Replies to post #831 on The Securities and Exchange Commission (SEC)

[Stock]

SEC v. Blue Bottle Limited and Matthew C. Stokes, 07 Civ. 01-CV-1380 (CSH) (KNF) (S.D.N.Y.)

.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20047 / March 16, 2007

Court Orders Preliminary Injunction and Asset Freeze in SEC Fraud Action Involving Trading in Advance of Press Releases of 12 U.S. Companies

On March 7, 2007, in a fraud action filed last month by the Securities and Exchange Commission, the United States District Court for the Southern District of New York entered a preliminary injunction order against defendants Blue Bottle Limited and Matthew Charles Stokes. In that order, the Honorable Charles S. Haight, Jr., among other things, enjoined Stokes, a citizen of Guernsey, and Blue Bottle, a Hong Kong chartered company, from violations of the antifraud provisions of the federal securities laws. In addition, the Court, which had previously entered a temporary restraining order and asset freeze on February 26, 2007, continued the freeze of the defendants' assets.

The Commission's complaint alleges that Blue Bottle and Stokes fraudulently gained access to material nonpublic information and, with that information, traded in the securities of 12 different U.S. public companies immediately prior to the publication of news releases concerning those companies, realizing profits of $2,707,177. The Commission also alleges that Blue Bottle and Stokes provided false information and used fake documents to open an account at the U.S. broker-dealer through which they executed the illegal trades. As a result of the illegal trading in the 12 companies, the Commission alleges that Blue Bottle and Stokes violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rule 10b-5.

The Commission acknowledges the assistance of the Options Regulatory Surveillance Authority.

For further information, please see Litigation Release No. 20018 (February 26, 2007

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SEC v. Burton G. Friedlander, et al., Civil Action No. 01 Civ. 4683 (KMW) (S.D.N.Y.)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20046 / March 16, 2007

Burton Friedlander Consents To Permanent Injunction
On February 21, 2007, United States District Judge Kimba Wood entered final judgments by consent against Burton Friedlander and four entities he formerly controlled. These final judgments conclude the U.S. Securities and Exchange Commission's action, except for a final distribution by the court-appointed receiver.

The Commission filed its original complaint in May 2001, alleging fraud in connection with Friedlander's management of the assets of Friedlander International Limited, an overseas hedge fund. The Commission alleged that Friedlander inflated the hedge fund's net asset value by improperly and arbitrarily valuing certain unlisted securities of a company in which Friedlander and entities he controlled had heavily invested. The Commission's complaint also alleged that Friedlander engaged in "portfolio pumping" by purchasing a thinly-traded common stock as part of a manipulative scheme to inflate the value of that stock and to inflate the hedge fund's net asset value.

The Commission's amended complaint, filed in October 2003, additionally alleged that, in connection with a separate pooled investment fund he managed, Friedlander converted investors' proceeds to his own benefit. The amended complaint alleged that Friedlander provided pooled fund investors with false asset reports, portions of which were on the letterhead of an independent audit firm. However, the audit firm did not prepare or assist in preparing those asset reports. The audit firm also did not authorize the use of its letterhead, nor did it sign or approve any of these asset reports.

The Commission's case was stayed pending the resolution of a criminal indictment, U.S. v. Friedlander (03 Cr. 1173 (JGK)(S.D.N.Y.), against Friedlander based upon the same conduct alleged in the Commission's amended complaint. On May 25, 2005, Friedlander pleaded guilty to a felony count of fraud in violation of Section 206 of the Investment Advisers Act of 1940 (the "Advisers Act"). On March 9, 2006, Friedlander was sentenced to thirty months incarceration, two years of supervised release, and fined $50,000.

The consent judgments resolving the Commission's civil complaint permanently enjoin Friedlander, and the entities he formerly controlled, Friedlander Capital Management Corporation, Friedlander Limited Partnership, Friedlander International Limited, and Friedlander Management Limited, from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the judgments permanently enjoin Friedlander, Friedlander Capital Management, and Friedlander Management from violating Sections 206(1) and (2) of the Advisers Act.

In light of Friedlander's payment, forfeiture, and surrender of sums and assets totaling $4,875,674 in the Commission's action, the criminal action, and Friedlander's bankruptcy proceedings, and in light of his criminal conviction, the consent judgments do not impose disgorgement or penalties upon Friedlander or the entities he formerly controlled.

For further information see Litigation Release No. 17021 (June 1, 2001), Litigation Release No. 17315 (January 15, 2002), Litigation Release No. 18426 (October 24, 2003), and Advisers Act Release No. 2397 (June 16, 2005).


http://www.sec.gov/litigation/litreleases/2007/lr20046.htm

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SEC v. Raymond Burghard and eSafetyWorld, Inc. (n/k/a EZ Auctions and Shipping Inc.), Civil Action No. CV-05-5851 (Eastern District of New York) (Judge Hurley)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20045 / March 16, 2007

Raymond Burghard Enjoined and Order to Pay Penalty, Default Judgment Ordered Against eSafetyworld, Inc. (n/k/a EZ Auctions and Shipping Inc.)

The United States Securities and Exchange Commission announced that the Honorable Denis R. Hurley, United States District Judge for the Eastern District of New York, entered final judgment as to defendant Raymond Burghard, a former stock broker and Managing Director of Harbor Ridge Communications, Inc., on May 18, 2006. Burghard, without admitting or denying the allegations of the Commission's complaint, consented to the entry of the judgment, which enjoins him from aiding and abetting violations of the antifraud, reporting, and recordkeeping provisions of the Securities Exchange Act of 1934 ("Exchange Act"). The judgment also orders Burghard to pay a civil penalty of $25,000.

The Commission commenced this action against Burghard on December 15, 2005, and filed its First Amended Complaint on February 22, 2006, alleging that Burghard aided and abetted financial fraud at eSafetyworld by signing a false loan agreement and a false loan confirmation that he knew would be provided to eSafetyworld's auditors. In so doing, the Commission alleged that Burghard aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-1, 13b2-1 and 13b2-2 thereunder.

By a separate order, dated January 4, 2007, the Court issued a default judgment against eSafetyworld, enjoining eSafetyworld from violations of the antifraud, reporting, and recordkeeping provisions of the Exchange Act. The Commission's First Amended Complaint alleged that eSafety engaged in fraudulent schemes in 2001 involving financial fraud, false statements to eSafetyworld's auditors, issuance of a false press release, and market manipulation. The First Amended Complaint alleged that eSafetyworld violated Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the "Exchange Act"), Rules 10b-5, 13a-1, 13a-13, 13b2-1, 12b-20, and 12b-25 thereunder, and Section 232.302 of Regulation S-T.

These judgments conclude this litigation.

For more information, see Litigation Release 19494, and Administrative Releases 34-53418, 34-53330, 34-53087, and 34-52959.

http://www.sec.gov/litigation/litreleases/2007/lr20045.htm

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SEC v. Barry Hertz, Civil Action No. 05-2848 (E.D.N.Y.)(CBA)(KAM)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20044 / March 16, 2007

SEC Settles Civil Injunctive Action Against Barry Hertz, Chairman and CEO of Track Data Corporation

The Commission announced that a final judgment was entered today by the United States District Court for the Eastern District of New York against Barry Hertz, the chairman, chief executive officer, and majority shareholder of Track Data Corporation, a financial services company, in a previously-filed action alleging insider trading in the shares of Track Data. Hertz consented to the entry of final judgment, without admitting or denying the allegations of the Commission's complaint, except as to jurisdiction.

The Commission's Complaint

The complaint, which was filed June 14, 2005, alleges that Hertz, while in possession of material, nonpublic information concerning Track Data's earnings for the second and third quarters of 2003, sold Track Data stock through several accounts over which he had trading authority prior to the company's negative earnings announcements. At the time that he sold the shares, Hertz was also subject to Track Data's quarterly "black-out" periods prohibiting trading in Track Data stock prior to the company's public disclosure of its financial results. The complaint also alleges that Hertz tipped several of his relatives who sold small amounts of Track Data stock at or around the same time he did. Hertz also purchased shares of Track Data stock in one of the accounts prior to the positive news of a first time dividend issuance, about which he had prior knowledge. The Complaint further alleges that following the disclosure of Track Data's financial results for the 2003 second and third quarters, the price of Track Data stock dropped 21% and 14.2%, respectively. Following the news of the issuance of a company dividend, the price of the stock increased by 19%.

The Settlement

The final judgment against Hertz, age 57, of Brooklyn, permanently enjoins Hertz from violating antifraud provisions of the federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933, orders him to disgorge $61,657.33, representing profits earned and losses avoided in trading Track Data shares, imposes a civil penalty in the amount of $61,657.33, and bars him from serving as an officer or director of a public corporation for a period of two years.

In connection with the settlement, Hertz has also consented to the institution of settled administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934, which will bar Hertz from association with any broker or dealer for two years. The Order will be based on the permanent injunction contained in the final judgment.

For further information, see Litigation Release No. 19268 (June 14, 2005).

http://www.sec.gov/litigation/litreleases/2007/lr20044.htm

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U.S. Securities and Exchange Commission v. Conrad M. Black, F. David Radler and Hollinger Inc., Civil Action No. 04C7377 (N.D. Ill. 2004)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20043 / March 16, 2007

The Securities and Exchange Commission announced that on March 16, 2007, it settled its enforcement action against F. David Radler, the former Deputy Chairman and COO of Hollinger International, Inc., pending in the U.S. District Court, Northern District of Illinois. Under the terms of the settlement, Radler is

- ordered to pay approximately $23.7 million in disgorgement and prejudgment interest;
- ordered to pay a $5 million civil penalty;
- barred from serving as an officer or director of a public company; and
- enjoined from violations of the antifraud, proxy, books and records, reporting, and internal control provisions of the federal securities laws.

On Nov. 15, 2004, the Commission filed its action against Radler, Conrad M. Black, Hollinger International's former Chairman and CEO, and Hollinger, Inc., Hollinger International's controlling shareholder, alleging that from approximately 1999 through 2003, the defendants engaged in a fraudulent and deceptive scheme to divert cash and assets from Hollinger International, Inc., through a series of related party transactions.

The Commission's complaint alleges, among other things, that Black and Radler diverted to themselves, other corporate insiders and Hollinger, Inc. approximately $85 million of the proceeds from Hollinger International's sale of newspaper publications through purported "non-competition" payments. The complaint also alleges that Black and Radler orchestrated the sale of certain of Hollinger International's newspaper publications at below-market prices to another privately-held company owned and controlled by Black and Radler, including the sale of one publication for $1.00. The complaint further alleges that in order to perpetrate their fraudulent scheme, Black and Radler misled Hollinger International's Audit Committee and Board of Directors concerning the related party transactions and also misrepresented and omitted to state material facts regarding these transactions in Hollinger International's filings with the Commission and during shareholder meetings.

Radler, without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment which permanently enjoins him from violations of Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 14a-3 and 14a-9 hereunder, and, as a control person, Sections 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 hereunder. The Final Judgment also bars Radler from acting as an officer and director of a public company and orders Radler to pay a total of $23,695,227 in disgorgement and prejudgment interest and a $5,000,000 civil penalty. The $28,695,227 shall be distributed to The Sun-Times Media Group, Inc., formerly known as Hollinger International, Inc., pursuant to the Fair Funds provisions of Section 308 of the Sarbanes-Oxley Act of 2002. The settlement is subject to approval of U.S. District Judge William T. Hart.

The SEC acknowledges the assistance of the Ontario Securities Commission.

http://www.sec.gov/litigation/litreleases/2007/lr20043.htm