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ENFORCEMENT PROCEEDINGSSecurities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Against Seven Public Companies For Failure to Make Required Periodic FilingsOn December 21, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement alleges that the seven 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 Administrative Law 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 Administrative Law 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. For further information contact Gregory G. Faragasso, Assistant Director, at (202) 551-4734 or Neil J. Welch, Jr., Senior Investigations Counsel, at (202) 551-4731. (Rel. 34-63583; File No. 3-14168) In the Matter of American Pegasus LDG, LLC, et al.On December 21, the Securities and Exchange Commission charged two San Francisco-based investment adviser firms, along with their former CEO, former general counsel, and former portfolio manager, with defrauding investors in a $100 million hedge fund that invested in subprime automobile loans. The SEC found that CEO Benjamin P. Chui and portfolio manager Triffany Mok — who managed the American Pegasus Auto Loan Fund — together with general counsel Charles E. Hall, Jr., engaged in improper self-dealing, misused client assets, and failed to disclose conflicts of interest. The firms — American Pegasus LDG, LLC (APLDG) and American Pegasus Investment Management, Inc. (APIM) — and Chui, Hall, and Mok settled the SEC’s charges by agreeing to sanctions including bars from the industry and more than $1 million in penalties and repayments to the fund. The SEC’s order instituting administrative proceedings finds that unbeknownst to investors, in mid-2007, Chui used more than $18 million in loans and advances from the Auto Loan Fund to buy the fund’s sole supplier of auto loans for himself, Hall, and Mok. This created a pervasive conflict of interest as Chui, Hall, and Mok had a duty to maximize the fund’s performance while at the same time had an interest in generating profits for the loan supplier they secretly owned. The SEC also found that Chui used millions in cash borrowed from the Auto Loan Fund to prop up other hedge funds he managed. By late 2008, roughly 40 percent of the Auto Loan Fund’s assets consisted of “loans” to the fund managers’ related businesses — with fund investors being charged fees based on these undisclosed related-party payments. According to the SEC’s order, Chui, Hall, and Mok then essentially wiped much of this debt to the fund off the books by selling assets to the fund at a 300 percent mark-up. Chui, with help from Hall and Mok, purchased an auto loan portfolio for $12 million in February 2009 — then sold it to the Auto Loan Fund the same day for more than $38 million. The fraudulently inflated sale was used to erase money owed to the fund for the various related-party transactions. The Commission’s order finds that all respondents willfully violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; that APLDG, APIM, Chui, and Mok willfully violated Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder; that Hall willfully aided and abetted and caused APLDG and APIM’s violations of Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8; that APLDG, APIM, Chui, and Hall willfully violated Section 207 of the Advisers Act; and that APLDG and APIM willfully violated, and Chui, Hall, and Mok willfully aided and abetted and caused APLDG and APIM’s violations of, Section 206(3) of the Advisers Act. Without admitting or denying the SEC’s findings, the respondents agreed to the following settlement terms. Chui, who lives in San Carlos, Calif., agreed to pay a $175,000 penalty and be barred from associating with an investment adviser with the right to reapply for association after five years. Hall, who lives in Carlisle, Penn., agreed to pay a $100,000 penalty, be barred from associating with an investment adviser with the right to reapply for association after three years, and be denied the privilege of appearing or practicing before the Commission as an attorney for three years with the right to apply for reinstatement after three years. Mok, who lives in Fremont, Calif., agreed to pay a $75,000 penalty and be suspended from associating with an investment adviser for twelve months effective on the second Monday following the entry of the Commission’s order. APLDG agreed to forgive $850,000 in its claims against the Auto Loan Fund and a related hedge fund for unpaid advisory fees and certain reimbursement. (Rels. 33-9167; 34-63585; IA-3125; IC-29542; File No. 3-14169) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Six Public Companies For Failure to Make Required Periodic FilingsOn December 21, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of six companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement alleges that the six 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 Administrative Law 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 Administrative Law 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. For further information contact Gregory G. Faragasso, Assistant Director, at (202) 551-4734 or Neil J. Welch, Jr., Senior Investigations Counsel, at (202) 551-4731. (Rel. 34-63586; File No. 3-14170) Court Enters Temporary Restraining Order Freezing Assets and Enjoining Violations of Anti-Fraud Provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934On December 16, United States District Judge Edward J. Lodge entered a Temporary Restraining Order freezing the assets of defendants Alternate Energy Holdings Inc. (AEHI), Chief Executive Officer Donald L. Gillispie and Senior Vice President Jennifer Ransom, and relief defendants Bosco Financial, LLC and Energy Executive Consulting, LLC. The Order temporarily restrains AEHI from violating Sections 13(a) and 17(a) of the Securities Act of 1933 and Rule 13a-11 thereunder, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Order also temporarily restrains Gillispie from violating Section 17(a) of the Securities Act and Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3 thereunder, and from aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Order also temporarily restrains Ransom from violating Section 16(a) of the Exchange Act and Rule 16a-3 threunder, and from aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. On the same day, Judge Lodge entered an Order to Show Cause requiring defendants to show cause why the Court should not enter a Preliminary Injunction and order preliminary relief against them. [SEC v. Alternate Energy Holdings, Inc., et al., United States District Court for the District of Idaho, Civil Action. No. 1:10-cv-00621-EJL] (LR-21786) SEC Charges Hedge Fund Managers and Trustees With Operating Multi-Million Dollar Offering FraudOn December 21, the Securities and Exchange Commission filed a civil injunctive action against Robert Buckhannon, Terry Rawstern, Dale St. Jean and Gregory Tindall (the Managing Members), the four managing members of two now-defunct hedge funds, Arcanum Equity Fund, LLC and Vestium Equity Fund, LLC (the Funds), through which they conducted an offering fraud that raised $34 million from 101 investors throughout the U.S. and Canada. The SEC also charged Imperium Investment Advisors, LLC, a registered investment adviser which served as trustee for Vestium Equity Fund, and its three principals, Richard Mittasch, Christopher Paganes and Glenn Barikmo, for their roles in the scheme. The SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, alleges that from April 2008 through April 2010, the Managing Members raised funds promising investors that they would generate substantial returns through conservative investments in high-grade debt instruments and, in some cases, limited physical commodities transactions. Additionally, the offering materials and prospectus for Vestium Equity Funds further assured investors that Imperium would safeguard their funds from impermissible uses. Contrary to these assurances, however, the defendants disregarded the Funds’ respective investment parameters and used investor funds for illiquid private investments and loans to affiliate entities. Additionally, although the Funds incurred investment losses of at least $8.1 million, the Managing Members disseminated monthly statements falsely depicting consistent profits and paid at least $6 million to investors in alleged profits. The Managing Members further paid themselves over $1.3 million in compensation that was improperly based on inflated asset values and fictitious profits. The SEC’s complaint further alleges that Buckhannon, Mittasch, Paganes and Barikmo collectively misappropriated at least $734,000 of investor funds to themselves and others. The SEC’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Buckhannon and Rawstern violated Section 17(a) of the Securities Act of 1933, and that defendants Buckhannon, Rawstern, St. Jean and Tindall also violated, and Mittasch, Paganes, Barikmo and Imperium aided and abetted violations of, Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC’s complaint seeks permanent injunctive relief, disgorgement and prejudgment interest thereon, and civil penalties. Without admitting or denying the SEC’s allegations, Buckhannon settled the Commission’s action by consenting to a final judgment providing for permanent injunctive relief, disgorgement with prejudgment interest in the amount of $1,239,176 and a civil penalty in the amount of $130,000. Rawstern also partially settled the Commission’s action by consenting to the entry of a judgment providing for injunctive relief and for the imposition of disgorgement and a civil penalty, in amounts to be determined at a later date upon the Commission’s motion. The matter remains in litigation with respect to the remaining defendants. The Commission acknowledges the assistance and cooperation of the Alberta Securities Commission in this matter. [SEC v. Robert L. Buckhannon, Terry D. Rawstern. Dale E. St. Jean, Gregory D Tindall, Richard D. Mittasch, Christopher T. Paganes, Glenn M. Barikmo and Imperium Investment Advisors, LLC, Civil Action No. 8:10-cv-2859-T27-MAP, M.D. Fla., filed Dec. 21, 2010] (LR-21787) INVESTMENT COMPANY ACT RELEASESNotice of Applications for Deregistration under the Investment Company ActFor the month of December 2010, a notice has been issued giving interested persons until Jan. 11, 2011, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act declaring that the applicant has ceased to be an investment company:
(Rel. IC-29541 - December 16) SELF-REGULATORY ORGANIZATIONSProposed Rule ChangeThe Commission issued notice of filing of proposed rule change filed by NASDAQ OMX PHLX LLC (SR-Phlx-2010-176) under Rule 19b-4 of the Securities Exchange Act relating to listing and trading of Alpha Index Options. Publication is expected in the Federal Register during the week of December 20. (Rel. 34-63575) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig122110.htm
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