2009, in a civil injunctive action previously filed by the Commission, it issued an Order barring Brian P. Corbett from association with any broker, dealer or investment adviser, with a right to reapply after three years. Corbett, age 36, of Baltimore, Maryland, is a former registered representative of Prudential Securities, Inc. The Commission filed its complaint against Corbett and three other former Prudential Securities registered representatives in August 2006. The Commission's complaint alleged that, from at least January 2001 until September 2003, Corbett directed the day-to-day activities of a team of brokers and assistants who spent most of their time on market timing transactions that defrauded mutual fund companies and the funds' shareholders on behalf of five hedge fund customers through the use of multiple customer account numbers and financial adviser numbers.
Corbett consented to the issuance of the Commission's Order without admitting or denying its findings. (Rels. 34-59640; IA-2861; File No. 3-13418)
Court Enters Final Consent Judgments Against Shuster, Renteria, and Vujovic in Widespread Insider Trading Scheme
On March 26, 2009, the Honorable Kimba M. Wood, Chief United States District Judge for the Southern District of New York, entered final consent judgments against defendants Nickolaus Shuster, Juan C. Renteria, Jr. and Monika Vujovic, in an action filed in 2005 by the Commission, charging 17 defendants with collectively engaging in a insider trading scheme, which netted almost $7 million in illicit gains, through trading in at least 26 stocks.
As alleged in the Fourth Amended Complaint, Shuster and Renteria were hired by the two primary architects of the insider trading schemes, David Pajcin and Eugene Plotkin, to obtain jobs at Quad/Graphics, Inc., a printing plant for BusinessWeek magazine. Pursuant to the scheme, Shuster and Renteria called Pajcin and Plotkin, and read them key portions of the "Inside Wall Street" column - a widely-read column that generally moves the price of the securities of companies mentioned in it - prior to the time the column was made available to the public. As a result of the information provided, Pajcin and Plotkin traded in, and/or tipped others with material non-public information concerning at least 10 companies, resulting in collective ill-gotten gains of approximately $280,000. Pajcin and Plotkin paid Renteria approximately $5,000 and paid Shuster approximately $20,000 for the information. The Court entered orders permanently enjoining both Shuster and Renteria from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
As alleged in the Fourth Amended Complaint, Vujovic, who was dating Pajcin at the time, allowed Pajcin to open a brokerage account in her name at Ameritrade, Inc. and to engage in insider trading through that account in order to avoid detection. Pajcin executed trades from this account based on material non-public information he received stemming from Business Week, as well as Merrill Lynch, collectively making over $314,000 in ill-gotten gains. The Court entered an order permanently enjoining Vujovic from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and further found Vujovic liable to pay disgorgement of $261,364.12, to be satisfied by payment of all funds in a brokerage account held in Vujovic's name at TD Ameritrade, Inc., which had been frozen since 2005 pursuant to a Court order. [SEC v. Sonja Anticevic, et al., 05 Civ. 6991 (KMW) (S.D.N.Y.)] (LR-20976)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the New York Stock Exchange modifying the Wireless Data Communications Initiatives and codifying the Wireless Policy (SR-NYSE-2009-33) 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 March 30. (Rel. 34-59626)
A proposed rule change filed by NYSE Amex formally adopting and codifying its Wireless Data Communications Initiatives (SR-NYSEAmex-2009-02) 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 March 30. (Rel. 34-59627)
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