Articles Posted in It Would Be Funny If It Were Not True

Securities and Exchange Commission Charges City of Harrisburg for Fraudulent Public Statements

The Securities and Exchange Commission (Commission) recently charged the City of Harrisburg, Pa., with securities fraud for its misleading public statements when its financial condition was deteriorating and financial information available to municipal bond investors was either incomplete or outdated.

An SEC investigation found that the misleading statements were made in the city’s budget report, annual and mid-year financial statements, and a State of the City address. This marks the first time that the SEC has charged a municipality for misleading statements made outside of its securities disclosure documents. Harrisburg has agreed to settle the charges.

Securities and Exchange Commission v. City of Victorville, et al., Civil Action No. EDCV 13-776 JAK (DTBx) (C.D. Cal., filed April 29, 2013)

SEC Charges City of Victorville, Underwriter, and Others with Defrauding Municipal Bond Investors

The Securities and Exchange Commission recently charged that the City of Victorville, Calif., a city official, the Southern California Logistics Airport Authority, and Kinsell, Newcomb & De Dios (KND), the underwriter of the Airport Authority’s bonds, defrauded investors by inflating valuations of property securing an April 2008 municipal bond offering.

Administrative Proceeding No. 3-15237, Before the Securities and Exchange Commission:

The Securities and Exchange Commission recently charged the State of Illinois with securities fraud for misleading municipal bond investors about the state’s approach to funding its pension obligations.

An SEC investigation revealed that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.

Securities and Exchange Commission v. Hunter, Civil Action No. 12-cv-3123 (S.D.N.Y.)

BRITISH TWIN BROTHERS AGREE TO PAY $175,000 TO SETTLE MICROCAP PUMP-AND-DUMP CHARGES

The Securities and Exchange Commission recently announced that brothers Alexander John Hunter and Thomas Edward Hunter, both of Great Britain, have agreed to settle the Commission’s pending civil action against them. The Commission’s complaint, filed April 20, 2012 in the United States District Court for the Southern District of New York, alleges that the Hunters were just 16 years old when they began disseminating subscription-based e-mail newsletters through a pair of websites they created to tout stocks selected by a “stock picking robot,” which they described as a highly sophisticated computer trading program that was the product of extensive research and development. Some investors paid an additional fee for the “home version” of the robot software.

The Securities and Exchange Commission recently charged three health care company employees and four others in a New Jersey-based insider trading ring of various high school friends generating $1.7 million in illegal profits and kickbacks by trading in advance of 11 public announcements involving mergers, a drug approval application, and quarterly earnings of pharmaceutical companies and medical technology firms.

The SEC alleges that Celgene Corporation’s director of financial reporting John Lazorchak, Sanofi S.A.’s director of accounting and reporting Mark S. Cupo, and Stryker Corporation’s marketing employee Mark D. Foldy each illegally tipped confidential information about their companies for the purpose of insider trading. Typically the nonpublic information involved upcoming mergers or acquisitions, but Lazorchak also tipped confidential details about Celgene’s quarterly earnings and the status of a Celgene application to expand the use of its drug Revlimid. The trading was carefully orchestrated so there was usually someone acting solely as a non-trading middleman who received the nonpublic information from the insider and tipped others. They hoped to avoid detection with no direct connection between the insiders and the traders, and the insiders were later compensated for the inside information with cash payments made in installments to avoid any scrutiny of large cash withdrawals.

The SEC alleges that Cupo’s friend Michael Castelli along with Lawrence Grum, who attended high school with Castelli, were the primary traders in the scheme. Among the ways that Castelli and Grum tried to hide their illegal conduct was by compiling binders of research to serve as a false basis for their trading. They actively traded in Celgene securities to create a pattern of long-standing positions in the stock. Grum reassured Cupo that discovery of the scheme and consequent legal action was unlikely due to limited government resources to police insider trading activity. Grum said, “At the end of the day, the SEC’s got to pick their battle because they have a limited number of people and a huge number of investors to go after.”

SEC Charges New York Stock Exchange for Improper Distribution of Market Data

NYSE Agrees to Settle Charges by Paying First-Ever SEC Financial Penalty Against An Exchange

September, 2012:

SEC Charges Bristol-Myers Squibb Executive With Insider Trading in Stock Options of Potential Acquisition Targets

August, 2012:

The Securities and Exchange Commission recently charged an executive at Bristol-Myers Squibb with insider trading on confidential information about companies being targeted for potential acquisitions. His illegal trading took place as recently as just weeks ago.

Securities and Exchange Commission v. 3 Eagles Research & Development LLC, Harry Dean Proudfoot III, Matthew Dale Proudfoot, Laurie Anne Vrvilo and Dennis Ashley Bukantis, Civil Case No. 3:12-cv-01289-ST (D. Oregon, filed July 17, 2012)

SEC Charges Family-Run Business Promising Investors Stake in Purported $11 Billion Gold Mine

July, 2012:

South Florida Broker/Dealer Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

June, 2012:

SEC Charges Florida Broker in Astrology-Based Ponzi Scheme

Transfer Agent Fraud and Mismanagement Litigation and FINRA Arbitration Attorney, Russell L. Forkey, Esq.

June, 2012:

SEC v. Steven H. Bethke, Civil Action No. 4:12-cv-01638 (S.D. Tex., Houston Division, filed June 1, 2012)

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