Securities: March 2007 Archives

Lawsuit Over Anti-Fraud Law Dismissed

The Free Enterprise Fund filed a lawsuit in February 2006 alleging that the Public Company Accounting Oversight Board violates the Constitution's outline of separation of powers among three federal branches because its five members are not appointed by the president, cannot be removed by the president, and Congress does not control the board's budget. However, the lawsuit was rejected this week after U.S. District Court Judge James Robertson said that "the plaintiffs have brought a facial challenge to the PCAOB, presenting nothing but a hypothetical scenario of an overzealous or rogue PCAOB investigator."

Suit Over Anti-Fraud Law Dismissed

The PCAOB said that it was pleased with the court's decision and planned to "continue to fulfill the mandate given to us by Congress to protect the interests of investors." A lobbyist for the Free Enterprise Fund vowed to continue the constitutionality of the PCAOB.

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Elderly Should Be Wary of Securities

Mark Tepper, a securities fraud attorney, says that shareholders should be wary of financial products called Collateralized Mortgage Obligations (CMOs) because many of these products are volatile and unsuitable for many investors. AAA ratings and government guarantees do not provide protection to investors who become involved with CMOs. Tepper recently has filed a claim with the National Association of Securities Dealers (NASD.) The claim has been filed on behalf of a Florida widow who used the money from her husband's life insurance policy to invest in a CMO. The CMO went bankrupt soon after it was sold to her and the woman describes the investment as "toxic waste."

Securities Fraud Attorney Urges Elderly Investors to Beware Aggressive Brokers Bearing Mortgage Backed Securities

Tepper says of CMOs: "Wall Street is dividing CMOs, a type of mortgage-backed security, into several parts or tranches and giving the safe portions to financial institutions like banks while sticking the volatile parts into portfolios of unsuspecting novice or elderly investors. We allege that my client, a recent widow, was defrauded by SAMCO which falsified records with the intent to deceive and sold her a CMO portfolio on margin without proper risk disclosure."

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Record Japan Fine for Securities Fraud

Livedoor Co., an internet startup, was fined a record amount over charges of securities fraud. The Tokyo District Court ordered that Livedoor pay a penalty of 280 million yen ($2.4 million) for violating securities laws. Media Innovation Co., Livedoor's former marketing company, was fined 40 million yen. Takafumi Horie, Livedoor's creator, will spend two and a half years in jail for faking Livedoor's profits.

Livedoor Gets Record Japan Fine for Securities Fraud

Tokyo District Justice Toshiyuki Kosaka said of the charges, "the prosecution proved its case." Two Livedoor accountants also were convicted of securities fraud for falsifying financial statements.

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Davison Pays $250,000 to Settle Fraud Case

Pat Davison, a Billings, Montana businessman, will pay $250,000 to settle a state securities fraud case in which he is believed to have defrauded nine people of about $6 million through a Ponzi scheme. Davison will face additional penalties when he is sentenced in June. Davison pleaded guilty to two federal securities fraud charges. Montana state auditor John Morrison said that Davison will have 10 years to pay the fine and will permanently be barred from selling securities in Montana.

Davison to pay $250,000 fine to settle securities fraud case

Morrison said that "this fine should send a strong signal that Ponzi schemes and other securities fraud will be firmly punished in Montana." Davison was a former Republican gubernatorial candidate. One of his former employers, UBS Financial Services, already reached a settlement in which they will pay Davison's clients more than $4.5 million in restitution.

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Utah Company Suspected of Securities Fraud

The CEO of CyberKey Solutions has been accused of a cyber-scam. Jim Plant is accused of having sold unregistered stock. CyberKey is a publicly-traded company that the company said was worth millions, largely due to a contract between CyberKey and the Department of Homeland Security. Colin Fraser, an investor scammed by the stock plot, said that Plant "continued to claim that the contract was real. He continued to claim that he had the revenues. So everybody held on." Fraser lost about $11,000 in the scam; he has friends who have lost as much as $200,000.

Utah Company Suspected Of Large Securities Fraud

In a video made for CyberKey shareholder, Plant said that "CyberKey Solutions has experienced incredible growth over the last year. We've received over $18-million dollars from these orders so far." However, the Securities and Exchange Commission actually has filed civil fraud charges against Plant and his company, saying Plant faked a $25-million dollar purchase order and made false public statements. Plant was arrested March 13 in St. George, Utah on charges of securities fraud.

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3 Men Blamed for Stock Scheme

Three hackers from India have been indicted in the U.S. on charges of conspiracy and fraud. The men are believed to have accessed dozens of online brokerage accounts in order to inflate stock prices and gather more than $120,000 in illegal profits. One brokerage firm lost at least $2 million as a result of the scheme, said the Justice Department. Approximately 60 customers and nine U.S. brokerage firms, including Ameritrade Holding Corp., E-Trade Financial Corp., and OptionsXpress, lost money as a result of the men's plot.

3 Indian Men Indicted in Stock Scheme

The suspects bought stocks through U.S. online firms with their own accounts and then used stolen identity information to act as online share-buyers. The men then sold their shares at a higher price, taking in a profit of more than $121, 5000. One victim of the scheme had $180,000 cash and equity in his account, only to discover five days later that he had a negative $200,000 balance. The indictment by the Nebraska grand jury includes charges of conspiracy, computer, wire and securities fraud, and aggravated identity theft. Assistant Attorney General Alice Fisher says that cases such as these "pose serious risks to investors and brokerage firms across the globe."

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Bank of America Securities to Pay $26 Million

The Bank of America's securities business has agreed to pay $26 million to settle federal regulators' charges that they published fraudulent research reports on companies and that they did not prevent leaks of reports that could be used for improper trading. The settlement was the latest in the Securities and Exchange Commission's efforts to crackdown on conflicts of interest at Wall Street investment firms. A statement from Bank of America said that "we believe it is in the best interest of the corporation and our shareholders to settle this matter at this time."

The settlement comes after a censure and a $10 million fine that the SEC ordered Bank of America to pay three years ago for not producing relevant documents and for hindering the SEC's investigation. The SEC says that between January 1999 to December 2001, Bank of America had a "breakdown" in its internal controls designed to prevent the misuse of company research reports. The SEC says that Bank of America Securities also failed to prevent conflicts of interest "that compromised the independence and integrity of its analysts."

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Canadian Fraud Suspect Arrested

A Canadian man, who is believed to have stolen millions of dollars from investors, has been arrested in Spain. Brian David Anderson, was arrested at his hotel for charges stemming to an alleged pyramid scheme that caused investors to lose a total of US$4 million. An FBI affidavit says that Anderson and his daughter, Bonnie Dick, created a fake investment program called Frontier Assets in 2001 and "falsely (promised) high, guaranteed rates of return."

Canadian Suspect in Fraud Case Arrested in Madrid

Anderson also faces securities fraud allegations in British Columbia; the security commission says that he convinced people to invest $14 million in two investment opportunities: Frontier Assets and "The Alpha Program." Anderson pleaded guilty to an investment fraud case in 2004.

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Dunn Goes Free After Spying Case is Dismissed

Patricia Dunn, the former chairman of Hewlett-Packard, and three others who were involved in Hewlett-Packard's boardroom spying scandal were allowed free after a plea deal was reached. Dunn was forced to leave Hewlett-Packard for her part in the spying scandal, did not enter a plea when faced with a misdemeanor charge of fraudulent wire communications. Kevin Hunsaker, the former head of corporate ethics at HP, and private investors Ronald DeLia and Matthew DePante, pleaded no contest to the same charge. Once the conditions of the plea deal are met, none of the defendants will have a criminal record.

Dunn Walks Free After Spying Case is Dismissed

A source near the case said that the misdemeanor charges were "only slightly more significant than a parking ticket." The verdict closes the six-month long investigation into the boardroom spying scandal at Hewlett-Packard.

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Some Companies Admit Using Backdating to Profit from 9/11

Affiliated Computer Services Inc., Corinthian Colleges Inc., KLA-Tencor Corp., Progress Software Corp., and Take-Two Interactive Software Inc. have admitted to falsifying dates on options grants given to executives and other employees to make it appear that the grants were given at low points in the companies' stock prices after September 11. Other companies that have admitted backdating also gave options during the time following 9/11, but have not said whether these options were backdated to take advantage of the effect the terrorist attacks had on the stock market.

Report: Some companies have admitted options backdating in 9/11 twist

An analysis by the Wall Street Journal showed that among 1,800 companies, the frequency of options awarding more than doubled in late September 2001, during the stock market's low point. Backdating is beneficial to stock options because options will be more profitable if the date at which they were given is set back to a low point in the stock's value. If disclosed and approved by the company's board or share holders, backdating can be legal. Securities and Exchange Commission Chairman Christopher Cox says that the widespread backdating scandal is “a pandemic of crooked accounting.”

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Ex-Gateway Officials Found Liable for Securities Fraud

The Securities and Exchange Commission has ruled that four years after two former Gateway Inc. executives were first accused of manipulating earnings, the men can be held liable for violating fraud and record-keeping laws and for making false statements. Gateway former Chief Financial Officer John J. Todd ad former Controller Robert D. Manza are believed to have participated in a scheme that booked false sales and relied increasingly on loans to customers in order to close the gap between Wall Street's expectations and actual results. Randall R. Lee, the director of the SEC's Pacific regional office in Los Angeles, said that "the desire to meet Wall Street analysts' expectations is no excuse for accounting tricks and other deceptive practices."

Ex-Gateway executives found liable in accounting fraud

Gateway fired the two men in early 2001 and the company is not named in the current case. The SEC says that the accounting irregularities that Todd and Manza perpetuated inflated revenue by 6.5% or $154 million during the third quarter of 2000. The third defendant in the case, former Gateway Chief Executive Jeffry Weitzen, was cleared of securities fraud allegations last year.

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Four Admit Fraud at Able Laboratories

Four managers at Able Laboratories pleaded guilty to falsifying data at the generic drug manufacturer. The seven year plot ultimately caused the failure of the company. The highest ranking of the four guilty parties, Shashikant Shah, the vice president of quality control and regulatory affairs, also pleaded guilty to conspiring to commit securities fraud; Shah made more than $900,000 by selling company stock while having knowledge of the illegal test practices going on at the company. All four parties said that the company's chief executive officer, Dhanajay G. Wadekar, also was involved in the scheme; however, Wadekar was not named in court and faces no charges as of this time. Assistant U.S. Attorney Robert A. Kirsch says that "the investigation is active and ongoing."

4 admit fraud at now-defunct Able Laboratories

Able Laboratories made generic versions of name-brand drugs for pain, inflammation, obesity, and cardiovascular conditions. The Food and Drug Administration says that Able falsified data in order to make its drugs appear to meet federal standards when they did not. In 41 incidents, drugs from the company were found to have too much or too little of their active ingredient; however, in each case, the strength of the drug was within legal limits. Able filed for bankruptcy reorganization in July 2005, but changed to liquidation in March 2006. All four could be sentenced to up to five years in jail and a $250,000 fine when sentenced.

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Supreme Court Won't Hear Ebbers' Appeal

Bernard Ebbers, the former WorldCom Inc. chief executive accused of fraud, lost his bid to appeal his case to the U.S. Supreme Court. Ebbers' appeal was turned away without comment from the justices. Ebbers had said that his case was not fairly tried because the government would not allow three WorldCom employees to testify as defense witnesses by giving them immunity from prosecution. Ebbers currently is serving a 25-year prison sentence for his role in the $11 billion fraud scheme.

Supreme Court won't hear appeal by Ebbers

Ebbers attorneys said that in not allowing the WorldCom witnesses, Ebbers was "prevented from offering crucial evidence in his defense." Ebbers' case is a high profile conviction in the government's ongoing corporate-fraud crackdown. WorldCom lost more than $180 billion in stock market value before it filed for bankruptcy in July 2002.

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$3 Million Frozen in Cyber Fraud Case

$3 million, belonging to an Eastern European cyber-ring involved in an online stock manipulation case, has been ordered frozen by a federal judge. The members of the ring live in Russia, Latvia, Lithuania and the British Virgin Islands. From at least December 2005 to December 2006 the group managed to gain at least $733,000 in a complex scheme that combined hacking with "pump-and-dump" market manipulation, said the Securities and Exchange Commission.

$3 Million Frozen in Cyber-Fraud Case

The hackers were able to hide their path by hijacking Internet protocol addresses of unrelated third parties across the United States. The ring's money is kept in 75 accounts managed by a Raleigh, N.C. securities broker and the $3 million represents the profit that the hackers made and the brokerages' loss to refund clients.

Posted by Patricia Bowling at 01:39 PM | Permalink | Comments (0) | TrackBacks (0)

MBC Managers Plead Guilty

Two managers from Mutual Benefits Corp. pleaded guilty to securities fraud and agreed to pay $830 million in restitutions to investors. Carol Trainia and Bari Wiggins both pleaded guilty to one count of conspiracy to commit securities fraud. Both will face up to five years in jail. Mutual Benefits, which sold investment interests in life settlements, was closed by federal regulators in May 2004.

MBC Managers Plead Guilty in $830 Million Securities Fraud

Traina, who worked as an office manager, misrepresented the safety and the security of the investments and distributed misleading life expectancies. Wiggins took the insurance policies, despite knowing that the sales agents were misleading investors. Sentencing in scheduled for May 8.

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SEC Charges Lawyer with Securities Fraud on Biofuel Companies

The U.S. Securities and Exchange Commission says that it has filed an injunctive action in U.S. District Court alleging that from January 2006 to February 2007, Louis W. Zehil, a corporate attorney, took part in a fraudulent plan to obtain and sell millions of shares of securities in violation of the antifraud and registration standards set by federal securities laws. Zehil, 41, was a partner with the law firm of McGuireWoods LLP, until his legal troubles began.

SEC charges lawyer with securities fraud on biofuel companies

The complaint says that Zehil represented seven, primarily biofuel, public companies and issued their stock in PIPE transactions. PIPE stands for private investments in public equity. The seven public companies involved were Gran Tierra Energy, Inc., Foothills Resources, Inc., MMC Energy, Inc., Alternative Energy Sources, Inc., Ethanex Energy, Inc., GoFish Corp., and Kreido BioFuels, Inc. Profits of at least $17 million were gained from the scheme.

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Ex-McAfee Lawyer Charged with Securities Fraud

Kent Roberts, McAfee Inc.'s former top lawyer, was charged with securities fraud by the U.S. Securities and Exchange Commission. Roberts is believed to have changed stock option grant dates in order to benefit himself and others. Securities regulators say that Roberts changed the date of a February, 2000 stock option grant in order to boost the potential value of the options by $197,500. Roberts then concealed the faked repricing by filing stock ownership reports by filing fake stock ownership reports with the SEC and by not disclosing the repricing.

Former Top McAfee Lawyer Charged with Securities Fraud

Roberts also changed the dates on 420,000 stock options that were given to McAfee's then-chief executive officer George Samenuk. Roberts' attorney says that Roberts will fight the charges which can carry a prison sentence of up to 20 years and a $5-million fine. The SEC said it plans to fine Roberts monetarily and also plans to seek restitution of his illegal gains. Roberts was fired from McAfee in May, 2006.

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13 Charged in Securities Fraud Scheme

Eleven top Wall Street workers and a husband and wife pair of lawyers were charged for their illegal trading in an alleged securities fraud scheme. The scheme earned the 13 more than $15 million. The case was said to be "one of the most pervasive Wall Street insider trading rings since the days of Ivan Boesky and Dennis Levine" by Linda Chatman Thomsen, the director of the Division of Enforcement for the Securities and Exchange Commission. Thomsen said that the case was of concern because the defendants included registered representatives, compliance personnel, hedge fund portfolio managers, and the lawyers. The defendant used illegal tips over five years in order to conduct their illegal trading.

13 Charged In Securities Fraud Scheme

U.S. Attorney Michael Garcia said that the defendants relied upon tips given to them by insiders at UBS Securities LLC and Morgan Stanley and Co. One of the defendants, Mitchel Guttenberg, was an executive director and institutional client manager at UBS. Prosecutors say that two insider trading schemes and two separate bribery schemes are involved in the case.

Posted by Patricia Bowling at 09:23 PM | Permalink | Comments (0) | TrackBacks (0)

Ex-FDA Chief Fined in Fraud Case

Former Food and Drug Administration chief Lester Crawford was sentenced to three years' supervised probation with fines of about $90,000 for lying about stocks he owned in companies that were regulated by the FDA. Magistrate Judge Deborah A. Robinson did not give Crawford jail time but fined him more than the $50,000 fine proposed by Crawford's defense attorney and by federal prosecutors.

Judge Fines Ex-FDA Chief in Fraud Case

"While the total fine exceeds what the parties agreed to, the fine is well below the maximum under the statute," said Robinson. Robinson also said that Crawford must conduct 50 hours of community service. Crawford, 69, pleaded guilty last October to falsely reporting information about stocks that he and his wife owned. The couple filed seven incorrect financial reports with a government ethics office and Congress. Crawford did pay taxes and dividends on the options. "I want to assure you that I accept responsibility for what I've done," Crawford said.

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Hedge Fund Report Gets Mixed Reviews

The Bush administration's decision that there is no need for greater government oversight of the hedge fund industry and other private investment groups was met with mixed feelings. Wall Street supported the decision, while some lawmakers and industry observers complained that the report's recommendations were too weak. The administration recommended that investors, hedge fund companies, and lenders were capable of managing themselves by following simple guidelines.

Hedge Fund Report Draws Mixed Reactions

The guidelines say that investors should not take risks that they cannot tolerate and should carefully evaluate the strategies and management skills of hedge funds. Richard Blumenthal, the Connecticut attorney general, said that the new guidelines did not protect investors. These vague recommendations lack substance and specifics, making them unenforceable,” he said in a statement. “In a perfect world, everyone would already follow these guidelines, but in the real world we need real protections.”

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Man Indicted for $9.4 Million Securities Fraud

Robert O. Bryant, 49, has been indicted on 49 counts of securities fraud and one count of theft, said the Colorado Attorney General. He will face penalties of up to 12 years in jail and up to $750,000 in fines on each of the counts. Bryant was involved in a scam that promised investors high rates of return on loans backed by deeded real estate.

Man Indicted for $9.4 Million Securities Fraud

Bryant and his partner in crime, Salvatore Favata from Orange County, California, are believed to have approached consumers by saying that they were representing individuals needing loans with real property as collateral. However, such property frequently never existed. Bryant is believed to have taking more than $9.4 million from Colorado families through 130 different transactions. Over $8 million has not been repaid. John Suthers, the Colorado Attorney General, said that "individuals who commit securities fraud prey upon the the trust and good faith of Coloradoans. Cases like this demonstrate that fraudulent activity will not go unnoticed, and responsible parties will be held accountable."

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March 30, 2007

Lawsuit Over Anti-Fraud Law Dismissed

March 29, 2007

Elderly Should Be Wary of Securities

March 28, 2007

Record Japan Fine for Securities Fraud

March 27, 2007

Davison Pays $250,000 to Settle Fraud Case

March 26, 2007

Utah Company Suspected of Securities Fraud

March 22, 2007

3 Men Blamed for Stock Scheme

March 21, 2007

Bank of America Securities to Pay $26 Million

March 20, 2007

Canadian Fraud Suspect Arrested

March 19, 2007

Dunn Goes Free After Spying Case is Dismissed

March 16, 2007

Some Companies Admit Using Backdating to Profit from 9/11

March 15, 2007

Ex-Gateway Officials Found Liable for Securities Fraud

March 14, 2007

Four Admit Fraud at Able Laboratories

March 13, 2007

Supreme Court Won't Hear Ebbers' Appeal

March 12, 2007

$3 Million Frozen in Cyber Fraud Case

March 09, 2007

MBC Managers Plead Guilty

March 08, 2007

SEC Charges Lawyer with Securities Fraud on Biofuel Companies

March 07, 2007

Ex-McAfee Lawyer Charged with Securities Fraud

March 06, 2007

13 Charged in Securities Fraud Scheme

March 05, 2007

Ex-FDA Chief Fined in Fraud Case

March 02, 2007

Hedge Fund Report Gets Mixed Reviews

March 01, 2007

Man Indicted for $9.4 Million Securities Fraud