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LR-20061 Mar. 29, 2007 First United Financial Group, LLC, et al.
http://www.sec.gov/litigation/litreleases/2007/lr20061.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20061 / March 29, 2007
SEC v. First United Financial Group, LLC, et al., Civ. Action No. 1:04-cv-1601-CKK (United District Court for the District of Columbia) (Judge Kollar-Kotelly)
Robert L. Hall, Jr. Consents to Permanent Injunctions
On February 6, 2007, United States District Judge Colleen Kollar-Kotelly entered a final judgment by consent against Robert L. Hall, Jr., in an action that the SEC filed in the United States District Court for the District of Columbia in 2004.
The Commission's complaint alleges that, from at least June 2001 until August 2003, Hall, acting through First United Financial Group, LLC, offered and sold securities called "Asset Placement Agreements" in unregistered transactions to more than 150 investors in at least 18 states. Through cold calls, seminars, sales agents and newspaper advertisements, First United raised over $1.38 million. In connection with the offer and sale of securities, Hall made misrepresentations and omissions of material fact to investors concerning, among other things, the use of investor funds, expected returns, and the investment risks. He also made misrepresentations that the funds raised would be invested in real estate in Washington, DC to assist lower and moderate income residents in a "friendly real estate development system" to assist residents who might be displaced "by the market pressures of gentrification." In fact, investors' funds were not invested in real estate projects in Washington, DC or elsewhere.
The final judgment, to which Hall consented, permanently enjoins Hall from violations of the registration provisions of the federal securities laws contained in Section 5 of the Securities Act of 1933 ("Securities Act"), and from violations of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the final judgment includes a conduct-based injunction that permanently enjoins Hall from participating in unregistered offers or sales of securities. Based on the criminal action described below, the Commission did not require Hall to pay disgorgement or penalties as part of the settlement. The Court's order concludes this litigation.
In a parallel criminal proceeding, United States v. Robert L. Hall, Jr., No. 1:05-cr-00030-HHK (D.D.C), Hall was on March 3, 2006, convicted on 18 criminal counts related to the conduct alleged in the Commission's complaint. On December 7, 2006, Hall was sentenced to serve incarceration of 188 months, three years of supervised release, and to pay $713,924 in restitution.
For additional information, see Litigation Release No. 18886 (September 15, 2004) and Litigation Release No. 19860 (October 6, 2006).
http://www.sec.gov/litigation/litreleases/2007/lr20061.htm
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Home | Previous Page Modified: 03/29/2007
Litigation Releases - March 29, 2007
LR-20061 Mar. 29, 2007 First United Financial Group, LLC, et al.
http://www.sec.gov/litigation/litreleases/2007/lr20061.htm
LR-20060 Mar. 29, 2007 Nicor, Inc. and Jeffrey L. Metz
See also: Complaint in this matter
http://www.sec.gov/litigation/litreleases/2007/lr20060.htm
Exchange Delistings - March 29, 2007
Form Formats Description Accepted Filing Date File/Film No
UNIVISION COMMUNICATIONS INC (0001017008) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000326 Act: 34 Size: 4 KB 2007-03-29
16:03:48 2007-03-29 001-12223
07727740
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000326 Size: 4 KB 2007-03-29
16:03:48 2007-03-29
"UNIVISION COMMUNICATIONS INC Class A Common Stock"
http://www.sec.gov/Archives/edgar/data/876661/000087666107000326/xslF25X02/primary_doc.xml
MERRILL LYNCH & CO INC (0000065100) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000047 Act: 34 Size: 3 KB 2007-03-29
10:20:09 2007-03-29 001-07182
AMERICAN STOCK EXCHANGE LLC (0001143313) (Filed by)
25-NSE [html][text]
Accession Number: 0001143313-07-000047 Size: 3 KB 2007-03-29
10:20:09
"MERRILL LYNCH & CO INC Strategic Return Notes linked to the Oil and Natural Gas Index, maturing March 28, 2007"
http://www.sec.gov/Archives/edgar/data/65100/000114331307000047/xslF25X02/primary_doc.xml
SEC Center for Complaints and Enforcement Tips
Through this page you can file a complaint or provide us with tips on potential securities law violations. We welcome hearing from you because your information may alert us to a bad broker or firm, an unfair practice in the securities industry that needs to be changed, or the latest fraud.
How Do I Reach the SEC?
There are several ways to file a complaint:
Complaints - Use one of our online forms to file your complaint electronically.
Tips - Report a potential violation of the securities laws directly to enforcement@sec.gov. Please do not use this email box for general comments or questions.
Spams - Forward investment-related spam e-mails to enforcement@sec.gov.
Questions - Use our "Fast Answers" web page for general questions about the federal securities laws or your investments.
If you do not want to communicate electronically, either print and fill out a form or write us a letter. Our address is: SEC Complaint Center, 100 F Street NE, Washington, D.C. 20549-0213. You can also send a fax to 202-772-9295.
Whistleblower Protection: If you work for a publicly traded company and have been fired, demoted, suspended, threatened, harassed, or discriminated against for reporting a potential shareholder fraud to a supervisor, federal regulator, or member of Congress, then please contact OSHA’S Office of Investigative Assistance right away. OSHA is the federal agency that investigates and handles these sorts of "whistleblower" complaints.
What Information Should I Provide?
We can best respond to you if we receive accurate and complete information. Though you are not required to furnish any more information than you wish, critical information for us to completely evaluate your complaint or tip includes:
Your name, mail and email addresses, and telephone numbers.
The name, mail and email addresses, telephone numbers, and website address of any individual or company you mention in the complaint.
If you have a complaint about a security or a securities salesperson, specific details of how, why, and when you were defrauded or encountered problems with investments or your broker or adviser.
What Happens After I Send Information to the SEC?
We thoroughly review and evaluate your information so that we may refer it to the appropriate SEC office. The Office of Investor Education and Assistance will handle certain general questions about the securities laws and complaints relating to financial professionals or a complainant's personal financial matters. The professionals in this office can counsel you regarding possible remedies and may, under appropriate circumstances, approach brokerage firms, advisers or other financial professional concerning matters you have raised.
Attorneys in the Division of Enforcement evaluate information and tips concerning violations of the federal securities laws. It is the general policy of the SEC to conduct its investigations on a confidential basis to preserve the integrity of its investigative process as well as to protect persons against whom unfounded charges may be made or where the SEC determines that enforcement action is not necessary or appropriate.
Subject to the provisions of the Freedom of Information Act, the SEC cannot disclose the existence or non-existence of an investigation and any information gathered unless made a matter of public record in proceedings brought before the SEC or in the courts. You can find information about public enforcement actions on our Web site.
http://www.sec.gov/complaint.shtml
--------------------------------------------------------------------------------
Modified: 03/26/2007
Investors Claims Funds
This page lists the SEC enforcement cases in which a Receiver, Disbursement Agent, or Claims Administrator has been appointed. Funds that are recovered and available for investors will be distributed according to an approved plan.
In addition to seeing whether a claims fund has been established, you may want to find out whether a private class action has been filed against the company you invested in. If you're aware of violations of the securities laws, please tell us by using our online complaint form.
If your broker-dealer has gone out of business, you can visit the website of the Securities Investor Protection Corporation to find out whether your firm is the subject of a liquidation proceeding and how you can obtain a claim form.
Alphabetical Index
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
#
12daily Pro
4NExchange, LLC, Paul R. Grant and Ronald Bassett
A
ABC Viaticals, et al.
Advanced Financial Services, Larry W. Tyler, et al.
Alanar, Inc., et al.
Alliance Capital Management, L.P.
Alpha Telcom, Inc.
American-Amicable Life Insurance Company of Texas
American Express Financial Advisors Inc.
American Express Financial Corporation
Ashbury Capital Partners, L.P., Ashbury Capital Management, L.L.C., and Mark Yagalla
B
Banc of America Capital Management, LLC, BACAP Distributors, LLC, and Banc of America Securities, LLC
Banc One Investment Advisors Corporation
Beacon Hill Asset Management, et al.
Bear, Stearns & Co., Inc. and Bear, Stearns Securities Corp.
Bennett Funding Group, Inc.
Bentley Financial Services, Inc.
BetzDearborn Inc. Insider Trading Distribution Fund
Bio-Heal Laboratories, Inc., et al.
Bradford C. Bleidt and Allocation Plus Asset Management Company, Inc.
Bridgeway Capital Management, Inc. and John Noland Ryan Montgomery
Bristol-Myers Squibb Company
C
Capital Consultants, LLC, Jeffrey L. Grayson, and Barclay L. Grayson
Capital Enhancement Club
Carolina Development Company, Lambert Vander Tuig, and Jonathan Carman
Cash 4 Titles, Charles Richard Homa, and Michael Gause
Charis Johnson, LifeClicks, LLC, and 12daily Pro
Charles W. Crouse and Norman R. Hess
CIBC World Markets Corp. and Canadian Imperial Holdings Inc.
Colin Nathanson, et al.
Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc.
Credit Bancorp, Ltd.
Credit First Fund, LP, David R. Lund, et al.
Cyprus Funds, Inc. and Latin American Services Co., Ltd.
D
David M. Mobley/Maricopa Investment Fund, Ltd.
David Tanner d/b/a/ Capital Enhancement Club, et al.
Discover Capital Holdings Corp., et al.
Donald Matthew Greth and Brenda B. Melton
D.W. Heath & Associates, Inc. et al.
E
Edward D. Jones & Co.
Edward S. Digges, et al.
Elfindepan S.A., et al
Emvest Mortgage Fund, LLC, Emvest, Inc., and Milon Lyle Brock
Enron
F
Federated Investment Management Company, Federated Securities Corp. and Federated Shareholder Services Company
First Choice Management Services, Inc. and Gary Van Waeyenberghe
First Command Financial Planning
Franklin Advisers, Inc.
Freedom Financial, Inc., et al.
G
Gemstar-TV Guide International, Inc.
Geneva Group and Nicholas Garcia
Geoffrey A. Gish; Weston Rutledge Financial Services, Inc.; Zamindari Capital, LLC; Lexington International Fund, LLC a/k/a Lexington International Fund, Inc.; and Oxford Adams Capital, LLC
Global Express Capital Real Estate Investment Fund I, LLC et al.
Global Money Management, L.P., LF Global Investments, LLC, and Marvin Friedman
Global Research Analyst Settlement
H
Health Maintenance Centers, Inc. et al.
Heartland Financial Services, Inc.
Heyman International
Homestore, Inc.
Horizon Establishment
Huntington Bancshares, Inc.
I
i2 Technologies, Inc.
International Capital Management, Inc.
International Equity Advisors, LLC and Richard Roger Lund
International Fiduciary Corp., S.A., et al.
International Funding Association, Ronald Stephen Holt, et al.
International Management Associates, LLC et al.
Invesco Funds Group, Inc. and AIM Advisors, Inc.
IPIC International, et al.
J
Jack Brown, Jules Fleder et al.
James R. Harrold, et al.
James P. Lewis, Jr., Financial Advisory Consultants, et al.
Janus Capital Management LLC
John Wayne Zidar et al.
Jon W. James, J.W. James & Associates, et al.
J.T. Wallenbrock & Associates, Citadel Capital Management Group, Larry Toshio Osaki, and Van Y. Ichinotsubo
K
K.L. Group, LLC, et al.
Kenneth Roy Weare, also known as Roy Weaver, J&K Global Marketing Corporation, and AAA-Auction.com, Inc.
Knight Securities L.P.
KS Advisors, et al.
L
Le Club Prive S.A.
Learn Waterhouse, Inc. et al.
Lotus Development Corporation
M
Massachusetts Financial Services Co., John W. Ballen, and Kevin R. Parke
Megafund Corporation
Merrill Scott & Associates, Ltd., et al.
Michael Lauer, Lancer Management Group, LLC, and Lancer Management Group II, et al.
Mid-America Foundation, Inc., Robert R. Dillie, et al.
Millennium Financial, Ltd. and Newpont Fiduciaries & Nominees, S.A.
Mobile Billboards of America, Inc., et al.
Mutual Benefits Corp., et al.
MX Factors, LLC et al.
N
New Times Securities Services, Inc, New Age Financial Securities, Inc. and William Goren
NexstarCommunications, LLC
NJ Affordable Homes Corp. and Wayne Puff
North American Medical Products, Inc.
Northshore Asset Management LLP, et al.
NYSE Specialist Firms
O
Ohana International, Inc., Financial Solutions, and Christiano Hashimoto
P
PA Fund Management LLC f/k/a PIMCO Advisors Fund Management LLC et al.
Par Three Financial Group, Inc. and Melvin D. Ruth
Paramount Capital Management, Inc. and William C. Bolton
Pay Pop, Inc.
Pension Fund of America LC, et al.
Pilgrim Baxter & Associates, Ltd., Gary L. Pilgrim and Harold J. Baxter
Pinnacle Development Partners LLC and Gene A. O’Neal
PinnFund USA, Inc.
Pittsford Capital Income Partners, L.L.C., et al.
Presto Telecommunications, Inc.
Prudential Equity Group, LLC, formerly known as Prudential Securities Inc.
Putnam Investment Management LLC
Q
Qwest Communications International Inc.
R
Rainmaker Managed Living, LLC, et al.
Resource Development International LLC, et al.
RS Investments Management, Inc. et al.
S
Sebastian International Enterprises, Inc.
Southern Financial Group, Inc.
Spear & Jackson, Inc.
Steve Madden Ltd.
Strong Capital Management, et al.
Superior Opportunities, Inc.
Systems of Excellence and Charles O. Huttoe
T
Terry L. Dowdell, et al.
Time Warner Inc.
TLC Investments & Trade Co., et al.
Travis E. Correll, individually and doing business as Horizon Establishment, et al.
Tri Energy et al.
U
Uniprime Capital Acceptance, Inc. and Alfred J. Flores
U.S. Reservation Bank & Trust, Higher Investment Technologies, Inc., Global-Link Capital Markets L.L.C. et al.
V
Viatical Capital, Inc., d/b/a Life Settlement Network, Life Investment Funding Enterprises, Inc., Charles D. York, and Robert K. Coyne
Virtual Cash Card, et al.
Virtual Private Marketplace, Ltd., Gary L. Moody, Steven R. Moody, and Billpay Systems LLC
Vivendi Universal, S.A.
W
W.L. Ware Enterprises and Investments, Inc. and Warren L. Ware
Wellington Bank and Trust, Ltd. et al.
Wellness Universe, et al.
Weston Rutledge Financial Services, Inc.
William L. Brotherton and International Business Consortium, Inc.
World Class Limousines, Inc., 1-800-GET-LIMO, Inc. and 1-800-GET-LIMO Service, Inc.
WorldCom
Worldwide Entertainment, Inc., et al.
X
Y
Z
Archive of Investors Claims Funds Notices
http://www.sec.gov/divisions/enforce/claims.htm
34-55551 Mar. 28, 2007 Edward S. Pliner, CPA
Other Release No.: AAER-2585
http://www.sec.gov/litigation/admin/2007/34-55551.pdf
UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55551 / March 28, 2007
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 2585 / March 28, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12602
In the Matter of
EDWARD S. PLINER, CPA,
Respondent.
ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OFTHE COMMISSION’S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Edward S. Pliner (“Pliner” or “Respondent”) pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice.1
II.
In anticipation of the institution of these proceedings, the Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below.
1 Rule 102(e)(3)(i) provides, in relevant part, that:
The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:2
1. Pliner, age 49, has been a Certified Public Accountant licensed in Massachusetts at all relevant times. During 1997 through February 2000, Pliner served as the lead engagement partner on the audits of the financial statements for Raytheon Company (“Raytheon” or the “company”). From approximately April 2000 until December 2002, Pliner served as Raytheon’s Controller and then became the company’s CFO.
2. Raytheon is a Delaware corporation, headquartered in Waltham, Massachusetts. The company is an industry leader in defense, government electronics, space technology, and business and special mission aircraft. Between 1997 and 2001, Raytheon reported between $13 billion and $20 billion in net sales revenue annually and employed between 75,000 to 120,000 individuals. During this time period and continuing through today, Raytheon’s securities have been registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 and are listed on the New York, Chicago, and Pacific Exchanges.
3. On March 15, 2007, the Commission filed a complaint against Respondent in Securities and Exchange Commission v. Edward S. Pliner, Civil Action No. 07-cv-00495 (GK), in the United States District Court for the District of Columbia. Respondent neither admits nor denies the allegations in that complaint. On March 26, 2007, a final judgment was entered by consent against Pliner, permanently enjoining him from committing violations of Sections 17(a)(2) and (3) of the Securities Act of 1933 and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 13b2-1 promulgated thereunder. The final judgment ordered Pliner to pay $325,000 in disgorgement of certain past bonus amounts, $90,042 in prejudgment interest thereon, and a $150,000 civil money penalty.
4. The Commission’s complaint alleges among other things that, between 1997 and 2001, Raytheon and certain members of its senior management made false and misleading disclosures and used improper accounting practices that operated as a fraud by masking the declining results and deteriorating business of Raytheon Aircraft Company (“RAC”) and inaccurately reporting the company’s operating results on both a segmented and consolidated basis. According to the SEC’s complaint, certain of these disclosures and accounting practices were undertaken by or with the knowledge of Pliner and others.
5. The Commission’s complaint also alleges that, as Raytheon’s lead auditor, Pliner was aware of certain bill-and-hold and commuter aircraft accounting practices at RAC, which he knew or should have known were improper. Yet, he signed unqualified audit opinions for the 1997 and 1998 audits, which represented that the company’s financial statements “present fairly, in all material respect, the financial position of Raytheon Company and Subsidiaries
2 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or entity in this or any other proceeding. 2
Consolidated… and the results of their operations…in conformity with generally accepted accounting principles.”
6. The Commission’s complaint further alleges that, as Raytheon’s Controller, Pliner continued to be aware of and involved in certain on- and off-balance sheet commuter accounting, which he knew or should have known did not accurately reflect the negative impact of declining commuter values in Raytheon’s financial statements. According to the Commission’s complaint, Pliner further did not make or ensure the timely, accurate, and full disclosure of material trends and uncertainties related to Raytheon’s commuter aircraft business in the company’s SEC filings during 2000 and 2001, and he also did not ensure that the company maintained an adequate system of internal accounting controls related to these assets.
7. According to the Commission’s complaint, RAC’s operating results would have been reduced by at least $67 million (41 percent) at year-end 2000 had Pliner and others in senior Raytheon and RAC management timely and appropriately recognized losses inherent in a planned “soft landing” of the commuter aircraft line. According to the Commission’s complaint, at this time, these and other senior executives further expected commuter losses of $240 million given the cash sales prices that had been approved in the “soft landing,” and a charge of $67 million to $240 million would have reduced Raytheon’s 2000 profit before taxes by at least 8 to 27 percent.
8. The Commission’s complaint alleges that Pliner and others caused Raytheon to improperly take this charge in the third quarter of 2001, when the company wrote down its on-balance sheet commuter assets and increased reserves for its off-balance sheet commuter receivables by a total of $693 million after the terrorist attacks of September 11th. According to the Commission’s complaint, given the charge that the company should have taken at year-end 2000, Raytheon’s third quarter 2001 commuter loss provision was materially overstated by at least 10 to 53 percent.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in the Respondent’s Offer.
Accordingly, IT IS HEREBY ORDERED, effective immediately, that:
A. Pliner is suspended from appearing or practicing before the Commission as an accountant.
B. After three (3) years from the date of this Order, Pliner may request that the Commission consider his reinstatement by submitting an application (attention: Office of the Chief Accountant) to resume appearing or practicing before the Commission as:
1. a preparer or reviewer, or a person responsible for the preparation or review, of any public company’s financial statements that are filed with the Commission. Such an application must satisfy the Commission that Pliner’s work in his practice before the Commission will be reviewed either by the independent audit committee of the public
3
company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or
2. an independent accountant. Such an application must satisfy the Commission that:
(a) Pliner, or the public accounting firm with which he is associated, is registered with the Public Company Accounting Oversight Board (“Board”) in accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective;
(b) Pliner, or the registered public accounting firm with which he is associated, has been inspected by the Board and that inspection did not identify any criticisms of or potential defects in the Respondent’s or the firm’s quality control system that would indicate that the Respondent will not receive appropriate supervision; and
(c) Pliner has resolved all disciplinary issues with the Board, and has complied with all terms and conditions of any sanctions imposed by the Board (other than reinstatement by the Commission); and
(d) Pliner acknowledges his responsibility, as long as he appears or practices before the Commission as an independent accountant, to comply with all requirements of the Commission and the Board, including, but not limited to, all requirements relating to registration, inspections, concurring partner reviews and quality control standards.
C. The Commission will consider an application by Pliner to resume appearing or practicing before the Commission as an accountant provided that his accountant status is current and he has resolved any disciplinary issues with the applicable board of accountancy. However, if the resolution of any disciplinary action by a board of accountancy is dependent on reinstatement by the Commission, the Commission will consider an application on its other merits. The Commission’s review may include consideration of, in addition to the matters referenced above, any other matters relating to Pliner’s character, integrity, professional conduct, or qualifications to appear or practice before the Commission.
By the Commission.
Nancy M. Morris
Secretary
4
Administrative Proceedings - March 28, 2007
34-55551 Mar. 28, 2007 Edward S. Pliner, CPA
Other Release No.: AAER-2585
http://www.sec.gov/litigation/admin.shtml
LR-20058 Mar. 28, 2007 Jordan H. Mintz and Rex R. Rogers
Other Release No.: AAER-2584
http://www.sec.gov/litigation/litreleases/2007/lr20058.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20058 / March 28, 2007
Accounting and Auditing Enforcement Release No. 2584 / March 28, 2007
SEC v. Jordan H. Mintz and Rex R. Rogers, Civil Action No. 07-1027 (SDTX) (March 28, 2007)
SEC Charges Two Former Enron In-House Lawyers With Securities Fraud And Related Violations
On March 28, 2007, the Securities and Exchange Commission charged two former in-house attorneys of Enron Corp., Jordan H. Mintz, a former Enron Vice President and General Counsel of Enron's Global Finance group (EGF) and Rex R. Rogers, a former Enron Vice President and Associate General Counsel, in connection with a fraudulent scheme to make material misrepresentations in, and to omit material disclosures from, Enron's public filings. The Commission's complaint charges Mintz and Rogers with violating the antifraud and other provisions of the federal securities laws, and aiding and abetting Enron's violations of the antifraud and periodic reporting provisions. In addition, the complaint charges Mintz with violating the books and records and lying to auditors provisions, and Rogers with aiding and abetting violations of the insider stock sale reporting provision by Enron's then Chairman, Kenneth Lay. Mintz, as General Counsel of EGF, was responsible for managing the related party disclosures in Enron's 2000 Proxy Statement (incorporated in its 2000 Form 10-K) and second quarter 2001 Form 10-Q, and closing a fraudulent related party transaction while knowingly or recklessly disregarding that the transaction was in fulfillment of a secret oral side agreement. Rogers, as Enron's top securities lawyer, was responsible for the timing and content of all Enron's SEC filings, including Enron's 2000 Proxy Statement, second quarter 2001 Form 10-Q and relevant 2001 Form 4 filings.
The Commission's complaint alleges the following: In 1999, Enron sold an interest in a troubled power project in Cuiaba, Brazil to a related party called LJM1, a partnership controlled by Enron's then Chief Financial Officer, Andrew Fastow, to deconsolidate the project (to take the asset off of its balance sheet) and recognize related earnings. (Fastow also controlled a second related party, a partnership called LJM2.) In conformity with relevant accounting rules, deconsolidation and earnings recognition were not appropriate because the seller (Enron) did not transfer to the buyer (LJM1) the usual risks and rewards of ownership, in that the sale included an oral side agreement that LJM1 would not lose money. The oral side agreement was neither memorialized in the deal documents nor disclosed to Enron's auditor. In 2001, Enron bought back LJM1's Cuiaba interest in satisfaction of the oral side agreement. Under the terms of the buyback, Enron paid LJM1 a profit despite the fact that LJM1's investment had decreased in value. The complaint alleges that Mintz knew, or was reckless in not knowing, of the oral side agreement and knowingly or recklessly directed the documenting and closing of the buyback in fulfillment of the oral side agreement.
The complaint further alleges that Mintz knowingly or recklessly failed to disclose Enron's buyback of LJM1's Cuiaba interest as a "currently proposed" transaction in Enron's 2000 Proxy Statement (filed March 27, 2001), when he knew of, and was responsible for, the execution of the buyback agreement on March 28, 2001, the day after Enron's 2000 Proxy Statement was filed. The complaint also alleges that Mintz and Rogers knowingly or recklessly failed to disclose in Enron's 2000 Proxy Statement the monetary amount of Fastow's earnings from LJM1 and LJM2 (more than $18 million), including management fees and distributions, resulting from Enron-LJM transactions. According to the complaint, Mintz and Rogers further knowingly or recklessly made a materially false and/or misleading statement in Enron's second quarter 2001 Form 10-Q (filed August 14, 2001) when stating in that filing that Fastow sold his interests in the LJM partnerships and those partnerships were no longer related parties to Enron. Mintz and Rogers knew, or were reckless in not knowing, that this statement was materially false and/or misleading because (a) the Cuiaba repurchase was pending (it closed on August 15, 2001, the day after the Form 10-Q was filed), (b) the Cuiaba repurchase was negotiated and agreed to while Fastow controlled LJM1, and (c) Enron continued to provide the LJM partnerships with the use of Enron employees, facilities and equipment during the third and fourth quarters of 2001. The complaint further alleges that Rogers knowingly or recklessly failed to disclose in Enron's 2000 Proxy Statement that during 2000, Lay sold $16 million of Enron stock to Enron to repay Lay's Enron line of credit. According to the complaint, Rogers also knowingly or recklessly authorized Lay and others to fail to disclose in Lay's 2001 monthly SEC Form 4 filings that during 2001, Lay sold an additional $70 million of Enron stock to Enron to repay his Enron line of credit.
The complaint also alleges that Mintz directly or indirectly made, or caused to be made, materially false and/or misleading representations to Enron's auditor concerning Enron's second quarter 2001 Form 10-Q. The complaint alleges that Mintz reviewed and approved misrepresentations to be made to Enron's auditor so the auditor would sign off on the statement in the Form 10-Q that Fastow sold his interests in the LJM partnerships and those partnerships were no longer related parties to Enron. The specific misrepresentations were that there were no unfulfilled obligations, commitments, contingencies or special arrangements between Enron and the LJM entities related to the sale of Fastow's LJM interests, and there were no pending transactions between the LJM entities and Enron for which the terms were negotiated and agreed to prior to the effective date of the sale of Fastow's LJM interests. Mintz knew, or was reckless in not knowing, that these representations were materially false and/or misleading because, among other reasons, Mintz knew (a) from documenting and closing the Cuiaba buyback, that the Cuiaba buyback had been pending since, and its terms were negotiated and agreed to, in March 2001, and (b) the LJM entities continued to have a commitment or special arrangement with Enron whereby the LJM entities used Enron employees, equipment and facilities to conduct LJM business during the third and fourth quarters of 2001.
According to the complaint, by engaging in this conduct, Mintz and Rogers violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5 and 14a-9. In addition, the complaint alleges that Mintz violated Exchange Act Section 13(b)(5) and Exchange Act Rules 13b2-1 and 13b2-2, and aided and abetted Enron's violations of Exchange Act Section 13(b)(2)(A). The complaint further alleges that through their conduct, Mintz and Rogers also aided and abetted violations of Exchange Act Sections 10(b), 13(a) and 14(a) and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13 and 14a-9. According to the complaint, Rogers also aided and abetted Lay's violations of Exchange Act Section 16(a) and Exchange Act Rules 16a-2 and 16a-3.
The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil money penalties from both defendants, as well as orders barring them from serving as an officer or director of a publicly-traded company.
The Commission's investigation is continuing.
Details concerning the fraudulent Cuiaba transaction, which has been the subject of other civil actions brought by the Commission against other former Enron employees, are at: http://www.sec.gov/litigation/litreleases/2006/lr19865.htm and http://www.sec.gov/litigation/litreleases/lr18543.htm
SEC Complaint in this matter
http://www.sec.gov/litigation/complaints/2007/comp20058.pdf
http://www.sec.gov/litigation/litreleases/2007/lr20058.htm
Litigation Releases - March 28, 2007
LR-20058 Mar. 28, 2007 Jordan H. Mintz and Rex R. Rogers
Other Release No.: AAER-2584
http://www.sec.gov/litigation/litreleases/2007/lr20058.htm
See also: Complaint in this matter
http://www.sec.gov/litigation/complaints/2007/comp20058.pdf
Exchange Delistings - March 28, 2007
Form Formats Description Accepted Filing Date File/Film No
STRATEGIC DISTRIBUTION INC (0000073822) (Subject)
25-NSE [html][text]
Accession Number: 0001354457-07-000085 Act: 34 Size: 3 KB 2007-03-28
16:06:16 2007-03-28 000-05228
07724388
NASDAQ Stock Market LLC (0001354457) (Filed by)
25-NSE [html][text]
Accession Number: 0001354457-07-000085 Size: 3 KB 2007-03-28
16:06:16 2007-03-28
"STRATEGIC DISTRIBUTION INC Common Stock"
http://www.sec.gov/Archives/edgar/data/73822/000135445707000085/xslF25X02/primary_doc.xml
WHITTIER ENERGY CORP (0001108520) (Subject)
25-NSE [html][text]
Accession Number: 0001354457-07-000084 Act: 34 Size: 3 KB 2007-03-28
16:05:54 2007-03-28 000-30598
07724383
NASDAQ Stock Market LLC (0001354457) (Filed by)
25-NSE [html][text]
Accession Number: 0001354457-07-000084 Size: 3 KB 2007-03-28
16:05:54 2007
"WHITTIER ENERGY CORP Common Stock"
http://www.sec.gov/Archives/edgar/data/1108520/000135445707000084/xslF25X02/primary_doc.xml
I hope and pray that someday I see the QBID scumbags listed here.
34-55534 Mar. 27, 2007 CMERUN Corp., Combine Corp., Integrated Homes, Inc., and Lighthouse Fast Ferry, Inc.
http://www.sec.gov/litigation/admin/2007/34-55534.pdf
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934 Release No. 55534 / March 27, 2007
ADMINISTRATIVE PROCEEDING File No. 3-12517
___________________________________
In the Matter of
:
CMERUN CORP., COMBINE CORP., DIGITAL CONCEPTS INTERNATIONAL, INC., INTEGRATED HOMES, INC., LIGHTHOUSE FAST FERRY, INC., and WANNIGAN CAPITAL CORP.
: : : : : : : :
ORDER MAKINGS FINDINGS AND REVOKING REGISTRATIONS BY DEFAULT AS TO CMERUN CORP., COMBINE CORP., INTEGRATED HOMES, INC., AND LIGHTHOUSE FAST FERRY, INC.
___________________________________
The Securities and Exchange Commission (Commission) initiated this proceeding with an Order Instituting Proceedings (OIP) on December 28, 2006, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act). All Respondents were served with the OIP by February 1, 2007. See 17 C.F.R. § 201.141(a)(2)(ii). To date, only Respondents Wannigan Capital Corp. (Wannigan) and Digital Concepts International, Inc. (Digital), have filed Answers to the OIP, due ten days after service. See 17 C.F.R. § 201.220; OIP at 4.
Prehearing conferences were held on March 2 and 13, 2007, at which only the Division of Enforcement, Wannigan, and Digital made appearances. On March 15, 2007, the Division of Enforcement filed a motion for default against CMERUN Corp. (CMERUN), Combine Corp. (Combine), Integrated Homes, Inc. (Integrated Homes), and Lighthouse Fast Ferry, Inc. (Lighthouse) (collectively, “Defaulting Respondents”). As of today, the Defaulting Respondents have failed to file a response to the motion.
The Defaulting Respondents are in default for failing to file Answers to the OIP, attend a prehearing conference, or otherwise defend the proceeding. See 17 C.F.R. §§ 201.155(a), .220(f), .221(f). Pursuant to Rule 155(a) of the Commission’s Rules of Practice, I find the following allegations in the OIP to be true as to the Defaulting Respondents.
CMERUN is a Delaware corporation located in Hudson, Massachusetts, with a class of equity securities registered with the Commission pursuant to Section 12(g) of the Exchange Act. CMERUN is delinquent in its periodic filings with the Commission because it has not filed a periodic report since its Form 10-KSB for the period ending September 30, 2000. That filing reported a net loss of approximately $11.6 million for the period November 8, 1999, to September 30, 2000, and $4.2 million in total assets as of September 30, 2000. As of August 1, 2006, the company’s common stock (symbol “CMER”) was traded on the over-the-counter
markets. The company’s common stock has no market makers and is not eligible for the piggyback exemption of Rule 15c2-11(f)(3) of the Exchange Act.
Combine, formerly known as CTC Cosmetics Holdings Co., Inc., is a former Delaware corporation located in Hamilton, Bermuda, with a class of equity securities registered with the Commission pursuant to Section 12(g) of the Exchange Act. The company is delinquent in its periodic filings with the Commission because it has not filed a periodic report since its Form 10QSB for the period ending November 30, 2001. That filing reported that Combine had no assets and an accumulated deficit during its development stage of approximately $2 million. The company’s common stock (symbol “CEBP”) is not publicly traded.
Integrated Homes is a dissolved Colorado corporation located in Boca Raton, Florida, with a class of equity securities registered with the Commission pursuant to Section 12(g) of the Exchange Act. The company is delinquent in its periodic filings with the Commission because it failed to file any periodic reports since its Form 10-SB filed on October 13, 2000, became effective. It had filed an initial Form 10-SB on July 16, 1999, but voluntarily terminated that registration on September 27, 1999, before any periodic reports were due. Prior to the latter filing, the Colorado Secretary of State had administratively dissolved the corporation on September 1, 2000. As of August 1, 2006, the company’s common stock (symbol “INHI”) was quoted on the Pink Sheets, had four market makers and is eligible for the piggyback exemption of Rule 15c2-11(f)(3) of the Exchange Act.
Lighthouse is a revoked New Jersey corporation located in West Caldwell, New Jersey, with a class of equity securities registered with the Commission pursuant to Section 12(g) of the Exchange Act. Lighthouse is delinquent in its periodic filings with the Commission because it has not filed a periodic report since a Form 10-QSB for the period ending June 30, 2002. The filing reported a net loss of approximately $6.1 million for the six months ending June 30, 2002, and $14.5 million in total assets as of June 30, 2002. As of August 1, 2006, the company’s common stock (symbol “LHFF”) was quoted on the Pink Sheets, had four market makers and is eligible for the piggyback exemption of Rule 15c2-11(f)(3) of the Exchange Act.
As discussed above, the Defaulting Respondents are delinquent in their periodic filings with the Commission, have repeatedly failed to meet their obligation to file timely periodic reports, and failed to heed delinquency letters sent to them by the Division of Corporation Finance requesting compliance with their periodic filing obligations or, through their failure to maintain a valid address on file with the Commission as required by Commission rules, did not receive such letters.
Section 13(a) of the Exchange Act and the rules promulgated thereunder require issuers of securities registered pursuant to Section 12 of the Exchange Act to file with the Commission current and accurate information in periodic reports, even if the registration is voluntary under Section 12(g). Specifically, Rule 13a-1 requires issuers to file annual reports (Forms 10-K or 10KSB), and Rule 13a-13 requires issuers to file quarterly reports (Forms 10-Q or 10-QSB). As a result of the conduct described above, the Defaulting Respondents failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.
2
In view of the above, I find it necessary and appropriate for the protection of investors to revoke the registrations of the registered securities of CMERUN, Combine, Integrated Homes, and Lighthouse.
ORDER
IT IS ORDERED THAT, pursuant to Section 12(j) of the Securities Exchange Act of 1934, the registrations of each class of the registered securities of Respondents CMERUN Corp., Combine Corp., Integrated Homes, Inc., and Lighthouse Fast Ferry, Inc., are hereby REVOKED.
_______________________________ Robert G. Mahony Administrative Law Judge
3
http://www.sec.gov/litigation/admin/2007/34-55534.pdf
34-55535 Mar. 27, 2007 James Cavaliere
http://www.sec.gov/litigation/admin/2007/34-55535.pdf
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55535 / March 27, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12563
-------------------------------------------------------x
:
:
In the Matter of : ORDER MAKING FINDINGS AND
: IMPOSING REMEDIAL SANCTIONS
: PURSUANT TO
JAMES CAVALIERE : SECTION 15(b) OF THE : SECURITIES EXCHANGE ACT OF 1934
: AS TO JAMES CAVALIERE
Respondent. :
:
-------------------------------------------------------x
I.
On February 8, 2007, the Securities and Exchange Commission (“Commission”) instituted administrative proceedings, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), against James Cavaliere (“Cavaliere” or “Respondent”).
II.
Respondent has submitted an Offer of Settlement (the “Offer”), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings and the findings contained in Section III. 2, which are admitted, Respondent consents to the entry of this Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934, as to James Cavaliere (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
1. Cavaliere, 44, from July 1999 to August 2000, was a registered representative
2
associated with Bryn Mawr Investment Group, Inc., a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act, which later was known as Valley Forge Securities, Inc. (“Valley Forge”).
2. On October 18, 2005, Cavaliere pled guilty to one count of conspiracy to commit securities fraud and wire fraud. United States v. James Cavaliere, 05 Cr. 49 (D.N.J.).
3. The sole count of the criminal information to which Cavaliere pled guilty alleged, inter alia, that Cavaliere, using various instrumentalities of interstate commerce, while employed at Valley Forge, defrauded investors by receiving undisclosed excessive cash commissions, which were not disclosed to customers. Cavaliere also paid excessive and undisclosed commissions to licensed and unlicensed brokers employed at Valley Forge’s Staten Island Office. Cavaliere also employed deceptive sales practices to mislead customers into buying certain stocks.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Cavaliere’s Offer.
Accordingly, it is hereby ORDERED:
Pursuant to Section 15(b)(6) of the Exchange Act that Cavaliere be, and hereby is barred from association with any broker or dealer.
Any reapplication for association by Cavaliere will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against Cavaliere, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a
customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.
For the Commission, by its Secretary, pursuant to delegated authority.
Nancy M. Morris
Secretary
http://www.sec.gov/litigation/admin/2007/34-55535.pdf
Administrative Proceedings - March 27, 2007
34-55535 Mar. 27, 2007 James Cavaliere
http://www.sec.gov/litigation/admin/2007/34-55535.pdf
34-55534 Mar. 27, 2007 CMERUN Corp., Combine Corp., Integrated Homes, Inc., and Lighthouse Fast Ferry, Inc.
http://www.sec.gov/litigation/admin/2007/34-55534.pdf
SEC v. Myron F. Olesnyckyj, United States District Court for the Southern District of New York, Civil Action No. 07 CV 1176 (HB) (S.D.N.Y.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20056 / March 27, 2007
Accounting and Auditing Release No. 2583 / March 27, 2007
The Securities and Exchange Commission ("Commission") today announced that it has settled its enforcement action against Myron F. Olesnyckyj, the former general counsel of Monster Worldwide, Inc. On March 26, 2007, the Honorable Howard Baer of the United States District Court for the Southern District of New York entered a final judgment that permanently enjoined Olesnyckyj from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 13b2-2 and 14a-9 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. In addition, the judgment permanently enjoined Olesnyckyj from acting as an officer or director of a public company. Olesnyckyj, without admitting or denying the allegations in the complaint, consented to the entry of this final judgment. In a parallel criminal action, Olesnyckyj pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud and has agreed to pay a forfeiture of $381,000. Olesnyckyj has not yet been sentenced in the criminal action.
On February 15, 2007, the Commission filed its action against Olesnyckyj. The complaint alleged that, from 1997 through 2003, Olesnyckyj backdated stock options grants to coincide with the dates of low closing prices for the Company's common stock, resulting in grants of in-the-money options to numerous individuals. When making grants of options, certain officers and employees at Monster would select a low closing stock price at which they wanted to grant stock options. Olesnyckyj, or others acting at his direction, then prepared backdated documentation for Monster's Compensation Committee containing the grant date that reflected the low closing price for Monster's common stock. Olesnyckyj then caused Monster to misrepresent in its periodic filings and proxy statements that all stock options were granted at the fair market value of the stock on the date of the award, when that was simply not the case. In fact, by backdating the options, Monster granted undisclosed compensation to its employees, failed to recognize compensation expenses, and overstated its net income by $340 million from 1997 through 2005. Olesnyckyj personally profited by receiving backdated options. The complaint further alleged that Olesnyckyj misled Monster's outside auditors in an attempt to hide the backdating scheme by providing documentation to them that misrepresented the grant date of the stock option awards.
http://www.sec.gov/litigation/litreleases/2007/lr20056.htm
SEC v. Eduardo A. Masferrer, Juan Carlos Bernacé and John M.R. Jacobs, Civil Action No. 03-22524-CIV-Jordan (S.D. Fla.)
Judgment of Permanent Injunction and Other Relief Entered Against Defendant Eduardo Masferrer and Monetary Claims Dismissed as to John M.R. Jacobs
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20057 / March 27, 2007
The Securities and Exchange Commission announced that on March 8, 2007, the Honorable Adalberto Jordan, United States District Judge for the Southern District of Florida entered a Judgment of Permanent Injunction and Other Relief against Defendant Eduardo Masferrer. Masferrer consented to the entry of an injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. In addition to injunctive relief, the Judgment permanently bars Masferrer from acting as an officer or director of any issuer registered with the Commission pursuant to Section 12 of the Exchange Act. The Judgment also dismissed the Commission's claims against Masferrer for disgorgement and civil penalties.
Previously, on February 6, 2007, pursuant to the Commission's Motion, Judge Jordan dismissed the Commission's claims against John M.R. Jacobs for disgorgement and civil penalties without prejudice, based on Jacob's conviction and restitution order in the related criminal proceeding.
For additional information see Litigation Release No. 18363 (September 25, 2003); Litigation Release No. 18772 (June 30, 2004); and Litigation Release No. 19599 (March 8, 2006).
http://www.sec.gov/litigation/litreleases/2007/lr20057.htm
Litigation Releases - March 27, 2007
LR-20057 Mar. 27, 2007 Eduardo A. Masferrer, Juan Carlos Bernacé and John M.R. Jacobs
http://www.sec.gov/litigation/litreleases/2007/lr20057.htm
LR-20056 Mar. 27, 2007 Myron F. Olesnyckyj
Other Release No.: AAER-2583
http://www.sec.gov/litigation/litreleases/2007/lr20056.htm
Exchange Delistings - March 27, 2007
Form Formats Description Accepted Filing Date File/Film No
TXI CAPITAL TRUST I (0001062548) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000324 Act: 34 Size: 3 KB 2007-03-27
16:35:40 2007-03-27 001-04887-01
07721715
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000324 Size: 3 KB 2007-03-27
16:35:40 2007-03-27
"$2.75 Shared Preference Redeemable Securities ('SpuRS')"
http://www.sec.gov/Archives/edgar/data/876661/000087666107000324/xslF25X02/primary_doc.xml
ELKCORP (0000032017) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000323 Act: 34 Size: 4 KB 2007-03-27
16:09:33 2007-03-27 001-05341
07721501
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000323 Size: 4 KB 2007-03-27
16:09:33 2007-03-27
"ELKCORP Common Stock"
http://www.sec.gov/Archives/edgar/data/32017/000087666107000323/xslF25X02/primary_doc.xml
HOME PROPERTIES INC (0000923118) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000321 Act: 34 Size: 4 KB 2007-03-27
15:22:35 2007-03-27 001-13136
07721212
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000321 Size: 4 KB 2007-03-27
15:22:35 2007-03-27
"HOME PROPERTIES INC 9.00% Series F Cumulative Redeemable Preferred Stock"
http://www.sec.gov/Archives/edgar/data/876661/000087666107000321/xslF25X02/primary_doc.xml
NATIONAL AUSTRALIA BANK LTD (0000833029) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000319 Act: 34 Size: 4 KB 2007-03-27
15:13:03 2007-03-27 001-09945
07721133
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000319 Size: 4 KB 2007-03-27
15:13:03 2007-03-27
"NATIONAL AUSTRALIA BANK LTD Exchangeable Capital Units (ExCaps)"
http://www.sec.gov/Archives/edgar/data/833029/000087666107000319/xslF25X02/primary_doc.xml
BEVERLY ENTERPRISES INC (0001040441) (Subject)
25-NSE [html][text]
Accession Number: 0001143362-07-000017 Act: 34 Size: 5 KB 2007-03-27
12:20:52 2007-03-27 001-09550-02
NYSE ARCA, INC. (0001143362) (Filed by)
25-NSE [html][text]
Accession Number: 0001143362-07-000017 Size: 5 KB 2007-03-27
12:20:52 2007-03-27
"BEVERLY ENTERPRISES INC Common Stock"
http://www.sec.gov/Archives/edgar/data/1040441/000114336207000017/xslF25X02/primary_doc.xml
RUSSELL CORP (0000085812) (Subject)
25-NSE [html][text]
Accession Number: 0001143362-07-000015 Act: 34 Size: 4 KB 2007-03-27
11:54:14 2007-03-27 001-05822
NYSE ARCA, INC. (0001143362) (Filed by)
25-NSE [html][text]
Accession Number: 0001143362-07-000015 Size: 4 KB 2007-03-27
11:54:14 2007-03-27
"RUSSELL CORP Common Stock"
http://www.sec.gov/Archives/edgar/data/85812/000114336207000015/xslF25X02/primary_doc.xml
GUIDANT CORP (0000929987) (Subject)
25-NSE [html][text]
Accession Number: 0001143362-07-000014 Act: 34 Size: 4 KB 2007-03-27
11:37:13 2007-03-27 001-13388
NYSE ARCA, INC. (0001143362) (Filed by)
25-NSE [html][text]
Accession Number: 0001143362-07-000014 Size: 4 KB 2007-03-27
11:37:13 2007-03-27
"GUIDANT CORP Common Stock"
http://www.sec.gov/Archives/edgar/data/929987/000114336207000014/xslF25X02/primary_doc.xml
ALBERTSONS INC /DE/ (0000003333) (Subject)
25-NSE [html][text]
Accession Number: 0001143362-07-000013 Act: 34 Size: 4 KB 2007-03-27
11:24:31 2007-03-27 001-06187
NYSE ARCA, INC. (0001143362) (Filed by)
25-NSE [html][text]
Accession Number: 0001143362-07-000013 Size: 4 KB 2007-03-27
11:24:31 2007-03-27
"ALBERTSONS INC /DE/ Common Stock"
http://www.sec.gov/Archives/edgar/data/3333/000114336207000013/xslF25X02/primary_doc.xml
BEDFORD PROPERTY INVESTORS INC/MD (0000910079) (Subject)
25-NSE [html][text]
Accession Number: 0001143362-07-000012 Act: 34 Size: 4 KB 2007-03-27
11:11:32 2007-03-27 001-12222
NYSE ARCA, INC. (0001143362) (Filed by)
25-NSE [html][text]
Accession Number: 0001143362-07-000012 Size: 4 KB 2007-03-27
11:11:32
"BEDFORD PROPERTY INVESTORS INC/MD Common Stock, $0.02 par value"
http://www.sec.gov/Archives/edgar/data/910079/000114336207000012/xslF25X02/primary_doc.xml
Reagan Budget Head Stockman Is Charged With Fraud
By Carrie Johnson
Washington Post Staff Writer
Tuesday, March 27, 2007; Page A01
NEW YORK, March 26 -- David A. Stockman, a chief architect of President Ronald Reagan's economic revolution turned Wall Street money man, was indicted Monday on charges of conspiracy, securities fraud and obstruction of justice.
Stockman, 60, who faces the prospect of three decades in prison, is accused of defrauding investors and banks during his stewardship of Collins & Aikman, a large Southfield, Mich., auto-parts maker that descended into bankruptcy in 2005.
First elected to the House of Representatives at age 30, the boy wonder grew in stature when he was named Reagan's first director of the Office of Management and Budget. In that post he became the highly visible point man for the "trickle-down" economic doctrine of the 1980s. But his private conversations about the budget with a journalist instigated a falling out with Reagan, who took him, he said, to the "woodshed." Disillusioned with Washington, Stockman eventually left for the world of investment banking in New York.
Stockman turned himself in at the U.S. Postal Inspection Service on Church Street in lower Manhattan shortly before 10:30 a.m., when investigators removed his blue-and-gold tie as a security precaution. Two hours later, he appeared in court wearing a navy pinstriped suit, tasseled loafers and a pair of tortoiseshell glasses. In a firm voice, Stockman pleaded "not guilty." He was released on a $1 million personal recognizance bond.
Manhattan U.S. Attorney Michael J. Garcia said that Stockman and a team of handpicked executives entered into secret agreements with suppliers, created false documentation to fool auditors and lied repeatedly about a cash squeeze to ensure that banks would continue to finance their operations. Stockman also misled company investigators examining deals between Collins & Aikman and a business owned by a board member, according to the grand jury indictment.
"Stockman did not only have money at stake," Garcia said at a news conference. "His reputation was on the line as well."
Prosecutors charged three other former Collins & Aikman officials, including a former finance chief and a former controller. Four other employees have pleaded guilty and agreed to testify against their onetime supervisor.
Outside the courthouse, Stockman presided over an impromptu news briefing, calmly discussing his efforts to move to a motel and work 16-hour days to save the company in the midst of an unprecedented cash crunch. "I took from my pocket to help," Stockman said. "I didn't line my pockets in any way."
By all accounts, Stockman operated Collins & Aikman with both hands on the wheel, fielding questions from reporters and analysts, negotiating directly with key clients, hoisting a canvas sack filled with fiscal projections and installing trusted subordinates into top posts at the auto firm, which once equipped more than 90 percent of all North American vehicles with dashboards, floor mats and other parts.
He is pursuing his defense in the same driven, detail-oriented way. Stockman blasted the charges against him as "hypertechnical" disputes about accounting policies and business judgments in an environment where board members still run scared from lawsuits after scandals at Enron and WorldCom. Stockman and prominent New York defense lawyer Elkan Abramowitz met twice with law enforcement officials in an unsuccessful bid to prevent the government from bringing the case after nearly two years of investigation.
At their news conference Monday, investigators pointed to what they called "purposeful lies" by Stockman and his team, all with an eye aimed at digging Collins & Aikman out of an ever-deepening financial hole. Ron Walker, inspector in charge of the Postal Inspection Service's New York division, said Stockman and his allies engaged in "increasingly desperate attempts to lie to lenders . . . to get them to throw good money after bad."
Stockman blamed his May 2005 ouster from the company and the multiple federal probes that followed as a "reckless spasm" of the Sarbanes-Oxley corporate accountability law. He argued that his case could not be more different than accounting scandals five years ago. "This wasn't any kind of joyride," he said. "This was Detroit" at a time when auto suppliers and the Big Three car makers were struggling to survive.
Stockman is almost certain to take the witness stand when the case goes to trial no earlier than next year, in part because he already has provided sworn testimony to securities regulators. Abramowitz told reporters Monday that the idea of a guilty plea "never came up."
A former babysitter for then-Sen. Daniel Patrick Moynihan (D-N.Y.) , Stockman enjoyed a meteoric rise. He served two House terms as a Republican from Michigan and, at 34, was appointed the youngest Cabinet secretary in a century. Stockman's eventual exit from government in the mid-1980s made him hugely wealthy. The long-haired workaholic with the oversized eyeglasses wrote a book about the perils of political life and the struggles of truth-telling in Washington. Eventually he joined the Blackstone Group, a lucrative private investment partnership that brought him tens of millions of dollars.
But he remains best known for his bold projections as Reagan's first OMB director. Reagan chastised his young budget chief for expressing doubts to a Washington Post editor about massive defense spending, tax cuts and the resulting deficits at the same time he was selling the plan to the public and the Congress. The article threw Washington into uproar.
Stockman and his advisers hasten to point out that he and his Greenwich, Conn., investment firm, Heartland Industrial Partners, lost more than any other investor when Collins & Aikman veered off course. Heartland poured $360 million into the auto business, and Stockman lost $13 million more. Moreover, Stockman said he and Heartland continued to buy stock throughout his tenure at the company, on more than 150 trading days between 2002 and 2004, without unloading shares on the open market.
Linda Chatman Thomsen, enforcement director at the Securities and Exchange Commission, which filed related civil charges against Stockman on Monday, said that Heartland had received $45 million in fees and services over Stockman's tenure, half of which she said Stockman personally collected. Government lawyers are seeking forfeiture of more than $1.35 billion, a portion of the $1.6 billion in outstanding debt and financing the company received from such banks as Credit Suisse and JP Morgan Chase, lead prosecutor Helen V. Cantwell said.
In the end, Collins & Aikman, founded in 1843, will not survive intact. The company, which will pay no criminal or civil fines in connection with Monday's court filings, shed more than 11,000 employees. Current officials are selling off the company in pieces, a process that may be complete long before the Stockman case goes to trial.
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/26/AR2007032600518.html?nav=rss_email/c...
16:03 TSAH Tessa Complete Health Care, Inc. Common Stock 01/26/2007 12(j) Registration Revoked by SEC **
http://www.otcbb.com/asp/dailylist_detail.asp?mkt_ctg=NON-OTCBB&d=01/25/2007
34-55521 Mar. 26, 2007 Detour Media Group, Inc., DrivingAmerica.com, Inc., Legends Enterprises, Inc., Oxir Investments, Inc., Spinplanet.com, Inc. (n/k/a EntertainMax Worldwide, Inc.), and Tessa Complete Health Care, Inc.
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55521/March 26, 2007
ADMINISTRATIVE PROCEEDING
FILE NO. 3-12493
___________________________________
In the Matter of :
:
DETOUR MEDIA GROUP, INC., :
DRIVINGAMERICA.COM, INC., : ORDER MAKING FINDINGS
LEGENDS ENTERPRISES, INC., : AND REVOKING REGISTRATION
OXIR INVESTMENTS, INC., : BY DEFAULT
SPINPLANET.COM, INC. (n/k/a :
ENTERTAINMAX WORLDWIDE, :
INC.), and :
TESSA COMPLETE HEALTH CARE, :
INC. :
___________________________________
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) on December 1, 2006, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act). All Respondents were served with the OIP by December 14, 2006. Spinplanet.com, Inc., n/k/a EntertainMax Worldwide, Inc. (EntertainMax), is the only remaining Respondent. The other five Respondents had the registrations of each class of registered securities revoked by default on January 25, 2007. Detour Media Group, Inc., Exchange Act Release No. 55169.
On December 18, 2006, the Division of Enforcement (Division) moved for the entry of an order of default against all six Respondents or, in the alternative, for leave to file a motion for summary disposition as to all six Respondents. On December 19, 2006, I held the Division’s request in abeyance and ordered EntertainMax to show cause, on or before January 5, 2007, why it should not be held in default and the proceeding resolved against it. EntertainMax responded to the show cause order of December 19, and on January 18, 2007, I held a telephonic prehearing conference in which I accepted the untimely Answer of EntertainMax and granted the Division of Enforcement’s (Division) request for leave to file a motion for summary disposition.
At the prehearing conference, the parties agreed to a briefing schedule. EntertainMax also agreed to file and serve a letter by January 26, 2007, from its outside auditor, stating when that auditor accepted the engagement and explaining the outside auditor’s schedule for reviewing and certifying all of EntertainMax’s delinquent periodic reports. The Division filed its motion for summary disposition on February 16, 2007. As set in the briefing schedule, EntertainMax was to file and serve its opposition by March 9, 2007.
To date, EntertainMax has not filed its opposition to the Division’s motion. Nor has it filed the letter from its outside auditor. On March 14, 2007, I ordered EntertainMax to show cause, on or before March 21, 2007, why it should not be held in default and why it should not have the registration of its registered securities revoked. EntertainMax has failed to respond to the show cause order of March 14.
Accordingly, EntertainMax is in default for failing to respond to a dispositive motion or otherwise defend the proceeding. See 17 C.F.R. § 201.155. As authorized by Rule 155(a) of the Commission’s Rules of Practice, I deem the following allegations in the OIP to be true.
EntertainMax (CIK No. 1046893) is a Colorado corporation located in Baltimore, Maryland, and St. Cloud, Florida, with a class of equity securities registered pursuant to Exchange Act Section 12(g). EntertainMax is delinquent in its periodic filings with the Commission, having not filed any periodic reports since it filed a Form 10-QSB for the period ended June 30, 2000, which reported a net loss of $2,540 for the prior six months.
EntertainMax is delinquent in its periodic filings with the Commission, having repeatedly failed to meet its obligations to file timely periodic reports, and failed to heed delinquency letters sent to it by the Division of Corporation Finance at its most recent address shown in its most recent filings with the Commission, or did not receive the letters because of its failure to keep an updated address on file with the Commission as required by Commission rules.
Section 13(a) of the Exchange Act and the rules promulgated thereunder require issuers of securities registered pursuant to Section 12 of the Exchange Act to file with the Commission current and accurate information in periodic reports, even if the registration is voluntary under Section 12(g). Specifically, Rule 13a-1 requires issuers to file annual reports (Forms 10-K or 10-KSB), and Rule 13a-13 requires issuers to file quarterly reports (Forms 10-Q or 10-QSB). As a result, EntertainMax failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.
In light of the foregoing, I find it necessary and appropriate for the protection of investors to revoke the registration of each class of registered securities of EntertainMax.
ORDER
IT IS ORDERED THAT, pursuant to Section 12(j) of the Securities Exchange Act of 1934, the registration of each class of registered securities of Spinplanet.com, Inc. (n/k/a EntertainMax Worldwide, Inc.), is REVOKED.
______________________
James T. Kelly
Administrative Law Judge
2
http://www.sec.gov/litigation/admin/2007/34-55521.pdf
34-55523 Mar. 26, 2007 Ernst & Young LLP
Other Release No.: AAER-2580
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55523 / March 26, 2007
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 2580 / March 26, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12600
In the Matter of
ERNST & YOUNG LLP,
Respondent.
ORDER INSTITUTING PUBLIC
ADMINISTRATIVE AND CEASE-
AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 102(e) OF THE COMMISSION’S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Ernst & Young LLP (“Respondent” or “E&Y”) pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.1
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over E&Y and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Public
1 Rule 102(e)(1)(ii) provides, in pertinent part, that:
The Commission may censure a person . . . who is found by the Commission . . . to have engaged in unethical or improper professional conduct.
2
Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds2 that:
A. SUMMARY
This action concerns violations of auditor independence standards by E&Y. During 2001, E&Y, through one of its National Office partners, compromised its professional independence by assisting one client, American International Group, Inc. (“AIG”), in its development and marketing of an accounting-driven financial product and then advising an audit client, The PNC Financial Services Group, Inc. (“PNC”), on the accounting treatment for a version of that product in PNC’s financial statements, without E&Y performing a meaningful analysis of the accounting separate from the analysis that the National Office partner had performed.3
The accounting-driven financial product purported to enable a company to transfer volatile financial assets to a special purpose entity (“SPE”) and thereby to remove those assets from the company’s financial statements. AIG sold three such products to PNC in 2001, and as a result, PNC improperly excluded certain assets from its consolidated financial statements. E&Y advised PNC on the accounting for each transaction. In January 2002, PNC announced that it would restate its financial statements for the second and third quarters of 2001, and revised its previously announced financial results for the fourth quarter and year-end of 2001, to include the previously excluded assets.
Through the National Office partner, E&Y advised PNC, in connection with E&Y’s work as PNC’s auditor, on the appropriateness of the accounting treatment of the SPE product that the National Office partner had assisted AIG to develop and market. Accordingly, as a result of the actions of the National Office partner, E&Y compromised its auditor independence required by generally accepted auditing standards (“GAAS”) and Regulation S-X of the Commission’s rules
and regulations. Additionally, the reporting provisions of the federal securities laws require that quarterly financial statements be reviewed by an independent accountant. Because E&Y was not
2 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
3 The Commission previously brought settled proceedings against PNC, AIG, Thomas F. Garbe, and Michael S. Joseph, the National Office partner, related to their roles in these matters. PNC Financial Services Group, Inc., Securities Act Release No. 8112, Securities Exchange Act Release No. 46225, Accounting and Auditing Enforcement Release No. 1597 (July 18, 2002); SEC v. American International Group, Inc., No. 1:04CV02070 (GK) (D.D.C. judgment entered Dec. 7, 2004); In the Matter of Thomas F. Garbe, Securities Exchange Act Release No. 54906, Accounting and Auditing Enforcement Release No. 2522, Administrative Proceeding No. 3-12501 (Dec. 11, 2006); In the Matter of Michael S. Joseph, CPA, Securities Act Release No. 8759, Securities Exchange Act Release No. 54907, Accounting and Auditing Enforcement Release No. 2523, Administrative Proceeding No. 3-12502 (Dec. 11, 2006).
3
independent in its review of PNC’s financial statements for the second and third quarters of 2001, E&Y was a cause of PNC’s violations of the reporting provisions.
B. RESPONDENT
Ernst & Young LLP is a national accounting firm with its headquarters in New York, New York. At all relevant times, E&Y provided auditing services to PNC. Specifically, E&Y was responsible for, among other things, the audit of PNC’s consolidated financial statements, interim reviews of quarterly financial statements, and reviews and consultations pertaining to filings with the SEC. While serving as auditor for and advisor to PNC, E&Y also was employed as an advisor to AIG with responsibility for assisting AIG in addressing generally accepted accounting principles (“GAAP”) compliance issues during the design stage of an SPE product, a version of which was used in transactions between AIG and PNC.
C. OTHER RELEVANT ENTITIES
American International Group, Inc. is a Delaware corporation with its principal place of business in New York, New York. Through its subsidiaries, AIG is engaged in a broad range of insurance-related and asset management activities in the United States and abroad.
The PNC Financial Services Group, Inc. is a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania. PNC is a bank holding company that is regulated by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of Cleveland (together the “Federal Reserve”) and has a national bank subsidiary that is regulated by the Comptroller of the Currency.
D. FACTS
1. Development and Marketing of C-GAITS Product
In early 2001, AIG engaged one of E&Y’s National Office partners to assist it in developing an accounting–driven financial product, known as a Contributed Guaranteed Alternative Investment Trust Security (“C-GAITS”). The C-GAITS product purported to enable a public company to reduce the earnings impact of troubled or other potentially volatile financial assets by transferring those assets from the public company’s balance sheet to an SPE established by AIG. Under the C-GAITS structure, the SPE was to be consolidated onto AIG’s balance sheet.
The National Office partner issued reports to AIG pursuant to Statement on Auditing Standards No. 50, Reports on the Application of Accounting Principles (“SAS 50 letters”)4, over
4 A “SAS 50” letter is a report issued by an accounting firm that provides guidance to a non-audit client. A SAS 50 letter could relate to the type of opinion that may be rendered on a specific entity’s financial statements, the application of accounting principles to specific proposed or completed transactions, or the application of accounting principles to hypothetical transactions. These letters frequently were used for marketing purposes by non-audit clients. SAS No. 50 was amended in June 2002 by Statement on Auditing Standards No. 97, Amendment to Statement on Auditing Standards No.
4
E&Y’s firm signature, representing that the favorable nonconsolidation accounting treatment for the SPE established in a hypothetical C-GAITS transaction was an appropriate application of GAAP. As intended, AIG used the E&Y SAS 50 letters to promote the C-GAITS product. AIG also relied extensively on the E&Y National Office partner’s accounting advice as it attempted to sell the product. For example, AIG referred to E&Y’s accounting advice in its marketing materials and referred potential buyers directly to the E&Y National Office partner to answer accounting-related questions. The National Office partner reviewed and edited term sheets for at least two proposed C-GAITS deals. On several occasions, the National Office partner also participated in conference calls with AIG when AIG marketed the C-GAITS product to potential purchasers.
From March 2001 through January 2002, AIG marketed the C-GAITS product to several public companies, with the assistance of the National Office partner. Despite its marketing effort, AIG ultimately closed only the three C-GAITS transactions with PNC. These transactions were referred to respectively as “PAGIC I,” “PAGIC II,” and “PAGIC III” (and collectively as the “PAGIC transactions”).
2. PNC’s Second Quarter 2001
Around the beginning of June 2001, AIG marketed the C-GAITS product to PNC using a SAS 50 letter written by the National Office partner that addressed the accounting for a C-GAITS structure. Throughout its negotiations with AIG that month, PNC management consulted frequently with the E&Y audit engagement team, which, in turn, consulted with the National Office partner, to determine the accounting treatment for the transaction that PNC was contemplating. In fact, when PNC began considering PAGIC I, PNC senior management contacted the E&Y coordinating partner for the PNC audit account and requested formal written guidance on the accounting treatment for the transaction. The coordinating partner assigned the technical partner on the engagement to prepare a guidance letter. That partner then contacted the National Office partner, with the knowledge of PNC.
The National Office partner provided an existing SAS 50 letter to the technical partner for use as a template for the PNC guidance letter. The National Office partner thereafter reviewed drafts of the guidance letter and discussed accounting issues related to the PAGIC I transaction with the technical partner.
Without performing a meaningful analysis, the E&Y engagement team incorporated virtually verbatim into the guidance letter the accounting analysis and conclusions that the National Office partner had included in the SAS 50 letter.5 The National Office partner reviewed and approved the guidance letter before it was issued to PNC. The guidance letter was issued over the E&Y firm signature and stated that it was E&Y’s view that PNC’s nonconsolidation of the SPE
50, Reports on the Application of Accounting Principles. Accountants are now prohibited from providing a report on accounting principles concerning hypothetical transactions.
5 Each guidance letter for each of the three PAGIC transactions included a factual description of the particular transaction for which the guidance letter was written and a discussion of accounting issues. The factual descriptions in the letters differed, but the discussion of the accounting issues was largely identical to the corresponding discussion in the SAS 50 letter.
5
conformed with GAAP. On June 28, 2001, AIG and PNC closed the first of the three PAGIC transactions.
E&Y performed a review of PNC’s financial statements for the second quarter of 2001. E&Y, however, did not perform any separate analysis of PNC’s accounting for the PAGIC I transaction in the course of that review. In evaluating the accounting for the transaction, E&Y instead incorporated and relied on the National Office partner’s analysis, including the written guidance letter issued to PNC, which mirrored the SAS 50 letters provided to AIG. E&Y's conclusion on the appropriateness of PNC's accounting was largely based on work performed by the National Office partner for AIG during the design of the product.
On August 14, 2001, PNC filed its Form 10-Q for the second quarter of 2001 with the Commission. The Form 10-Q included the second quarter financial statements that E&Y had reviewed. In those financial statements, PNC excluded from its balance sheet the assets it transferred to the SPE in the PAGIC I transaction. The financial statements reflected that PNC had $374 million in nonperforming loan assets and $16 million in other nonperforming assets. These figures did not include $84 million in nonperforming loan assets among the $257 million of loan assets that PNC had transferred to the SPE. PNC’s second quarter Form 10-Q did not provide any disclosure concerning the PAGIC I transaction.
3. PNC’s Third Quarter 2001
E&Y continued to assist AIG in its efforts to market the C-GAITS product. In September 2001, the National Office partner accompanied an AIG marketing team to assist in AIG’s marketing of the C-GAITS product to another public company. Also in September 2001, E&Y advised PNC on the accounting for the PAGIC II transaction, which closed on September 27, 2001. PNC again relied on the National Office partner’s advice in connection with its evaluation of the applicable accounting. Once again, E&Y provided PNC with a written guidance letter stating that it was E&Y’s view that nonconsolidation was the appropriate accounting treatment for PAGIC II. As before, E&Y incorporated virtually verbatim into the guidance letter the accounting analysis and conclusions that the National Office partner had included in the SAS 50 letter. The National Office partner once again reviewed and approved the guidance letter before it was issued to PNC.
E&Y performed a review of PNC’s financial statements for the third quarter of 2001. E&Y again, however, did not perform any separate analysis of PNC’s accounting for the PAGIC II transaction in the course of that review. In evaluating the accounting for the transaction, E&Y incorporated and relied on the National Office partner’s analysis, as reflected in the accounting guidance letter.
On November 14, 2001, PNC filed its Form 10-Q for the third quarter of 2001 with the Commission. The Form 10-Q included the third quarter financial statements that E&Y had reviewed. In those financial statements, PNC excluded from its balance sheet the assets it had transferred to the SPEs in the two PAGIC transactions. The financial statements reflected that PNC had $361 million in nonperforming loan assets and $13 million in other nonperforming assets. These figures did not include a total of $207 million in nonperforming assets among the
6
$592 million of loan assets that PNC had transferred to the SPEs in the first two PAGIC transactions. PNC’s third quarter Form 10-Q did not provide any disclosure concerning the two PAGIC transactions into which PNC had entered.
4. PNC’s Fourth Quarter 2001
Throughout October and November 2001, the National Office partner continued to assist in AIG’s marketing efforts and on November 29, 2001, the National Office partner issued another SAS 50 letter for AIG’s negotiations with yet another public company. Also at about the same time, the National Office partner conferred with another E&Y audit client regarding a potential C-GAITS transaction with AIG.
On October 23, 2001, the Federal Reserve sent a letter to PNC expressing concern about PNC’s accounting for the assets transferred in PAGIC I. E&Y, including the National Office partner, reviewed and commented on PNC’s proposed responses to the Federal Reserve, which defended PNC’s accounting. During the same October-to-November period, the National Office partner, through E&Y’s engagement team, advised PNC on the accounting treatment for a third PAGIC transaction, which closed on November 29, 2001. Again, E&Y provided PNC management with a written guidance letter stating that it was E&Y’s view that nonconsolidation was the appropriate accounting treatment for PAGIC III. As before, E&Y incorporated virtually verbatim into the PNC guidance letter the accounting analysis and conclusions that the National Office partner had included in the SAS 50 letter. The National Office partner reviewed and approved the guidance letter before it was issued to PNC.
Also in November 2001, another of E&Y’s banking audit clients discussed with the Federal Reserve the accounting for a C-GAITS transaction that it was contemplating. On or about December 4, 2001, the Federal Reserve informed E&Y’s client of its view that the proposed accounting was not in conformity with GAAP. When consulted by AIG, the National Office partner helped AIG defend the proposed accounting for the transaction.
On January 11, 2002, the Federal Reserve directed PNC to consolidate the three PAGIC transactions in its bank holding company regulatory reports for 2001. Thereafter, on January 29, 2002, PNC announced that it would reverse the accounting for all three PAGIC transactions, restate its financial statements for the second and third quarters of 2001, and revise its previously announced fourth quarter and full-year 2001 financial results. The change in accounting and restatement resulted in a $155 million charge to PNC’s earnings and a $0.53 per share drop (equivalent to 38%) in PNC’s previously reported earnings per share for 2001.
For its work on the SAS 50 letters, the accounting guidance given to PNC, and the interim reviews and work related to the restatements of PNC’s financial statements, E&Y billed AIG and PNC $1,196,700.
E. LEGAL ANALYSIS
7
1. Applicable Professional Standards
Standards relating to the independence of public accounting firms are contained in GAAS and Rule 2-01(b) of Regulation S-X. Throughout the relevant time, GAAS required that “n all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.”6 This requirement is necessary because of the importance in having the public maintain confidence in the independence of auditors.7 Auditors, accordingly, are required not only to be independent in fact but also to avoid the appearance of a lack of independence.8
Rule 2-01(b) of Regulation S-X, in pertinent part, provides as follows:
The Commission will not recognize an accountant as independent, with respect to an audit client, if the accountant is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable of exercising objective and impartial judgment on all issues encompassed within the accountant’s engagement. In determining whether an accountant is independent, the Commission will consider all relevant circumstances, including all relationships between the accountant and the audit client, and not just those relating to reports filed with the Commission.9
2. E&Y Violated Independence Standards
As discussed above, the National Office partner was intimately involved in the development of AIG’s C-GAITS product and assisted in AIG’s efforts to market that product. The National Office partner provided advice on the structure, prepared four SAS 50 letters that AIG used in marketing the product, participated in conference calls with potential purchasers of the product and, on at least one occasion, accompanied an AIG marketing team to assist in AIG’s marketing of the C-GAITS product to a potential customer. The National Office partner charged AIG for his services. As a result of the activities of the National Office partner, E&Y was invested both financially and reputationally in the success of the C-GAITS product and therefore had a conflict of interest when it evaluated the accounting for that product for its audit client PNC.10
E&Y’s engagement team relied upon the National Office partner’s advice and analysis of the accounting for the PAGIC transactions, both when drafting and issuing the guidance letters to
6 Codification of Statements on Auditing Standards, Statement on Auditing Standards No. 1, § 150.02 (Am. Inst. of Certified Pub. Accountants 1972).
7 See id. § 220.03.
8 Id.
9 17 CFR § 210.2-01(b).
10 In determining whether an accountant is independent, the Commission “looks in the first instance to whether a relationship or the provision of a service: creates a mutual or conflicting interest between the accountant and the audit client: [or] places the accountant in the position of auditing his or her own work….” 17 CFR § 210.2-01 prelim. note.
8
PNC and during E&Y’s interim reviews of PNC’s Form 10-Qs. E&Y’s engagement team did not perform a meaningful analysis when issuing the accounting guidance letters to PNC and did not perform any separate analysis in the course of the interim reviews, but instead relied on the National Office partner’s accounting analysis. Because of the role that the National Office partner had played in AIG’s development and marketing of the C-GAITS product and because of the role the National Office partner also played in evaluating and advising PNC on the PAGIC transactions in connection with E&Y’s audit work for PNC, a reasonable investor with knowledge of all relevant facts and circumstances would conclude that E&Y was not impartial and lacked the requisite independence in the performance of its functions as PNC's auditor.
The departures from GAAS and failure to comply with Rule 2-01 of Regulation S-X described above constitute improper professional conduct within the meaning of Rule 102(e)(1)(ii). Regarding accountants, the term “improper professional conduct” is defined by Rule 102(e)(1)(iv) to include a “single instance of highly unreasonable conduct that results in a violation of applicable professional standards in circumstances in which an accountant knows, or should know, that heightened scrutiny is warranted” or “repeated instances of unreasonable conduct, each resulting in a violation of applicable professional standards, that indicate a lack of competence to practice before the Commission.”11 E&Y’s conduct in this matter represents improper professional conduct under either standard. At a minimum, as described above, E&Y engaged in multiple instances of unreasonable conduct resulting in independence violations. In addition, inasmuch as a reasonable investor would have concluded that E&Y, through the National Office partner, was operating on both sides of several transactions which led to auditor independence violations, E&Y engaged in highly unreasonable conduct under circumstances in which it knew or should have known warranted heightened scrutiny. As the Commission has stated, “Because of the importance of an accountant’s independence to the integrity of the financial reporting system, the Commission has concluded that circumstances that raise questions about an accountant’s independence always merit heightened scrutiny.”12
3. E&Y Caused PNC to Violate Reporting Provisions
As a result of its violation of the independence standards, E&Y also caused PNC to violate reporting provisions of the federal securities laws. Section 13(a) of the Exchange Act requires issuers of registered securities to file periodic reports with the Commission containing information prescribed by Commission rules and regulations. Exchange Act Rule 13a-13 requires the filing of quarterly reports on Form 10-Q, and Exchange Act Rule 12b-20 requires that, in addition to the information required by Commission rules to be included in periodic reports, such further material information as may be necessary to make the required statements not misleading also must be included. Periodic reports must be complete and accurate. Rule 10-01(d) of Regulation S-X requires that interim financial statements included in quarterly reports must be reviewed by an independent public accountant prior to filing.13 Because E&Y was not independent, PNC failed to
11 17 CFR § 201.102(e)(1)(iv).
12 Amendment to Rule 102(e) of the Commission’s Rules of Practice, Securities Act
Release No. 7593, at 1I.C. (October 19, 1998) (emphasis added).
13 17 CFR § 210.10-01(d).
9
comply with Rule 10-01(d) of Regulation S-X and consequently violated Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13.
By its conduct described above, E&Y caused PNC’s violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13 thereunder.
F. REMEDIAL ACTIONS BY E&Y
In determining to accept the Offer, the Commission considered the remedial steps taken by E&Y. Since the conduct discussed in this Order, E&Y has significantly revised its independence policies and procedures. E&Y has also set forth new procedures that specifically address potential conflicts of interest that may arise when providing accounting advice to investment bankers and financial intermediaries.
G. FINDINGS
A. Based on the foregoing, the Commission finds that E&Y engaged in improper professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.
B. Based on the foregoing, the Commission finds that E&Y was a cause of PNC’s violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20 and13a-13.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent E&Y’s Offer.
Accordingly, it is hereby ORDERED, effective immediately, that:
A. E&Y hereby is censured; and
B. E&Y shall, within ten days of the entry of this Order, pay disgorgement of $1,196,700 and interest of $390,470.42, totaling $1,587,170.42, to the victim restitution fund established pursuant to paragraph 7 of the Deferred Prosecution Agreement between PNC ICLC
1 0
Corp. and the United States Department of Justice, Criminal Division, Fraud Section signed on June 2, 2003, together with a cover letter identifying Ernst & Young LLP as the Respondent in these proceedings, identifying the file number of these proceedings, and specifying that the payment is being made pursuant to this Order. E&Y shall simultaneously transmit a photocopy of the cover letter and the document by which payment is made to Thomas D. Silverstein, Esq., Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549.
By the Commission.
Nancy M. Morris
Secretary
http://www.sec.gov/litigation/admin/2007/34-55523.pdf
34-55527 Mar. 26, 2007 Dean C. Reder
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55527 / March 26, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12601
In the Matter of
DEAN C. REDER,
Respondent.
ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 15(b) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AS TO DEAN C. REDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Dean C. Reder (“Respondent” or “Reder”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below.
2
III.
On the basis of this Order and Respondent’s Offer, the Commission finds1 that:
Respondent
1. Reder, age 38, is a resident of Orono, Minnesota. From the fall of 2000 to January 2003, Reder was the Controller of Stockwalk Group, Inc. (“Stockwalk”) and supervised the accounting department. He was also Financial Operations Principal (“FINOP”) for Stockwalk.com, Inc., Stockwalk’s former subsidiary on-line brokerage. In February 2003, Reder became Chief Compliance Officer of Miller Johnson Steichen Kinnard, Inc. (“MJSK”), a position he continues to hold. From at least July 2001 through September 2001 (the “relevant time period”), Reder was a registered representative associated with broker-dealers registered with the Commission. He is also a certified public accountant, but his certificate was inactive during the relevant time period.
Other Relevant Entities and Persons
2. Stockwalk is a Minnesota corporation with its principal place of business in Minneapolis, Minnesota, originally incorporated in the 1990s. Its subsidiary, MJK Clearing, Inc. (“MJK”) was originally incorporated as Miller Johnson and Kuehn, Inc. in 1980. At all relevant times, Stockwalk’s common stock was registered under Section 12(g) of the Exchange Act and was traded on the NASDAQ under the ticker “STOK.” The common stock has since been delisted. During the relevant time period, Stockwalk had three subsidiaries: MJK, Stockwalk.com, Inc., a registered online broker-dealer, and MJSK, a full-service broker-dealer.2 In 2002, Stockwalk reorganized its debt under Chapter 11 of the Bankruptcy Code. The only subsidiary still operating under Stockwalk is MJSK.
3. From January 2001, MJK provided securities clearing functions for Stockwalk’s three registered broker-dealers and sixty-five other correspondent brokerage firms. MJK became insolvent on September 25, 2001. MJK and its predecessor, Miller Johnson and Kuehn, Inc., had been registered with the Commission as a broker-dealer since 1981.
Summary
4. In July and August 2001, MJK improperly calculated its net capital by failing to reduce its net capital for stock borrow deficits relating to certain securities it borrowed from a counter-party broker-dealer, Native Nations Securities, Inc. (“Native Nations”). MJK’s
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
2 Clearing and transaction settlement services were originally provided by MJK Clearing Services, a division within Miller Johnson & Kuehn, Inc. On January 1, 2001, MJK Clearing, Inc. (“MJK”) became a wholly-owned subsidiary of Stockwalk, while the brokerage components of Miller Johnson & Kuehn, Inc. were merged with the recently acquired R.J. Steichen and Co., and John G. Kinnard Co. brokerages, to create MJSK, then a wholly-owned subsidiary of MJK.
3
stock lending department had failed to collect marks to market owed to MJK by Native Nations when the value of securities MJK had borrowed from Native Nations declined. This resulted in significant stock borrow deficits, which MJK and Stockwalk failed to discover and account for in a timely manner. MJK’s miscalculation of its net capital caused it to conduct business while not maintaining sufficient net capital in August 2001 and September 2001. Moreover, the Financial and Operational Combined Uniform Single (“FOCUS”) Reports for July and August 2001 filed with the NASD reflected the inaccurate net capital computations. During that time, Stockwalk’s accounting department was responsible for MJK’s incorrect net capital calculations and inaccurate FOCUS Reports filed with the NASD. Reder participated in the preparation of MJK’s FOCUS Reports and he reviewed the net capital computation. As a result of his conduct, Reder willfully aided and abetted and caused MJK’s violations of the net capital requirements, its filing of incorrect FOCUS Reports, and its failure to file proper notice with the Commission of its net capital deficiencies, in accordance with Rule 17a-11, C.F.R. §240.17a-11. Upon its discovery of the net capital deficiency, MJK immediately contacted the NASD and staff of the Commission.
Improper Net Capital Computations and Failure to Comply
with the Notice Requirements
5. On or about July 31, 2001 and August 31, 2001, the accounting department of Stockwalk failed to detect, calculate, and deduct charges related to MJK’s stock borrow deficits with Native Nations when calculating MJK’s monthly net capital. According to MJK’s FOCUS Reports from July and August, MJK calculated and reported excess net capital of $14.7 million on July 31, 2001 and $14.8 million on August 31, 2001.
6. However, proper deduction of charges relating to MJK’s stock borrow deficits reveals that MJK actually had excess net capital of $6.2 million on July 31, 2001, and a net capital deficiency of $6.1 million on August 31, 2001. On September 25, 2001, MJK contacted Commission staff to report a net capital deficiency, which prompted Commission examination staff to conduct an exam. In the course of this exam, staff determined that MJK had a net capital deficiency of $70.3 million. Thus, from at least August 31, 2001 through September 25, 2001, MJK conducted business without sufficient net capital.
7. Prior to MJK’s miscalculation of its net capital, Stockwalk received a deficiency letter dated July 17, 2001 from the staff of the Commission regarding MJSK, another subsidiary of Stockwalk. The letter stated that, among other things, the accounting department had not been properly reducing MJSK’s net worth for certain stock borrow deficits which became necessary after MJSK borrowed securities from MJK. The accounting department failed to take any remedial steps to ensure that the charges for stock borrow deficits were being appropriately made in MJK’s calculations of net capital figures.
8. MJK’s miscalculation of its net capital during the relevant time period led MJK to file inaccurate July 2001 and August 2001 FOCUS Reports with the NASD.
9. MJK also failed to provide proper notice to the Commission that it was out of compliance with its minimum net capital requirement on August 31, 2001.
4
Respondent’s Omissions as FINOP
10. As a registered FINOP assisting in the preparation of MJK’s FOCUS Reports, it was Reder’s responsibility to review the computations in the reports to ensure their accuracy. The accounting department had the information necessary to calculate the charges for MJK’s stock borrow deficits. In performing his duties, Reder reviewed MJK’s FOCUS Reports and net capital computations for accuracy. However, Reder failed to review adequately the documentation that included MJK’s stock borrow deficits and the need to deduct appropriate charges in calculating net capital. Proper review of MJK’s net capital computations and the supporting documents would have revealed that MJK’s net capital calculations and FOCUS Reports were inaccurate, and that notice of net capital deficiencies was required.
Violations
11. As a result of the conduct described above, Reder willfully aided and abetted and caused MJK’s violations of Section 15(c)(3) of the Exchange Act and Rule 15c3-1 promulgated thereunder, which prohibit a broker-dealer from effecting transactions in securities in contravention of Commission rules with respect to financial responsibility and requires a broker-dealer to maintain a minimum level of liquid net worth (net capital). Paragraph (c)(2)(iv)(B) of Rule 15c3-1 of the Exchange Act requires a broker-dealer to deduct from its net worth in computing net capital certain unsecured and partly secured receivables. As a result of the conduct described above, Reder willfully aided and abetted and caused MJK’s failure to deduct charges related to its stock borrow deficits, thereby resulting in MJK’s operation of a securities business while it was net capital deficient.
12. As a result of the conduct described above, Reder willfully aided and abetted and caused MJK’s violations of Section 17(a) of the Exchange Act and Rule 17a-5 promulgated thereunder, which require registered brokers or dealers that clear transactions or carry customer accounts, such as MJK, to file accurate monthly and quarterly FOCUS Reports that include net capital computations.
13. As a result of the conduct described above, Reder willfully aided and abetted and caused MJK’s violations of Section 17(a)(1) of the Exchange Act and Rule 17a-11 thereunder, which require every broker or dealer whose net capital falls below the minimum required amount, to give notice that same day to the Commission.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Respondent Reder’s Offer.
5
Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby ORDERED that:
A. Respondent Reder cease and desist from causing any violations and any future violations of Sections 15(c)(3) and 17(a) of the Exchange Act and Rules 15c3-1, 17a-5 and 17a-11 thereunder.
B. It is further ordered that Respondent shall, within thirty (30) days of the entry of this Order, pay a civil money penalty in the amount of $15,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier’s check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies Dean C. Reder as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Tracy W. Lo, Securities and Exchange Commission, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604.
By the Commission.
Nancy M. Morris
Secretary
http://www.sec.gov/litigation/admin/2007/34-55527.pdf
34-55530 Mar. 26, 2007 Knight Securities L.P.
Note: See also the Distribution Plan
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55530 / March 26, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-11771
________________________________
:
In the Matter of :
: ORDER APPROVING DISTRIBUTION
Knight Securities L.P., : PLAN AND APPOINTMENT OF AN
: ADMINISTRATOR OF THE
: DISTRIBUTION FUND
Respondent. :
________________________________ :
On December 16, 2004, the Commission issued an Order Instituting Administrative
and Cease-and-Desist Proceedings, Making Findings and Imposing Remedial Sanctions
Pursuant to Sections 15(b)(4) and 21C of the Securities Exchange Act of 1934 (“December
16 Order") against Knight Securities, L.P. (“Knight” or “Respondent”).1 Among other
things, the December 16 Order directed Knight to pay disgorgement in the amount of
$41,146,663.50, prejudgment interest in the amount of $13,195,068 and a civil penalty in
the amount of $12,500,000 (collectively referred to as the “settlement amount”). In April
2005, Knight retained Heffler, Radetich & Saitta, L.L.P. as the Independent Distribution
Consultant. Additionally, on June 14, 2005, the Commission appointed Heffler, Radetich
& Saitta, L.L.P. as the Tax Administrator of the distribution fund.
Pursuant to the December 16 Order, Heffler, Radetich & Saitta, L.L.P. submitted a proposed distribution plan to the Commission (the “Distribution Plan”). The Distribution Plan concerns the distribution of disgorgement and civil penalties paid by Knight pursuant to the December 16 Order. The Distribution Plan describes the procedures by which Heffler, Radetich & Saitta, L.L.P. identified the Institutional Customers who were affected by violations committed by Knight, as determined in connection with the December 16 Order. The Distribution Plan further describes the procedures by which Heffler, Radetich & Saitta, L.L.P.will calculate the total amount of disgorgement and interest to be paid to the Institutional Customers, and distribute those funds to those Institutional Customers. On October 19, 2006, pursuant to Rule 1103 of the Securities and Exchange Commission’s Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. § 201.1103, the Commission published a Notice of Proposed Plan and Opportunity for Comment (“Notice”) for the
1 Knight, now known as Knight Equity Markets, L.P., is a registered broker-dealer headquartered in Jersey City, New Jersey.
distribution of monies placed into a Fair Fund in the above-captioned matter. The Notice invited public comment on the proposed distribution plan through November 20, 2006. The Commission received one comment, which, in general, requested that Knight bear more of the administrative burden related to the distribution or, in the alternative, Institutional Customers should be reimbursed for reasonable fees and expenses associated with directing Distribution Amounts to recipients.
After careful consideration, the Commission has concluded that the Distribution Plan adequately allocates the responsibilities for the distribution between Knight and the Institutional Customers. Although the Distribution Plan notes that Institutional Customers have duties to their own customers to ensure an appropriate distribution of the disgorged funds, it also permits the Institutional Customers to balance this obligation with the costs of the distribution.
The comment letter also maintains that Knight retains certain detailed account information from its Institutional Customers that would facilitate the distribution process. In response to the comment, Knight has represented to the Commission staff that, to the extent that the firm still retains any relevant information, the firm will provide it upon request to the Institutional Customers that will be participating in the distribution.
Thus, the Commission finds that the Distribution Plan provides for an appropriate distribution of the settlement amount paid by the Respondent pursuant to the December 16 Order. Additionally, the Commission finds that it is appropriate to appoint Heffler, Radetich & Saitta, L.L.P. as the Administrator of the Distribution Fund and to waive the bond requirement of Rule 1105(c) of the Securities and Exchange Commission’s Rules on Fair Fund and Disgorgement Plans since custody or control of the distribution funds will remain with the Commission.
Accordingly, IT IS ORDERED, pursuant to Rule 1104 of the Commission’s Rules on Fair Fund and Disgorgement Plans, 17, C.F.R. § 201.1104, that the Distribution Plan is approved.
IT IS FURTHER ORDERED, pursuant to Rule 1105 of the Commission’s Rules on Fair Fund and Disgorgement Plans, 17, C.F.R. § 201.1105, that Heffer, Radetich & Saitta, L.L.P., is appointed as the Administrator of the Distribution Fund and that the bond requirement is waived for good cause shown.
By the Commission.
Nancy M. Morris Secretary
http://www.sec.gov/litigation/admin/2007/34-55530.pdf
Administrative Proceedings - March 26, 2007
34-55530 Mar. 26, 2007 Knight Securities L.P.
Note: See also the Distribution Plan
34-55527 Mar. 26, 2007 Dean C. Reder
34-55523 Mar. 26, 2007 Ernst & Young LLP
Other Release No.: AAER-2580
34-55521 Mar. 26, 2007 Detour Media Group, Inc., DrivingAmerica.com, Inc., Legends Enterprises, Inc., Oxir Investments, Inc., Spinplanet.com, Inc. (n/k/a EntertainMax Worldwide, Inc.), and Tessa Complete Health Care, Inc.
Securities and Exchange Commission v. Collins & Aikman Corporation, David A. Stockman, J. Michael Stepp, Gerald E. Jones, David R. Cosgrove, John G. Galante, Elkin B. McCallum, Paul C. Barnaba, Christopher M. Williams and Thomas V. Gougherty, United States District Court for the Southern District of New York, SEC v. Collins & Aikman Corporation, et al. Civil Action No. 1:07-CV-2419(LAP) (S.D.N.Y. March 26, 2007)
Litigation Release No. 20055 / March 26, 2007
Accounting and Auditing Enforcement Release No. 2581 / March 26, 2007
Washington, D.C., March 26, 2007 - The Securities and Exchange Commission today filed civil fraud charges against auto parts manufacturer Collins & Aikman Corporation ("C&A"), David A. Stockman ("Stockman"), who served as C&A's former Chief Executive Officer and Chairman of the Board of Directors, and eight other former C&A directors and officers.
The SEC's complaint alleges that between 2001 and 2005, Stockman personally directed fraudulent schemes to inflate C&A's reported income by accounting improperly for supplier payments. In furtherance of those schemes, the complaint alleges that Stockman and other defendants obtained false documents from suppliers designed to mislead C&A's external auditors. According to the complaint, when aspects of the schemes were discovered in March 2005, Stockman embarked on a public campaign to mislead investors, potential financiers and others by minimizing the extent of the fraudulent accounting and hiding C&A's dire financial condition. During the time Stockman was engaged in this fraudulent conduct, he was collecting millions of dollars of the management fees C&A paid Stockman's private equity fund, Heartland Industrial Partners. The other former officers, including the Chief Financial Officer, Corporate Controller, and Treasurer, and a former member of C&A's Board of Directors, are alleged to have participated in the accounting schemes or the campaign to mislead investors. The SEC and C&A have agreed to settle the charges against the company.
In addition to Stockman, the other former C&A directors and officers charged in the complaint are:
J. Michael Stepp, the former Chief Financial Officer of C&A and Vice-Chairman of its Board of Directors;
Elkin B. McCallum ("McCallum"), a former member of C&A's Board of Directors;
David R. Cosgrove, the former Corporate Controller of C&A;
John G. Galante, the former Treasurer of C&A;
Christopher M. Williams, the former Executive Vice President of C&A's Business Development Group;
Gerald E. Jones, the former Chief Operating Officer and Executive Vice President of C&A's Fabrics Division.
Paul C. Barnaba, the former Vice President and Director of Purchasing for C&A's Plastics Division; and
Thomas V. Gougherty, the former Controller of C&A's Plastics Division.
The Commission's complaint alleges that between late 2001 and early 2005, the defendants engaged in multiple fraudulent schemes and made materially false and misleading statements concerning C&A's financial condition and operating results in, among other things, filings with the Commission, offering documents, and press releases. The allegations include the following.
Between the fourth quarter of 2001 and the first quarter of 2003, Stockman and other defendants negotiated a series of "round-trip transactions" with McCallum. These transactions were structured to give the appearance that C&A was receiving rebates that would increase C&A's income from a company McCallum owned. In fact, because C&A repaid McCallum or his companies for each purported rebate, the transactions should have had no impact on C&A's income statement, and C&A's use of these transactions to inflate its income was improper.
From at least as early as the second quarter of 2002 until the scheme was discovered in early 2005, C&A accounted improperly for actual rebates it received from its suppliers. Some of these rebates were recognized in income prematurely, while others should never have been recognized in income at all. At the direction of Stockman and other defendants, C&A's Purchasing Department solicited and received false confirmation letters from suppliers that purported to justify the immediate recognition of rebates in income, and were intended to mislead C&A's outside auditors if they questioned these transactions.
Between the round-trip transactions and the improper accounting for rebates, C&A fraudulently and materially increased its reported income by over $49 million. As a result, C&A overstated its reported pre-tax operating income (or reduced its loss) by ten percent or more in eight different quarters.
In March 2005 questions from its outside auditor forced C&A to publicly acknowledge the improper accounting for supplier rebates. However, Stockman, in concert with other defendants, engaged in a campaign to reassure investors, analysts and others that C&A was still economically viable, when in fact the company was on the verge of bankruptcy. In press releases, an earnings call and a presentation to potential bond investors, Stockman, and other defendants, concealed C&A's liquidity crisis and made unreasonable financial projections. As a result of these false and misleading statements, C&A obtained additional financing. But when a more accurate picture of C&A's financial condition emerged a month later, C&A was forced to declare bankruptcy.
C&A simultaneously settled the charges, without admitting or denying the Commission's allegations, by consenting to the entry of a final judgment permanently enjoining it from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The settlement is subject to the approval of the United States District Court for the Southern District of New York.
The Commission's complaint alleges that the individual defendants violated and/or aided and abetted C&A's violations of the federal securities laws as follows:
Stockman and Stepp violated Section 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b 5, 13a-14, 13b2-1, and 13b2-2 thereunder, and aided and abetted C&A's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b 20, 13a-1, 13a-11, 13a-13 thereunder;
McCallum and Galante violated Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b 5, 13b2-1, and 13b2-2 thereunder, and aided and abetted C&A's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b 20, 13a-1, 13a-11, 13a-13 thereunder;
Cosgrove violated Section 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b 5, 13b2-1, and 13b2-2 thereunder, and aided and abetted C&A's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b 20, 13a-1, 13a-11, 13a-13 thereunder;
Williams violated Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b 5 and 13b2-1 thereunder, and aided and abetted C&A's violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b 20 and 13a-11 thereunder;
Jones, Barnaba and Gougherty violated Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b 5, 13b2-1, and 13b2-2 thereunder, and aided and abetted C&A's violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5,12b 20, 13a-1, 13a-11, 13a-13 thereunder;
As to all of the individual defendants, the complaint seeks permanent injunctions against future violations of these provisions, officer-and-director bars, disgorgement of ill-gotten gains, with prejudgment interest, and civil penalties.
Today the U.S Attorney's Office for the Southern District announced parallel indictments against Stockman and others. The Commission acknowledges the assistance and cooperation in this investigation of the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service.
The Commission's investigation is continuing.
SEC Complaint in this matter
http://www.sec.gov/litigation/litreleases/2007/lr20055.htm
Litigation Releases - March 26, 2007
LR-20055 Mar. 26, 2007 Collins & Aikman Corporation, David A. Stockman, J. Michael Stepp, Gerald E. Jones, David R. Cosgrove, John G. Galante, Elkin B. McCallum, Paul C. Barnaba, Christopher M. Williams and Thomas V. Gougherty
Other Release No.: AAER-2581
See also: Complaint in this matter
http://www.sec.gov/litigation/litreleases/2007/lr20055.htm
Exchange Delistings - March 26, 2007
Form Formats Description Accepted Filing Date File/Film No
SPECTRALINK CORP (0000894268) (Subject)
25-NSE [html][text]
Accession Number: 0001354457-07-000083 Act: 34 Size: 3 KB 2007-03-26
16:10:14 2007-03-26 000-28180
07718248
NASDAQ Stock Market LLC (0001354457) (Filed by)
25-NSE [html][text]
Accession Number: 0001354457-07-000083 Size: 3 KB 2007-03-26
16:10:14 2007-03-26
http://www.sec.gov/Archives/edgar/data/894268/000135445707000083/xslF25X02/primary_doc.xml
MOLECULAR DEVICES CORP (0001003113) (Subject)
25-NSE [html][text]
Accession Number: 0001354457-07-000082 Act: 34 Size: 3 KB 2007-03-26
16:09:53 2007-03-26 000-27316
07718246
NASDAQ Stock Market LLC (0001354457) (Filed by)
25-NSE [html][text]
Accession Number: 0001354457-07-000082 Size: 3 KB 2007-03-26
16:09:53 2007-03-26
http://www.sec.gov/Archives/edgar/data/1003113/000135445707000082/xslF25X02/primary_doc.xml
NAVISTAR INTERNATIONAL CORP (0000808450) (Subject)
25-NSE [html][text]
Accession Number: 0000876882-07-000005 Act: 34 Size: 5 KB 2007-03-26
10:31:42 2007-03-26 001-09618
CHICAGO STOCK EXCHANGE INC (0000876882) (Filed by)
25-NSE [html][text]
Accession Number: 0000876882-07-000005 Size: 5 KB 2007-03-26
10:31:42
http://www.sec.gov/Archives/edgar/data/808450/000087688207000005/xslF25X02/primary_doc.xml
With spam stocks, in for a penny, in for a pounding
Those touted by e-mails typically have a spurt and then a plunge
03:19 AM CDT on Sunday, March 25, 2007
By BRENDAN M. CASE and MICHAEL GRABELL / The Dallas Morning News
bcase@dallasnews.com; mgrabell@dallasnews.com
The urge to get in on the ground floor of a promising business leads many investors to penny stocks.
Spammers are keenly aware of the appeal.
Spam touting stocks accounts for 15 percent of all unsolicited e-mail, according to a recent report from researchers at Purdue University and Oxford University.
That adds up to hundreds of millions of e-mail messages per week.
What's more, stocks experience "a significantly positive return" when they are heavily touted in spam e-mails, according to the study, "Spam Works: Evidence from Stock Touts and Corresponding Market Activity."
In other words, spam e-mail persuades some people to plunk down money for obscure penny stocks.
"Recipients may wish to avoid spam generally, but at least some part of the Internet public appears to be hungry for investing advice and information, enough so to absorb and follow advice that is flatly against [their own] interest and delivered in one of the most reviled formats of the information age," the report said.
Spammed stocks typically fall after the initial jump, dropping by an average of more than 5 percent in the two days following the heaviest touting, the researchers found.
Typically priced at less than $5 a share, penny stocks trade over the counter, often with less regulatory oversight than mainstream exchanges such as the New York Stock Exchange or Nasdaq.
Many are ambitious small companies with promising prospects.
Others are distressed businesses, some employing thousands, that used to trade on the big exchanges.
A New Hampshire technology executive, Joshua Cyr, prepared his own research into the performance of penny stocks touted in spam e-mails that he received.
He created a hypothetical portfolio of spammed stocks that can be viewed on his Web site, spamstock tracker.com.
Here's what he found: If he'd spent $70,987 buying stocks based on spam tips when the index was created in May 2005, his holdings would have been worth just $9,387.90 as of Friday.
http://www.dallasnews.com/sharedcontent/dws/news/localnews/stories/032507dnmetsecsider.455c1ff.html
http://www.dallasnews.com/sharedcontent/dws/img/03-07/0325secinvestigatestrip.pdf
Exclusive: SEC investigating possible 'pump-and-dump' scam
Inquiry looks into whether network victimized stock buyers
03:16 AM CDT on Sunday, March 25, 2007
By BRENDAN M. CASE and MICHAEL GRABELL / The Dallas Morning News
bcase@dallasnews.com; mgrabell@dallasnews.com
The stock tips hit millions of fax machines and e-mail accounts.
"Get filthy rich as the recovery begins," said one message after Hurricane Katrina. "Double profit opportunities from America's energy crisis," said another.
Investors bought into an Illinois roofing business, an Oklahoma company advertising a cancer-treating nose spray and an Addison producer of a video series, Racetrack Girls Go Nutz.
At first, the shares soared on the penny stock market, a loosely regulated bazaar of small-time companies where some investors seek to buy a piece of the next big thing.
Then, after sell-offs by some lucky or well-informed investors, the stocks plunged, taking millions from the pockets of recent buyers.
The losers in such cases often blame bad fortune. But the U.S. Securities and Exchange Commission is investigating whether they were victims of fax and e-mail stock scams orchestrated by a group of lawyers, accountants, brokers and consultants – many in the Dallas area.
The group "may have manipulated or attempted to manipulate the share price of certain companies by making false or misleading statements to the public," said SEC enforcement lawyer Kevin Muhlendorf, in an affidavit filed in federal court in Washington, D.C.
The SEC won't discuss particulars of its investigation, but such classic "pump-and-dump" scams are a high priority for the agency because e-mail spam and instant online stock trading make small investors more vulnerable than ever.
"With the Internet technology, there is so much more ability to get to the retail investors through their computers," said Kit Addleman, associate director of enforcement for the SEC's regional office in Fort Worth.
SEC inquiry
The two-year investigation into what officials call the "shell creation group" is being handled from SEC headquarters in Washington, D.C.
SEC subpoenas, obtained by The Dallas Morning News, list more than 100 people and companies, and corporate records show that many of those companies tie back to a common group of Dallas-area business people. One person who comes up again and again is a former SEC attorney who used to enforce the nation's securities laws.
SEC officials cautioned that inquiries don't always lead to legal proceedings and that subpoenas don't mean that the people named in them have broken the law. The SEC hasn't publicly said which individuals may be under scrutiny, or identified everyone who profited from the stock trades.
But two civil lawsuits filed in Dallas allege that specific people profited from manipulating stock in companies that are part of the SEC investigation.
National Storm Management Inc., the roofing firm whose stock soared and plunged after Katrina, makes such allegations against David Gordon, a Tulsa, Okla., securities lawyer. He was once sued unsuccessfully by his brother, accused of orchestrating a stock fraud on the family jewelry business in Conroe, Texas.
The company with the racetrack video, Consolidated Sports Media Group Inc., sued Dallas lawyer Phillip Offill. He spent 15 years in the SEC's Fort Worth office and until recently was a partner in the law firm Godwin Pappas Langley Ronquillo LLP.
Mr. Gordon and Mr. Offill deny any wrongdoing. They say they are the victims of the companies' own mismanagement and misdeeds. And the business people accused of stock manipulation in the civil lawsuits contend that they lost money as company managers profited.
"This is a big, huge investigation the SEC is doing that involves well over 100 companies," said Jules Slim, an Irving lawyer representing people accused of stock fraud in both lawsuits. "We're not really sure who they're going after. The plaintiffs are simply capitalizing on the fact that those people have been subpoenaed."
So far, the SEC investigation has resulted in only one penalty.
On Jan. 17, the SEC announced an agreement with John Shrewder, an Oklahoma stock promoter accused of sending out 87 million faxes in 2004 and 2005 to manipulate the stock price of Artec Inc., the business with the anti-cancer drug, and other companies.
Mr. Shrewder did not admit or deny wrongdoing, but he acknowledged liability for $1,031,000 in improper trading profits and interest. But he will have to pay back only $150,000 to the U.S. government under a settlement with the SEC that considered his financial condition.
And this month, as part of a crackdown on e-mail stock fraud called Operation Spamalot, the SEC suspended trading in four companies that listed Mr. Offill as corporate counsel in disclosure reports. He also had ties to four others, including one that listed a company he controlled, Supreme City Holdings, as a major shareholder.
Mr. Offill denied ownership interest in the Spamalot companies and said he formed Supreme City Holdings on behalf of a client, whom he wouldn't identify. When asked about another company in which a firm he controlled owned stock, Mr. Offill said he couldn't discuss client matters.
Two of the Spamalot companies also showed up on SEC subpoenas related to the investigation into the shell creation group.
Taking a risk
Why would anyone send out 87 million faxes, or tens of millions of e-mails?
Because, experts say, in some cases, they're a good way to separate investors from their money.
Researchers at Purdue University and Oxford University recently found that electronically pumped stocks show "a significantly positive return" at first and then tend to collapse, leaving unsuspecting investors with big losses that they often attribute to the gamble of the stock market.
"What are you going to do? It was a risk and I took it," said Jon Browar, a Consolidated Sports shareholder who owns a screen-printing business outside Kansas City. "My kids aren't going to go without because of this, but in the same respect, there's a lot more I can do with $3,000."
Federal and state laws prohibit the distribution of unsolicited faxes to hype a stock. Both junk faxes and spam e-mails may violate securities laws if they contain falsehoods about a company or if promoters don't disclose that they have been paid to tout a stock.
For example, the SEC alleged that the Artec faxes understated Artec's debt and the number of shares available to make each share appear more valuable.
Moreover, while Mr. Shrewder's faxes urged other investors to buy shares, he was selling them.
"Shrewder was actively selling Artec shares for less than $.50 while he was recommending that others buy them until the price reaches between $2 and $4," the SEC said in its complaint.
Mr. Shrewder said in a court filing that he was unaware of any misrepresentations in the faxes. He also said he had disclosed in the faxes that he might trade in the shares. In an interview, he said his faxes only went to people who asked to receive them.
Expanded inquiry
The SEC opened its Artec investigation in December 2004 after officials noticed suspicious trading and price movements. By June 2005, the investigation had expanded to reflect interest in the larger circle of people who appeared to be involved in what the SEC came to call the "shell creation group."
After Katrina, e-mails and faxes enticed investors to buy shares in National Storm and in Deep Rock Oil & Gas Inc., an Oklahoma energy company. National Storm's stock price rose from 51 cents to $2.41. Deep Rock's price increased tenfold, to $1.11. Within months, both fell to less than a quarter a share.
Phone records of a Florida investor – who the SEC alleges played a role in producing and disseminating the faxes – showed several calls to numbers associated with the Dallas-based shell group, the SEC said.
Some of those phone calls, listed in SEC court documents, trace back to Mr. Gordon, the Tulsa lawyer for Deep Rock who also helped take National Storm public.
National Storm has sued Mr. Gordon, accusing him of masterminding stock manipulation schemes.
"The Shell Creation Group's activities frequently prove ruinous to the legitimate private companies they deceive," National Storm said in court documents.
Mr. Slim, who is representing Mr. Gordon and others in the lawsuit, said the company's counterclaim is a distraction from the original complaint. The lawsuit was filed against National Storm by Trucolor Inc., which is partly owned by Mr. Gordon.
Trucolor alleged in the lawsuit that National Storm cheated it by breaching a loan that had been induced through fraud.
In an interview, Mr. Gordon said that he had followed all securities laws and that he believed the information released by Deep Rock and National Storm was accurate. He said he didn't know who distributed the blast faxes.
"Believe me, I do not do pump-and-dumps," he said.
Consolidated Sports
The Consolidated Sports lawsuit alleges Mr. Offill and others made millions of dollars by perpetrating a pump-and-dump scam on the company's stock.
The company says Mr. Offill arranged for a merger with an inactive corporation to use a legal loophole that gave investors millions of freely tradable shares that didn't have to be registered with the SEC. Mr. Offill brought investors into Consolidated Sports, including companies that he controlled, the lawsuit says.
In November 2004, a junk fax went out touting the stock. Consolidated Sports lawyers say the fax was approved by Mr. Offill and drafted by one of his associates.
"The specific intent behind the blast fax was to cause the price of the stock in CSMG to spike upward, after which Offill's friends, clients and business associates, and entities controlled by Offill, would sell their stock, leaving the other shareholders and the innocent purchasers to bear the losses," Consolidated Sports' lawsuit says.
Mr. Offill, who has also been a lawyer for Artec, declined to be interviewed, referring questions to his lawyer, Richard Sayles. In January, Mr. Offill left Godwin Pappas to pursue his own practice, Mr. Sayles said. Mr. Offill said in a deposition that he didn't know about the blast fax until after it was sent.
"A fax of this nature – that appears oriented towards providing investor awareness on a public basis – is something that an issuer should never send," he said.
A trial in the Consolidated Sports lawsuit is expected this year.
A WEB OF LAWSUITS AND SUBPOENAS
Corporate records and lawsuits indicate the following people have ties to the Securities and Exchange Commission's investigation of the "shell creation group." SEC inquiries do not necessarily lead to legal proceedings or indicate that people named in subpoenas have broken any law.
DAVID GORDON
A Tulsa, Okla., securities lawyer, Mr. Gordon, 45, has been accused of stock fraud in several lawsuits, including one from Consolidated Sports Media Group Inc. and another brought unsuccessfully by his brother. He was the lawyer for Deep Rock Oil & Gas Inc. and helped take National Storm Management Inc. public. In a lawsuit, National Storm called him a mastermind of pump-and-dump schemes. More than a half-dozen companies on a subpoena issued to a Dallas brokerage have ties to him. He and his associates have denied wrongdoing.
PHILLIP OFFILL
A former SEC enforcement attorney in Fort Worth, Mr. Offill, 48, was a partner until recently at Godwin Pappas Langley Ronquillo LLP in Dallas. He was a corporate lawyer for Artec and Consolidated Sports. Consolidated Sports says that he helped orchestrate a pump-and-dump scheme on its stock using a junk fax and that two companies he controlled profited. He says he never saw the blast fax before it went out. Some three dozen companies mentioned in the SEC subpoenas list him as an officer, corporate counsel, or in some other capacity. In other cases, one of his companies is listed as a major shareholder. He denies any wrongdoing.
MARK LINDBERG
An amateur golfer, Mr. Lindberg, 39, of Coppell, helped take Consolidated Sports and National Storm public, according to Consolidated Sports court documents and National Storm annual reports. Consolidated Sports said in its lawsuit that Mr. Lindberg paid investor Doyle Mark White for arranging a junk fax touting its stock. Nearly 20 companies on the SEC subpoenas list Mr. Lindberg as an officer or consultant, or one of his companies as a major shareholder. And he received several calls from a Florida investor the SEC says played a role in the junk faxes after Hurricane Katrina. Mr. Lindberg declined an interview but denied the allegations in court documents. In a deposition, he said that he's never been involved in a pump-and-dump scheme and that he transferred the money to Mr. White's firm on behalf of another company.
DOYLE MARK WHITE
Consolidated Sports said in its lawsuit that Mr. White, 49, of Colleyville, sent a junk fax touting its stock behind the company's back. Mr. White, a former Irving stockbroker, was barred from the U.S. securities industry last year, accused of manipulating a separate penny stock. In the settlement, he did not admit or deny wrongdoing. Mr. White did not respond to requests for an interview. In a deposition, he said he sent the fax to a distribution service after Consolidated Sports approved it. The company denies that.
GARY ZINN
Described as an international businessman with ties to Bulgaria, Mr. Zinn, of Rancho Cucamonga, Calif., was sued by the SEC for not answering a subpoena related to the stocks of National Storm and Deep Rock, which were allegedly manipulated after Katrina. A judge ordered him to comply, and the case was dismissed. The SEC said in court documents that Mr. Zinn has ties to two companies managed in London, High Charm Ltd. and Putnam International Consulting, which each made more than $50,000 trading in the stocks. Putnam had paid a marketing company to distribute the junk faxes, according to a disclaimer on the faxes. High Charm and Putnam were also top shareholders in Consolidated Sports. Mr. Zinn and his lawyer did not return phone calls seeking comment.
JOSHUA LANKFORD
An entrepreneur who once sold neckties in downtown skyscrapers, Mr. Lankford, 33, became one of the most successful stockbrokers at Dallas brokerage Barron Moore Inc., even becoming part owner before leaving. In its lawsuit, Consolidated Sports says he participated in a pump-and-dump on its stock. He denied the allegations in a deposition, saying he warned company executives that he couldn't raise money for them until they had revenue.
CHASITY THOMPSON AND JASON FREEMAN
As a business consultant, Ms. Thompson, 28, helped incorporate Artec, Consolidated Sports and National Storm. Plano-based Routh Stock Transfer Inc., which she ran with Mr. Freeman, 31, served as a transfer agent for National Storm, Deep Rock and about 10 other companies listed on SEC subpoenas. Ms. Thompson and Mr. Freeman were consultants for several other companies on the subpoenas. Consolidated Sports alleges that Ms. Thompson falsified corporate records to help commit fraud on its stock. Her attorney said she has done nothing wrong. Earlier this month, Mr. Freeman filed a shareholder lawsuit against Consolidated Sports, saying the company fraudulently funneled money to a consultant who used it to repay investors in past failed ventures. Consolidated Sports lawyers said that hundreds of hours of video footage show the money was spent legitimately.
http://www.dallasnews.com/sharedcontent/dws/bus/stories/032507dnmetsecinvestigate.40477d8.html#
http://www.dallasnews.com/sharedcontent/dws/img/03-07/0325secinvestigate.pdf
Accelerated Return Bear Market Notes Linked to the Performance of the PHLX Housing Sector Index, maturing March 22, 2007
Delisted March 23, 2007
MERRILL LYNCH & CO INC (0000065100) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000046 Act: 34 Size: 4 KB 2007-03-23
11:21:55 2007-03-23 001-07182
AMERICAN STOCK EXCHANGE LLC (0001143313) (Filed by)
25-NSE [html][text]
Accession Number: 0001143313-07-000046 Size: 4 KB 2007-03-23
11:21:55 2007-03-23
http://www.sec.gov/Archives/edgar/data/65100/000114331307000046/xslF25X02/primary_doc.xml
American Stock Exchange Lists Merrill Lynch's Accelerated Return Bear Market Notes Linked to the Performance of the PHLX Housing Sector Index
NEW YORK, Dec. 29 /PRNewswire/ -- The American Stock Exchange(R) (Amex(R))
today began trading Merrill Lynch's Accelerated Return Bear Market Notes
Linked to the Performance of the Philadelphia Stock Exchange (PHLX) Housing
Sector Index.
Priced at $10.00 with an initial offer size of 8,300,000 shares, this
equity trades under the ticker symbol MPL and has a maturity date of March 22,
2007.
The notes are issued by Merrill Lynch. The Amex specialist unit is
Wolverine Trading Group LLP.
If you would like to receive a copy of the prospectus for MPL, please
contact the Capital Markets Group at the American Stock Exchange at
capitalmarkets@amex.com or call (212) 306-1659.
The American Stock Exchange(R) (Amex(R)) is the only primary exchange that
offers trading across a full range of equities, options and exchange traded
funds (ETFs), including structured products and HOLDRS(SM). In addition to its
role as a national equities market, the Amex is the pioneer of the ETF,
responsible for bringing the first domestic product to market in 1993. Leading
the industry in ETF listings, the Amex lists 150 ETFs to date. The Amex is
also one of the largest options exchanges in the U.S., trading options on
broad-based and sector indexes as well as domestic and foreign stocks.
SOURCE American Stock Exchange
Date Open High Low Close Volume Change Change %
3/21/07 13.28 13.28 13.27 13.28 12,100 0.01 0.08%
3/20/07 13.26 13.27 13.26 13.27 4,300 0.01 0.08%
3/19/07 13.26 13.26 13.26 13.26 34,700 0.02 0.15%
3/16/07 13.22 13.24 13.22 13.24 23,800 0.02 0.15%
3/15/07 13.24 13.24 13.21 13.22 119,600 0.01 -0.08%
3/14/07 13.20 13.25 13.20 13.23 61,500 – –
3/13/07 13.15 13.28 13.08 13.23 163,300 0.13 0.99%
3/12/07 12.59 13.17 12.59 13.10 132,000 0.36 2.83%
3/9/07 12.47 12.87 12.47 12.74 44,800 0.15 1.19%
3/8/07 12.69 12.69 12.46 12.59 23,700 0.01 -0.08%
3/7/07 12.50 12.72 12.50 12.60 43,800 0.05 -0.40%
3/6/07 12.60 12.71 12.55 12.65 238,000 0.08 -0.63%
3/5/07 12.11 12.74 12.11 12.73 274,700 0.54 4.43%
3/2/07 12.10 12.25 12.00 12.19 51,300 0.29 2.44%
3/1/07 12.00 12.30 11.66 11.90 72,700 0.10 -0.83%
2/28/07 11.90 12.10 11.82 12.00 47,500 0.10 0.84%
2/27/07 11.35 12.00 11.35 11.90 23,300 0.55 4.85%
2/26/07 11.50 11.50 11.23 11.35 11,200 0.25 -2.16%
2/23/07 11.30 11.60 11.30 11.60 19,400 0.39 3.48%
2/22/07 10.95 11.34 10.90 11.21 21,400 0.20 1.82%
2/21/07 11.25 11.30 11.01 11.01 14,500 0.05 -0.45%
2/20/07 11.10 11.16 11.06 11.06 2,400 0.24 -2.12%
2/16/07 11.20 11.30 11.13 11.30 8,200 0.25 2.26%
2/15/07 11.11 11.29 11.05 11.05 7,300 0.10 -0.90%
2/14/07 11.36 11.36 11.15 11.15 10,600 0.25 -2.19%
2/13/07 11.67 11.67 11.40 11.40 9,800 0.25 -2.15%
2/12/07 11.48 11.69 11.40 11.65 11,900 0.16 1.39%
2/9/07 11.22 11.50 11.20 11.49 16,700 0.30 2.68%
2/8/07 10.72 11.30 10.72 11.19 44,600 0.46 4.29%
2/7/07 10.80 10.85 10.55 10.73 11,000 0.07 -0.65%
2/6/07 10.90 10.90 10.80 10.80 13,800 0.0201 -0.19%
2/5/07 10.80 10.92 10.80 10.82 9,100 0.0801 0.75%
2/2/07 11.04 11.04 10.60 10.74 41,600 0.32 -2.89%
2/1/07 11.31 11.31 11.05 11.06 31,600 0.31 -2.73%
1/31/07 11.78 11.85 11.36 11.37 18,200 0.41 -3.48%
1/30/07 11.69 11.81 11.61 11.78 28,000 0.04 -0.34%
1/29/07 11.78 11.82 11.62 11.82 20,400 0.04 0.34%
1/26/07 11.77 11.87 11.60 11.78 50,800 0.05 0.43%
1/25/07 11.25 11.80 11.25 11.73 25,400 0.46 4.08%
1/24/07 11.50 11.60 11.25 11.27 18,500 0.33 -2.84%
1/23/07 11.70 11.70 11.35 11.60 31,500 0.27 -2.27%
1/22/07 11.80 11.87 11.71 11.87 4,800 0.16 1.37%
1/19/07 12.00 12.03 11.70 11.71 13,000 0.29 -2.42%
1/18/07 12.10 12.19 11.95 12.00 59,400 0.02 0.17%
1/17/07 12.19 12.20 11.98 11.98 18,500 0.21 -1.72%
1/16/07 12.04 12.19 12.02 12.19 12,000 0.03 -0.25%
1/12/07 12.02 12.22 11.98 12.22 8,800 0.07 0.58%
1/11/07 12.30 12.35 12.15 12.15 23,600 0.15 -1.22%
1/10/07 12.25 12.35 12.15 12.30 8,700 0.05 0.41%
1/9/07 12.25 12.25 12.15 12.25 5,200 – –
1/8/07 12.10 12.25 12.10 12.25 12,100 0.15 1.24%
1/5/07 12.01 12.11 12.01 12.10 5,300 0.10 0.83%
1/4/07 11.95 12.03 11.95 12.00 11,900 0.29 2.48%
1/3/07 11.70 11.80 11.65 11.71 11,600 0.01 0.09%
12/29/06 11.60 11.70 11.45 11.70 12,700 0.30 2.63%
12/28/06 11.75 11.75 11.40 11.40 7,300 0.35 -2.98%
12/27/06 11.81 11.85 11.75 11.75 23,500 0.05 -0.42%
12/26/06 11.75 12.00 11.75 11.80 13,800 0.05 0.43%
12/22/06 11.60 11.84 11.60 11.75 1,300 0.14 1.21%
12/21/06 11.83 11.83 11.61 11.61 2,700 0.09 -0.77%
12/20/06 11.90 11.90 11.70 11.70 6,300 0.05 -0.43%
12/19/06 11.73 11.90 11.73 11.75 7,600 0.10 0.86%
12/18/06 11.37 11.65 11.23 11.65 19,800 0.15 1.30%
12/15/06 11.51 11.51 11.48 11.50 10,200 0.06 -0.52%
12/14/06 11.70 11.90 11.56 11.56 37,600 0.16 -1.37%
12/13/06 11.77 11.90 11.70 11.72 6,200 0.08 -0.68%
12/12/06 11.70 11.80 11.70 11.80 3,600 0.15 1.29%
12/11/06 11.57 11.83 11.55 11.65 39,400 0.05 -0.43%
12/8/06 11.50 11.70 11.37 11.70 16,700 0.20 1.74%
12/7/06 11.35 11.70 11.35 11.50 37,400 0.20 1.77%
12/6/06 11.58 11.70 11.25 11.30 56,000 0.15 -1.31%
12/5/06 11.85 11.85 11.38 11.45 84,400 0.34 -2.88%
12/4/06 11.87 11.87 11.75 11.79 19,700 0.09 -0.76%
12/1/06 12.01 12.10 11.88 11.88 17,900 0.13 -1.08%
11/30/06 12.15 12.20 12.00 12.01 40,900 0.14 -1.15%
11/29/06 12.25 12.30 12.15 12.15 19,600 0.25 -2.02%
11/28/06 12.30 12.40 12.15 12.40 13,700 0.10 0.81%
11/27/06 12.30 12.30 12.30 12.30 6,000 0.15 1.23%
11/24/06 12.15 12.15 12.15 12.15 2,600 0.14 -1.14%
11/22/06 12.25 12.29 12.15 12.29 19,200 0.01 -0.08%
11/21/06 12.25 12.30 12.25 12.30 8,400 – –
11/20/06 12.35 12.35 12.30 12.30 18,200 – –
11/17/06 12.30 12.30 12.30 12.30 1,800 0.05 0.41%
11/16/06 12.36 12.36 12.25 12.25 31,300 0.20 -1.61%
11/15/06 12.45 12.50 12.45 12.45 5,300 0.05 0.40%
11/14/06 12.41 12.51 12.40 12.40 28,800 0.01 -0.08%
11/13/06 12.46 12.46 12.35 12.41 11,400 0.05 -0.40%
11/10/06 12.56 12.56 12.46 12.46 20,300 – –
11/9/06 12.42 12.59 12.42 12.46 11,500 0.10 -0.80%
11/8/06 12.35 12.56 12.33 12.56 15,000 0.21 1.70%
11/7/06 12.24 12.35 12.24 12.35 19,200 0.14 1.15%
11/6/06 12.20 12.24 12.15 12.21 24,800 0.04 -0.33%
11/3/06 12.18 12.25 12.15 12.25 32,400 0.07 0.57%
11/2/06 12.18 12.18 11.94 12.18 55,400 0.02 -0.16%
11/1/06 12.10 12.20 12.00 12.20 83,100 0.08 0.66%
10/31/06 12.12 12.12 12.12 12.12 800 0.01 0.08%
10/30/06 12.00 12.14 12.00 12.11 8,900 0.01 0.08%
10/27/06 11.98 12.10 11.98 12.10 27,600 0.10 0.83%
10/26/06 12.05 12.14 11.98 12.00 7,800 0.05 -0.41%
10/25/06 12.14 12.14 12.01 12.05 15,600 0.09 -0.74%
10/24/06 12.14 12.14 12.10 12.14 9,400 0.01 0.08%
10/23/06 12.14 12.15 12.13 12.13 6,900 0.07 0.58%
10/20/06 12.04 12.15 11.94 12.06 58,500 0.02 0.17%
10/19/06 12.02 12.04 11.90 12.04 27,800 0.02 0.17%
10/18/06 11.90 12.05 11.90 12.02 4,900 0.05 0.42%
10/17/06 12.00 12.05 11.95 11.97 7,800 0.02 0.17%
10/16/06 11.90 12.05 11.85 11.95 10,600 0.04 0.34%
10/13/06 12.00 12.11 11.80 11.91 60,400 0.24 -1.98%
10/12/06 12.00 12.15 11.80 12.15 57,000 0.16 1.33%
10/11/06 12.00 12.00 11.88 11.99 86,800 0.09 0.76%
10/10/06 12.18 12.18 11.80 11.90 79,600 0.36 -2.94%
10/9/06 12.35 12.35 12.22 12.26 34,200 0.09 -0.73%
10/6/06 12.42 12.42 12.35 12.35 3,700 0.07 -0.56%
10/5/06 12.42 12.42 12.42 12.42 10,000 – –
10/4/06 12.42 12.54 12.42 12.42 14,700 – –
10/3/06 12.26 12.42 12.26 12.42 23,000 0.07 0.57%
10/2/06 12.28 12.35 12.28 12.35 5,900 – –
9/29/06 12.35 12.36 12.35 12.35 3,500 0.09 0.73%
9/28/06 12.33 12.35 12.26 12.26 5,500 0.09 -0.73%
9/27/06 12.35 12.35 12.30 12.35 2,700 0.10 0.82%
9/26/06 12.27 12.30 12.25 12.25 16,900 0.02 -0.16%
9/25/06 12.35 12.38 12.27 12.27 8,300 0.17 -1.37%
9/22/06 12.27 12.44 12.27 12.44 4,800 0.04 0.32%
9/21/06 12.26 12.40 12.25 12.40 10,200 0.14 1.14%
9/20/06 12.23 12.26 12.19 12.26 9,200 0.04 -0.33%
9/19/06 12.23 12.30 12.15 12.30 18,700 0.07 0.57%
9/18/06 12.21 12.23 12.21 12.23 3,500 0.01 -0.08%
9/15/06 12.21 12.24 12.16 12.24 14,100 0.02 0.16%
9/14/06 12.20 12.25 12.17 12.22 31,200 – –
9/13/06 12.25 12.35 12.19 12.22 57,600 0.03 -0.24%
9/12/06 12.38 12.38 12.20 12.25 58,200 0.13 -1.05%
9/11/06 12.37 12.40 12.31 12.38 14,900 0.06 -0.48%
9/8/06 12.44 12.44 12.35 12.44 7,600 0.04 0.32%
9/7/06 12.33 12.40 12.33 12.40 15,700 0.04 0.32%
9/6/06 12.38 12.40 12.35 12.36 14,000 0.03 0.24%
9/5/06 12.33 12.40 12.33 12.33 10,700 – –
9/1/06 12.35 12.40 12.33 12.33 17,600 0.02 -0.16%
8/31/06 12.35 12.37 12.31 12.35 14,400 0.04 0.32%
8/30/06 12.11 12.35 12.11 12.31 18,700 0.10 0.82%
8/29/06 12.30 12.30 12.19 12.21 27,300 0.09 -0.73%
8/28/06 12.32 12.39 12.19 12.30 34,000 0.02 -0.16%
8/25/06 12.33 12.35 12.31 12.32 9,000 0.01 -0.08%
8/24/06 12.30 12.43 12.25 12.33 18,400 0.08 0.65%
8/23/06 12.25 12.40 12.23 12.25 29,200 – –
8/22/06 12.15 12.25 12.14 12.25 33,500 0.07 0.57%
8/21/06 12.33 12.35 12.18 12.18 36,900 0.20 -1.62%
8/18/06 12.38 12.40 12.29 12.38 30,400 0.02 -0.16%
8/17/06 12.32 12.41 12.31 12.40 16,600 0.01 0.08%
8/16/06 12.45 12.45 12.30 12.39 53,400 0.01 0.08%
8/15/06 12.31 12.48 12.25 12.38 21,200 0.09 -0.72%
8/14/06 12.36 12.47 12.25 12.47 65,700 0.16 1.30%
8/11/06 12.25 12.40 12.26 12.31 52,700 0.08 -0.65%
8/10/06 12.25 12.48 12.23 12.39 37,000 0.01 -0.08%
8/9/06 12.23 12.40 12.21 12.40 31,200 0.17 1.39%
8/8/06 12.21 12.30 12.20 12.23 9,800 0.03 0.25%
8/7/06 12.21 12.21 12.19 12.20 10,900 0.02 0.16%
8/4/06 12.28 12.30 12.18 12.18 18,300 0.10 -0.81%
8/3/06 12.28 12.35 12.23 12.28 24,600 – –
8/2/06 12.27 12.28 12.27 12.28 3,900 0.01 0.08%
8/1/06 12.30 12.40 12.20 12.27 33,500 0.12 0.99%
7/31/06 12.26 12.40 12.15 12.15 51,500 0.08 -0.65%
7/28/06 12.25 12.25 12.23 12.23 16,600 – –
7/27/06 12.28 12.39 12.22 12.23 39,400 0.05 -0.41%
7/26/06 12.39 12.39 12.21 12.28 22,500 0.11 -0.89%
7/25/06 12.21 12.39 12.21 12.39 77,400 0.18 1.47%
7/24/06 12.21 12.23 12.21 12.21 10,200 – –
7/21/06 12.11 12.40 12.11 12.21 23,900 0.09 0.74%
7/20/06 12.10 12.25 12.02 12.12 30,000 0.03 -0.25%
7/19/06 12.15 12.15 11.86 12.15 49,000 0.15 -1.22%
7/18/06 12.20 12.38 12.07 12.30 67,100 0.10 0.82%
7/17/06 12.30 12.45 12.16 12.20 18,900 0.10 0.83%
7/14/06 12.00 12.25 12.00 12.10 22,900 0.09 0.75%
7/13/06 11.88 12.20 11.88 12.01 27,400 0.13 1.09%
7/12/06 11.88 11.95 11.81 11.88 10,000 0.02 0.17%
7/11/06 11.80 11.95 11.76 11.86 21,900 0.06 0.51%
7/10/06 11.82 11.85 11.75 11.80 19,600 0.09 -0.76%
7/7/06 11.80 11.89 11.75 11.89 24,700 0.11 0.93%
7/6/06 11.77 11.80 11.77 11.78 9,100 0.01 0.08%
7/5/06 11.74 11.87 11.74 11.77 5,200 0.03 0.26%
7/3/06 11.74 11.74 11.70 11.74 4,200 0.15 -1.26%
6/30/06 11.70 11.94 11.70 11.89 11,100 0.16 1.36%
6/29/06 11.87 11.94 11.70 11.73 34,200 0.16 -1.35%
6/28/06 11.84 11.94 11.80 11.89 5,400 0.19 1.62%
6/27/06 11.65 11.75 11.61 11.70 38,800 0.10 0.86%
6/26/06 11.54 11.75 11.50 11.60 31,700 0.06 0.52%
6/23/06 11.57 11.70 11.47 11.54 25,900 0.03 -0.26%
6/22/06 11.52 11.80 11.52 11.57 29,700 0.04 0.35%
6/21/06 11.60 11.90 11.53 11.53 75,900 0.07 -0.60%
6/20/06 11.61 11.75 11.55 11.60 32,100 0.05 0.43%
6/19/06 11.54 11.65 11.35 11.55 66,300 0.05 0.43%
6/16/06 11.50 11.50 11.48 11.50 35,300 – –
6/15/06 11.59 11.59 11.30 11.50 73,900 0.15 -1.29%
6/14/06 11.70 11.71 11.30 11.65 54,200 0.01 -0.09%
6/13/06 11.25 11.70 11.20 11.66 152,300 0.16 1.39%
6/12/06 11.50 11.59 11.40 11.50 14,400 0.07 0.61%
6/9/06 11.50 11.59 11.40 11.43 42,700 0.16 -1.38%
6/8/06 11.59 11.60 11.40 11.59 50,100 0.21 1.85%
6/7/06 11.60 11.60 11.30 11.38 77,400 0.07 -0.61%
6/6/06 11.55 11.73 11.43 11.45 41,200 0.05 -0.43%
6/5/06 11.30 11.50 11.25 11.50 13,700 0.39 3.51%
6/2/06 11.02 11.25 11.00 11.11 18,400 0.03 0.27%
6/1/06 11.00 11.10 10.94 11.08 30,800 0.08 0.73%
5/31/06 11.00 11.00 10.90 11.00 21,500 0.10 0.92%
5/30/06 10.90 10.98 10.65 10.90 91,300 0.10 0.93%
5/26/06 10.84 10.84 10.75 10.80 4,500 0.10 -0.92%
5/25/06 10.90 10.97 10.84 10.90 36,900 0.02 -0.18%
5/24/06 10.80 10.93 10.70 10.92 36,600 0.02 0.18%
5/23/06 10.60 10.90 10.50 10.90 38,000 0.10 0.93%
5/22/06 10.85 11.00 10.55 10.80 50,000 0.05 -0.46%
5/19/06 10.60 10.85 10.60 10.85 13,300 0.15 1.40%
5/18/06 10.65 10.70 10.60 10.70 15,700 0.05 -0.47%
5/17/06 10.50 10.75 10.40 10.75 25,300 0.25 2.38%
5/16/06 10.55 10.60 10.44 10.50 30,800 0.05 0.48%
5/15/06 10.31 10.63 10.20 10.45 64,200 0.14 1.36%
5/12/06 10.30 10.35 10.30 10.31 12,400 0.07 0.68%
5/11/06 10.00 10.24 10.00 10.24 11,800 0.19 1.89%
5/10/06 10.00 10.05 9.90 10.05 9,400 0.05 0.50%
5/9/06 9.88 10.05 9.88 10.00 8,000 – –
5/8/06 9.85 10.05 9.85 10.00 4,300 – –
5/5/06 10.05 10.05 10.00 10.00 8,700 0.03 -0.30%
5/4/06 10.00 10.03 10.00 10.03 8,700 0.01 0.10%
5/3/06 10.02 10.02 10.02 10.02 1,400 0.02 0.20%
5/2/06 9.74 10.00 9.74 10.00 33,800 0.15 1.52%
5/1/06 9.80 9.90 9.77 9.85 12,200 0.05 0.51%
4/28/06 9.90 9.90 9.73 9.80 40,000 0.05 -0.51%
4/27/06 9.76 9.85 9.70 9.85 19,000 0.10 1.03%
4/26/06 9.75 9.75 9.70 9.75 2,500 0.05 -0.51%
4/25/06 9.71 9.85 9.71 9.80 11,800 0.10 1.03%
4/24/06 9.70 9.70 9.70 9.70 1,000 0.05 0.52%
4/21/06 9.70 9.70 9.50 9.65 65,700 0.15 1.58%
4/20/06 9.70 9.70 9.50 9.50 7,900 0.25 -2.56%
4/19/06 9.55 9.75 9.50 9.75 10,800 0.20 2.09%
4/18/06 9.95 9.95 9.55 9.55 15,000 0.25 -2.55%
4/17/06 9.70 9.90 9.70 9.80 8,100 0.15 1.55%
4/13/06 9.47 9.65 9.47 9.65 26,000 0.30 3.21%
4/12/06 9.50 9.55 9.32 9.35 22,800 0.05 -0.53%
4/11/06 9.35 9.40 9.35 9.40 5,900 0.14 1.51%
4/10/06 9.35 9.35 9.25 9.26 12,700 0.05 0.54%
4/7/06 9.35 9.35 9.21 9.21 33,100 0.29 -3.05%
4/6/06 9.50 9.50 9.43 9.50 3,200 – –
4/5/06 9.56 9.56 9.50 9.50 5,400 0.10 -1.04%
4/4/06 9.60 9.60 9.60 9.60 9,000 0.15 -1.54%
4/3/06 9.65 9.75 9.61 9.75 7,200 0.14 1.46%
3/31/06 9.85 9.85 9.57 9.61 5,000 0.05 0.52%
3/30/06 9.62 9.65 9.55 9.56 14,200 0.09 -0.93%
3/29/06 9.70 9.95 9.65 9.65 26,700 – –
3/28/06 9.75 9.75 9.65 9.65 5,000 – –
3/27/06 9.76 9.76 9.65 9.65 11,500 0.16 -1.63%
3/24/06 9.90 9.90 9.81 9.81 4,500 0.16 1.66%
3/23/06 9.80 9.80 9.60 9.65 24,600 0.20 -2.03%
3/22/06 9.80 9.85 9.80 9.85 5,700 0.05 -0.51%
3/21/06 9.80 10.00 9.80 9.90 15,500 0.05 0.51%
3/20/06 9.95 9.95 9.85 9.85 2,100 – –
3/17/06 9.90 9.90 9.80 9.85 11,300 0.05 -0.51%
3/16/06 9.90 9.901 9.90 9.90 9,300 – –
3/15/06 10.00 10.00 9.90 9.90 11,900 0.15 -1.49%
3/14/06 10.10 10.12 10.05 10.05 13,500 – –
3/13/06 10.20 10.32 10.05 10.05 30,800 0.15 -1.47%
3/10/06 10.20 10.20 10.20 10.20 2,700 0.15 1.49%
3/9/06 10.20 10.25 10.00 10.05 22,600 – –
3/8/06 9.85 10.10 9.85 10.05 68,000 0.20 2.03%
3/7/06 9.80 10.00 9.65 9.85 45,200 0.10 1.03%
3/6/06 9.60 9.80 9.55 9.75 30,200 0.04 -0.41%
3/3/06 9.70 9.80 9.55 9.79 12,400 0.19 1.98%
3/2/06 9.55 9.70 9.55 9.60 13,900 0.10 1.05%
3/1/06 9.60 9.85 9.50 9.50 19,700 0.35 -3.55%
2/28/06 9.60 9.85 9.33 9.85 20,100 0.35 3.68%
2/27/06 9.50 9.50 9.30 9.50 15,400 0.10 1.06%
2/24/06 9.70 9.75 9.24 9.40 29,000 0.35 -3.59%
34-55516 Mar. 23, 2007 One Price Clothing Stores, Inc. ONPRQ ONPRQ.PK
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55516 / March 23, 2007
ADMINISTRATIVE PROCEEDING File No. 3-12598
In the Matter of ONE PRICE CLOTHING STORES, INC. Respondent.
ORDER INSTITUTING PROCEEDINGS, MAKING FINDINGS, AND REVOKING REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(j) OF THE SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it necessary and appropriate for the protection of investors that proceedings be, and hereby are, instituted pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Exchange Act”), against One Price Clothing Stores, Inc. (“One Price” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these proceedings, Respondent consents to the entry of this Order Instituting Proceedings, Making Findings, and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
A. One Price is a Delaware corporation headquartered in Duncan, South Carolina. Until February 2004, One Price operated a chain of discount retail clothing stores. On February 9, 2004, One Price filed a voluntary Chapter 11 bankruptcy petition in the Southern District of New York. On March 23, 2005, the bankruptcy case was converted into a Chapter 7 case.
B. The common stock of One Price has been registered under Section 12(g) of the Exchange Act since June 1987. Until June 24, 2003, One Price stock was listed and traded on Nasdaq. It is currently quoted on the “Pink Sheets” disseminated by Pink Sheets LLC.
C. One Price has failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, while its common stock was registered with the Commission in that it has not filed an Annual Report on Form 10-K since May 23, 2003, or periodic or quarterly reports on Form 10-Q for any fiscal period subsequent to its fiscal quarter ending November 1, 2003.
IV.
Section 12(j) of the Exchange Act provides as follows:
The Commission is authorized, by order, as it deems necessary or appropriate for the protection of investors to deny, to suspend the effective date of, to suspend for a period not exceeding twelve months, or to revoke the registration of a security, if the Commission finds, on the record after notice and opportunity for hearing, that the issuer of such security has failed to comply with any provision of this title or the rules and regulations thereunder. No member of a national securities exchange, broker, or dealer shall make use of the mails or any means of instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked pursuant to the preceding sentence.
In view of the foregoing, the Commission finds that it is necessary and appropriate for the protection of investors to impose the sanction specified in Respondent’s Offer.
Accordingly, it is hereby ORDERED, pursuant to Section 12(j) of the Exchange Act, that registration of each class of Repondent’s securities registered pursuant to Section 12 of the Exchange Act be, and hereby is, revoked.
For the Commission, by its Secretary, pursuant to delegated authority.
Nancy M. Morris Secretary
2
Administrative Proceedings - March 23, 2007
34-55516 Mar. 23, 2007 One Price Clothing Stores, Inc.
http://www.sec.gov/litigation/admin/2007/34-55516.pdf
SEC v. Violet Gail Eldridge and UTA-BVI, Ltd., Defendants, and The United Tribes of the Americas Inc. and Executive Bureau of Research and Recovery, Inc., Relief Defendants, No. 05-0735 (U.S.D.C. N.D. Georgia)
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20052 / March 23, 2007
On March 21, 2006, the Honorable Clarence Cooper of the United States District Court for the Northern District of Georgia granted summary judgment in favor of the Commission and against Defendants Violet Gail Eldridge ("Eldridge") and UTA-BVI, Ltd. ("UTA-BVI") and Relief Defendants The United Tribes of the Americas, Inc. and Executive Bureau of Research and Recovery, Inc. (collectively "Relief Defendants"). The Court found that UTA-BVI violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"), 15 U.S.C. § 80b-6(1) and 80b-6(2), and that Eldridge, who served as a director and trustee of UTA-BVI, aided and abetted UTA-BVI's violations. The Court also found that the Relief Defendants received ill-gotten gains to which they have no legitimate claim.
The Court found that UTA-BVI was an investment adviser because it exercised control over the assets of First National Equity, LLC ("FNE") and P.K. Trust & Holding, Inc. ("P.K.T.") and decided to invest those assets in securities. Moreover, the Court found that UTA-BVI was in the business of providing investment advice to FNE and P.K.T, did so for an extended period of time and was to be compensated for its services rendered, as evidenced by Trust Management Agreements UTA-BVI entered into with FNE and P.K.T.
The Court found that UTA-BVI, through Eldridge, violated the Advisers Act by making transfers of funds entrusted to it by FNE and P.K.T. for the benefit of Eldridge and the Relief Defendants. The Court found that funds were used for a variety of purposes not in the best interest of FNE and P.K.T., including for transfers to Eldridge and the Relief Defendants and for credit card payments, hotels, restaurants, retail purchases, rent and other payments and transfers. The Court found that Eldridge aided and abetted UTA-BVI's violations by directing these transfers from UTA-BVI's brokerage accounts.
In granting the Commission's motion for summary judgment, the Court ruled that UTA-BVI should be permanently enjoined from future violations of the Advisers Act and that Eldridge should be permanently enjoined from aiding and abetting future violations of the Advisers Act. The Court will set amounts of disgorgement and civil penalties at an evidentiary hearing set for a later date.
For additional information concerning this matter, see Litigation Release No. 19146 (March 18, 2005).
http://www.sec.gov/litigation/litreleases/2007/lr20052.htm
SEC v. Aragon Capital Management LLC, Aragon Partners LP, Zvi Rosenthal, Amir Rosenthal, Ayal Rosenthal, Oren Rosenthal, Noga Delshad, David Heyman, Heyman & Son Investment Partnership LP, Young Kim, and Bahram Delshad, 07 CV 00919 (KMK) (S.D.N.Y.)
SEC Amends Charges to Include Noga Delshad
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20053 / March 23, 2007
The Securities and Exchange Commission today announced the filing of an amended complaint in this matter to add Noga Delshad as a defendant, alleging that she violated the antifraud provisions of the federal securities laws by trading on material, nonpublic information about Taro Pharmaceuticals Industries, Ltd. ("Taro") that she obtained from her father-in-law, Zvi Rosenthal ("Zvi"), or her husband, Amir Rosenthal ("Amir").
In its initial complaint, the Commission alleged that the other defendants violated the antifraud provisions of the federal securities laws by trading in Taro securities while in possession of material nonpublic information that originated from Zvi, a former vice president at Taro. As alleged in the amended complaint, the insider trading ring generated more than $4 million in profits for the defendants.
In addition to the civil case against them, on February 8, 2007, four of the defendants in this matter, Zvi, Amir, Ayal Rosenthal, and David Heyman, each pled guilty to conspiracy to commit securities fraud in the U.S. District Court for the Eastern District of New York.
For further information, see Litigation Release No. 19995A (February 13, 2007).
http://www.sec.gov/litigation/litreleases/2007/lr20053.htm
Litigation Releases - March 23, 2007
LR-20053 Mar. 23, 2007 Aragon Capital Management LLC, Aragon Partners LP, Zvi Rosenthal, Amir Rosenthal, Ayal Rosenthal, Oren Rosenthal, Noga Delshad, David Heyman, Heyman & Son Investment Partnership LP, Young Kim, and Bahram Delshad
http://www.sec.gov/litigation/litreleases/2007/lr20053.htm
LR-20052 Mar. 23, 2007 Violet Gail Eldridge and UTA-BVI, Ltd., Defendants, and The United Tribes of the Americas Inc. and Executive Bureau of Research and Recovery, Inc., Relief Defendants
http://www.sec.gov/litigation/litreleases/2007/lr20052.htm
Exchange Delistings - March 23, 2007
Form Formats Description Accepted Filing Date File/Film No
ALLEN ETHAN INC (0000003711) (Subject)
25-NSE [html][text]
Accession Number: 0000876882-07-000004 Act: 34 Size: 5 KB 2007-03-23
17:23:12 2007-03-23 001-11806
CHICAGO STOCK EXCHANGE INC (0000876882) (Filed by)
25-NSE [html][text]
Accession Number: 0000876882-07-000004 Size: 5 KB 2007-03-23
17:23:12 2007-03-23
Common Stock, par value $0.10
http://www.sec.gov/Archives/edgar/data/3711/000087688207000004/xslF25X02/primary_doc.xml
MORGAN STANLEY GOVERNMENT INCOME TRUST (0000825353) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000316 Act: 34 Size: 4 KB 2007-03-23
14:36:24 2007-03-23 001-09807
07714985
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000316 Size: 4 KB 2007-03-23
14:36:24 2007-03-23
MORGAN STANLEY GOVERNMENT INCOME TRUST Shares of Beneficial Interest
http://www.sec.gov/Archives/edgar/data/825353/000087666107000316/xslF25X02/primary_doc.xml
AUTOMATIC DATA PROCESSING INC (0000008670) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000314 Act: 34 Size: 4 KB 2007-03-23
13:39:16 2007-03-23 001-05397
07714719
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000314 Size: 4 KB 2007-03-23
13:39:16 2007-03-23
Liquid Yield Option Notes due February 20, 2012 (Zero Coupon - Subordinated)
http://www.sec.gov/Archives/edgar/data/8670/000087666107000314/xslF25X02/primary_doc.xml
ALEXANDRIA REAL ESTATE EQUITIES INC (0001035443) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000312 Act: 34 Size: 4 KB 2007-03-23
11:24:44 2007-03-23 001-12993
07714131
NEW YORK STOCK EXCHANGE INC (0000876661) (Filed by)
25-NSE [html][text]
Accession Number: 0000876661-07-000312 Size: 4 KB 2007-03-23
11:24:44 2007-03-23
9.10% Series B Cumulative Redeemable Preferred Stock
http://www.sec.gov/Archives/edgar/data/876661/000087666107000312/xslF25X02/primary_doc.xml
MERRILL LYNCH & CO INC (0000065100) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000046 Act: 34 Size: 4 KB 2007-03-23
11:21:55 2007-03-23 001-07182
AMERICAN STOCK EXCHANGE LLC (0001143313) (Filed by)
25-NSE [html][text]
Accession Number: 0001143313-07-000046 Size: 4 KB 2007-03-23
11:21:55 2007-03-23
Accelerated Return Bear Market Notes Linked to the Performance of the PHLX Housing Sector Index, maturing March 22, 2007
http://www.sec.gov/Archives/edgar/data/65100/000114331307000046/xslF25X02/primary_doc.xml
GOLDMAN SACHS GROUP INC/ (0000886982) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000045 Act: 34 Size: 3 KB 2007-03-23
11:20:32 2007-03-23 001-14965
AMERICAN STOCK EXCHANGE LLC (0001143313) (Filed by)
25-NSE [html][text]
Accession Number: 0001143313-07-000045 Size: 3 KB 2007-03-23
11:20:32 2007
0.25% Exchangeable Notes, Exchangeable for Common Stock of EMC Corporation, maturing March 22, 2007
http://www.sec.gov/Archives/edgar/data/886982/000114331307000045/xslF25X02/primary_doc.xml
http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=&type=25-nse&owner=include&coun...
Okay. The point I'm trying to make here is that Faulk, Patch, Byrne, Altomare -- anybody that actually speaks publicly about their BELIEF that there is a massive NSS scam in the US markets -- these kinds of posts are just not what this thread is about now.
If people want to scream at the wind about the wickedness of naked short selling, there are MULTIPLE single stock threads on iHub where that crap is being discussed AD NAUSEAM.
This thread is where the facts of the cases and actions are posted.
It may have been about something else before, but I really don't care. I took this thread over because iHub didn't need another SEC thread... this one was fine and dandy.
I appreciate the fact that you have been a consultant in a stock fraud case. That really adds something to the discussion. I am not attacking you, just the idea that NSS needs to be discussed here... this is the database of SEC actions, good or bad... searchable and available as a reference to all...
Thanks.
34-55511 Mar. 22, 2007 America's Sports Voice, Inc., n/k/a Milagro Holdings, Inc.
SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934 Rel. No. 55511 / March 22, 2007
Admin. Proc. File No. 3-12329
In the Matter of
AMERICA'S SPORTS VOICE, INC.
(N/K/A MILAGRO HOLDINGS, INC.)
c/o Samy M. Salem, Interim President
53 Finch Drive
Roslyn, New York 11576
OPINION OF THE COMMISSION SECTION 12(j) PROCEEDING Grounds for Remedial Action Failure to Comply with Periodic Filing Requirements Company failed to file periodic reports in violation of Section 13(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 13a-1 and 13a-13. Held, it is necessary and appropriate for the protection of investors to revoke the registration of company's securities.
APPEARANCES: Samy M. Salem, for America's Sports Voice, Inc. (n/k/a Milagro Holdings, Inc.). Carl A. Tibbetts and Stephen R. Herm, for the Division of Enforcement.
Appeal filed: August 16, 2006 Last brief received: October 23, 2006
2
I.
America's Sports Voice, Inc., n/k/a Milagro Holdings, Inc. (the "Company"), appeals from an administrative law judge's decision finding that the Company had violated Section 13(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 13a-1 and 13a-13 thereunder by failing to file its required annual and quarterly reports for the past five years and, on that basis, revoking the registration of the Company's securities. 1/ We base our findings on an independent review of the record, except with respect to those findings not challenged on appeal.
II.
This case concerns repeated failures by the Company to comply with Exchange Act periodic reporting requirements from 2001 onward. The Company became subject to these reporting requirements based on the registration of its common stock pursuant to Exchange Act Section 12(g). 2/ The relevant facts are as follows.
On November 15, 1999, the Company filed a Form 10-SB to register its common stock under the Exchange Act. According to the Form 10-SB, the Company was "a development stage company which was incorporated under the laws of the state of New York" and whose "objective [was] to create an organization to impact the sports industry by representing the interests of its sports fan members with owners of sport franchises, as well as the players themselves." The Form 10-SB disclosed that, "[a]s a result of the accumulated deficit of $408,485 at June 30, 1999, lack of operating revenues and its minimal capital resources then available to meet obligations which were normally expected to be incurred by similar companies, there [was] a substantial doubt about the Company's ability to continue as a going concern . . . ."
The Company's Form 10-KSB 3/ for the fiscal year ended June 30, 2000 was filed on October 16, 2000. 4/ The Form 10-KSB disclosed that the Company was a development-stage
1/ Exchange Act Section 13(a) requires issuers of securities registered pursuant to Exchange
Act Section 12 to file periodic reports with the Commission in accordance with the rules
established by the Commission. 15 U.S.C. § 78m(a). Rule 13a-1, 17 C.F.R. § 240.13a-1,
requires issuers to file annual reports with the Commission, and Rule 13a-13, 17 C.F.R.
§ 240.13a-13, requires issuers to file quarterly reports with the Commission.
2/ 15 U.S.C. § 78l(g).
3/ Forms 10-KSB and 10-QSB may be filed, in lieu of Forms 10-K and 10-Q, by a company
that is a "small business issuer." See 17 C.F.R. § 228.10(a)(1). This regulation defines a
"small business issuer" as a company that, among other requirements, has revenues of
less than $25 million and is not an investment company. The Company qualified as a
"small business issuer" under these requirements.
4/ Exchange Act Rule 13a-1, 17 C.F.R. § 240.13a-1, provides that "[a]nnual reports shall be (continued...)
3
company with a plan to operate varied businesses in the future. Its audited financial statements for that year indicated zero revenues and a $1,418,009 net loss from the Company's inception on February 12, 1997 through June 30, 2000, and contained another "going concern" statement from its auditors.
On August 15, 2001, the Company filed a Form 10-KSB for the fiscal year ended June 30, 2001 that lacked financial statements. 5/ According to this Form 10-KSB, the Company stated that it was "acting as a Holding Company while still operating as a high technology, multi-media marketing company utilizing both the Internet and publishing businesses to accomplish its business objectives."
The Company's last public filing of any type was a Form 8-K, filed on October 17, 2001. The Form 8-K disclosed that the Company's Form 10-KSB for the fiscal year ended June 30, 2001, which, as indicated, was filed in August lacking financial statements, had not been completed due to an "electric fire and the removal of equipment from the company's location at 270 Broadway, Huntington, New York" and a change of auditors in the middle of its fiscal year. According to the Company, its new accounting firm was attempting to reconstruct the data for the June 30, 2001 fiscal year in order to complete its audit of the Company's financial statements. In this Form 8-K, the Company noted that it had requested an extension to complete its audit and to file the omitted financial statements for its Form 10-KSB. 6/ The Company never filed these audited financial statements. The Company admits, and our records confirm, that it has not filed
4/
(...continued)
filed within the period specified in the appropriate form." General Instruction A to Form
10-KSB requires that "[a]nnual reports on this form shall be filed within 90 days after the
end of the fiscal year covered by the report." We take official notice of the fact that, on
September 29, 2000, the Company filed with the Commission a notice on Form 12b-25 of
its intent to file this Form 10-KSB after the filing deadline. Exchange Act Rule 12b-25
requires that issuers provide notification of their inability to file a Form 10-KSB, or other
periodic report, along with supporting reasons, by filing a Form 12b-25 "no later than one
business day after the due date" for such report. 17 C.F.R. § 240.12b-25(a); see 17
C.F.R. § 249.322 (Form 12b-25). An issuer that files a Form 12b-25 by this deadline will
have its late-filed periodic report "deemed to be filed on the prescribed due date for such
report" if, among other things, it files the late report by the deadline set out in Rule 12b
25(b)(2)(ii), 17 C.F.R. § 240.12b-25(b)(2)(ii). In the case of a late-filed Form 10-KSB,
the report must be filed "no later than the fifteenth calendar day following the prescribed
due date."
5/
On August 2, 2001, the Company filed a Form 12b-25 seeking an extension to file its
annual report on Form 10-KSB for the fiscal year ended June 30, 2001 due to the
Company being "in the process of relocation."
6/
This is presumably a reference to the Form 12b-25 filed by the Company on August 2,
2001. See supra note 5.
4
any annual or quarterly reports since the incomplete Form 10-KSB for the fiscal year ended June 30, 2001.
According to the Company's brief, in January 2004, America's Sports Voice, Inc. was acquired by Milagro Holdings, Inc. through a "reverse merger." 7/ Soon thereafter, however, the Company’s management learned that America's Sports Voice, Inc. had been "dissolved by the State of New York by Proclamation prior to th[e] merger." 8/ Samy Salem, who states that he is the Company's "interim president," subsequently "reinstated the Company with the State of New York as Milagro Holdings, Inc."
The Company asserts in its brief that it "had no business from 2001 until conveyed in January 2004 . . . [and that it] is presently in the process of reorganizing under a new administration." It further states that it has had no income since January 2004 "and is presently in the process of compiling all expenditures." The Company contends that "for all intent and purpose [it] is a new company existing since January 2004."
On June 15, 2006, we issued an order, pursuant to Exchange Act Section 12(k), temporarily suspending trading in several companies, including the Company, from June 15, 2006 through June 28, 2006. 9/ In our suspension order, we found that "there is a lack of current and accurate information concerning the [Company's] securities . . . because it has not filed a periodic report since the period ended June 30, 2001 . . . [and] that the public interest and the protection of investors require a suspension of trading." 10/
III.
7/ A "reverse merger" is a method by which a private company arranges to be acquired by a public company with minimal assets through a merger of the companies, with the shell company surviving and the former shareholders of the private business controlling the surviving entity. See Use of Form S-8, Form 8-K, and Form 20-F by Shell Companies, Securities Act Rel. No. 8587 (July 15, 2005), 85 SEC Docket 3698; see also SEC v. Cavanagh, 445 F.3d 105, 108 n.4 (2d Cir. 2006) (discussing mechanics of a reverse merger).
8/ The Company claims that the "merger was engineered by Investment Bankers that unfortunately did not do a proper due diligence."
9/ Exchange Act Section 12(k) provides, in relevant part, that "f in its opinion the public interest and the protection of investors so require, the Commission is authorized by order . . . summarily to suspend trading in any security . . . for a period not exceeding 10 business days."
10/ Securities Exchange Act Rel. No. 53985 (June 15, 2006), 88 SEC Docket 682.
5
Exchange Act Section 13(a) requires issuers of securities registered under Exchange Act Section 12 to file periodic and other reports containing such information as the Commission's rules prescribe. Exchange Act Rules 13a-1 and 13a-13 require such issuers to file annual and quarterly reports. 11/ The Company admits that it has failed to file annual or quarterly reports for any period after June 30, 2001. 12/ We, accordingly, find that the Company has violated Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder.
Exchange Act Section 12(j) authorizes the Commission, "as it deems necessary or appropriate for the protection of investors," to suspend for a period not exceeding twelve months, or revoke, the registration of a security, if it finds that the issuer of such security has failed to comply with any provision of the Exchange Act or its rules and regulations. 13/ Our determination of what sanctions will ensure that investors will be adequately protected "turns on the effect on the investing public, including both current and prospective investors, of the issuer's violations, on the one hand, and the Section 12(j) sanctions, on the other hand." 14/ Factors we consider in making this determination include the seriousness of the issuer's violations, the isolated or recurrent nature of the violations, the degree of culpability involved, the extent of the issuer's efforts to remedy its past violations and ensure future compliance, and the credibility of its assurances, if any, against further violations. 15/
11/ 17 C.F.R. §§ 240.13a-1 and 240.13a-13.
The financial statements included in annual reports on Form 10-KSB must be prepared in conformity with generally accepted accounting principles and audited by an independent accountant in accordance with generally accepted auditing standards. See Item 7 of Form 10-KSB (17 C.F.R. § 249.310b), and Item 310(a) of Regulation S-B (17 C.F.R. § 228.310(a)); see also United States v. Arthur Young & Co., 465 U.S. 805, 810 (1984) (observing that "[c]orporate financial statements are one of the primary sources of information available to guide the decisions of the investing public").
12/ It is unnecessary for us to find that the Company was aware of, or intentionally ignored, its reporting obligations as scienter is not necessary to establish an issuer's liability under Exchange Act Section 13(a) and Rules 13a-1 and 13a-13, although there is no evidence, and the Company does not argue, that its failure to file was inadvertent or otherwise without intent. See Ponce v. SEC, 345 F.3d 722, 737 n.10 (9th Cir. 2003); SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998).
13/ 15 U.S.C. § 78l(j).
14/ Gateway Int'l Holdings, Inc., Exchange Act Rel. No. 53907 (May 31, 2006), 88 SEC Docket 430.
15/ Id. at 438-39.
6
Based on our consideration of those factors, we believe that the protection of investors requires revoking the Section 12(g) registration of the Company's common stock. The Company’s filing failures are numerous and extend over a lengthy period. It has now failed to file twenty-two straight periodic reports since its incomplete 2001 Form 10-KSB. The Company is more than sixty-five months late in filing the financial statements for its Form 10-KSB for the fiscal year ended June 30, 2001. The Company is more than twenty-nine months late in filing its Form 10-KSB for the fiscal year ended June 30, 2004 -- the first year that the Company's current management assumed control -- and more than seventeen months late in filing its Form 10-KSB for the fiscal year ended June 30, 2005 -- the first full fiscal year under the current management. In the three years that its current management has been running its operations, the Company has not filed any of its required reports. Neither the change of management, the institution of these proceedings, nor our June 2006 order temporarily suspending trading in the Company's stock has made any difference in the Company's long history of ignoring its reporting obligations. We thus find that the Company's violations were very serious, recurrent, and evidenced a high degree of culpability.
We also find that a consideration of the other relevant factors -- the issuer's efforts, if any, to return to compliance and the credibility of management’s assurances against further violations -- supports revocation. Although it does not dispute its past violations, the Company now claims that it "has all the necessary information and documentation to complete [its deficient] filings" and that it will "fulfill all its obligations" if we "grant the Company 90 days" to do so. According to the Company, because the "legal, accounting and edgarization costs . . . to complete these filings . . . are about $50,000" and because it "has [generated] no income from January 2004 to the present," the Company "did not want to expend these funds unless it was given a 90-day window" to return to compliance.
We believe that the Company's position reflects a highly troubling attitude towards
Commission reporting requirements. Compliance with those requirements is mandatory and may
not be subject to conditions from the registrant. 16/ The Company's position indicates that it
16/ As long as an issuer's securities are registered under Section 12(g) of the Exchange Act, Exchange Act Section 13(a) mandates that the issuer "shall file with the Commission" all required reports. If an issuer subject to Exchange Act Section 12(g) periodic reporting requirements wishes to terminate this obligation, it must do so, pursuant to the provisions of Exchange Act Rule 12g-4, 17 C.F.R. § 240.12g-4, by filing a Form 15 with the Commission. The issuer must certify on the Form 15 that the number of stockholders of record is less than three hundred, or less than five hundred when its total assets have not exceeded $10 million on the last day of each of its most recent three fiscal years. See 17 (continued...)
7
does not appreciate the significant public policy objectives the requirements are intended to serve, i.e., providing the public, particularly current and prospective shareholders, with material, timely, and accurate information about an issuer's business. 17/ It also suggests that the Company lacks the resources to prepare the requisite filings. 18/ In either case, the Company's filing history and current attitude suggest the strong likelihood of continuing or future violations.
The Company claims that revocation will harm its shareholders whom, it asserts, strongly support the Company's "endeavors with the Securities and Exchange Commission to allow belated filings." 19/ We previously have recognized, however, that, "in any deregistration current shareholders could be harmed by a diminution in the liquidity and value of their stock by virtue of the deregistration." 20/ We also have held that "[t]he extent of any harm that may result to existing shareholders cannot be the determining factor in our analysis." 21/ In evaluating
16/ (...continued)
C.F.R §§ 240.12g-4(a) and 249.323. Upon the filing of a certification on Form 15, an issuer's duty to file any reports required under Exchange Act Section 13(a) that arose because of an issuer's Section 12(g) registration is suspended immediately, and its registration under Exchange Act Section 12(g) is terminated ninety days thereafter. See 17 C.F.R § 240.12g-4(b).
17/ The reporting requirements are "the primary tool[s] which Congress has fashioned for the protection of investors from negligent, careless, and deliberate misrepresentations in the sale of stock and securities." SEC v. Beisinger Indus. Corp., 552 F.2d 15, 18 (1st Cir. 1977).
18/ According to the Company, "[t]he accounts from the Company from January 2004 to March 2005 are available and the accounting for the subsequent periods are in the process of being done." However, the Company has failed to file any reports covering the January 2004 through March 2005 period notwithstanding its assertion that its accounts for this period are available and notwithstanding institution of these proceedings and the law judge's determination to revoke the Company's registration. In addition, the Company admits that it is seeking new corporate counsel, and it has not furnished any evidence indicating that it has hired an auditor.
19/ According to the Company, it has contacted over 80% of the stockholders who, it states, "are aware of these attenuating circumstances" and support management's efforts to retain the Company's registered status.
20/ Eagletech Communications, Inc., Exchange Act Rel. No. 54095 (July 5, 2006), 88 SEC Docket 1225, 1230.
21/ Gateway Int'l Holdings, 88 SEC Docket at 443. We note that, in Gateway, we determined that revocation was warranted notwithstanding the fact that Gateway, unlike (continued...)
8
what is necessary or appropriate to protect investors, "regard must be had not only for existing stockholders of the issuer, but also for potential investors." 22/ Indeed, we have emphasized the significant interests of prospective investors who can be substantially hindered in their ability to evaluate an issuer in the absence of current filings. 23/ In any event, both existing and prospective shareholders are harmed by the continuing lack of current and reliable financial information for the Company. 24/
Here, the Company's failure to comply with its reporting obligations has deprived the investing public of vital information about the Company's operations and financial condition for a period of more than five years, three years of which occurred after current management assumed control of the Company. During this five year period, the Company has provided no data regarding its current finances or future prospects. Nor, despite its purported willingness to return to compliance under certain circumstances, has the Company provided any evidence that it in fact is capable of doing so. Moreover, the Company has demonstrated a lack of commitment to the Commission's reporting requirements and the important role those requirements play in keeping the public fully informed about an issuer's current business and future prospects. Under
21/ (...continued) the Company, had taken significant steps to return to compliance.
22/ Id.
23/ Id. (stating that, in the context of NASD listing decisions, the Commission has emphasized the interests of future investors rather than the interests of existing shareholders and noting that "similar policy considerations are applicable in a Section 12(j) proceeding"). We have, nevertheless, observed that existing shareholders may also be harmed by an issuer's failure to have its financial statements audited since, for example, "in the absence of an audit, an existing shareholder could be forced to determine whether to sell his stock based on financial statements that give an inaccurate view of the issuer's financial situation." Id. Similar considerations apply, of course, in the case of prospective stockholders who are deciding whether to purchase stock.
24/ See Eagletech Communications, 88 SEC Docket at 1230. We also note that, as we previously have observed, revocation proceedings under Exchange Act Section 12(j), such as this one, play an important role in the Commission's enforcement program because many publicly traded companies that fail to file on a timely basis are "shell companies" and, as such, attractive vehicles for fraudulent stock manipulation schemes. Revocation under Section 12(j) can make such issuers less appealing to persons who would put them to fraudulent use. e-Smart Tech., Inc., Exchange Act Rel. No. 50514 (Oct. 12, 2004), 83 SEC Docket 3586, 3590-91 n.14.
9
the circumstances, we believe that revoking the Section 12(g) registration of the Company's common stock is warranted for the protection of investors. 25/
An appropriate order will issue. 26/
By the Commission (Chairman COX and Commissioners ATKINS, CAMPOS, NAZARETH, and CASEY).
Nancy M. Morris Secretary
25/ The Division’s motion for summary affirmance is denied. See Rule of Practice 411(e)(2), 17 C.F.R. § 201.411(e)(2) (authorizing the granting of "summary affirmance if [the Commission] finds that no issue raised in the initial decision warrants consideration by the Commission of further oral or written argument"); see also Richard Kern, Exchange Act Rel. No. 51115 (Feb. 1, 2005), 84 SEC Docket 2923, 2924 (observing that "summary affirmance is rare, given that generally we have an interest in articulating our views on important matters of public interest") (citations omitted).
26/ We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934 Rel. No. 55511 / March 22, 2007
Admin. Proc. File No. 3-12329
In the Matter of
AMERICA'S SPORTS VOICE, INC.
(N/K/A MILAGRO HOLDINGS, INC.)
c/o Samy M. Salem, Interim President
53 Finch Drive
Roslyn, New York 11576
ORDER IMPOSING REMEDIAL SANCTIONS
On the basis of the Commission's Opinion issued this day, it is
ORDERED that the registration of all classes of the registered securities of America's
Sports Voice, Inc. under Section 12(g) of the Securities Exchange Act of 1934, be, and it hereby is, revoked pursuant to Exchange Act Section 12(j).
By the Commission.
Nancy M. Morris Secretary
http://www.sec.gov/litigation/opinions/2007/34-55511.pdf
Commission Opinions & Orders - March 22, 2007
34-55511 Mar. 22, 2007 America's Sports Voice, Inc., n/k/a Milagro Holdings, Inc.
http://www.sec.gov/litigation/opinions.shtml
34-55506 Mar. 22, 2007 Banc of America Securities LLC
UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55506 / March 22, 2007
Administrative Proceeding
File No. 3-12591
____________________________________
:
In the Matter of :
:
Banc of America Securities LLC, : Order Appointing
: Tax Administrator
Respondent. :
____________________________________:
By order dated January 30, 2007, the Commission issued the “Omnibus Order Directing the Appointment of Tax Administrator in Administrative Proceedings that Establish Distribution Funds” (“Omnibus Order”), Rel. No. 34-55196, authorizing the Secretary to issue orders during calendar year 2007 appointing, upon request by the Commission staff, Damasco and Associates (“Damasco”), a certified public accounting firm located in San Francisco, California, as tax administrator (“Tax Administrator”) in administrative proceedings where the distribution fund may incur tax-related obligations as a Qualified Settlement Fund (“QSF”) under the Department of the Treasury Regulation § 1.468B-1(c).
On March 20, 2007, the Commission staff requested, pursuant to the Omnibus Order, the appointment of Damasco as the Tax Administrator for the QSF in the above-referenced proceeding.
Accordingly,
IT IS ORDERED that Damasco, pursuant to and in accordance with the Omnibus Order, is appointed the Tax Administrator for the QSF in the above-referenced proceeding.
For the Commission, by its Secretary, pursuant to delegated authority.
Nancy M. Morris
Secretary
http://www.sec.gov/litigation/admin/2007/34-55506.pdf
34-55508 Mar. 22, 2007 Richard Robinson
Note: See also Release Nos. 34-55507 and 34-55509
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934 Release No. 55507 / March 22, 2007
ADMINISTRATIVE PROCEEDING File No. 3-12594
In the Matter of
American Stock Exchange LLC,
Respondent.
ORDER INSTITUTING ADMINISTRATIVE AND CEASE-ANDDESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS, A CENSURE, AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 19(h)(1) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it necessary and appropriate in the public interest and for the protection of investors that public administrative and cease-and desist proceedings be, and hereby are, instituted pursuant to Sections 19(h)(1) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”), against the American Stock Exchange LLC (“Amex” or “Respondent”).
II.
In anticipation of the institution of these proceedings, the Amex has submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over the Amex and the subject matter of these proceedings, which are admitted, the Amex consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions, a Censure, and a Cease-and-Desist Order Pursuant to Sections 19(h)(1) and 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds1 that:
A. SUMMARY
This matter involves the failure by the Amex adequately to enforce certain order handling rules and to comply with its record keeping obligations. From at least 1999 through June 2004, the Amex had critical deficiencies in its surveillance, investigative, and enforcement programs for assuring compliance with its rules as well as the federal securities laws. The Amex did not conduct adequate surveillance for certain types of violations by its specialists and floor brokers. This was primarily because the Amex’s surveillance programs were inadequate to detect such violations. When the surveillance programs detected possible order handling rule violations, the Amex did not adequately review the surveillance reports, investigate the potential violations reflected in those reports, or did not complete certain investigations in a timely manner. When the Amex did detect violations, it sometimes failed to make referrals for disciplinary action or improperly excused the conduct.
The Amex’s continual regulatory deficiencies during this time period resulted in large part from its failures to pay adequate attention to regulation, to put in place an oversight structure, or to dedicate sufficient resources to ensure that the exchange was meeting its regulatory obligations. These failures were particularly significant with respect to the options market because the Amex was under a Commission order to improve its surveillance and enforcement of the options order handling rules. As a result of its failure adequately to surveil for and investigate violations of, and to enforce, certain options order handling rules, the Amex violated Section 19(g) of the Exchange Act. In addition, the Amex failed to furnish accurate records and, as a result, violated Section 17(a)(1) of the Exchange Act and Exchange Act Rule 17a-1.
In December 2004, the Amex was sold to its members, and in 2005, prior senior management was replaced. All of the conduct at issue occurred under prior senior management.
B. RESPONDENT
American Stock Exchange LLC, located in New York, New York, is a national securities exchange registered with the Commission pursuant to Section 6 of the Exchange Act. From 1998 until December 31, 2004, the Amex was a subsidiary of the National Association of Securities Dealers, Inc. (“NASD”). On December 31, 2004, the NASD completed the sale of its interest in the Amex and transferred control to the Amex Membership Corporation. New management has
1 The findings herein are made pursuant to Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.
2
assumed senior executive positions at the Amex, including the Chairman/Chief Executive Officer. The Amex trades over 800 stocks, various types of options, and over 100 exchange-traded funds.
C. FACTS
1. Prior Commission Action
From at least 1999, the Amex was on notice that its surveillance, investigatory, and enforcement programs were inadequate. On September 11, 2000, the Commission issued an order (“September 2000 Order”), to which the Amex consented, finding, in relevant part, that the Amex had failed effectively to enforce compliance by its members with exchange rules, policies, or procedures relating to options order handling.2 Specifically, the Commission found that the Amex had failed to surveil for, or to take appropriate action with respect to evidence of, violations of firm quote,3 customer priority,4 limit order display,5 and trade reporting rules6. These rules were designed to protect investors and provide some of the primary safeguards against execution abuses by specialists.
2 See In the Matter of Certain Activities of Options Exchanges, Exchange Act Rel. No. 43268 (Sept. 11, 2000). The Commission issued its order against the Amex and three other options exchanges.
3 The firm quote rule generally requires options specialists to trade options at the prices and in the amounts that they quote. During most of the period relevant to this Order, the firm quote rule for options was set forth in Exchange Act Rule 11Ac1-1, which had a compliance date of April 2001, and Amex Rule 958A. With the Commission’s adoption of Regulation NMS in August 2005, the Commission’s firm quote rule was redesignated as Exchange Act Rule 602. Under Exchange Act Rule 602, its predecessor Exchange Act Rule 11Ac1-1, and Amex Rule 958A, responsible brokers or dealers are required, with a few exceptions, to execute options transactions with customers at prices at least as favorable as their published bids or offers at the time the orders are presented and in any amount of contracts up to their published sizes.
4 With certain exceptions, the priority rules generally require that a customer limit order be executed prior to the execution of any other order if it has the best price, i.e., the highest bid or lowest offer. See Amex Rules 126 and 950(d). If there is more than one customer order at the best price, the customer order that arrives first has priority.
5 The obligation to display limit orders generally requires that a customer limit order that is priced better than the highest bid or the lowest ask price currently quoted on the exchange immediately be displayed in the quotations. As discussed infra at III.C.2.c., at the time of the September 2000 Order, specialists were required to display such limit orders as part of their due diligence obligations. In January 2005, the Commission approved, and the Amex thereafter implemented, a limit order display rule specifically applicable to options.
6 The trade reporting rule generally requires that transactions be reported within a specified time after execution. The Amex’s trade reporting rule, adopted in August 2000, requires that options transactions are to be reported to the Amex Options Market Data System within 90 seconds of execution and that transactions not reported within that time are to be designated as late. See Amex Rule 992.
3
The Commission ordered the Amex to enhance and improve its regulatory programs for surveillance, investigation, and enforcement of the options order handling rules, including compliance with the limit order display, priority, trade reporting, and firm quote rules. The Amex further was required to provide Commission staff with annual affirmations detailing its progress in complying with the September 2000 Order. The Amex failed to comply with these obligations.
2. Inadequate Surveillance, Investigatory, and Enforcement Programs for Options Trading
Notwithstanding the September 2000 Order, as late as 2003, there remained significant deficiencies in the Amex’s surveillance, investigatory, and disciplinary programs regarding the firm quote, customer priority, trade reporting, limit order display, as well as, other options order handling rules. During the relevant time, the Amex’s Derivatives Trading Analysis Department (“DTA”) was primarily responsible for the Amex’s regulatory surveillance program for the derivatives and options markets. In January 2002, the Amex formed the Best Execution Department (“Best Ex”) within the DTA specifically to conduct surveillance reviews and investigations into whether Amex members complied with options order handling rules. Best Ex was responsible for reviewing surveillance reports for violations of the firm quote, trading ahead, trade reporting, and stopped order rules, as well as, the limit order display obligation.
When Best Ex was formed, the Amex contemplated that the department would have five individuals to carry out its functions. During the relevant time, however, Best Ex never had a staff of five. It initially had a staff of four and thereafter had four or fewer individuals. The lack of staff in Best Ex was a significant contributing factor to the Amex’s inadequate surveillance, investigative, and enforcement programs for options order handling rules.
a. The Firm Quote Rule
The firm quote rule is one of the primary means of ensuring that investors receive the best price available for their orders. Notwithstanding the importance of the rule, there were multiple deficiencies in the Amex’s surveillance, investigatory, and enforcement programs related the rule. The Amex improperly applied the rule, established unreasonable surveillance parameters, and failed adequately to pursue disciplinary actions for violations of the rule.
The firm quote rule, in part, requires a responsible broker or dealer7 to stand by the quoted price up to the full quoted size for each option series.8 As such, when a responsible broker or
7 A responsible broker or dealer is a member of an exchange who communicates quotes to other members of the exchange. See Exchange Act Rule 602(b)(65). The responsible broker or dealer frequently is the specialist for the subject security.
8 Options of the same class that have the same exercise price and expiration date are an option series.
4
dealer receives several executable orders in different series simultaneously, the responsible broker or dealer must fill orders up to the quoted size at the quoted price for each option series. The Amex, however, improperly applied the rule and permitted a responsible broker or dealer to back away from the quote in every option series within a class after executing an order of any size in any series within the class.
The Amex also employed incorrect parameters in reviewing exception reports to determine whether there was an applicable exception to the firm quote rule.9 For example, when it initially began reviewing these reports, the Amex simply concluded without investigation that if the quote changed in the thirty seconds following receipt of an order, the specialist was in the process of changing the quote when he or she received the order. The thirty-second period was an unreasonably long period to use in this analysis, because it permitted the precise type of conduct that the firm quote rule was designed to prohibit. Specifically, within thirty seconds, a specialist could receive an order, revise the quote to an inferior price, and either not execute the order or execute it at an inferior price without being cited for a violation of the firm quote rule.
Shortly after it began using the thirty-second review parameter, the Amex expanded the time frame to seventy seconds. The Amex took this action because of the possibility that there could be a delay of up to forty seconds between the time when an order entered the Amex’s electronic systems and the time when the order was displayed on the specialist’s order book. The seventy-second period, however, afforded specialists even more time to revise quotes and then either not execute orders or execute them at inferior prices without the risk of review of their conduct and possible disciplinary action.
The Amex also excused violations of the firm quote rule based on rationales not recognized under any exception to the rule. For example, the Amex improperly excused violations when a customer limit order was executed at the limit price rather than at an Amex quote that represented a better price. It also excused violations when a specialist paired off a customer’s order with another customer order even though, at the time, there was a posted quote at a better price. Excusing violations of the firm quote rule based on non-existent exceptions potentially deprived investors of the execution prices to which they were entitled.
In addition to incorrectly applying the firm quote rule and using unreasonable surveillance parameters, the Amex failed to investigate conduct that its surveillance reports identified as potential rule violations. One surveillance report that the Amex used to identify
9 A responsible broker or dealer is excused from the firm quote obligation if (1) prior to the presentation of the order, a revised quote was communicated to the Exchange, (2) at the time of presentation of the order, a transaction is in the process of being effected and a revised quote is communicated to the Exchange immediately thereafter, or (3) the Exchange is experiencing “unusual market conditions” such that it is “incapable of collecting, processing, and making available to quotation vendors” quotation data that accurately reflect the state of the market on the Exchange. See Exchange Act Rule 602(a)(3)(i), (b)(3)(i); former Exchange Act Rule11Ac1-1(b)(3)(i), (c)(3)(i); Amex Rule 958A(c), (d).
5
potential violations of the rule was the “Executable Orders Unexecuted” report. The report was generated on a daily basis and captured instances in which an Amex specialist failed to execute a market or limit order after the order became executable. As such, all orders captured on the report represented potential violations of the rule. The Amex, however, did not review all of the orders that appeared on the report. In certain instances, for example, the Amex reviewed only those orders that were unexecuted for more than two minutes. This practice was adopted in part due to the extraordinarily limited resources of Best Ex. By December 2002, Best Ex was so backlogged in its review that it was only reviewing orders from August 2002. By March 2003, Best Ex had slightly decreased the backlog, but was still over two months behind in its review. The delay in reviewing the Executable Orders Unexecuted report impeded further investigation of potential violations and their ultimate referral for disciplinary action, because of the difficulty the specialist and other witnesses had recalling the details of an order placed months in the past.
When it made referrals, the DTA referred almost all potential violations to its Minor Floor Violation Disciplinary Committee (“MFV Disciplinary Committee”). The delay in making the referrals to the MFV Disciplinary Committee further impeded disciplinary actions because the committee’s evaluation of the conduct also depended on the memory of the specialist. After the committee complained about the delay, the DTA, in August 2002, stopped referring potential violations of the firm quote rule to the MFV Disciplinary Committee.
Even when the MFV Disciplinary Committee considered referrals, it improperly applied the firm quote rule. In some instances, committee members did not understand what were valid exceptions to the rule and in other instances, committee members excused conduct based on improper analysis. For example, in determining whether a violation had occurred, committee members considered the prior disciplinary history of the specialist, whether the violation was intentional, and whether the specialist was busy. None of these factors represents a valid exception, and the MFV Disciplinary Committee’s reliance on these factors contributed to the Amex’s failure to enforce the firm quote rule.
b. Trading Ahead
The Amex’s trading ahead rules require a specialist to give precedence to an order entrusted to him or her as agent before executing at the same price any transaction in the same option for an account in which the specialist has an interest.10 To monitor for violations of these rules, the Amex created the “Trading Ahead Report.” There were, however, significant deficiencies in the parameters of the Trading Ahead Report and also in the Amex’s review of the report.
10 See Amex Rules 155 and 950(a). The Amex also had a rule that required a registered options trader, when establishing or increasing a position for an account in which he or she had an interest, to give precedence to off-floor orders. See Amex Rule 111(d). A registered options trader is a participant on the exchange trading for his or her own or firm’s account who is responsible for making two-sided markets.
6
The Trading Ahead Report captured only those potential trading ahead violations in which a specialist’s execution occurred at least sixty seconds after receipt of the customer’s order. This parameter essentially gave the specialist a sixty-second grace period to trade ahead of a customer’s order and thereby receive a better price than the customer then received. There is no justification for permitting a specialist to trade ahead of a customer’s order within sixty seconds of receipt of the order. The Trading Ahead Report also did not capture instances in which a specialist traded ahead for his or her own account at the same price as a customer order held on the specialist’s book. This conduct, which deprives the customer of the opportunity to receive a timely execution, is also prohibited by the Amex’s rules.
With respect to the review and analysis of the information on the Trading Ahead Report, the Amex again did not review all instances of potential trading ahead violations identified on the report. It instead reviewed only selected instances of potential violations. In several instances, the Amex excused what appear to be clear violations, such as when a specialist traded for his or her account at a better price than the specialist’s customer received.11 Accordingly, the Amex’s surveillance, investigatory, and enforcement programs related to violations of the trading ahead rules were deficient.
c. Limit Order Display
Pursuant to its rules, the Amex required specialists to exercise due diligence in handling customer orders.12 As part of their due diligence obligations, specialists immediately were to display customer limit orders that improved Amex quotes.13 The immediate display of such orders is an important means of enabling investors to receive the best executions for their orders. However, the Amex’s surveillance, investigative, and enforcement programs relating to the limit order display obligation were deficient.
Following issuance of the September 2000 Order, the Amex developed the “Limit Order Display” report which was supposed to capture instances in which a specialist failed immediately to display a customer order that improved the Amex quote. The Amex, however, inappropriately
11 The Amex rules do allow a specialist or registered options or equity trader to trade ahead of a customer order in limited circumstances, such as when the registered trader is closing a position. These exceptions do not appear to have been a factor in the analysts’ review of the Trading Ahead Report.
12 See Amex Rules 156 and 950(g).
In January 2005, the Commission approved, and the Amex thereafter implemented, a limit order display rule that was specifically applicable to options. See Self-Regulatory Organizations; Order Approving a Proposed Rule Change and Amendments No. 1, 2, 3, 4, 5, and 6 Thereto, and Notice of Filing and Order Granting Accelerated Approval to Amendments No. 7 and 8 Thereto by the American Stock Exchange LLC to Require the Immediate Display of Customer Options Limit Orders, Exchange Act Rel. No. 51062 (Jan. 21, 2005). The role of a limit order display rule is described generally supra at note 5.
7
13
limited its surveillance to the conduct of specialist units. 14 By limiting its surveillance in this manner, however, the Amex overlooked misconduct by individual specialists. This was an unreasonable practice because it is the individual specialist who is responsible for displaying limit orders, and specialists not infrequently change firms. Limiting its surveillance to the conduct of specialist units also meant that the Amex was unable to detect patterns of limit order display violations in options classes.
Even to the extent that it did surveil for violations of the limit order display obligation, the Amex employed a flawed method of determining compliance rates. The Amex measured compliance by calculating the orders not displayed as a percentage of all marketable orders received by the specialist unit.15 Marketable orders, however, do not improve published quotes and, accordingly, are not subject to the display requirement. As a result, the Amex’s calculation of compliance rates was inflated.
d. Trade Reporting
The trade reporting rule requires that transactions be reported within a specified time after execution.16 Reliable trade reporting enhances the transparency of the markets and effective surveillance and enforcement with respect to order handling and other rules. Similar to its surveillance relating to the limit order display obligation, the Amex inappropriately limited its review of potential violations of the trade reporting rule to instances in which a specialist unit reported more than five percent of its trades late. In determining whether the five-percent threshold was exceeded, trades that were automatically reported were included, rather than just trades that were not reported automatically. This practice gave the appearance of a higher compliance rate than was warranted.17
Separately, the Amex did not monitor for compliance by option class and thus was unable to determine whether there were patterns of late trade reporting in particular options classes. The Amex further did not surveil for transactions that were reported late but that were not designated as such when the transactions were reported.18 As a result of these deficiencies, the Amex
14 A specialist unit is comprised of several individual specialists employed by a specialist firm.
15 A marketable order is an order that is executable immediately either because it is an order to buy or sell at the current market price or because it is a limit order that is executable at the currently published quote,
i.e. a buy limit order priced at or higher than the published offer or a sell limit order priced at or below the published bid. Market orders, marketable limit orders, and certain other orders were not subject to the display requirement.
16 See supra note 6.
17 At the relevant time, the Amex estimated that approximately sixty percent to seventy percent of options transactions were electronically routed and executed orders that were reported immediately.
18 Pursuant to Amex Rule 992(b), a transaction not reported within ninety seconds of execution was to be
8
inadequately surveilled for and investigated violations of, and enforced, the trade reporting rule.
e. Busted and Adjusted Trades
The improper cancellation of trades can be a means by which specialists or other market participants avoid their firm quote and other regulatory obligations. Amex Rule 135, in effect for options during the period in question, prohibited exchange members from busting or adjusting a trade unless the transaction was made in error or the bust or adjust was made for other proper reasons. The rule further required both parties to the trade to agree to the bust or adjust. Amex Rule 22 additionally requires that there be a written record of all floor official rulings on busting or adjusting trades and that, at the end of each day, the ruling records be submitted to the exchange.
Continuing at least through 2004, the Amex allowed trades to be busted and adjusted without necessarily obtaining the approval of both parties to the transactions. The Amex’s records, moreover, had no clear indication whether floor officials had approved busted or adjusted trades or whether the parties to the transactions had agreed to the bust or adjust.19 Without this information, the Amex could not assess whether violations of the relevant rules had occurred. Accordingly, the Amex failed to surveil for violations of, and enforce, its rules for busting or adjusting trades.
f. Stopped Orders
The Amex’s “stopped order” rule essentially requires a specialist to provide execution assurances under certain circumstances.20 An exchange member who wants to buy or sell an option at a better price than the price currently available can ask the specialist to “stop” the member’s order and to attempt to obtain a better price. If the specialist agrees, the specialist then is obligated to execute the member’s order at a better price or, if one cannot be obtained, at the market price at the time of the stop. The Amex developed a “Stopping Orders Report” that captured orders that specialists stopped at the Amex quote or at prices inferior to the Amex quote. The Amex was to review the report for instances in which a stopped order was executed at a price below the Amex quote at the time of the stop.21 As with other surveillance reports, the Amex did not review all potential violations reflected on the Stopping Orders Report but only selected transactions. In addition, instances in which specialists executed stopped orders at prices that were
designated as late. When that occurred, the specialist was supposed to add to the trade report a modifier designating the trade as late.
19 The lack of documentation also is a violation of the Amex’s record keeping obligations, which are discussed infra.
20 See Amex Rules 109, 154, and 950(f), (o).
21 The execution of an order at a price inferior to the Amex quote at the time of the stop order also may constitute a violation of the firm quote rule.
9
worse than the market prices at the time of the stop were excused. The Amex thus unreasonably failed to surveil for and investigate violations of, and to enforce, the stopped order rule.
3. Inadequate Surveillance for Equity Trading and Floor Brokers
The Amex also failed adequately to surveil for compliance with certain equity trading rules by its specialists. For example, from at least January 2003 until June 2004, the Amex did not conduct any surveillance for limit order display rule compliance for equities. During that same time, the Amex failed to generate its trading ahead surveillance reports for approximately seven months. Furthermore, the Amex’s surveillance with respect to firm quote violations used inappropriate review parameters which excluded categories of potential violations. Specifically, to determine whether there were potential violations of the firm quote rule, the Amex inappropriately looked at the quote in effect at an order’s time of execution rather than the earlier time when the order was presented to the specialist. The majority of the Amex’s other equity trading surveillances had similar deficiencies in that they were not done, were conducted only sporadically, or had parameters that did not result in sufficient surveillance.
Surveillance for floor broker trading were also inadequate. Several of the floor broker surveillances, including surveillance for frontrunning,22 either were not conducted at all or were conducted sporadically.
4. Failure to Make, Keep, and Furnish Complete and Accurate Records
The Amex also failed to make and keep certain of the required records relating to its surveillance, investigatory, and enforcement activities and further furnished the Commission with inaccurate documents.
a. Inadequate Documentation
(i) Options
The Amex lacked documentation sufficient to support its options surveillance, investigatory, and enforcement activities. The Amex, for example, failed uniformly to maintain in its case files the surveillance reports that gave rise to investigations, lacked audit trail data to support the potential applicability of exceptions to the firm quote rule, failed to maintain analyses and supporting documentation related to reviews of the Trading Ahead and Stopping Orders Reports, and failed to make or keep records of floor official approval and customer consent to busted and adjusted trades. Not only were Amex investigative files incomplete, but in an internal
22 Frontrunning involves a trader taking a position in a security to profit from advance, nonpublic knowledge of an imminent order that may affect the market price of that security. See Amex Rules 111, commentary .03(c) and 950(c).
10
review in 2003, the Amex was unable to locate many investigative files. In some instances, documents in case files were dated after the Amex’s case tracking log reflected that the matters had been closed. In other instances, case files lacked documentation of how the matters were resolved, but logs reflected that the matters had been referred to the MFV Disciplinary Committee.
Documentation related to enforcement actions taken by the MFV Disciplinary Committee was also inadequate. The minutes of the meetings of the committee were vague and conclusory and did not provide sufficient information to evaluate the committee’s actions. The minutes, for example, included records of the committee’s decisions, but did not contain a discussion of the rationales for those decisions. Some of the minutes, moreover, failed even to include references to the types of violations that the committee considered. Other minutes were unclear as to which violations the committee considered or on which the violations the committee acted. In other instances, the minutes did not include a discussion of some matters that purportedly were on the agenda for those meeting.
(ii) Equities and Floor Brokers
The Amex similarly failed to maintain complete and accurate documentation regarding its equity and floor broker regulatory programs. For example, documentation relating to several surveillances in these areas was missing. For some surveillances, due to deficiencies in technology, the Amex maintained inaccurate data and was unable to electronically generate accurate surveillance logs. A lack of qualified individuals and insufficient supervision of those individuals also contributed to the Amex’s failure to make and keep accurate records of its surveillances. All these deficiencies contributed to the Amex’s failure adequately to surveil for violations by equity specialists and floor brokers.
b. The Failure to Furnish Timely, Complete, and Accurate Affirmations
The Amex furnished affirmations required by the September 2000 Order that were late, inaccurate, and incomplete. Affirmations detailing the Amex’s compliance with the September 2000 Order were due annually on September 11. Without notice or a request for an extension of time, the Amex submitted the first affirmation (for 2001) almost five months late, on January 31, 2002, and the second affirmation (for 2002) again almost five months late, on February 7, 2003.
The first affirmation included the following representations:
(1)
the Amex’s Enforcement Department was reviewing all matters that the DTA was proposing to submit to the MFV Disciplinary Committee before they were presented to the MFV Disciplinary Committee;
(2)
firm quote violations “will be forwarded to the Enforcement Department for their review and action unless there are extenuating circumstances”;
11
(3)
in early September 2001, a Trading Ahead of Customer Orders Report and an Executable Orders Unexecuted Report had been incorporated into the Amex’s routine surveillance;
(4)
the Amex was utilizing the following surveillance reports: (a) Lack of Traders Trading in Between the Markets and (b) Specialists Routinely Being the Only Contra-Side on a Trade;
(5)
the Amex had incorporated a Trade Reporting Report into its routine surveillance program; and
(6)
a Floor Broker Order Handling Summary Report had been incorporated into the Amex’s routine surveillance.
None of these representations was accurate. At the time of the Amex’s first affirmation, the Enforcement Department was not reviewing all matters that the DTA was proposing to submit to the MFV Disciplinary Committee, nor did the Enforcement Department ever review routinely all matters that the DTA was proposing to submit to the MFV Disciplinary Committee. The DTA also was not forwarding routinely firm quote violations to the Enforcement Department, nor did the DTA ever forward routinely firm quote violations to the Enforcement Department. Instead, the DTA referred most firm quote violations to the MFV Disciplinary Committee. In addition, the Trading Ahead of Customer Orders Report and the Executable Orders Unexecuted report were still in testing in September 2001 and were not actually implemented until approximately January 2002. Similarly, the reports for the Lack of Traders Trading in Between the Markets and for Specialists Routinely Being the Only Contra-Side on a Trade were also still in development at the time of the affirmation. Indeed, after March 2002, work on these reports ceased. Neither report was used for surveillance. In addition, requirements for the Trade Reporting Report did not start to be developed until February 2002, and a Floor Broker Order Handling Summary Report was never developed.
In its second affirmation, the Amex referenced the first affirmation, stating “[a]s reported in the Exchange’s previous affirmation, during the first year following the issuance of the Commission’s order, the Exchange implemented a significant number of initiatives . . .”, but the second affirmation failed to correct the inaccuracies in the first affirmation. The second affirmation itself was less than three pages in length. It was conclusory in nature and provided little detail of improvements to the Amex’s regulatory program.
D. DISCUSSION
12
As a self-regulatory organization, an exchange such as the Amex is a quasi-governmental body that has a responsibility that is fundamental to the enforcement of the federal securities laws.23 It must have the capacity to comply, and to enforce compliance by its members, with the Exchange Act, the rules and regulations thereunder, and the exchange’s own rules.24 When an exchange fails to comply or to enforce compliance with these provisions, the Commission may take actions that it deems appropriate. The Amex violated provisions of the Exchange Act and Exchange Act rules and failed to enforce compliance by its members.
The Amex’s regulatory deficiencies resulted in large part from its failures to pay adequate attention to regulation, to put in place an oversight structure, or to dedicate sufficient resources to ensure that the exchange was meeting its regulatory obligations. These failures were particularly significant with respect to the options market because the exchange was subject to the September 2000 Order.
1. Violation of Section 19(g)(1) of the Exchange Act
Section 19(g)(1) of the Exchange Act obligates the Amex as a self-regulatory organization to comply with the Exchange Act, the Exchange Act rules and regulations, and the Amex’s rules. Section 19(g)(1) further obligates the Amex, absent reasonable justification or excuse, to enforce compliance with these provisions by its members and persons associated with those members. In carrying out its duty to enforce compliance, the Amex was required to develop and maintain surveillance over its members and to “be vigilant in surveilling for, evaluating, and effectively addressing issues that could involve violations” of the securities laws.25 The conduct described above reflects a significant failure by the Amex to surveil for and investigate violations of, and to enforce compliance with, options and equities trading rules by Amex members. Particularly in light of the Amex’s undertaking in the September 2000 Order to enhance and improve its surveillance, investigative, and enforcement processes with respect to the option order handling rules, there is no reasonable justification or excuse for the Amex’s conduct. Under these circumstances, the Amex violated Section 19(g)(1) of the Exchange Act.
2. Violation of Section 17(a)(1) of the Exchange Act and Exchange Act Rule 17a-1
Section 17(a)(1) of the Exchange Act requires an exchange such as the Amex to make and keep for prescribed periods, and then to furnish the Commission with a copy of, such records as the Commission prescribes as necessary or appropriate in the public interest, for the protection of investors, or for other purposes set forth in the Exchange Act. Exchange Act Rule 17a-1(a) further
23 See Regulation of Exchanges and Alternative Trading Systems, Exchange Act Rel. No. 40760, at 63 (Dec. 8, 1998).
24 See Exchange Act § 6(b), 15 U.S.C. § 78f(b).
25 National Ass’n of Sec. Dealers, Inc., Exchange Act Rel. No. 37538, at 3 (Aug. 8, 1996).
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requires an exchange to keep and preserve at least one copy of all correspondence, records, and other documents made or received by it in its business and in the conduct of its self-regulatory activity. Rule 17a-1(c) requires an exchange promptly to furnish the Commission with a copy of any such document that the Commission requests. The requirement that an exchange keep and furnish records to the Commission includes the requirement that any accompanying explanation of those records be complete and accurate and that those materials be furnished on a timely basis.
The preparation, maintenance, and furnishing of complete and accurate records are essential to the proper functioning of an exchange as a self-regulatory organization. As described above, the Amex failed to keep and furnish records with respect to its surveillance and investigatory functions as well as its enforcement activities. By submitting the affirmations late and with inaccuracies, the Amex further failed to satisfy its obligation promptly to furnish the Commission with such documents as it requests.26 Under these circumstances, the Amex violated Section 17(a)(1) of the Exchange Act and Exchange Act Rule 17a-1.
E. SUBSEQUENT DEVELOPMENTS RELATING TO THE AMEX
In determining to accept the Offer, the Commission has considered the remedial actions that the Amex has taken, including the Amex’s agreement to comply with the undertakings described in Section III.F. below and the replacement of senior management responsible for regulatory compliance during the period in which the violations discussed herein occurred.
F. UNDERTAKINGS
The Amex has agreed to comply with the following undertakings:
1. The Amex shall, within 60 days after issuance of the Order, file with the Commission a proposed rule change that complies with Section 19(b) of the Exchange Act to identify and implement enhancements, to the extent practicable, to its trading systems for equities and options reasonably designed to prevent specialists from violating the Amex’s priority rules, such that when a specialist is in the process of executing a specialist’s proprietary trade while in possession of a customer order that could trade in place of some or all of the specialist’s side of the trade, the Amex system will systemically prevent the reporting of the execution and enable the specialist to allocate the appropriate portion of the specialist’s trade to the customer order, unless the trade meets a specified exemption in the Amex’s rules. Inappropriate use of any such exemption shall be subject to surveillance by the Amex. The Amex shall also require that the system enhancements adopted in compliance with this undertaking may not be disabled by the specialists. The
26 The affirmations, which were required by the September 2000 Order, were prepared in the course of the Amex’s activity as a self-regulatory organization and are records within the meaning of Section 17(a) of the Exchange Act and Exchange Act Rule 17a-1.
14
Amex shall fully implement this undertaking within 180 days of the date of this
Order, subject to Commission approval of the relevant proposed rule changes.
2.
The Amex shall, within 90 days after issuance of the Order, enhance its existing training programs as necessary to implement a mandatory annual training program for all Floor Members and members of the Amex’s regulatory staff responsible for surveillance, investigation, examination, and discipline of Floor Members that addresses compliance with the federal securities laws and the Amex’s rules in place to prevent and deter unlawful trading by Floor Members.
3.
The Amex shall
(a)
Commencing in 2007, and for each of the successive two-year periods thereafter (for a total of three two-year periods), retain a Third Party Auditor (“Auditor”), not unacceptable to the Commission staff, to conduct a comprehensive audit of the Amex’s surveillance, examination, investigation and disciplinary programs relating to trading applicable to all Floor Members in order to achieve the following audit objectives:
(i)
to determine whether the Amex’s policies and procedures are reasonably designed and effective to ensure compliance with, and to detect and deter violations of, the federal securities laws and the Amex’s rules relating to trading; and
(ii)
to determine whether the Amex is in compliance with (1) the policies and procedures identified in section III.F.3(a)(i), above; (2) any outstanding commitments made by the Amex in relation to the written recommendations made by the Commission’s Office of Compliance Inspections and Examinations (“OCIE”) or the Division of Market Regulation relating to compliance with trading rules or surveillance for trading rule violations; and (3) any undertakings contained in this Order or section IV.B.f. of the September 2000 Order.
(b)
Require the Auditor and other qualified persons hired by the Auditor (“qualified persons”) to have or acquire within a reasonable period of time adequate knowledge and understanding of the Amex’s regulatory programs, policies and procedures and to possess sufficient competence and resources necessary to assess the Amex’s surveillance, examination, investigation, and disciplinary programs.
(c)
Require the Auditor to develop a written audit plan of sufficient scope and detail to achieve the audit objectives described in section III.F.3(a) above and to identify regulatory areas in need of special consideration. The Amex
15
further shall require that, in performing the audit, the Auditor and the qualified persons shall exercise due professional care and independence.
(d)
Require the Auditor to formulate an opinion based on sufficient competent evidential matter that is obtained through, among other things, (i) inspection of documents, including written procedures, rules, and staff files; (ii) observation of trading processes and the Amex’s regulatory systems and practices; (iii) interviews of regulatory staff, floor members, and other relevant persons; and (iv) case studies and testing of various regulatory functions and trading practices.
(e)
Cooperate fully with the Auditor and qualified persons and provide the Auditor and qualified persons with access to its files, books, records, and staff as reasonably requested for the audit.
(f)
Require that each audit be concluded within 180 days of the field work. No later than 45 days after each audit is concluded, the Amex shall require the Auditor to submit an audit opinion as to its assessment of the Amex’s surveillance, examination, investigation, and disciplinary programs to the Amex’s Board of Governors and to the following officials at the Commission (the “Commission Officials”): (i) the Director of OCIE; and
(ii) the Director of the Division of Market Regulation. The audit opinion shall also be included in the Amex’s annual report.
(g)
No later than 45 days after each audit is concluded, require the Auditor also to submit an audit report to the Amex’s Board of Governors and to the Commission Officials (i) describing the purpose, scope and nature of the audit; and (ii) identifying any significant deficiencies or weaknesses in the Amex’s policies and procedures, or the Amex’s compliance with these policies and procedures, OCIE recommendations, and the undertakings described in section III.F.1., 2, and 3.(a), above.
(h)
No later than 90 days after the date of the audit report, review all significant deficiencies or weaknesses identified in the audit report and develop a written plan of corrective actions to address each deficiency or weakness, including a date by which each corrective action shall be implemented. The Amex shall maintain a copy of such plan for the entire period of this undertaking and shall provide the plan to the Commission staff upon request.
(i)
Bear the full expense of each audit. Within 45 days after issuance of this Order, the Amex shall set aside a reserve fund of $3 million ($1 million per audit) for the establishment, retention and payment of the Auditor for the three audits. If the expenses for the audits exceed the funds in the reserve
16
fund, the Amex shall use additional funds to pay the costs of the audits. If
any funds remain after completion of the three audits described in section III.F.3.(a) above, those funds shall be used for future audits that the Commission may direct.
(j)
Require the Auditor to provide the Commission staff with any documents or other information the Commission requests regarding the Auditor’s work pursuant to this undertaking. The Amex shall not assert, and shall require the Auditor to agree not to assert, privilege or work product claims in response to any of the Commission staff’s requests.
(k)
Require the Auditor to enter into an agreement that provides that for the period of the engagement and for a period of two years from completion of the engagement, the Auditor shall not, without prior written consent of the Commission staff, enter into any employment, consultant, attorney-client, auditing or other professional relationship with the Amex, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity. The agreement will also provide that the Auditor will require that any firm with which he/she is affiliated or of which he/she is a member, and any person engaged to assist the Auditor in performance of his/her duties under this Order shall not, without prior written consent of the Commission staff, enter into any employment, consultant, attorney-client, auditing or other professional relationship with the Amex, or any of its present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of the engagement and for a period of two years after the engagement.
4. The Amex shall implement the enumerated undertakings within the time specified herein unless, upon written request and for good cause shown by the Amex, the Commission staff grants the Amex such additional time as the Commission staff deems reasonable and necessary to implement any of the enumerated undertakings.
17
IV.
In view of the foregoing, the Commission deems it appropriate, in the public interest, and for the protection of investors to impose the sanctions agreed to in the Offer.
Accordingly, pursuant to Sections 19(h)(1) and 21C of the Exchange Act, it is hereby ORDERED, that
A. Respondent Amex be, and hereby is, censured;
B. Respondent Amex cease and desist from committing or causing any violations and any future violations of Sections 17(a)(1) and 19(g)(1) of the Exchange Act and Exchange Act Rule 17a-1; and
C. Respondent Amex shall comply with the undertakings enumerated in Section III.F. above.
By the Commission.
Nancy M. Morris Secretary
18
http://www.sec.gov/litigation/admin/2007/34-55507.pdf
34-55509 Mar. 22, 2007 Salvatore F. Sodano
Note: See also the Order in this matter and Release Nos. 34-55507 and 34-55508
SECURITES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934 Release No. 55509 / March 22, 2007
Admin. Proceeding File No. 3-12596
In the Matter of Salvatore F. Sodano
The United States Securities and Exchange Commission (“Commission”) today issued an Order Instituting Administrative Proceedings Pursuant to Section 19(h) of the Securities Exchange Act of 1934 and Notice of Hearing (“Order”) against Salvatore F. Sodano, the former chairman and chief executive officer of American Stock Exchange LLC (“Amex”). In the Order, the Division of Enforcement (“Division”) alleged that, as an officer of the Amex, Sodano had an obligation to enforce compliance with federal securities laws and regulations and the Amex’s rules by members and persons associated with those members. The Division further alleged that, while Sodano was chairman and CEO, the Amex’s surveillance, investigatory, and enforcement programs related to the options and equities markets, and the conduct of floor brokers, were inadequate. Sodano was on notice of, and had responsibility for, these regulatory deficiencies. The deficiencies resulted in large part from Sodano’s failures to make regulation an Amex priority, to pay adequate attention to regulation, to put in place an oversight structure to monitor compliance, to ensure that regulatory staff was properly trained, and to dedicate sufficient resources to regulation. These failures were particularly significant with respect to the Amex’s options market because Sodano knew that, in a September 2000 order, the Commission had sanctioned the Amex and had ordered it to enhance and improve its regulatory programs for surveillance, investigation, and enforcement of the options order handling rules. Based on the above, the Division alleged that, without reasonable justification or excuse, Sodano failed to enforce compliance with the Securities Exchange Act of 1934 (“Exchange Act”), the rules and regulations thereunder, and the Amex’s rules. In view of the Division’s allegations, the Commission instituted proceedings against Sodano.
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide Sodano with an opportunity to dispute the allegations, and to determine what, if any, remedial action pursuant to Section 19(h)(4) of the Exchange Act is appropriate. The Commission directed that an administrative law judge issue an initial decision no later than 300 days from the date of service of the Order.
http://www.sec.gov/litigation/admin/2007/34-55509.pdf
34-55510 Mar. 22, 2007 Paul E. Johnson
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55510 / March 22, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12392
In the Matter of
Paul E. Johnson,
Respondent.
ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS
PURSUANT TO SECTION 15(b)(6) OF
THE SECURITES EXCHANGE ACT OF
1934
I.
On August 11, 2006, the Securities and Exchange Commission (“Commission”) instituted
public administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of
1934 (“Exchange Act”) against Paul E. Johnson (“Johnson” or the “Respondent”).
II.
Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has
determined to accept. Solely for the purpose of these proceedings and any other proceedings
brought by or on behalf of the Commission, or to which the Commission is a party, Respondent
consents to the Commission’s jurisdiction over him and over the subject matter of these
proceedings, and further consents to the entry of this Order Making Findings and Imposing
Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (the
“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
1. Respondent, age 46, resides in New York, New York. From 1994 until June 2002,
Respondent was a managing director and senior equity analyst at Robertson Stephens, Inc. (“RSI”),
a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act.
2. On July 24, 2006, a final judgment was entered against Respondent in the civil
action entitled Securities and Exchange Commission v. Paul E. Johnson, Civil Action Number 03-
0177, by the United States District Court for the Southern District of New York, enjoining him for
a period of five years from future violations of Section 17(a) of the Securities Act of 1933, Section
10(b) of the Exchange Act and Rule 10b-5 thereunder.
3. The Commission’s Complaint alleged that, in 1999, 2000, and 2001, Respondent
failed to properly disclose his financial interest in three companies that he covered as a research
analyst.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to
impose the sanctions agreed to in Respondent’s Offer.
Accordingly, it is hereby ORDERED:
Pursuant to Section 15(b)(6) of the Exchange Act, that Respondent be, and hereby is barred
from association with any broker or dealer with the right to reapply for association after five (5)
years to the appropriate self-regulatory organization, or if there is none, to the Commission.
Any reapplication for association by the Respondent will be subject to the applicable laws
and regulations governing the reentry process, and reentry may be conditioned upon a number of
factors, including, but not limited to, the satisfaction of any or all of the following: (a) the
disgorgement ordered against the Respondent in the Amended Final Judgment, in the civil action
entitled Securities and Exchange Commission v. Paul E. Johnson, Civil Action Number 03-0177,
by the United States District Court for the Southern District of New York; (b) any arbitration
award related to the conduct that served as the basis for the Commission order; (c) any selfregulatory
organization arbitration award to a customer, whether or not related to the conduct that
served as the basis for the Commission order; and (d) any restitution order by a self-regulatory
organization, whether or not related to the conduct that served as the basis for the Commission
order.
By the Commission.
Nancy M. Morris
Secretary
http://www.sec.gov/litigation/admin/2007/34-55510.pdf
I had my stint with the SEC quite a few years ago. I joined as a consultant on a stock fraud case involving SEXI. Just today I learned that all claims that validated the buyer's losses will be covered. Amazing that there is enough money to return to investors to wipe out their losses in this fraud. Of course the bad part is they had to wait quiter a few years to get their checks. Sometimes the system does work.Wonder if they have any interest inpursuing a new fraud case-ANLT
Administrative Proceedings - March 22, 2007
34-55510 Mar. 22, 2007 Paul E. Johnson
34-55509 Mar. 22, 2007 Salvatore F. Sodano
Note: See also the Order in this matter and Release Nos. 34-55507 and 34-55508
34-55508 Mar. 22, 2007 Richard Robinson
Note: See also Release Nos. 34-55507 and 34-55509
34-55507 Mar. 22, 2007 American Stock Exchange LLC
Note: See also Release Nos. 34-55508 and 34-55509
34-55506 Mar. 22, 2007 Banc of America Securities LLC
http://www.sec.gov/litigation/admin.shtml
nope. please read the iBox and this message again:
#msg-17980644
This thread is a repository for enforcement and litigation actions.
Exchange Delistings - March 22, 2007
Form Formats Description Accepted Filing Date File/Film No
CAREMARK RX INC (0001000736) (Subject)
25-NSE [html][text]
Accession Number: 0000876661-07-000310 Act: 34 Size: 4 KB 2007-03-22
15:38:27 2007-03-22 001-14200
07711924
MORGAN STANLEY (0000895421) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000044 Act: 34 Size: 4 KB 2007-03-22
11:58:37 2007-03-22 001-11758
MORGAN STANLEY (0000895421) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000043 Act: 34 Size: 4 KB 2007-03-22
11:58:03 2007-03-22 001-11758
MORGAN STANLEY (0000895421) (Subject)
25-NSE [html][text]
Accession Number: 0001143313-07-000042 Act: 34 Size: 4 KB 2007-03-22
11:57:22 2007-03-22 001-11758
read the entire article and you'll find it to be right "on topic"
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•._.•´¯`•._.•´¯`• PURPOSE OF THIS THREAD •._.•´¯`•._.•´¯`•._.•
Regulatory Actions
This page provides links to releases concerning SEC rulemaking activity, including concept releases, proposed rules, final rules, interpretive releases, and policy statements. It also links to announcements concerning SRO rulemaking, PCAOB rulemaking, instructions for Exchange Act Exemptive Applications, other Commission notices, and public petitions for rulemaking submitted to the SEC. http://www.sec.gov/rules.shtml
Division of Enforcement
The Division of Enforcement investigates possible violations of securities laws, recommends Commission action when appropriate, either in a federal court or before an administrative law judge, and negotiates settlements http://www.sec.gov/divisions/enforce.shtml
Enforcement Actions #msg-17969541
Trading Suspensions 2008: #msg-17980493 ---> Trading Suspensions! When the SEC Suspends Trading in a Stock #msg-17969590
Recent Press Releases #msg-18794230
Information of Interest
What does it mean when an "E" is added to a stock's ticker (courtesy of Generic): #msg-31755048
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