South Florida Arbitration & Litigation Lawyer Blog
April, 2012:
Broker/Dealer, Investment Advisor and Hedge Fund Fruad, Misrepresentation and Mismanagement FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.
Former Syntax-Brillian Corp. Chief Executive Officer Ordered to Pay More Than $11 Million For Insider Trading and Financial Fraud
On April 4, 2012, Judge Susan R. Bolton of the United States District Court for the District of Arizona entered a final judgment against James Li, the former Chief Executive Officer and Director of Syntax-Brillian Corporation (“Syntax”), a developer of high-definition LCD televisions based in Tempe, Arizona. The Court ordered Li to pay disgorgement of $1,673,481, prejudgment interest of $575,472.93, an insider trading penalty of $4,540,443, and a civil penalty of $4,810,000 for his role in the financial fraud scheme. The Commission has previously obtained a permanent injunction against Li from future violations of, among other things, the antifraud, reporting, books and records, internal controls, and misrepresentation to auditor provisions of the federal securities laws. The Court also imposed an officer and director bar against Li.
According to the SEC’s Complaint, from at least June 2006 through April 2008, Li and other members of Syntax’s senior management engaged in a complex scheme to overstate Syntax’s revenues and earnings and artificially inflate its stock price. As a result, Syntax reported false and misleading financial statements beginning in the fiscal year ended June 30, 2006, through the fiscal first quarter ended September 30, 2007. The scheme included the creation of fictitious sales and shipping documents and coordinating the circular transfer of funds among and between Syntax, its primary manufacturer in Taiwan, and its purported distributor in Hong Kong to make it appear that fake invoices were being paid.
The Court previously ordered defendant Thomas Chow to pay disgorgement of $10,370,317, prejudgment interest of $2,567,483, an insider trading penalty of $30,849,951, and a civil penalty of $4,680,000 for his role in the financial fraud scheme, as well as permanently enjoining him from violating the federal securities laws. The Court also issued permanent injunctions against defendants Roger Kao, Christopher Liu, Wayne Pratt, and Robert Chiu, and imposed monetary sanctions. In addition, the Commission obtained officer and director bars against Chow, Liu, and Pratt, and issued an administrative order suspending Pratt and Chiu from appearing or practicing before the Commission as an accountant with the right to reapply after five years.
On March 5, 2012, the Commission, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Exchange Act”), revoked the registration of each class of Syntax’s securities registered under Section 12 of the Exchange Act. [SEC v. James Li (a/k/a Ching Hua Li), Thomas Chow (a/k/a Man Kit Chow), Roger Kao (a/k/a Chao Chun Kao), Christopher Liu (a/k/a Chi Lei Liu), and Wayne A. Pratt, Civil Action No. CV-11-1712-PHX-SRB (SRB) (D. Ariz.)