In the Matter of Simone O. Fevola
On March 12, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Simone O. Fevola (Fevola). The Order finds that on March 4, 2010, a final judgment was entered by consent against Fevola, 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, and Sections 206(1), 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, in the civil action entitled SEC v. Wealth Management LLC, et al., Civil Action Number 1:09-cv-506, in the United States District Court for the Eastern District of Wisconsin.
The Order finds that the Commission's complaint alleged that Fevola improperly accepted $1.24 million in undisclosed payments derived from certain investments made by four of the six unregistered funds managed by Wealth Management LLC while continuing to cause clients to invest in those funds. The Order finds that the complaint further alleges that Fevola also breached his fiduciary duty and engaged in fraud by misrepresenting the safety and stability of the two largest unregistered funds managed by Wealth Management LLC. The Order finds that the complaint also alleges that Fevola signed Wealth Management's Form ADV while knowing that he had received undisclosed improper payments.
Based on the above, the Order bars Fevola from association with any investment adviser, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission. Fevola consented to the issuance of the Order without admitting or denying any of the findings except as to the entry of the final judgment. (Rel. IA-2999; File No. 3-13813)
Securities and Exchange Commission Orders Hearing on Registration Revocation or Suspension Against Two Public Companies for Failure to Make Required Periodic Filings
The Commission today instituted 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 two companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the two issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, 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 each class 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 this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-61707; File No. 3-13814)
In the Matter of InfoUSA Inc. k/n/a InfoGROUP Inc.
The Securities and Exchange Commission today filed civil injunctive actions charging former senior executives and a former director of Omaha-based infoUSA Inc., k/n/a infoGROUP Inc. (Info) with securities fraud and other violations of the federal securities laws. Specifically, the Commission's complaints against Vinod Gupta, Info's former CEO and Chairman, Vasant H. Raval, former chairman of Info's audit committee, and Rajnish K. Das and Stormy L. Dean, Info's CFOs during the relevant period, allege that from 2003 through 2007, the Defendants caused Info to pay Gupta almost $9.5 million of unauthorized and undisclosed perquisites and to enter into $9.3 million of undisclosed related party transactions with Gupta's entities.
The Commission's complaints, filed in federal district court in Nebraska, allege that Gupta improperly used corporate funds for over $3 million of personal jet travel for Gupta and his family and friends to such destinations as South Africa, Italy, and Cancun; $2.8 million of costs associated with Gupta's yacht; $1.3 million of personal credit card expenses; and costs associated with 28 club memberships, 20 automobiles, his homes around the country, and premiums for three personal life insurance policies. The Commission also alleges that Gupta failed to inform Info's other board members of the material fact that he had purchased shares of an Info acquisition target for his own benefit from which he obtained realized and unrealized ill-gotten gains.
The Commission also alleges that from January 2005 through July 2006, Raval, Info's former audit committee chairman, failed to respond appropriately to various red flags concerning Gupta's expenses and Info's related party transactions with Gupta's entities. According to the complaint, Raval failed to take appropriate action regarding the concerns expressed to him by two Info internal auditors that Gupta was submitting requests for reimbursement of personal expenses. Additionally, the complaint alleges that notwithstanding his charge by Info's board in January 2005 to investigate potential improper payments to Gupta, Raval failed to take meaningful action to further investigate Gupta's expenses and omitted critical facts in his report to the board concerning Gupta's expenses.
The Commission also alleges that two of Info's former CFOs, Das and Dean, allowed Gupta to support his lavish lifestyle by rubber-stamping hundreds of Gupta's expense reimbursement requests. According to the complaint, Das and Dean approved Gupta's expense reimbursement requests despite the fact that the requests lacked sufficient explanation of business purpose and supporting documentation, even in the face of concerns raised by several Info employees. The complaint alleges that Das and Dean knew, or were reckless in not knowing, that Info's Commission filings materially understated Gupta's compensation and failed to disclose properly related party transactions with Gupta's entities. The complaint further alleges that Das and Dean signed management representation letters to Info's outside auditor that represented falsely that all related party transactions had been properly recorded and disclosed in Info's financial statements.
Without admitting or denying the allegations in the Commission's complaints, Gupta and Raval agreed to settle the matters. Gupta consented to a final judgment enjoining him from violations of Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9 and from aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 13a-1, 13a-13, and 12b-20; imposing disgorgement of $4,045,000, plus prejudgment interest of $1,145,400; imposing a $2,240,700 civil money penalty; barring him from serving as an officer or director of a public company; and placing restrictions on Gupta's voting of his Info common stock.
Raval also consented to a final judgment enjoining him from violations of Exchange Act Sections 10(b) and 14(a) and Rules 10b-5, 14a-3, and 14a-9, and from aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20 and 13a-1; imposing a $50,000 civil money penalty; and barring him from serving as an officer or director of a public company for five years.
Das and Dean are charged with violating Exchange Act Sections 10(b), 13(b)(5), and 14(a), and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9, and for aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Rules 12b-20 and 13a-1. Additionally, Das is charged with violating Exchange Act Rule 13a-13. The Commission's complaint seeks permanent injunctions, third-tier civil penalties, prejudgment interest, and an officer and director bar against both defendants. The Commission's case against Das and Dean is ongoing.
In a related action, Info consented to the issuance of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (Order) without admitting or denying any of the findings in the Order. The Order orders Info to cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9. [SEC v. Vinod Gupta, Civil Action No. 8:10-cv-00100 (Dist. Neb.)]; SEC v. Vasant H. Raval, Civil Action No. 8:10-cv-00101 (Dist. Neb.)]; SEC v. Rajnish K. Das and Stormy L. Dean, Civil Action No. 8:10-cv-00102 (Dist. Neb.)] (LR-21451); Administrative Proceeding - (Rel. 34-61708; File No. 3-13815)
SEC Charges Investment Adviser With Fraud
On March 11, 2010, the Securities and Exchange Commission filed a civil injunctive action against Stephen X. Kim and Spyglass Management, L.P. (Spyglass) for their roles in defrauding Spyglass Capital Partners, L.P. (fund), a pooled investment vehicle or "hedge fund" managed by Kim through Spyglass.
In its settled Complaint, filed in the United States District Court for the Southern District of Texas, the Commission alleges that between in 2004 and 2006, Kim and Spyglass raised approximately $4.7 million from investors located primarily in Houston Texas using offering materials that contained misleading information relating to Kim's education, business experience, and compensation. The SEC also alleges that Kim falsely told investors that he would pool their funds and employ an investment strategy of trading Collateralized Mortgage Obligations (CMO) and other securities, and that Kim would manage risk through a "dynamic hedging strategy." Unfortunately, the SEC alleges, Kim and Spyglass failed to employ a hedging strategy to manage risk, and the fund incurred over $2 million in losses. Rather than disclose the losses to investors, the SEC alleges, Kim had Spyglass send false reports to investors indicating that the fund was profitable, and then Kim directed the fund to make approximately $1.7 million in Ponzi payments to investors. Finally, the SEC alleges that Kim misappropriated approximately $1.5 million of the hedge fund's remaining assets to repay several outstanding personal obligations.
Without admitting or denying the allegations contained in the Commission's complaint, Spyglass and Kim have consented to the entry of a final judgment permanently enjoining them from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The settlement is subject to the approval of the United States District Court for the Southern District of Texas. [SEC v. Stephen X. Kim and Spyglass Management, L.P., Defendants, Civil Action No. 4:10-cv-00816 (S.D. Tx)] (LR-21450)
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