SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Issues Notice of Proposed Plan of Distribution and Opportunity for Comment in the Matter of Smith Barney Fund Management LLC and Citigroup Global Markets Inc.

The Commission announced today that it has given notice, pursuant to Rule 1103 of the Securities and Exchange Commission's Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. S 201.1103, that Smith Barney Fund Management LLC and Citigroup Global Markets Inc. (Respondents) have submitted to the Commission a proposed plan for the distribution of the Fair Fund in the matter of Smith Barney Fund Management LLC and Citigroup Global Markets Inc. (Distribution Plan).

The Fair Fund is comprised of $183,704,031 in disgorgement, prejudgment interest and penalties paid by the Respondents, plus any interest and income generated while the funds were held by the Commission or by U.S. Department of Treasury's Bureau of Public Debt, less any fees, expenses, reserves, or taxes, if any, incurred by the Fair Fund. The proposed Distribution Plan proposes the distribution of disgorgement-related portions of the Fair Fund to funds from the Smith Barney Family of Funds (the Funds) that engaged a Citigroup affiliate, Citicorp Trust Bank fsb or a predecessor entity (collectively, CTB), as their transfer agent and paid transfer agent fees to CTB between Oct. 1, 1999, and Nov. 30, 2004, or to successors to such Funds, in proportion to the total transfer agent fees paid to CTB by each Fund or class of a Fund (subject to certain adjustments). Funds that were liquidated prior to the initial submission of this Plan will not participate in the proposed distribution. Further, the Respondents have been advancing the estimated distribution amounts under the Plan to Funds that were liquidated after the initial submission of the Plan but before the proposed distribution. Under the Plan, the Respondents will recover the amounts advanced to those liquidated Funds, plus interest.

A copy of the Distribution Plan may be printed from the Commission's public website, http://www.sec.gov. Interested parties may also obtain a written copy of the Distribution Plan by submitting a written request to Alison Conn, Assistant Regional Director, United States Securities and Exchange Commission, Room 400, 3 World Financial Center, New York, NY 10281-1022. All persons who desire to comment on the Distribution Plan may submit their comments, in writing, no later than 30 days from the date of the notice by (i) sending a letter to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090; or (ii) by using the Commission's Internet comment form (http://www.sec.gov/litigation/admin.shtml); or (iii) by sending an e-mail to rule-comments@sec.gov. Copies of all comments must be served, by first-class mail, upon the Division of Enforcement to the attention of Alison Conn, Assistant Regional Director, Securities and Exchange Commission, New York Regional Office, 3 World Financial Center, Room 400, New York, New York 10281. Comments submitted by email or via the Commission's website should include "Administrative Proceeding File Number 3-11935" in the subject line. Comments received will be available to the public. Commenters should only submit information that they wish to make publicly available. (Rel. 34-61312; File No. 3-11935)

Commission Meetings

Closed Meeting - Thursday, January 14, 2010 - 2:00 p.m.

The subject matter of the Closed Meeting scheduled for Thursday, January 14, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; consideration of amicus participation; 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.

ENFORCEMENT PROCEEDINGS

In the Matter of Christian Kuretski

On Jan. 6, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Christian Kuretski. The Order finds that from 2001 through 2004, Kuretski was the Managing Member of Worldwide Partners LLC (Worldwide), which was the General Partner of America's Hedge Fund (AHF). AHF was a hedge fund organized to invest in the equities and debt securities markets and filed with the Commission an exemption from registration on Form D under Rule 506 of Regulation D. In his role as Managing Member of Worldwide, Kuretski was an investment adviser to AHF and Worldwide in that, for compensation, he advised AHF and Worldwide as to the advisability of investing in, purchasing or selling securities. From 1994 to 2003, Kuretski was a registered representative associated with ten different broker-dealers registered with the Commission. Kuretski, 36 years old, is a resident of Hoboken, New Jersey.

The Order further finds that on Nov. 3, 2005, Kuretski pled guilty to two counts of conspiracy to commit securities and wire fraud in violation of Title 18 United States Code, Section 371 before the United States District Court for the Eastern District of New York, in U.S. v. Kuretski, et al., 05-CR-059. On Dec. 2, 2009, a judgment in the criminal case was entered against Kuretski. He was sentenced to six months probation and ordered to pay restitution in the amount of $1,499,917. The counts of the criminal indictment to which Kuretski pled guilty alleged, inter alia, that Kuretski defrauded investors in connection with a hedge fund and conspired to conduct financial transactions with the proceeds of the fraud.

Based on the above, the Order bars Christian Kuretski from association with any broker, dealer or investment adviser. Christian Kuretski consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the criminal conviction. (Rels. 34-61299; IA-2974; File No. 3-13735)

In the Matter of Osvaldo Pitters

On Jan. 6, 2010, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e)(3) of the Commission's Rules of Practice (Order) against Osvaldo Pitters. The Order finds that the United States District Court for the Southern District of Florida entered a permanent injunction by default against Pitters on November 9, 2009 in the civil action entitled SEC v. Osvaldo Pitters, et al, Case No. 09-20957-CIV. The injunction enjoined Pitters from violating provisions of the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act), stemming from conduct that occurred while he was acting as chief financial officer of VoIP, Inc., a public company that provided voice-over-Internet telecommunication services to retail and wholesale customers. The injunction also barred Pitters from serving as an officer or director of a public company.

The Order further finds that the Commission's complaint in the civil action alleged that from November 2004 through May 2005, Pitters and others recorded almost $1.4 million in fictitious revenues from purported computer hardware sales and management services on VoIP's financial statements because VoIP's revenues were falling short of company projections. By recording the false revenues, Pitters inflated the revenue VoIP publicly reported by more than 40 percent for the third quarter and year end 2004 and the first quarter of 2005.

Based on the above, the Order temporarily suspends Pitters from appearing or practicing before the Commission. If Pitters does not file a petition with the Commission within thirty days after service of the Order, the suspension shall become permanent pursuant to Rule 102(e)(3)(ii). (Rels. 34-61300; AAE Rel. 3095; File No. 3-13736)

In the Matter of Scott T. Veech, CPA

On Jan. 6, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Scott T. Veech (Veech), who has been a certified public accountant licensed in the State of Pennsylvania. He was the Chief Financial Officer of Merge Healthcare Inc., f/k/a Merge Technologies, Inc. (Merge), from July 2002 until July 2006.

The Order finds that, on Nov. 17, 2009, a final judgment was entered against Veech which permanently enjoins him from violating Section 17(a) of the Securities Act of 1933 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 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, 13a-1, 13a-11, and 13a-13 thereunder. The court ordered the injunction based on allegations in the Commission's complaint in the civil action entitled SEC v. Merge Healthcare, et al., No. 2:09-cv-01036 (filed Nov. 4, 2009). Veech was also ordered to pay $180,000 in disgorgement, $50,000 in prejudgment interest, and a $50,000 penalty.

In the Order, the Commission finds that the complaint alleged, among other things, that Veech participated in a fraudulent scheme which resulted in Merge filing materially false and misleading financial statements in the company's annual report on Form 10-K for the fiscal years ended Dec. 31, 2002, Dec. 31, 2003 and Dec. 31, 2004, and in the company's quarterly reports on Form 10-Q for the first three quarters of fiscal year 2005. The Commission finds that the complaint alleged that Veech engaged in improper accounting practices that materially increased Merge's annual and quarterly revenue and net income in a departure from generally accepted accounting principles.

Based on the court's entry of an injunction against Veech, the Commission ordered that Veech be suspended from appearing or practicing before the Commission as an accountant with the right to seek reinstatement after three years. Veech consented to the issuance of the Order without admitting or denying any of the findings in the Order except as to the Commission's jurisdiction over him, the subject matter of the proceedings, and the fact that the court entered the injunction against him, which he admitted. [SEC v. Merge Healthcare et al., Civil Action No. 2:09-cv-01036 (E.D. Wis.)] (LR-21282) (Rels. 34-61301; AAE Rel. 3096; File No. 3-13737)

In the Matter of Charles A. Gray, CPA

On Jan. 7, 2010, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against Charles A. Gray, CPA. The Order finds that Gray departed from the applicable professional standards and conducted improper audits and reviews of (a) Quest Resource Corporation's annual financial statements for years ended Dec. 31, 2005, 2006, and 2007 and quarterly financial statements during 2005, 2006, and 2007; and (b) Quest Energy Partners, L.P.'s annual financial statements for the year ended Dec. 31, 2007, and quarterly financial statements for the quarter ended Sept. 30, 2007. The Order also finds that Gray engaged in improper professional conduct within the meaning of Rule 102(e)(1)(ii) of the Commission's Rules of Practice.

Based on the above, the Order denies Gray the privilege of appearing or practicing before the Commission as an accountant. After five years, Gray may request reinstatement. Gray consented to the issuance of the Order without admitting or denying the findings in the Order. (Rel. 34-61305; AAE Rel. 3097; File No. 3-13738)

In the Matter of John W. Jacobsen, CPA

On Jan. 7, 2010, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against John W. Jacobsen, CPA. The Order finds that Jacobsen departed from the applicable professional standards and conducted improper reviews of (a) Quest Resource Corporation's quarterly financial statements for the quarter ended June 30, 2008; and (b) Quest Energy Partners, L.P.'s quarterly financial statements for the quarter ended June 30, 2008. The Order also finds that Jacobsen engaged in improper professional conduct within the meaning of Rule 102(e)(1)(ii) of the Commission's Rules of Practice.

Based on the above, the Order denies Jacobsen the privilege of appearing or practicing before the Commission as an accountant. After three years, Jacobsen may request reinstatement. Jacobsen consented to the issuance of the Order without admitting or denying the findings in the Order. (Rel. 34-61306; AAE Rel. 3098; File No. 3-13739)

In the Matter of David C. Mayfield, CPA

On Jan. 7, 2010, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against David C. Mayfield, CPA. The Order finds that Mayfield departed from the applicable professional standards and conducted improper reviews of (a) Quest Resource Corporation's quarterly financial statements for the quarter ended June 30, 2008; and (b) Quest Energy Partners, L.P.'s quarterly financial statements for the quarter ended June 30, 2008. The Order also finds that Mayfield engaged in improper professional conduct within the meaning of Rule 102(e)(1)(ii) of the Commission's Rules of Practice.

Based on the above, the Order denies Mayfield the privilege of appearing or practicing before the Commission as an accountant. After three years, Mayfield may request reinstatement. Mayfield consented to the issuance of the Order without admitting or denying the findings in the Order. (Rel. 34-61307; AAE Rel. 3099; File No. 3-13740)

SEC Obtains Injunctions Against "Investment Banker," Gerald Alexander, and His Companies, CJB Consulting Inc. and Regis Filia Holdings, for Unregistered Securities Sales

On Jan. 4, 2010, the United States District Court for the Northern District of Georgia entered judgments by default against Gerald P. Alexander, CJB Consulting, Inc., and Regis Filia Holdings, Inc. of Alpharetta, Georgia. The order enjoins Alexander, CJB, and Regis Filia from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act and the broker dealer registration requirements of Section 15(a) of the Exchange Act. Alexander and CJB were jointly and severally ordered to pay disgorgement and prejudgment interest totaling $2,351,720 and a third-tier civil penalty of $130,000. Alexander and Regis Filia were ordered to pay disgorgement and prejudgment interest totaling $396,258 and a third-tier civil penalty of $130,000. The order permanently barred the defendants from participating in the offering of penny stocks.

The Commission alleged that Alexander, CJB and Regis Filia purchased stock from thirteen issuers over two years beginning in March 2006 and then sold the stock when no registration statements had been filed with the Commission. The complaint alleged that the defendants engaged in a scheme to evade the securities registration provisions, and acted as underwriters because they acquired the shares with a view to distribute them to other investors. The complaint further alleged that Alexander held himself out as an "investment banker" who could assist companies with raising capital through sales of stock by CJB Consulting and Regis Filia Holdings. See Lit. Rel. No. 20973 (March 25, 2009) for a copy of the original complaint. [SEC v. Gerald P. Alexander, CJB Consulting, Inc., and Regis Filia Holdings, Inc., Civil Action No. 1:09-CV-0805 (N.D. Georgia)] (LR-21363)

INVESTMENT COMPANY ACT RELEASES

RiverSource Variable Portfolio - Select Series, Inc.

An order has been issued under Section 8(f) of the Investment Company Act declaring that RiverSource Variable Portfolio - Select Series, Inc. has ceased to be an investment company. (Rel. IC-29102 - January 5)

RiverSource Variable Portfolio - Managers Series, Inc.

An order has been issued under Section 8(f) of the Investment Company Act declaring that RiverSource Variable Portfolio - Managers Series, Inc. has ceased to be an investment company. (Rel. IC-29106 - January 5)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-108) relating to amending the Direct Edge ECN Fee Schedule 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 January 4. (Rel. 34-61289)

A proposed rule change filed by NYSE Amex (SR-NYSEAmex-2009-95) to establish registered representative fees 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 January 4. (Rel. 34-61291)

A proposed rule change filed by NYSE Amex (SR-NYSEAmex-2009-93) to amend rule 452 - NYSE Amex Equities and section 723 of the NYSE Amex Company Guide regarding broker discretionary voting for election of directors and on material amendments to investment advisory contracts. Publication is expected in the Federal Register during the week of January 4. (Rel. 34-61292)

A proposed rule change filed by NYSE Amex (SR-NYSEAmex-2009-100) to amend NYSE Amex Equities Rule 18 to eliminate the $500 minimum net loss requirement for a member organization to seek compensation in the event of an Exchange system failure 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 January 4. (Rel. 34-61293)

A proposed rule change filed by New York Stock Exchange (SR-NYSE-2009-135) to amend NYSE Rule 18 to eliminate the $500 minimum net loss requirement for a member organization to seek compensation in the event of an Exchange system failure 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 January 4. (Rel. 34-61294)

A proposed rule change filed by the International Securities Exchange relating to fee changes (SR-ISE-2009-114) 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 January 4. (Rel. 34-61296)

Accelerated Approval of Proposed Rule Change

The Commission granted accelerated approval to a proposed rule change (SR-ISE-2009-109) submitted by the International Securities Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the amounts that Direct Edge ECN, in its capacity as an introducing broker for non-ISE Members, passes through to such non-ISE Members. Publication is expected in the Federal Register during the week of January 4. (Rel. 34-61290)

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