Two Financial Fraud Cases and a SOX Section 304 Action

Based on a five-year financial fraud that began in 2002 and culminated in a $127 million 2008 restatement by Diebold, Inc., the Commission filed three actions. One settled case was filed against the company. SEC v. Diebold, Inc. , Civil Action No. 1:10-CV00908 (D.D.C. Filed June 2, 2010). A second...

This Week in Securities Litigation (June 4, 2010)

SEC enforcement this week brought another SOX claw back case, as well as actions alleging financial fraud and another investment fund case. DOJ dropped their appeals in the two Broadcom criminal option backdating cases which were dismissed for prosecutorial misconduct. DOJ's action finally brought...

SEC Drops Significant Claims In Settling Financial Fraud Case

The SEC settled a 2007 financial fraud action brought against Thomas Fisher, former Chairman, CEO and President of Nicor, Inc., after dropping its primary claims against the executive. SEC v. Fisher , Case No. 07-cv-4483 (N.D. Ill. Filed Aug. 9, 2007). The case continues as to two other executives...

Virginia: Bellwether Venue for Financial and Securities Fraud Enforcement

by Brian Whisler, Baker & McKenzie On June 15, 2010, Lee Bentley Farkas, the former CEO and Chairman of Florida based Taylor, Bean and Whitaker (TBW), was handcuffed and arrested outside of his health and fitness club, and was sent to the U.S. District Court in Alexandria, Virginia where he was...

Making a Bad Day Worse

Former SEC Enforcement Director Steve Cutler once told a meeting of the DC Bar Association that "no matter how bad the underlying conduct, you can always make things worse." At the time Mr. Cutler was talking about failing to produce documents in a Commission investigation. His remarks ...

Former Duane Reade CEO Sentenced to Prison for Financial Fraud

The former Chairman of the Board and CEO of Duane Reade, Inc., Anthony Cuti, was sentenced to serve a prison term of three years for financial fraud. He was also ordered to pay a $5 million fine. Mr. Cuti was convicted following a jury trial on one count of conspiracy to make false statements in...

Credit Suisse Traders Charged by SEC, DOJ

In significant market crisis based actions, the SEC and the U.S. Attorney for Manhattan brought, respectively, civil and criminal charges against former Credit Suisse Group traders centered on the overpricing of subprime bonds. SEC v. Kareem Serageldin, Civil Action 12 CIV 0796 (S.D.N.Y. Filed Feb...

Commission Files Offering Fraud Case

The SEC filed a fraud action against Edward Ellis, Sr. and Jennifer Seidel, alleging that the two defrauded investors in connection with the purchase of shares in their company, Sederon, Inc. SEC v. Ellis, Civil Action No. 12-cv-1203 (E.D. Pa. Filed March 8, 2012). The case is in litigation. Sederon...

SEC Files Securities Fraud Claim Against Failed Bank Officials

In an interesting variant on the kinds of claims that the former directors and officers of a failed financial institution can face, on April 6, 2012, the SEC charged two former officers of the publicly traded holding company for the failed Franklin Bank of Houston with securities fraud. In its April...

Former Pastor Pleads Guilty in Multi-Million Dollar Jewelry Ponzi Scheme

A Virginia man and former pastor entered a guilty plea to charges that he operated a Ponzi scheme under the guise of a legitimate jewelry business. Matthew James Addy, 34, of Lancaster, Pennsylvania, pled guilty to a single charge of securities fraud, which carries a maximum sentence of up to twenty...

U.S. Supreme Court: Discovery Rule Doesn’t Apply To SEC

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on Feb. 27 reversed a Second Circuit U.S. Court of Appeals ruling allowing the Securities and Exchange Commission to seek securities fraud penalties for conduct that had ceased more than five years before the SEC brought the lawsuit, saying that...

SEC Reaches Settlement With City over Federal Securities Law Violations

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...

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

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 Lee Insider Trading Case: A Critical Element of the SAC Charges

The case against S.A.C. Capital received what appears to have been a critical, last minute boost when Richard Lee agreed to plead guilty to one count of conspiracy to commit securities fraud and one count of securities fraud on July 23, 2013. U.S. v. Lee, 13 Crim 539 (S.D.N.Y. Filed July 23, 2013, unsealed...

Management Company Partner Convicted on Multiple Fraud Counts

A partner in an investment management company was convicted following a jury trial on multiple counts of mail and wire fraud as well as securities fraud. The charges stem from a scheme in which most of the $5 million in investor funds raised were siphoned off by the defendant and others for their personal...

Circuit Court Rejects SEC Position on Section 5 Liability

The Ninth Circuit rejected the SEC’s contention that a stock transfer agent and its principal are necessarily liable “by virtue of their position” for a company whose unregistered shares were sold in violation of Securities Act Section 5. SEC v. CMKM Diamonds, Inc., Nos. 11-17021, 11...

TD Bank Agrees to Pay $52.5M to Settle Charges Related to Rothstein Scheme

WASHINGTON, D.C. — (Mealey’s) TD Bank NA on Sept. 23 agreed to pay $52.5 million to settle federal regulators’ allegations that the bank helped attorney Scott Rothstein run a $1.2 billion Ponzi scheme out of his law firm. The Securities and Exchange Commission announced in a press...

SEC Charges Trader with Insider Trading, Manipulative Short Selling

The SEC filed a settled an insider trading and Rule 105 short selling action against a seasoned trader and his two trading vehicles. SEC v. Langston, Civil Action No. 1:13-cv-324360 (S.D. Fla. Filed Dec. 3, 2013). Defendant Charles Langston is a long time securities trader. He actively trades through...

SEC Files Offering Fraud Action Centered on Three Schemes In Three Years

The SEC brought another in a series of offering fraud cases. This one, however, does not focus on just one offering but three since mid- 2011. Promoters Robert Helms and Janniece Kaelin, their entities and Deven Sellers and Roland Barrera are named as defendants. SEC v. Helms, Civil Action No. 1:13-cv...

SEC Charges Securities Law Recidivist In Fraudulent Trading Scheme

The Commission filed another action against a securities law recidivist, this time centered on a fraudulent trading and investment program. SEC v. Lee, Civil Action No. 14CV0347 (S.D. Cal. Filed Feb. 13, 2014). James Lee is an unregistered investment adviser. Beginning in late 2008 he solicited investors...

SEC Names Company, Eight Directors and Officers in Financial Fraud Actions

Since the market crisis enforcement officials have heard repeated calls to prosecute not just companies but high ranking corporate officials. While the Commission brought a series of market crisis actions against firms and individuals, as part of the new “get tough” policy individuals will...

BAC CEO Pays $10 Million Plus D&O Bar to Settle NYAG Market Crisis Case

Former Bank of America CEO Kenneth Lewis agreed to pay $10 million and to be barred from serving as an officer or director of a public company for three years to settle fraud charges brought by the New York Attorney General based on the firm’s acquisition of Merrill Lynch just prior to the bankruptcy...

This Week In Securities Litigation (Week ending April 11, 2014)

Former hedge fund giant SAC Capital was sentenced this week. This concluded one of the most prominent insider trading cases. Under the terms of the sentence SAC Capital will no longer accept public funds. The DOJ and the SEC filed settled FCPA actions involving Hewlett-Packard and three of its subsidiaries...

SEC Names Recidivist, Claimed Country Music Fund Raiser, In Fraud Order

The Commission directed the institution of an administrative proceeding charging recidivist Stanley Jonathan Fortenberry, an unregistered fund adviser, with fraud in connection with the operation of a fund supposedly tied to a country music talent. In the Matter of Stanley Jonathan Fortenberry, Adm....

A Step Toward Credibility – SEC Wins in the Wyly Case

The SEC won a significant courtroom verdict Monday when a jury in New York returned a verdict in favor of the agency in the complex, high profile trading action brought almost four years ago against Samuel Wyly and the estate of his late brother Charles Wyly, Jr. who passed away during the case. Samuel...