SEC Issues Notice of Proposed Distribution Plan and Opportunity for Comment in the Matter of PA Fund Management LLC f/k/a PIMCO Advisors Fund Management LLC, PEA Capital LLC f/k/a PIMCO Equity Advisors LLC, and PA Distributors LLC
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. ž 201.1103, that the Division of Enforcement has filed a proposed plan (Distribution Plan) for the distribution of monies in the matter of PA Fund Management LLC f/k/a PIMCO Advisors Fund Management LLC (PAFM), PEA Capital LLC f/k/a PIMCO Equity Advisors LLC (PEA), and PA Distributors LLC (PAD).
The Distribution Plan provides for distribution of a total of $55,479,005, constituting the disgorgement, prejudgment interest, and civil penalties paid by PAFM, PEA, and PAD, plus any accumulated interest, less any federal, state or local taxes on the interest. The Distribution Plan provides for distribution of the Fair Fund to all shareholders harmed by market timing in four funds that were formerly part of the PIMCO Equity Funds: Multi-Manager Series, the Growth Fund, Opportunity Fund, Target Fund and Innovation Fund. Losses will be paid to all shareholders who were directly harmed by the market timer, to the extent these shareholders can be identified and located. This distribution will be based on shareholders' losses, defined as shareholder dilution and transaction costs, caused by the timing activity in the Growth, Opportunity, Target, and Innovation Funds. Harmed shareholders will receive their losses suffered and will also receive an allocation, based on their assets of advisory fees paid by the funds that suffered losses, and an allocation based on their harm of interest earned on the Fair Fund from February 22, 2005 through April 30, 2010. This will not be administered through a claims-made process, so procedures for providing notice and making and approving claims are not applicable.
A copy of the Distribution Plan may be obtained by submitting a written request to Lorraine B. Echavarria, Assistant Regional Director, United States Securities and Exchange Commission, 5670 Wilshire Boulevard, Los Angeles, CA, 90036. Interested parties may also print a copy of the proposed Distribution Plan from the Commission's public website, http://www.sec.gov. Any person or entity wishing to comment on the Distribution Plan must do so in writing by submitting their comments within 30 days of the date of the notice (i) to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090; or (ii) via the Commission's Internet comment form (www.sec.gov/litigation/admin.shtml); or (iii) by sending an e-mail to firstname.lastname@example.org. Comments submitted by mail must also be served, by first-class mail, upon Lorraine B. Echavarria, Assistant Regional Director, United States Securities and Exchange Commission, 5670 Wilshire Boulevard, Los Angeles, CA 90036. Comments submitted by e-mail or via the Commission's web site should include the Administrative Proceeding File Number in the subject line (Admin. Proc. File No. 3-11645). Comments received will be publicly available. Persons should submit only information that they wish to make publicly available. (Rel. 34-63059; File No. 3-11645)
In the Matter of Villa Pasta, Inc.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Villa Pasta, Inc., Administrative Proceeding No. 3-14027. The Order Instituting Proceedings alleged that eight Respondents repeatedly failed to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission. The Default Order finds these allegations to be true as to all of the Respondents and revokes the registrations of each class of registered securities of Villa Pasta, Inc., VIP Global Capital, Inc., Virtual World of Sports, Inc. (f/k/a Accord Ventures, Inc.), Viva Gaming & Resorts, Inc., VJG4, Inc., Voice It Worldwide, Inc., The Voyager Group, Inc., and Vu-Data Corp., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-63058; File No. 3-14027)
Michael S. Joseph, CPA Reinstated to Appear and Practice Before the Commission as an Accountant Responsible for the Preparation or Review of Financial Statements Required to be Filed With the Commission
Pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice, Michael S. Joseph, CPA has applied for and been granted reinstatement of his privilege to appear and practice before the Commission as an accountant responsible for the preparation or review of financial statements required to be filed with the Commission. Mr. Joseph's privilege of appearing or practicing before the Commission as an accountant was denied on December 11, 2006. His reinstatement is effective immediately. (Rel. 34-63061; AAE Rel. 3196; File No. 3-12502)
SEC Obtains Temporary Restraining Order and Asset Freeze of Imperia Invest IBC Relating to its Internet Based Offering Fraud
On October 6, 2010, the Securities and Exchange Commission obtained a temporary restraining order and emergency asset freeze against Imperia Invest IBC (Imperia) for defrauding more than 14,000 investors worldwide. The Commission's complaint alleges Imperia raised in excess of $7 million, $4 million of which was collected primarily from deaf investors in the United States. In addition to the asset freeze, the court has granted the Commission's motion for expedited discovery and prohibiting the destruction of documents.
According to the Commission's complaint filed in the U.S. District Court for Utah, Imperia defrauded investors by soliciting funds via the internet to purchase Traded Endowment Policies (TEP), the British term for viatical settlements, claiming to pay investors a guaranteed return of 1.2% per day. The Commission alleges that Imperia promised unrealistic returns to investors. The Imperia website allegedly stated that an initial $50 investment would allow the investor to obtain an $80,000 loan from an unnamed foreign bank which would be used by Imperia to purchase a TEP; Imperia would then trade the TEPs and pay the investor the guaranteed return. The Commission's complaint alleges that Imperia claimed to be licensed and located in both the Bahamas and Vanuatu when, in fact, it is not licensed to do business or located in either of those countries. It is also alleged that Imperia's website stated investors could only access their profits by purchasing a Visa debit card from Imperia, but that Imperia has no relationship with Visa and was using the Visa name without authorization. Additionally, the complaint contends that Imperia took proactive steps to conceal the identity of its control persons by using an anonymous browser to host its website, by communicating with all investors via email without disclosing the identity of any control persons and by establishing off-shore Paypal style bank accounts to conceal the recipient of the investment proceeds.
The Commission's complaint charges Imperia Invest IBC with 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. [SEC v. Imperia Invest IBC, Civil Action No. 2:10-cv-00986-B (D. Utah)] (LR-21686)
Italian Trader Agrees to Pay $3 Million to Settle Insider Trading Charges; SEC Pursues Additional Defendants
The Securities and Exchange Commission today announced a proposed settlement with Gianluca Di Nardo, an Italian citizen, and his investment vehicle Corralero Holdings, Inc., for alleged insider trading in the securities of two issuers, DRS Technologies, Inc. and American Power Conversion Corp. DiNardo, the beneficial owner of Corralero, agreed to settle the charges with the Commission by paying approximately $3 million in disgorgement and penalties. The Commission amended its Complaint in its previously-filed action against unknown purchasers of DRS and APCC call options to name these settling defendants. The Amended Complaint also names other previously-unknown defendants who allegedly engaged in insider trading in DRS securities.
In its Amended Complaint, the Commission alleges that Di Nardo, through Corralero, made highly profitable and suspicious purchases of DRS and APCC call options ahead of public disclosures announcing the acquisitions of these companies. The Amended Complaint alleges that, between September 21 and 22, 2006, Di Nardo bought 2,400 APCC call options at a cost of approximately $299,800 while in possession of material, nonpublic information. According to the Amended Complaint, Di Nardo liquidated all APCC call options and made a profit of approximately $1.4 million following the announcement by Schneider Electric SA on October 30, 2006, that it would acquire all of APCC's outstanding shares for $31 a share. In addition, the Commission alleges that on April 29, 2008, Di Nardo bought 550 DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information. According to the Amended Complaint, Di Nardo liquidated all DRS call options, reaping a profit of approximately $669,750 following a May 8, 2008, Wall Street Journal article reporting the advanced merger negotiations between Finmeccanica S.p.A. and DRS, and after confirmation by DRS that it was engaged in talks regarding a potential strategic transaction.
Under the terms of the proposed settlement, Di Nardo and Corralero consent, without admitting or denying the allegations of the Amended Complaint, to the entry of final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering them jointly and severally liable for the payment of $2,110,600 in disgorgement, $191,345.77 in prejudgment interest, and a civil penalty of $700,000. The settlement remains subject to the approval of the U.S. District Court for the Southern District of New York.
The Commission's Amended Complaint also identifies and alleges the following individuals and entities as purchasers of DRS call options in advance of the announcements: Oscar Ronzoni, an Italian citizen and manager of Luga Audit & Consulting SA in Lugano, Switzerland; Paolo Busard˛, an Italian citizen who works for a subsidiary of Luga in Milan, Luga Audit & Consulting srl; Tatus Corp., a Panamanian corporation, an investment vehicle based in Switzerland for which Busard˛ is the ultimate beneficial owner and Ronzoni is the formal managing director; and A-Round Investment SA, a consulting firm based in Lugano controlled by Busard˛.
The Amended Complaint alleges that Ronzoni, Busard˛, Tatus, and A-Round purchased DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information. According to the Amended Complaint, on May 5 and 6, 2008, Ronzoni bought a total of 340 DRS call options; on May 7, 2008, Ronzoni also purchased, through Tatus, 800 DRS call options; and, on May 7, 2008, Busard˛ through A-Round purchased a total of 130 DRS call options. Following the May 8th Wall Street Journal article, Ronzoni made a profit of $156,400, Tatus made a profit of $695,459.97, and Busard˛, through A-Round, made a profit of $115,840 after liquidating their DRS call option stakes.
By virtue of the conduct described above, the Commission alleges that Ronzoni, Busard˛, Tatus, and A-Round violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Amended Complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil money penalties. The Commission's action continues as to these defendants.
Previously in this action, pursuant to the Commission's emergency request in July 2008, the Court entered a temporary restraining order freezing the assets of the then-unknown purchasers of DRS and APCC call options. On August 18, 2008, the Honorable Paul A. Crotty, U.S. District Judge in the Southern District of New York, extended the asset freeze and ordered additional relief through the issuance of a preliminary injunction against the then-unknown purchasers of DRS and APCC call options.
The SEC acknowledges the assistance of the U.S. Department of Justice, the Chicago Board Options Exchange, the Swiss Financial Market Supervisory Authority, and the Swiss Federal Office of Justice in this matter. [SEC v. Gianluca Di Nardo, et al., U.S. District Court for the Southern District of New York, Civil Action No. 08-cv-6609 (PAC) (S.D.N.Y.)] (LR-21687A)
SEC Charges Purported Real Estate Business and Owner for Conducting Ponzi Scheme
The Securities and Exchange Commission today charged a Chicago-area company and its owner for perpetrating a Ponzi scheme in which they promised investors extraordinary returns generated from a purportedly successful real estate business.
The SEC alleges that Robert R. Anderson of Mt. Prospect, Ill., issued promissory notes through his company Rosand Enterprises that he claimed would generate investor returns ranging from 10 to 20 percent per month. Anderson misrepresented to investors that Rosand Enterprises purchased, constructed, rehabbed, and sold homes in the Chicago area and other locations. However, Anderson was not making any money in the real estate market and was instead conducting a Ponzi scheme to pay earlier investors with funds from new investors. He also helped himself to investor money to buy cars, make hefty credit card payments, and pay for his daughter's wedding.
The SEC's complaint, filed in U.S. District Court in Chicago, alleges that Anderson raised approximately $12 million from at least 77 investors between approximately December 2005 and May 2008. Anderson told investors that Rosand Enterprises purchased and rehabilitated existing homes and constructed pre-fabricated modular homes. Anderson told investors that their returns were to be generated from the sale of the homes.
The SEC alleges that Anderson's representations were false and he did not use investor funds to construct or rehabilitate homes. Anderson invested $550,000 of the $12 million raised in a company that he did not control that, in turn, purchased a piece of commercial real estate that was not profitable and nearly all of the money that Rosand invested was lost. Rosand did not disclose the investment loss to investors.
According to the SEC's complaint, Anderson used approximately $7.9 million to make monthly "interest" and return of principal payments to investors, and he used approximately $1.9 million to invest in several suspicious offerings. He misused $632,000 to pay employees, independent contractors, and office expenses with investor funds. Anderson also illegally siphoned off $818,000 for his own and his family's personal expenses, including $326,000 for credit card payments, $142,000 on tuition and a wedding for his daughter, and $38,000 on cars.
The SEC's complaint charges Anderson and Rosand Enterprises with 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 promulgated thereunder. The SEC is seeking a permanent injunction and disgorgement of ill-gotten gains with prejudgment interest, jointly and severally, against Anderson and Rosand and a civil penalty against Anderson. [SEC v. Robert R. Anderson and Rosand Enterprises, Inc. Case No. 10-CV-6420 (N.D. Ill.)] (LR-21688)
SEC v. Archie Paul Reynolds
The Securities and Exchange Commission announced today that the Honorable Richard W. Story, United States District Judge for the Northern District of Georgia, entered an order and final judgment permanently enjoining Archie Paul Reynolds (Reynolds). The order and final judgment restrained and enjoined Reynolds from future violations of Sections 5 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. Reynolds was also ordered to pay disgorgement in the amount of $834,717.88, pre-judgment interest in the amount of $36,907.39 and a civil penalty in amount of $2,000,000. Additionally, Reynolds' company, Success Trust, was ordered to pay a civil penalty in the amount of $2,000,000.
The Court found that, from as early as May 2005 through June 2006, Reynolds, acting through Success Trust, raised millions of dollars from at least 500 investors by fraudulently offering and selling interests in three investment programs. Reynolds and Success Trust made numerous false and misleading statements to investors, including: (1) false statements that investor funds and/or investor real estate equity would be used in profitable, risk-free transactions; (2) false claims that Success Trust had relationships with the "top global consortium group of the world" and the "top 15 Financial partners of the world"; (3) false representations that investors would receive bank guarantees or other instruments to protect their real property; and (4) numerous misrepresentations intended to deceive investors and potential investors into believing that the Success Trust programs had received regulatory approval. The Court also found that Reynolds and Success Trust failed to disclose several material facts to investors, including: (1) that investor funds were used to pay commissions to Independent Representatives; and (2) that funds from the Programs would be commingled and used to pay Reynolds' personal expenses. [SEC v. Archie Paul Reynolds and Success Trust, Civil Action No. 1:06-cv-1801-RWS (N.D.GA.)] (LR-21689)
SEC Charges Internationally Syndicated Radio Show Host With Securities Fraud Scheme
The Securities and Exchange Commission today charged a talk radio show host and two other executives at a Monterey, Calif.-based firm with misappropriating $2.5 million of approximately $7 million they raised through the fraudulent sale of interests in two real estate investment funds.
The SEC alleges that Barbra Alexander, the former president of APS Funding, used her status as host of an internationally-syndicated radio show for entrepreneurs called MoneyDots to lure investors who thought their money would be used to fund short-term loans secured by real estate. Alexander along with the firm's secretary/chief financial officer Beth Pi˝a of Fairfield, Idaho, and vice president Michael E. Swanson of Seaside, Calif., instead stole investor money to pay themselves $1.2 million and finance MoneyDots and other unrelated businesses unbeknownst to investors. Alexander even used $200,000 of investor funds to remodel her kitchen.
According to the SEC's complaint filed in federal district court in San Jose, Alexander, Pi˝a and Swanson raised nearly $7 million from 50 investors for two investment funds managed by APS Funding. They claimed that the funds would make short-term secured loans to homeowners and yield 12 percent annual returns to investors. Contrary to what investors were told, $1.2 million of their money instead went directly to Alexander, Pi˝a, and Swanson for personal use, and $1.3 million in investor funds was used to finance other businesses owned by Alexander and APS Funding, including MoneyDots.
The SEC further alleges that Alexander, Pi˝a, and Swanson furthered the scheme by sending monthly account statements to investors reflecting fictitious profits and, in classic Ponzi scheme fashion, paying out purported returns that actually came from new investors.
In its federal court action, the SEC charges Alexander, Pi˝a, Swanson, and APS Funding with violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The SEC also charges Alexander, Swanson, and APS Funding with violating Sections 5(a) and 5(c) of the Securities Act. [SEC v. Barbra Alexander, et al., Case No. CV-10-4535-PVT (N.D. Cal.)] (LR-21690)
Approval of Proposed Rule Change
The Commission has approved a proposed rule change (SR-FICC-2010-10) filed by the Fixed Income Clearing Corporation under Section 19(b)(1) of the Exchange Act to provide clarity with respect to the close out netting of the Government Securities Division in the event of FICC's default or insolvency. Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63038)
Proposed Rule Change
NYSE Arca filed a proposed rule change (SR-NYSEArca-2010-86) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 relating to listing of the Peritus High Yield ETF. Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63041)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by National Stock Exchange (SR-NSX-2010-13) to amend the NSX fee and rebate schedule has become immediately 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 October 4. (Rel. 34-63042)
A proposed rule change filed by the International Securities Exchange relating to a market maker incentive plan for foreign currency options (SR-ISE-2010-100) 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 October 4. (Rel. 34-63045)
A proposal filed by the Financial Industry Regulatory Authority (SR-FINRA-2010-050) making changes to Rules 12302 and 13302 of the Customer and Industry Codes of Arbitration Procedure has become immediately effective pursuant to Section 19(b)(3) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63046)
Accelerated Approval of Proposed Rule Change
The Commission issued a notice of filing of Amendment No. 1 and granted accelerated approval to a proposed rule change, as modified by Amendment No. 1, submitted by the Financial Industry Regulatory Authority (SR-FINRA-2010-042) pursuant to Rule 19b-4 of the Securities Exchange Act of 1934 to adopt FINRA Rule 4160 (Verification of Assets). Publication is expected in the Federal Register during the week of October 4. (Rel. 34-63044)
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