U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20114 / May 14, 2007 SEC v. Gayle Spence Luacaw, Civil Action No. 07-cv-00037 (D.N.H.) Permanent Injunction and Order of Disgorgement Entered As To Gayle Spence Luacaw The Securities and Exchange Commission announced today that on May 10th the United States District Court for the District of New Hampshire entered a settled Permanent Injunction and Order of Disgorgement as to Gayle Spence Luacaw, and a final judgment on May 14, 2007. Pursuant to the settlement, Luacaw, without admitting or denying the allegations of the Commission's complaint, consented to an injunction against future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder; and from aiding and abetting any violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Under the settlement, Luacaw also agreed to pay disgorgement plus prejudgment interest.
According to the Commission's complaint, from March 2000 through December 2001, Luacaw, a former vice president for the Executive Office of the President for Enterasys Networks, Inc., participated in a company-wide scheme to fraudulently inflate revenues at Enterasys and its former parent company, Cabletron Systems, Inc., and thereby convince the market that Enterasys was a viable independent company with consistently strong revenue growth.
Related Actions Luacaw pled guilty to one count of conspiracy to commit securities fraud and cooperated with the U.S. Attorney's Office for the District of New Hampshire in the prosecution of U.S. v. Barber et al., Criminal No. 04-126 (D.N.H.).
For further information, see LR-19998 (February 12, 2007).
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20115 / May 14, 2007 Securities and Exchange Commission v. Christopher M. Balkenhol, Case No. C-07-2537 JCS (N.D. Cal. filed May 14, 2007) SEC Charges Former Oracle Vice President with Illegal Insider Trading in Stocks of Oracle Acquisiton Targets Trader Misused Confidential Information Gleaned From Spouse, Who Was Lead Executive Assistant to Oracle's CEO and Co-Presidents The Securities and Exchange Commission today filed insider trading charges against a former Oracle Corporation vice president who allegedly traded on confidential information about Oracle acquisition targets gleaned from his spouse, who was also employed by Oracle. The Commission alleges that Christopher Balkenhol, 40, of San Mateo California, learned about secret merger negotiations from his wife, who worked at Oracle as the lead executive assistant to Oracle's CEO and two co-Presidents. Without admitting or denying the Commission's allegations, Balkenhol agreed to settle the action against him, paying a total of approximately $198,000-including a penalty of nearly $100,000.
The Commission's complaint, which was filed in the United States District Court for the Northern District of California, alleges that Balkenhol traded in a series of Oracle acquisition targets during 2004 and 2005. Balkenhol allegedly learned about the planned acquisitions from his wife, who had access to the schedules of Oracle's three top executives and was aware of significant merger-related meetings. The Commission does not allege that Balkenhol's wife knew about Balkenhol's illicit trades. Rather, the complaint alleges that Balkenhol breached a duty not to misuse confidences gleaned from his wife for his own gain.
The complaint alleges that Balkenhol engaged in pattern of insider trading by purchasing stock in Oracle acquisition targets before any public announcement of Oracle's interest. Balkenhol's first profitable trade came on March 1, 2005, when he invested $85,000 in Minneapolis-based Retek Inc. the day after Oracle executives began considering a tender offer for Retek. When Oracle announced the tender offer the following week, Retek's stock price jumped and Balkenhol sold the shares for approximately $15,000 in alleged unlawful profits.
Balkenhol allegedly continued his pattern of insider trading with a series of stock purchases in another acquisition target, Siebel Systems, Inc., during Oracle's negotiations to acquire the company in 2005. On June 9, 2005, the day after Oracle's two co-Presidents secretly met with Siebel's CEO to initiate merger discussions, Balkenhol bought over $270,000 worth of Siebel's stock. Over the next three months, Balkenhol made three additional purchases of Siebel stock, each following a critical advance in the confidential negotiations. Again, Balkenhol's wife had access to detailed inside information relating to each such advance. From June to September, Balkenhol ultimately purchased over 50,000 shares of Siebel stock for a total of approximately $448,000. Immediately after Oracle's September 12, 2005 announcement of its acquisition of Siebel, Balkenhol sold his entire position for approximately $82,000 in unlawful profits.
The total of approximately $198,000 Balkenhol agreed to pay in settlement of the Commission's action includes $97,282 in disgorgement, $4,115 in prejudgment interest and a $97,282 civil penalty. Balkenhol has also agreed to a permanent injunction from further violations of Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder.
The Commission acknowledges the assistance of the National Association of Securities Dealers (NASD) in this matter.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20116 / May 14, 2007 SEC v. NJ Affordable Homes Corp., Wayne Puff and Kenneth Lagonia, Civil Action No. 2:05-CV-04403 (JLL) (D.N.J.) SEC Adds Defendant to Ponzi Scheme Case, Charging Former Consultant to NJ Affordable Homes for Role in Defrauding Investors The Securities and Exchange Commission announced today that on May 10, 2007, the Commission filed an Amended Complaint in SEC v. NJ Affordable Homes, a case pending in the United States District Court for the District of New Jersey. The Amended Complaint adds Kenneth Lagonia as a defendant in the Commission's previously filed offering fraud case against NJ Affordable Homes and its president, Wayne Puff. The Amended Complaint alleges that Lagonia, a resident of Manorville, New York, played an integral role in the final years of a Ponzi scheme that defrauded hundreds of NJ Affordable Homes' investors, and made numerous fraudulent misrepresentations and omissions regarding NJ Affordable Home's business and the nature of the securities it was offering.
The Amended Complaint further alleges that from at least 1999 to September 12, 2005, the day the Commission obtained a temporary restraining order against NJ Affordable Homes and Puff, NJ Affordable Homes sold more than $90 million worth of securities in unregistered offerings to hundreds of investors in New Jersey and other parts of the United States. In selling those securities, NJ Affordable guaranteed investors high rates of return, of 15% and more, based on promises that their money would be used to fund the purchase, renovation, and resale of real property. However, the Defendants failed to disclose to investors that, among other things, the companies' properties were over-valued; that NJ Affordable Homes had a negative net worth and ever-worsening cash flow problems; that money from new investors was being used to fund payments to existing investors; that NJ Affordable Homes' books and records were in disarray and the company could not prepare audited financial statements; and that many of the company's property sales were to straw buyers at inflated prices, generating fictitious revenue and resulting in increased and undisclosed debt obligations to NJ Affordable Homes.
Specifically, the Amended Complaint alleges that NJ Affordable Homes, Puff, and Lagonia violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
For further information, see Litigation Release Nos. 19372 (September 12, 2005), 19377 (September 14, 2005), and 19408 (September 29, 2005).
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