SEC Charges Joseph Pacificio with Financial Fraud

Posted on October 22, 2012 by BraunHagey & Borden

SEC v. Joseph Pacifico, Case No. 1:12-cv-03636 (N.D. Ga.).  On October 18, 2012, the SEC announced charges against Joseph Pacifico, a former President of Carter’s, Inc., marketer of children’s clothing, for engaging in financial fraud at Carter’s.  Carter’s Executive Vice President of Sales, Joseph Elles, who reported to Pacifico, manipulated the amount of discounts that Carter’s gave to its largest wholesale customer in order to induce that customer to purchase more clothing for resale from Carter’s.  Elles then hid his conduct by getting the customer to delay subtracting the discounts from payments until later periods and creating and signing false documents misrepresenting the timing and amount of those discounts to Carter’s accounting personnel.  Continue reading →

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Hong Kong Firm Ordered To Pay $14 Million to Settle Insider Trading Charges

Posted on October 22, 2012 by BraunHagey & Borden

SEC v. Well Advantage Limited, et al., Case No. 12-cv-5786(S.D.N.Y.).  Previously, I’ve blogged here and here about the SEC’s asset freezes obtained in connection with insider trading related to various Chinese companies.  On October 18, 2012, the SEC announced that a Hong Kong-based firm charged with insider trading in July has agreed to settle the case by paying more than $14 million, which is double the amount of its alleged illicit profits.  Well Advantage has agreed to the entry of a final judgment requiring payment of $7,122,633.52 in illegal profits made from trading Nexen stock, and payment of a $7,122,633.52 penalty.  The proposed judgment also enjoins Well Advantage from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5.  Well Advantage neither admits nor denies the charges.

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SEC Charges Geoffrey Lunn, Darlene Bishop and Vincent Curry in $5.77 Million Investment Scheme

Posted on October 22, 2012 by BraunHagey & Borden

Securities and Exchange Commission v. Geoffrey H. Lunn, Darlene A. Bishop and Vincent G. Curry, Case No. 12-cv-02767 (D. Colo.).  On October 18 2012, the SEC announced charges against Geoffrey H. Lunn, Darlene A. Bishop and Vincent G. Curry for their roles in making false and misleading statements to investors and misappropriating investors’ money in connection with a $5.77 million investment scheme under the name of Dresdner Financial, a fictitious financial services company.  Continue reading →

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SEC Obtains More Than $3 Million In Accounting Fraud

Posted on October 22, 2012 by BraunHagey & Borden

Securities and Exchange Commission v. Joseph J. Monterosso, et. al., Case No. 07-61693 (S.D. Fla.).  On October 18 2012, the SEC announced that it obtained disgorgement, civil penalties, and officer-and-director bars against four remaining defendants in an accounting fraud action the SEC filed in 2007.  Timothy Huff was ordered to pay a $1.21 million civil monetary penalty and $1.5 million in disgorgement.  Lawrence Lynch was ordered to pay a $780,000 civil monetary penalty.  Joseph Monterosso was ordered to pay a $300,000 civil monetary penalty and $675,000 in disgorgement plus prejudgment interest and will be barred from serving as an officer or director of a public company for 10 years.  Luis Vargas was ordered to pay a $150,000 civil monetary penalty and will be barred from serving as an officer or director of a public company for 10 years.

In 2007, the SEC sued the Defendants for reporting millions of dollars in telecommunications revenue that was fake.  Huff and Thomas Jimenez were sentenced to prison as a result of parallel criminal prosecutions.  Monterosso and Vargas created hundreds of false invoices as part of the fraud.  Lynch alleged knew that the invoices submitted by Monterosso and Vargas did not represent actual telecom business but made and approved journal entries to record the fake revenue.

 

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SEC Defendant Arnett Waters Now Faces Criminal Charges in Fraud Scheme

Posted on October 22, 2012 by BraunHagey & Borden

SEC v. A.L. Waters Capital, LLC, et al., Case No. 12-cv-10783-DJC (D. Mass.); U.S. v. Arnett L. Waters, 12-cr-10336-DJC (D. Mass.).  On May 1, 2012, the SEC filed charges against Arnett Waters and two of his companies for their roles in fraudulent investment partnerships.  After filing its case, the SEC obtained a preliminary injunction and asset freeze.  In August, 2012, the SEC filed a contempt motion alleging that Waters violated the preliminary injunction by transferring frozen funds to an undisclosed bank account.  On October 17, 2012, the United States Attorney’s Office charged Waters with schemes to defraud investors and business clients.   Continue reading →

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SEC Charges Michael Southworth With Touting And Acting As An Unregistered Broker

Posted on October 18, 2012 by BraunHagey & Borden

SEC v. The Investors Registry, LLC, and Michael J. Southworth, Case No. 2:12-cv-02214-MEA (D. Ariz.).  On October 17, 2012, the SEC announced charges against Michael Southworth and The Investors Registry, LLC (“TIR”).  Southworth sold memberships in TIR.  Southworth profiled various issuers by sending emails and posting information on a website for TIR members.  Southworth solicited investments in five issuers, advised TIR members about investing in these issuers, and negotiated with the issuers about the terms of the offering.  He also touted the issuers without sufficiently disclosing remuneration he received from them.

Southworth and TIR have settled with the SEC.  Without admitting or denying the charges, they consented to permanent injunctions against violations of Section 15(a) of the Exchange Act and an order barring Southworth and TIR from participating in the offering or sale of a penny stock for three years.  Southworth also agreed to an injunction against violations of Section 17(b) of the Securities Act, and to pay disgorgement of $217,755 plus prejudgment interest, with the waiver of payment of all but $100,000.  Also, there is no civil monetary penalty based on Southworth’s Sworn Statement of Financial Condition.

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SEC’s Aberrational Performance Inquiry Leads To Charges Against Hedge Fund Executives Mark Angelo and Edward Schinik

Posted on October 18, 2012 by BraunHagey & Borden

SEC v. Yorkville Advisors, LLC, et al., Case No. 12-civ-7728 (S.D.N.Y.)  The SEC’s Aberrational Performance Inquiry, which is a joint effort among the Division of Enforcement, Office of Compliance, Inspections and Examinations, and the Division of Risk, Strategy and Financial Innovation, has yielded several cases against hedge funds.  On October 17, 2012, the SEC announced its most recent hedge fund case stemming from the Inquiry.  The SEC charged a former $1 billion hedge fund advisory firm and two of its executives.  The case concerns Yorkville Advisors, its founder and president Mark Angelo, and its CFO Edward Schinik.  Continue reading →

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SEC Obtains Judgment Against Derek F.C. Elliott in Connection with Fraudulent Offer of Interests in Dominican Republic Resorts

Posted on October 15, 2012 by BraunHagey & Borden

SEC v. James S. James B. Catledge, et al., Case No. 2:12-cv-00887-JCM-RJJ  (D. Nevada).  On October 15, 2012, the SEC announced it obtained a judgment against Derek F.C. Elliott.   The SEC’s enforcement action was filed in May 2012, against James B. Catledge, Elliott, EMI Resorts (S.V.G.) Inc., EMI Sun Village, Inc. and Sun Village Juan Dolio.  The case involved misrepresentations to investors in connection with the unregistered sale of interests in two resorts in the Dominican Republic.  The judgment against Elliot seeks no civil penalty at this time, waives disgorgement and authorizes the Commission to seek a civil penalty of not more than $250,000 by motion.  The judgment enjoins Elliott from future violations of Sections 5(a), 5(c) and 17(a)(1), (2) and (3) of the Securities Act and Section 15(a) of the Exchange Act.

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SEC Adds Defendant to Pending Insider Trading Case Against Chinese Citizens

Posted on October 12, 2012 by BraunHagey & Borden

SEC v. All Know Holdings, LTD et al., Case No. 11-cv-8605 (N.D. Ill).  On October 12, 2012, the SEC announced new charges in a pending insider trading case against several Chinese citizens and a Chinese-based entity.  The SEC previously charged the defendants with insider trading after they obtained more than $2.8 million in profits by trading in advance of a publicly announced merger.  The SEC has added Jie Meng as a defendant.  Meng was a friend of someone who worked at one of the merging companies and knew about the deal.  Meng learned about the deal and was also told that it was “top secret.”  Continue reading →

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SEC Obtains Contempt Order in 30-Year Old Case

Posted on October 12, 2012 by BraunHagey & Borden

SEC v. James L. Douglas a/k/a James Cooper, Case No. 82-cv-29 (N.D. Ohio).  After being criticized a few years ago about not being aggressive enough about going after defendants who do not pay their penalties, the SEC shows it is willing to pursue a defendant 30 years after the case was originally filed.  On October 12, 2012, the SEC announced it obtained a contempt order against James L. Douglas a/k/a James Cooper.  The SEC sued Douglas in 1982 in connection with a $7.5 million offering fraud.  Douglas settled in 1983 and was ordered to disgorge $200,000.  Continue reading →

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