In the Matter of Geotec, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default as to Four Respondents, Staying Proceeding as to Southeast Banking Corp., and Postponing Hearing (Order) in Geotec, Inc., Administrative Proceeding No. 3-13999. The Order Instituting Proceedings (OIP) alleged that eight Respondents each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission (Commission).
The proceeding ended as to Phlo Corp. and Geotec, Inc., on Aug. 27, 2010, and as to Marbledge Group, Inc. (n/k/a AR Growth Finance Corp.) on Sept. 1, 2010. Geotec, Inc., Exchange Act Release Nos. 62779A, 62780, 62808.
The Order stays the proceeding as to Southeast Banking Corp., pursuant to Commission Rule of Practice 161(c)(2), to enable the Commission to consider a settlement offer, and it finds the allegations of the OIP to be true as to the remaining four Respondents. It revokes the registrations of each class of registered securities of InnoPet Brands Corp., Pliant Systems, Inc., TNX Television Holdings, Inc., and WestPoint Stevens Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-62967; File No. 3-13999)
Commission Denies Application of Dagong Global Credit Rating Co., Ltd., for NRSRO Registration
Today, the Commission issued an order denying the application of Dagong Global Credit Rating Co., Ltd., a credit rating agency located in Beijing, China, for registration as a nationally recognized statistical rating organization (NRSRO) under Exchange Act Section 15E. This provision requires the Commission to deny an application for NRSRO status if the Commission finds that, if the applicant were to become registered as an NRSRO, its registration would be subject to suspension or revocation due to an inability to comply with applicable securities laws or regulations, among other things. The Commission explained that, "[a]t this time, we cannot conclude that Dagong is able to comply with the Exchange Act's recordkeeping, production, and examination requirements." (Rel. 34-62968; File No. 3-13860)
SEC Completes Review of Performance by UBS under Auction Rate Settlement
The Securities and Exchange Commission today announced that UBS Securities LLC and UBS Financial Services Inc., collectively, UBS, has satisfied its obligations under its auction rate securities (ARS) settlement with the SEC, which returned more than $18 billion to the firm's ARS customers.
Under the settlement, UBS was required to offer to purchase ARS at par from its individual, charitable, small business and institutional customers. In compliance with these settlement obligations, UBS purchased over $18 billion worth of ARS from over 32,000 customer accounts -- or almost 100% of its customers' ARS positions that had not already been liquidated through issuer redemptions. Of the eight broker-dealer firms that entered into ARS settlements with the Commission, UBS and Wachovia were the only two that agreed to purchase ARS held not only by retail and small business customers, but by institutional customers as well.
UBS also met its other settlement obligations, including compensating investors who sold ARS below par, reimbursing investors for excess interest costs associated with loans taken out due to ARS illiquidity, and participating in special arbitration proceedings before the Financial Industry Regulatory Authority. UBS also submitted periodic reports to, and met quarterly with, SEC staff regarding its progress in meeting its settlement obligations.
The UBS settlement provided for a potential deferred penalty if the firm did not meet its settlement obligations. The SEC has determined that based on the firm's compliance with its settlement, as well as other factors, no penalties will be pursued.
The Commission's eight ARS settlements, including the UBS settlement, followed the Commission's investigation into the ARS market seizure of February 2008, an event that left tens of thousands of investors holding ARS they could not sell. To date, over $67 billion has been returned to ARS customers of the settling firms.
The Commission notes the assistance and cooperation from the Office of the New York Attorney General, the Financial Industry Regulatory Authority, the Texas State Securities Board, the Massachusetts Securities Division, and the North American Securities Administrators Association.
For further information, please see Litigation Release Nos. 20824. [SEC v. UBS Securities LLC and UBS Financial Services, Inc., Civil Action No. 08 CIV 10754 (S.D.N.Y.)] (LR-21658)
SEC Charges a California Lawyer Who Pleaded Guilty to Two Felony Counts for His Role in a Phony Investment Pool Scheme
The Securities and Exchange Commission announced that it charged a California lawyer, Gustav George Bujkovsky, age 67, of Escondido, California, for his role in perpetrating a phony investment pool scheme directed by his clients.
The Commission's complaint, filed September 21, in federal court in San Diego, alleges that while Bujkovsky represented MAK 1 Enterprises Group, LLC (MAK 1) and its principals, Mohit A. Khanna and Sharanjit K. Khanna, he personally defrauded certain MAK 1 investors, aided and abetted the fraud of MAK 1 and the Khannas, and offered and sold MAK 1's unregistered securities. Investors in the $35 million MAK 1 scheme were promised exorbitantly high returns through guaranteed investments such as foreign currency trading. MAK 1 was in fact a Ponzi scheme and was halted by an emergency action filed by the Commission in federal court in San Diego in August 2009. In that action, SEC v. Mohit A. Khanna, et al., Case No. 09CV1784BEN (filed Aug.17, 2009, the Commission charged MAK 1 and the Khannas with violations of the federal securities laws, Bujkovsky represented MAK 1 and the Khannas as clients between April and August 2009.
The complaint alleges that despite having notice that MAK 1 was conducting an unregistered and likely fraudulent securities offering, Bujkovsky made material misrepresentations and failed to disclose material facts to some MAK 1 investors. Bujkovsky misrepresented that MAK 1 was engaged in foreign currency trading and that his own clients invested in MAK 1 and had received the promised high returns, and that the MAK 1 investment was insured and had other downside risk protection. The complaint further alleges that after Mohit Khanna told Bujkovsky on July 9, 2009, that MAK 1 did not engage in foreign currency trading and was a fraud, Bujkovsky lulled certain investors by falsely representing that their money would be returned after problems were resolved with "intermediaries" including European banks. During the period of Bujkovsky's representation, MAK 1 raised more than $3.3 million from investors, over $1.9 million of which was returned to earlier investors as interest payments or return of principal, and over $1.5 million of which were sent to Bujkovsky's client trust account from MAK 1 or the Khannas. By funneling these funds through his client trust account and the account of a sham corporation he created, Bujkovsky helped the Khannas misappropriate about $1.3 million investor funds for their own use. Bujkovsky retained over $459,000 of investor funds, about half of which he used for his personal expenses or paid to his wife, Betty D. Hansen, who was named as a relief defendant in the Commission's complaint.
The Commission seeks a permanent injunction, disgorgement plus prejudgment interest, and civil penalties against Bujkovsky and disgorgement from Hansen of her ill-gotten gains plus prejudgment interest.
Separately, Bujkovsky pleaded guilty to felony counts of obstruction of justice (for making false statements to Commission staff in connection with the Commission's investigation of MAK 1 and Mohit Khanna) and income tax evasion. United States of America v. Gustav G. Bujkovsky, U.S. District Court for the Southern District of California, case no. 10CR3467LAB (filed Aug. 31, 2010). Mohit Khanna pleaded guilty to felony counts of conspiracy to commit mail and wire fraud (in connection with his role in MAK 1) and filing a false tax return. United States of America v. Mohit Khanna, U.S. District Court for the Southern District of California, case no. 10CR2271LAB (filed June 17, 2010). Bujkovsky and Mohit Khanna are scheduled to be sentenced Nov. 15, 2010.
The Commission acknowledges the substantial assistance of the United States Attorney's Office for the Southern District of California, the United States Postal Inspection Service, and the Federal Bureau of Investigation. [SEC v. Gustav George Bujkovsky, et al., United States District Court for the Southern District of California, Case No. 10-CV1965BEN] (LR-21659)
Former Treasurer of Delphi Corporation Settles Accounting Fraud Case With SEC
The Securities and Exchange Commission today announced settlement of pending charges against John Blahnik, the former Treasurer and Vice President of Treasury, Mergers and Acquisitions of Delphi Corporation (Delphi).
On Sept. 22, 2010, United States District Judge Avern Cohn entered a Final Judgment by consent enjoining Blahnik from future violations of 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 Section 17(a) of the Securities Act of 1933 (Securities Act), and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, and13a-11 thereunder. Blahnik was also ordered to pay disgorgement and prejudgment interest totaling $50,000 and a civil money penalty of $50,000. Finally, the Court prohibited Blahnik from serving as an officer or director of a public company for a period of five (5) years. Blahnik settled the Commission's claims without admitting or denying the Commission's allegations.
The Commission's complaint against Blahnik alleged that as a result of his participation in three fraudulent schemes, Delphi filed materially false and misleading financial statements in the company's Forms 10-K for 2000 and 2002, and Forms 8-K filed in 2001 and 2003-2005. According to the Complaint, Delphi improperly accounted for two round trip transactions as sales rather than as financing transactions, and thereby improperly recognized a material amount in cash flow from operations and materially overstated its reported earnings per share and net income for the fourth quarter of 2000, and, combined with other misstatements, materially overstated its net income for the year 2000. In addition, from 2003 to 2004, Delphi intentionally failed to disclose material sales of accounts receivable (factoring).
The case against the four remaining individual defendants is set for trial in the United States District Court for the Eastern District of Michigan on Oct.18, 2010. [SEC v. Delphi Corporation, John Blahnik, et al., 06-cv-14891-AC-SDP (E.D. Mich.)] (LR-21660; AAE Rel. 3188)
INVESTMENT COMPANY ACT RELEASES
The Integrity Funds, et al.
An order has been issued on an application filed by The Integrity Funds, et al. for an exemption from Section 15(a) of the Investment Company Act and Rule 18f-2 under the Act. The order permits the applicants to enter into and materially amend subadvisory agreements without shareholder approval. (Rel. IC-29418 - September 21)
Proposed Rule Changes
The Chicago Stock Exchange filed a proposed rule change (SR-CHX-2010-22) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to enhance quotation requirements for market makers. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62949)
The NASDAQ Stock Market filed a proposed rule change (SR-NASDAQ-2010-115) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to enhance quotation requirements for market makers. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62950)
Chicago Board Options Exchange filed a proposed rule change (SR-CBOE-2010-087) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 related to CBSX Market-Maker obligations. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62951)
National Stock Exchange filed a proposed rule change (SR-NSX-2010-12) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend NSX Rule 11.8 to enhance quotation requirements for market makers. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62952)
Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2010-049) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to quotation requirements on the Alternative Display Facility. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62953)
NASDAQ OMX BX filed a proposed rule change (SR-BX-2010-066) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to enhance quotation requirements for market makers. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62954)
Immediate Effectiveness of Proposed Rule Change
A proposed rule change (SR-BX-2010-065) filed by NASDAQ OMX BX to provide an additional order type which will give options participants greater control over the circumstances in which their orders are executed 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 September 20. (Rel. 34-62959)
Approval of Proposed Rule Changes
The Commission granted approval of a proposed rule change submitted by New York Stock Exchange (SR-NYSE-2010-56), pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, amending its price list to reflect fees charged for co-location Services. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62960)
The Commission granted approval of a proposed rule change submitted by NYSE Amex (SR-NYSEAmex-2010-80) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 amending its price list to reflect fees charged for co-location Services. Publication is expected in the Federal Register during the week of September 20. (Rel. 34-62961)
SECURITIES ACT REGISTRATIONS
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