Where Will the New Administration Take the SEC?

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Mon, 20 May 2013 09:56:00 -0400

While the SEC Chair is battling Congress to secure a budget which approaches $2 billion the number of cases being brought by the enforcement program is dwindling. Regardless of what budget Congress actually gives the agency, a critical question will be how the resources are used and by what standard success will be measured. The number of cases filed during any given period, or even the amount of money obtained in resolved cases, is not the critical test of effective enforcement although those metrics may stimulate headlines.

Rather, the focus should be on the kind of cases being brought, the statement they make in the market place and the effectiveness

Delaware State Law Insider Trading Claim against Kohlberg Kravis Roberts & Co. Allowed to Proceed

FPileggi@eckertseamans.com (Francis G.X. Pileggi) — Fri, 17 May 2013 11:41:00 -0400

In re: Primedia, Inc., Shareholders Litigation, Cons., C.A. No. 6511-VCL (Del. Ch. May 10, 2013) [an enhanced version of this opinion is available to lexis.com subscribers].

Issue Addressed: Whether insider trading claim based on state law should be allowed to proceed despite motion to dismiss by special litigation committee.

This Week in Securities Litigation (Week ending May 17, 2013)

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Fri, 17 May 2013 09:26:00 -0400

Companies with China based operations were a focus this week for the SEC. The Commission filed two financial fraud actions against companies whose operations were in the PRC. In one there seemed to be virtually no operations while in the other two sets of books were used to falsify revenue while proceeds of a securities offering were diverted to the use of the chairman and the controlling shareholder. The SEC also concluded its "golden goose" insider trading case, settling with the two remaining defendants. And, another defendant in the Dell insider trading case was sentenced to prison.

The Commission prevailed in the Second Circuit which affirmed

City of Harrisburg Settles With SEC on Rule 10b-5 Violations

FoleyandLardner@placeholder.com (Foley & Lardner LLP) — Thu, 16 May 2013 18:14:00 -0400

Recently, the SEC settled with the City of Harrisburg (City) over violations of Rule 10b-5 in connection with material misstatements and omissions made by the City in its public statements and financial information, during a multi-year period.

This settlement underscores the increased focus by the SEC on state and municipal governments in connection with the trillion-dollar municipal bond market.

The SEC alleged that the City violated Rule 10b-5 as a result of its repeated failure to provide financial information and material events notices. As a result of the City's failure, investors only had access to stale and misleading financial information

The Dell Insider Trading Cases

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Wed, 15 May 2013 10:37:00 -0400

Anthony Chiasson, the co-founder of hedge fund Level Global Investors, was sentenced on insider trading charges this week to serve 78 months in prison. U.S. v. Newman, 1-12-cr-00121 (S.D.N.Y.). Mr. Chiasson was convicted along with co-defendant Todd Newman, a portfolio manager at Diamondback Capital Management LLC, by a jury last December. Mr. Newman has been sentenced to serve 54 months in prison.

The cases some called the Dell insider trading cases, centered on a ring which gathered inside information from company employees at Dell Inc. and NVIDIA Corporation. Mr. Chaisson's research analyst, Sam Adondakis, along with Jesse Tortora, Jon Horvath and

Motion to Dismiss Granted in Barclays LIBOR-Scandal Securities Suit

klacroix@oakbridgeins.com (Kevin M. LaCroix) — Tue, 14 May 2013 16:19:00 -0400

In a May 13, 2013 order (here), Southern District of New York Judge Shira Scheindlin granted defendants' motion to dismiss the LIBOR-scandal related securities suit that had been filed against Barclays and two of its former executives following the company's entry into a massive LIBOR-related settlement last summer. The suit's dismissal is just the latest setback for claimants hoping to recover damages in connection with the LIBOR scandal.

As discussed in greater detail

This Week In Securities Litigation (Week ending May 10, 2013)

dougesten.lnc@gmail.com (LexisNexis Community Staff) — Fri, 10 May 2013 16:59:00 -0400

The focus this week was on the proposed SEC budget as new SEC Chair Mary Jo White told a House subcommittee that the agency needs about a 26% increase. Part of the additional funding is to hire almost 700 new staff members.

SEC enforcement, in conjunction with the Manhattan U. S. Attorney's Office, brought a kickback action involving payments to an official of an Argentinian bank by employees of a New York brokerage firm. The Commission also brought its first action against a City based on statements not contained in the financing papers. In conjunction with that proceeding the agency also issued a Section 21(a) report cautioning city officials regarding their statements

Plaintiffs Seek Approval of $153M Securities Settlement with Fannie Mae, KPMG

timothy.raub@lexisnexis.com (Timothy Raub) — Fri, 10 May 2013 07:57:00 -0400

WASHINGTON, D.C. - (Mealey's) Lead plaintiffs in a securities class action lawsuit against Fannie Mae and accounting firm KPMG LLP on May 7 asked a federal judge to approve a $153 million settlement that would end the lawsuit, which was brought in 2004 (In re: Fannie Mae Securities Litigation, No. 04-01639, D. D.C.; See July 2009, Page 24).

Lead plaintiffs Ohio Republic Retirees System and State Teachers Retirement System of Ohio filed their motion for preliminary approval of the settlement in the U.S. District Court for the District of Columbia.

The lead plaintiffs originally filed

SEC Reaches Settlement With City over Federal Securities Law Violations

timothy.raub@lexisnexis.com (Timothy Raub) — Tue, 07 May 2013 16:17:00 -0400

WASHINGTON, D.C. - (Mealey's) The Securities and Exchange Commission and the City of Harrisburg, Pa., have agreed to a cease-and-desist order preventing the city from continuing its violation of federal securities laws in connection with statements it made both publicly and in financial documents regarding the city's failure to comply "with written undertakings executed by the City in the form of Continuing Disclosure Certificates," the SEC said in its order, filed May 6 (In the Matter of the City of Harrisburg, Pennsylvania, No. 3-15316, SEC).

The SEC alleges that the city violated Section 10(b

Bank of America to Pay $1.7B to Settle Mortgage-Backed Securities Claims

timothy.raub@lexisnexis.com (Timothy Raub) — Tue, 07 May 2013 14:59:00 -0400

NEW YORK - (Mealey's) Bank of America Corp. (BoA) will pay nearly $1.7 billion to MBIA Inc. and certain of its subsidiaries to settle claims in New York State court that BoA misrepresented the investment quality of and risk associated with certain mortgage-backed securities (MBS) it sold to MBIA, according to press releases issued by both parties May 6 (MBIA Insurance Corp. v. Countrywide Home Loans Inc., et al., No. 602825-2008, N.Y. Sup., New York Co.).

According to the MBIA press release, MBIA and subsidiaries MBIA Insurance Corp. and National Public Finance Guarantee Corp. (collectively, MBIA

The New SEC Chair Charts a Course for the Agency

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Mon, 06 May 2013 10:54:00 -0400

Commentators have speculated since the appointment of Mary Jo White as SEC Chair that there would be a new emphasis on enforcement. Ms. White's remarks during her Senate confirmation hearings about unrelenting enforcement bolstered that view. Yet her recent remarks suggest perhaps another focus.

"[W]e are not alone in the global regulatory space . . . " Ms. White declared in her first formal remarks as SEC Chair. Addressing the Investment Company Institute General Membership Meeting in Washington, D.C. on May 1, 2013 Ms. White focused on what she called "Regulation in a Global Financial System," In her remarks the new SEC Chair painted

This Week In Securities Litigation (Week ending May 3, 2013)

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Fri, 03 May 2013 17:30:00 -0400

The FCPA continued to be a focus this week. Another Alstrom executive was added to a pending criminal prosecution in a superseding indictment charging FCPA violations and money laundering.

In court the Commission prevailed in the D.C. Circuit as well as the district court. In the Circuit Court the Commission secured the dismissal on jurisdictional grounds of a suit challenging Exchange Act Section 13(q) and the related rules. Those provisions require the disclosure of certain payments made to foreign governments relating to the commercial development of oil, natural gas, or minerals. In the district court the agency prevailed on a summary judgment motion in

The “No Knowledge” Defense In A Criminal Securities Fraud Case

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Wed, 01 May 2013 16:13:00 -0400

Can a defendant plead guilty to criminal securities fraud, get a presentence report with a sentencing guideline recommendation of 121-151 months and avoid prison? Bryan Behrens tried. He failed, although his sentence was considerably less than the guideline calculation. U.S. v. Behrens, No. 11-3482 (8^th Cir. Filed April 25, 2013).

Bryan Behrens pleaded guilty to one count of securities fraud in violation of Exchange Act Section 10(b). Previously he owned and operated 21^st Century Financial Group, Inc. It was a life insurance agency and financial investment advisory business which he expanded into National Investments. Inc. That business

Advisen Reports on First Quarter 2013 Corporate and Securities Litigation

klacroix@oakbridgeins.com (Kevin M. LaCroix) — Tue, 30 Apr 2013 11:41:00 -0400

During the first quarter of 2013, new corporate and securities lawsuits and regulatory enforcement actions increased slightly compared to the fourth quarter of 2012 but remained well below annual averages over the last two years, according to a new report from Advisen, the insurance information firm. The April 2013 report, which can be found here, is entitled "D&O Claims Trends: 1Q 2013," notes that "if the first quarter is any indication, it appears that this downward trend may continue throughout 2013."

Reeders reviewing the Advisen report will want to be very

SEC Charges City and its Underwriter With Fraud

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Tue, 30 Apr 2013 11:19:00 -0400

The City of Victorville California, Assistant City Manager Keith Metzler, deal underwriter and broker Newcomb & Dedios or KND and its principle Jeffrey Kinsell were named as defendants by the Commission in a suit alleging fraud in connection with the sale of municipal bonds. The city airport authority, Southern California Logistics Airport Authority, two executives at KND and an affiliate of the firm were also named as defendants. SEC v. City of Victorville, Case No. EDCV 13-776 (C.D. Cal. Filed April 29, 2013).

Over a two year period beginning in 2006 the Airport Authority, created to redevelop a 132 acre tract of land around a former Air Force base

SEC Secures $2.7 Million Judgment Against Broker and Others

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Mon, 29 Apr 2013 10:45:00 -0400

The Commission prevailed on a motion for summary judgment against a brokerage firm, its principle and a former managing director, ultimately securing judgments of over $2.7 million. SEC v. Constantin, Civil Action No. 11-CV-4642 (S.D.N.Y. Filed July 6, 2011). This is one of what may be an increasing number of actions involving brokers and market professionals defrauding their clients.

The Constantin case was brought against Windham Securities, its owner and principal Joshua Constantin, and former firm managing director Brian Solomon. The complaint centers on an alleged fraud in connection with a private placement. Specifically, the defendants raised

Zeek Receiver Blasts Objections to Claims Process

jordan.maglich@gmail.com (Jordan D. Maglich) — Mon, 29 Apr 2013 09:14:00 -0400

"Hundreds of thousands of Zeek victims have waited patiently for months as the Receiver has completed the work necessary to provide an easy to use, fair and efficient claims process. But yet again, it appears that counsel pursuing their own agenda has come forward to delay and raise the costs of the Receiver moving forward in the best interest of all Zeek victims."

The court-appointed receiver tasked with recovering assets for victims of the $600 million ZeekRewards Ponzi scheme addressed objections to his proposal for the establishment of a claims process, dismissing the objections as meritless and questioning the underlying

Will Obstacles Deter the SEC's Dodd-Frank Whistleblower Program?

klacroix@oakbridgeins.com (Kevin M. LaCroix) — Fri, 26 Apr 2013 09:57:00 -0400

Whistleblower information may be one of the SEC's "most effective weapons in its new enforcement arsenal," but the agency's whistleblower program "faces challenges on many fronts," according to an April 23, 2013 New York Times Dealbook article entitled "Hazy Future for Thriving S.E.C. Whistle-Blower Effort" (here). As evidence of the whistleblower program's promise that article cites several "previously undisclosed" enforcement actions that whistleblower information have triggered or aided

This Week In Securities Litigation (Week ending April 26, 2013)

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Fri, 26 Apr 2013 09:26:00 -0400

George Canellos and Andrew Ceresney, two former colleagues in the Manhattan U.S. Attorney's Office, became the first Co-Directors of the SEC's Enforcement Division. The Division also secured a ruling this week which will permit its subpoena enforcement action against the PRC based affiliate of Deloitte to move forward. The ruling may set the stage for a precedent setting clash of U.S and PRC law on the question of whether audit work papers for a U.S. registered issuer based in the PRC and audited by a firm there are available to the SEC.

The Commission resolved an FCPA case this week in conjunction with the DOJ. For the first time the

SEC’s Action Seeking PRC Audit Papers Moves Forward

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Thu, 25 Apr 2013 18:16:00 -0400

The SEC's action seeking to compel the production of documents from the Chinese affiliate of Deloitte and Touche is moving toward resolution. The Court rejected a request by the audit firm for a stay pending the resolution of a Commission administrative proceeding which is based on similar issues. SEC v. Deloitte Touche Tohmasu CPA, Ltd., Civil Action No. 11-mc-512 (D.D.C. Ruling dated April 22, 2013 ("subpoena enforcement action").

The subpoena enforcement action: The subpoena enforcement action seeks an order requiring the production of PRC based audit work papers held by Deloitte Touche Tohmasu relating the audit

Ponzi Scheme Defendants Agree to Pay $55M in Investment Club Action

michael.lello@lexisnexis.com (Michael J. Lello) — Thu, 25 Apr 2013 10:26:00 -0400

WEST PALM BEACH, Fla. - (Mealey's) A federal judge in Florida on April 24 signed consent orders in which defendants agreed to pay nearly $55 million to end a suit in which the U.S. Commodity Futures Trading Commission (CFTC) alleged that they orchestrated a $28 million Ponzi scheme to defraud investment clubs (Commodity Futures Trading Commission v. Philip Milton, et al., No. 10-80738, S.D. Fla.).

U.S. Judge Daniel T.K. Hurley of the Southern District of Florida signed the supplemental consent orders. The first supplemental consent order requires Trade LLC managing member Philip Milton to pay $10.8 million in restitution

What is Regulation FD and Does it Prohibit the Use of Social Media?

arina.shulga@gmail.com (Arina Shulga) — Wed, 24 Apr 2013 12:38:00 -0400

Regulation Fair Disclosure (known as "Regulation FD") was enacted in 2000 by the Securities and Exchange Commission (the "SEC") to prohibit selective disclosure of material non-public information by the public companies or persons acting on their behalf to a selected group of outsiders (often market professionals, analysts or major investors) where it is reasonably foreseeable that they would trade on that information before it is made available to the general public. The Regulation requires that if such selective disclosure has been made, then the company must promptly disclose that same information

Utah Man Pleads Guilty To Running Two Separate Ponzi Schemes

jordan.maglich@gmail.com (Jordan D. Maglich) — Tue, 23 Apr 2013 15:57:00 -0400

A Utah man agreed to plead guilty for his involvement in two separate Ponzi schemes - while on parole for a previous conviction for a third Ponzi scheme - that took in more than $30 million from investors. Wayne Ogden, of Koosharem, Utah, was convicted earlier this year for his role in one of the Ponzi schemes, and in a deal with authorities, agreed to plead guilty to one count of wire fraud and one count of securities fraud in exchange for a recommended 10-year sentence to be served concurrently in both cases. As part of the deal, Ogden

This Week In Securities Litigation (Week ending April 19, 2013)

TGormanSECActionsBlog@porterwright.com (Thomas O. Gorman) — Mon, 22 Apr 2013 10:35:00 -0400

The Second Circuit's pending decision in the Commission's Citigroup market crisis case continues to loom as Judge Marreno approved the over $600 million insider trading settlement involving SAC Capital - conditioned on the outcome of Citigroup. New Chairman Mary Jo White's former partner, Andrew Ceresney, is rumored to be on the way to becoming the Director of the Division of Enforcement, according to a report from Thomson Reuters.

The FCPA seems to be back, with the Commission and the DOJ announcing settled cases tied to an earlier investigation. The Commission also settled with one of the individuals in its corruption action against

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