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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2010-198
October 20, 2010


OECD Commends U.S. Regulators for Efforts to Fight Transnational Bribery

U.S. efforts to fight transnational bribery were commended today after an official review by the Working Group on Bribery of the Organisation for Economic Co-operation and Development (OECD), announced the Departments of Justice, Commerce and State, and the Securities and Exchange Commission (SEC). In releasing its review, the OECD's 38-country Working Group on Bribery applauded U.S. enforcement efforts and high-level support for the fight against the bribery of foreign officials.

In finding the United States fully compliant with the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 2009 Recommendation for Further Combating Bribery, the Working Group highlighted a number of best practices developed by the United States in its efforts to combat foreign bribery, while also noting areas for potential enhancement.

For example, the report noted that the creation of dedicated, specialized units within the Department of Justice Criminal Division's Fraud Section and the FBI to focus on potential violations of the Foreign Corrupt Practices Act (FCPA) significantly increased the rate of enforcement, and that the creation of a new unit at the SEC should further strengthen enforcement efforts. The report also welcomed U.S. efforts toward close cooperation with foreign authorities and the regular interaction between U.S. and foreign law enforcement, noting that this cooperation is essential to ensuring an effective global fight against corruption.

The Working Group recommended that the United States ensure the statute of limitations period for the foreign bribery offense, which is currently five years, is sufficient to allow adequate investigations and prosecutions. It also recommended that the United States raise awareness of its diligent pursuit of books and records violations under the FCPA, including violations for misreported facilitation payments, and that it pursue additional opportunities to raise awareness generally among small- and medium-sized enterprises on the prevention and detection of foreign bribery. In future periodic reviews of policies and approaches to facilitation payments, the Working Group recommended the United States consider the views of the private sector and civil society.

U.S. OECD Ambassador Karen Kornbluh opened the U.S. review by noting that the U.S. fight against corruption, and transnational bribery in particular, is a priority for President Obama and Secretary Clinton. "We are proud our efforts are recognized by the Working Group. The United States will continue to elevate the issue of transnational bribery and to encourage all countries to adopt strong laws and effective enforcement mechanisms," the Ambassador added.

"Bribing foreign government officials is not a legitimate way to do business," said Assistant Attorney General Lanny A. Breuer of the Justice Department's Criminal Division. "The United States has risen to the forefront of enhanced global efforts to combat foreign bribery, including through our vigorous enforcement of the FCPA. We appreciate the Working Group's recognition of our success in holding companies and individuals accountable for their criminal wrongdoing, raising awareness among the business community, and increasing cooperation with our foreign law enforcement counterparts."

"We welcome this report, which recognizes the significant steps law enforcement agencies in the United States have taken to enforce the FCPA," said Robert Khuzami, Director of the SEC's Division of Enforcement. "The SEC has created an FCPA unit to crack down on cross-border bribery, and in the first nine months of 2010 alone, we obtained more than $400 million in disgorgement and penalties. Word is getting out that bribery is bad business, and we will continue to work closely with the business community and our colleagues in law enforcement in the fight against global corruption."

"This report shows that the United States is serious about fighting corruption in international business transactions, and sets a high standard for global cooperation in this fight," said Cameron Kerry, the General Counsel of the U.S. Commerce Department. "It also provides excellent guidance to U.S. companies on the FCPA. The Obama Administration is determined to fight corruption internationally, to promote the rule of law and reduce barriers to U.S. exports, and to level the playing field for U.S. companies in international business transactions."

United States: Phase 3, Report on the Implementation and Application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 2009 Recommendation for Further Combating Bribery was published after an approximately six-month review by teams of examiners from Argentina and the United Kingdom, assisted by the OECD's Secretariat, during which examiners reviewed approximately 1,000 pages of documentation and conducted a series of interviews with government, private sector, academic and civil society experts to determine U.S. compliance with the Anti-Bribery Convention.

An inter-agency team of individuals from the Departments of Justice, Commerce and State, and the SEC represented the United States. Along with Finland, the United States was the first country to undergo this Phase 3 review. The Phase 2 review of the United States was completed in October 2002.

Since the Phase 2 review in 2002, 71 individuals and 88 enterprises have been held accountable in the United States, criminally and civilly, for transnational bribery and related offenses. During this same time period, the United States has secured more than $3 billion in criminal and civil penalties and fines, criminal forfeiture, and civil disgorgement in FCPA related cases.

The United States will make an oral follow-up report of its actions to implement the Working Group's recommendations one year from the release of the report. The United States then will submit a written report on these actions to the Working Group within two years, which the group will then evaluate and will be made publicly available.

The full report and additional background information can be found at: www.justice.gov/criminal/fraud/fcpa/intlagree/. (Press Rel. 2010-200)

Thomas A. Bayer Named SEC Chief Information Officer

The Securities and Exchange Commission today announced that Thomas A. Bayer has been appointed as the SEC's new Chief Information Officer (CIO) who will oversee the agency's information technology functions.

Mr. Bayer comes to the SEC from Maris Technology Advisors in Leesburg, Va., where he advised banking and financial services clients on technology strategy, software development, and program management solutions. In his new role directing daily operations in the SEC's Office of Information Technology (OIT), Mr. Bayer will oversee applications development, maintenance, infrastructure, and user support for the agency. He will report to Jeff Heslop, who was named the agency's first-ever Chief Operating Officer earlier this year.

The SEC is in the process of revamping its technology systems for reviewing tips, complaints, and investigative leads and referrals provided by whistleblowers or other sources. The agency also is undertaking various technology initiatives to provide the infrastructure and software necessary to implement various regulatory requirements under the Dodd-Frank Act.

"Tom possesses the wide-ranging experience and technology strategy necessary to effectively manage our OIT operations as the agency continues to meet new challenges and develop new technology solutions," said Mr. Heslop. "Tom can provide expert leadership as we continue to vastly improve our technology for receiving thousands of tips, complaints and referrals from the public. He will spearhead our continuing transition from a disclosure system that's document-based to a system that's data-based and more useful for investors."

Mr. Bayer added, "The SEC plays a critical role in our government and our nation's economy, and I'm pleased to join an agency where technology is of ever-increasing importance as we serve the financial markets and the investing public."

The SEC's Office of Information Technology works with the Chairman, Commissioners, and the agency's divisions and offices to incorporate technology into all SEC programs to serve investors, maintain orderly markets, and promote capital formation. OIT operates the EDGAR system, which provides investors with access to more than 7 million public company financial statements and other filings.

Among Mr. Bayer's other private sector work prior to his consulting experience at Maris Technology Advisors, he was Vice President, Head of Software Development at GSI Commerce in King of Prussia, Pa., from 2007 to 2008, and he was Vice President, Business Information Officer at CapitalOne Financial in McLean, Va., from 2002 to 2007. He also worked nearly five years at Citicorp and Citigroup in New York in various leadership positions involving global technology infrastructure and network services, and spent more than eight years at Sprint Corporation where he held several product management and product development roles with increasing responsibility and technical diversity.

Mr. Bayer earned his bachelor's degree from The Ohio State University with a major in finance and economics and a minor in accounting. (Press Rel. 2010-201)


Grand Jury Issues Indictments for Conspiracy, Securities Fraud, and Obstruction of Justice for Making False Statements to the SEC during Insider Trading Investigation

The Securities and Exchange Commission announced that on October 14, 2010, the United States Attorney's Office for the District of Massachusetts announced Peter E. Talbot and Carl E. Binette were charged in a seven-count indictment with conspiracy and securities fraud related to an insider trading scheme. Binette was also charged with obstruction of justice for making false statements to the Commission during its attempts to discover and investigate that very scheme. U.S. v. Talbot et al., Criminal Action No. 3:10-cr-30036-MAP (D. Mass.) (Ponser, J).

As part of the indictment, Binette is accused of obstructing the SEC's investigation of his trading activities in Safeco securities. In particular, Binette is accused of making several false statements to SEC investigators regarding whether he had spoken to anyone prior to engaging in trading of Safeco securities. Binette repeatedly denied speaking to anyone before trading, even though in fact his trading was based on the tip he received from Talbot. Binette also claimed that his trades were based on a dream he had in which a deceased relative told him that she was "safe."

In addition, the indictment alleges that in April 2008, Talbot, who was then employed by the Hartford Investment Management Company (HIMCO), determined, through confidential information obtained through the course of his employment, that the insurance company Safeco Corp. was a potential acquisition target of the Hartford Financial Services Group, Inc. (HIMCO's parent company). Talbot tipped his nephew, Binette, and the two set up a brokerage account in Binette's name to buy Safeco securities. Less than a week after Talbot and Binette bought Safeco common stock and call option contracts, the acquisition of Safeco by a third insurance company, Liberty Mutual, was announced. Talbot and Binette sold all of the Safeco securities for a profit of approximately $615,833.

On July 13, 2009, the Commission filed a civil injunctive complaint alleging Binette's and Talbot's insider trading in Safeco securities violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Talbot and Binette each consented to the entry of a judgment without admitting or denying the allegations in the SEC's complaint. On February 25, 2010 and July 23, 2010, the U.S. District Court for the District of Massachusetts entered judgments permanently enjoining Talbot and Binette, respectively, from committing or aiding and abetting future violations of the above provisions; and ordering them to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties, in amounts to be determined by the court upon the Commission's motion. Additional information may be found in Litigation Release No. 21133 (July 15, 2009). [SEC v. Carl E. Binette and Peter E. Talbot, Civil Action No. 3:09-cv-30107-MAP (D. Mass.) (Ponser, J.)] (LR-21698)

SEC Settles Fraud and Related Charges Against East Delta Resources Corp. and Its Former CEO, Victor Sun in Market Manipulation Case

The Securities and Exchange Commission announced today the recent settlement of its claims against Victor Sun (Sun), the former CEO of East Delta Resources Corp. (East Delta), and East Delta in a civil action filed earlier this year in the United States District Court for the Eastern District of New York. The Commission's complaint charges that Sun, East Delta, David Amsel, and Mayer Amsel violated the federal securities laws in a scheme to manipulate the market for the securities of East Delta.

Without admitting or denying the allegations in the Commission's complaint, Sun consented to the entry of a final judgment that permanently enjoins him from violating certain provisions of the federal securities laws, imposes an officer and director bar, permanently bars him from participating in the offer or sale of penny stocks, imposes disgorgement in the amount of $109,411 plus prejudgment interest in the amount of $31,485, and orders him to pay a civil penalty of $70,000. The judgment against Sun was entered on September 22, 2010. Without admitting or denying the allegations in the Commission's complaint, East Delta consented to the entry of a final judgment against it containing certain injunctive relief and the prospect of monetary penalties to be ordered at a later date. The judgment against East Delta was entered on October 13, 2010.

According to the complaint, from 2004 through at least 2006, Sun and East Delta artificially inflated the volume of market activity for, and in turn the price of, East Delta stock, issued false press releases, and illegally sold East Delta shares received at little or no cost. The complaint alleges that the fraudulent proceeds from this scheme totaled more than $1,400,000.

After the filing of its complaint, the Commission suspended trading in East Delta securities and ultimately revoked the registration of the securities of East Delta.

The final judgment against Sun permanently enjoins him from violating the following antifraud, registration, reporting, and disclosure provisions of the federal securities laws: Sections 17(a), 5(a), and 5(c) of the Securities Act of 1933 (Securities Act); Sections 10(b), 13(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act); and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-14, and 16a-3. The final judgment bars Sun from serving as an officer or director of any company that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. It also bars him from participating in the offer or sale of any penny stock, as that term is defined by Section 3(a)(51) of the Exchange Act and Rule 3a-51 thereunder, imposes disgorgement in the amount of $109,411 plus prejudgment interest in the amount of $31,485, and orders him to pay a civil penalty of $70,000 under Securities Act Section 20(d) and Exchange Act Section 21(d)(3).

The final judgment entered against East Delta permanently enjoins it from violating the following antifraud, registration, and reporting provisions of the federal securities laws: Sections 17(a), 5(a), and 5(c) of the Securities Act; Sections 10(b) and 13(a) of the Exchange Act; and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-13. The final judgment also provides that upon motion of the Commission, the Court may order East Delta to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty.

The Commission's case is still pending against the remaining defendants, David Amsel and Mayer Amsel. [SEC v. East Delta Resources Corp., Victor Sun, David Amsel and Mayer Amsel, Civil No. CV10-0310 (E.D.N.Y.)] (LR-21700)

Court Enters Preliminary Injunction Against Investment Adviser Carlo G. Chiaese and His Firm, C.G.C. Advisors, LLC

The Securities and Exchange Commission announced that on October 19, 2010, the United States District Court for the District of New Jersey entered a preliminary injunction order against defendants Carlo G. Chiaese, age 38 and resident of Springfield, New Jersey, and his company, C.G.C. Advisors, LLC, and relief defendant Micol Chiaese. Pending a final disposition of the Commission's enforcement action, the preliminary injunction order enjoins the Defendants 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 preliminary injunction order also requires Defendants to prepare a written verified accounting and freezes the Defendants' and Relief Defendant's assets pending a final disposition of the Commission's enforcement action.

The Commission's complaint, filed on October 5, 2010, alleged that, between 2008 and the present, Chiaese and CGC misappropriated at least approximately $2.5 million from at least six of their advisory clients, including a union pension trust fund for the benefit of approximately 880 members. Chiaese repeatedly made false and misleading statements to his clients regarding the clients' investments, including creating and providing to clients fictitious, self-generated account statements that (i) misrepresented the value of their investments and (ii) falsely stated that their investments were safely held at a broker-dealer. In fact, Chiaese and CGC had misappropriated their clients' funds. Instead of investing these funds as Chiaese promised, he used much of his clients' funds to support his lavish lifestyle, including: mortgage payments on a million dollar home; approximately $32,000 on landscaping; approximately $70,000 on multiple country clubs; approximately $12,000 on his child's private school tuition; approximately $4,000 at a New York City hotel on New Year's Eve 2008; thousands of dollars on expensive cars; tens of thousands of dollars per month in living expenses; and numerous cash withdrawals. Micol Chiaese, an officer of CGC, benefited from this fraud by directly receiving at least $261,300 of clients' funds.

On October 5, 2006, the Court granted, among other emergency relief, temporary orders freezing the Defendants' and Relief Defendant's assets. In its enforcement action, the Commission is seeking additional relief, including orders permanently enjoining Chiaese and CGC from committing future violations of the foregoing federal securities laws, and a final judgment ordering Chiaese, Micol Chiaese and CGC to disgorge their ill-gotten gains plus prejudgment interest, and assessing civil penalties against Chiaese and CGC. [SEC v. Carlo G. Chiaese, et al., Civil Action No. 10-cv-5110 (WJM) (D.N.J.)] (LR-21701)


Citigroup Global Markets Inc., et al.

The Commission has issued a temporary order to Citigroup Global Markets Inc. (CGMI), et al., under Section 9(c) of the Investment Company Act with respect to an injunction entered against Citigroup Inc. (Citigroup) by the U.S. District Court for the District of Columbia on October 19, 2010. The temporary order exempts CGMI, CEFOF GP I Corp., CELFOF GP Corp., Citibank, N.A., Citigroup Alternative Investments LLC, Consulting Group Advisory Services LLC, Citigroup Capital Partners I GP I Corp., and Citigroup Capital Partners I GP II Corp., as well as companies of which Citigroup is or becomes an affiliated person, from the provisions of Section 9(a) of the Act until the Commission takes final action on an application for a permanent order. The Commission also has issued a notice giving interested persons until November 12, 2010, to request a hearing on the application filed by applicants for a permanent order under Section 9(c) of the Act. (Rel. IC-29464 - October 19)





Modified: 10/20/2010