Articles Tagged with SEC

photo-PDC-EB5-scam-300x200It’s never a good thing to have a federal judge order a freeze on your business’ assets. That’s what happened to an Orange County firm that federal officials claim stole money from foreign investors, mostly Chinese citizens, who hoped their cash would lead to permanent U.S. residency, the Los Angeles Times reports.

Newport Beach lawyer Emilio Francisco and his investment firm, PDC Capital, face civil fraud charges filed by the Securities and Exchange Commission (SEC). It claims Francisco spent at least $9.5 million of investors’ cash on personal expenses (some going to help pay for a yacht, a yacht-club membership and his credit card) instead of investments that would qualify investors for the EB-5 visa program, which offers permanent residency to foreigners who make job-creating investments in the U.S.

Investors provided PDC with more than $72 million from 2013 to 2016, according to the SEC’s suit. More than a hundred investors put in $500,000 each. They believed the money would be spent building assisted-living facilities and opening new locations of Caffe Primo, a Los Angeles coffee shop and restaurant chain. The SEC states some of the money went to the promised projects, but millions of dollars were invested in other projects and more than $2 million went to pay Francisco’s personal expenses.

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photo - jammin java pump and dumpBob Marley is the world’s most recognized reggae superstar even 34 years after his death. His socially conscious music touched people across the globe and we can only imagine what he might think of his family name being associated with possible shareholder fraud.

The former chief executive of Jammin’ Java Corporation, which sells Marley Coffee, Shane Whittle been charged by the Securities and Exchange Commission (SEC) with fraud in November, according to the Los Angeles Times. Whittle is accused of running a “pump-and-dump” stock scheme that resulted in $78 million in illegal trading profits.

A “pump-and-dump” scheme, according to the SEC, normally involves positive and false publicity about the stock and the company which can drive up the number of people buying the stock, increasing its price.

  • False claims are often made on social media, internet bulletin boards and chat rooms. People are urged to buy the stock early then sell it before the price drops. The party making the statements often claims to have inside information about some future development or skills in picking stocks.
  • Those “pumping” the stock price often are actually company insiders or people paid to promote the stock and/or they will profit by selling their shares due to increased interest in the stock created by bogus claims.
  • Once those involved in the scheme “dump” their shares and the hype stops, the price drops and investors find they’ve invested in a company worth much less than they believed.

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photo - golf by Steve JurvetsonThe game of golf has long been associated with business owners getting together, enjoying a round or two and using the time together to work out deals. That’s all well and good when the parties stick to the rules of the game and laws that apply to business.

“Golf is becoming a recurring theme in insider trading cases,” Thomas Gorman, a former official in the Security and Exchange Commission’s (SEC) enforcement division, is quoted as saying by the Politico website, so you may want to stick to talking about that new wedge you just bought, not the fact your company may be a merger target.

The SEC recently brought two insider trading cases that center on the relationships between golfing buddies and how their chitchat turned into lucrative and illegal trading bonanzas, according to Politico.

  • One filed this summer targets seven friends who regularly played at Oakley Country Club outside of Boston. The SEC charged they made more than $554,000 through illegal trades involving information shared about American Superconductor Corporation (AMSC).
  • A similar case filed last year alleged an accountant at Big Four firm KPMG with gave stock tips to his golfing partner.

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photo - expanded SOX liability by Gwan KhoCorporate officers face an ever expanding and deepening pool of potential legal liability when it comes to running their business and making (or not making) disclosures about it. A recent case involving the federal Securities and Exchange Commission (SEC) and a Florida computer equipment company is an example, according to an SEC press release.

The SEC’s approach in this case may increase practical exposure to liability for corporate officers who sign financial statements and certifications required under Section 302 of the Sarbanes-Oxley Act (“SOX”).

  • The SEC used a new theory of fraud against the former CEO (Marc Sherman) and CFO (Edward Cummings) of Quality Services Group, Inc. (QSGI), a business that filed for bankruptcy in 2009.
  • The SEC claims that Sherman misrepresented the extent of his involvement in evaluating internal controls and that he and Cummings were aware of significant internal controls issues with the company’s inventory practices that they failed to disclose to investors and internal auditors.
  • The case doesn’t involve a restatement of financial statements or claims of accounting fraud, just disclosure issues concerning internal controls and involvement in a review of the same by senior management.

To show an actionable misstatement, the SEC claims that Sherman and Cummings signed,

  • Form 10-Ks with false management reports on internal controls, and
  • SOX certifications in which they falsely represented that they had evaluated the management report on internal controls and disclosed all significant deficiencies to auditors.

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photo - men behaving badlyGreed can end up costing you a lot of money and grief, especially if it motivates you to engage in insider trading. If it also involves your spouse, it won’t help your marriage either.

Two California husbands of business executives learned that the hard way, according to a report by Bloomberg News. They are accused of using nonpublic information they heard their executive wives discuss on the phone about their employers.  These complaints, filed in March, are the latest in a number of Securities and Exchange Commission (SEC) cases involving men who allegedly traded on inside information they learned from spouses over the objections, or without the knowledge, of their wives.

“Family members have a duty to protect and safeguard that information, not to trade on it,” Jina Choi, director of the SEC’s regional office in San Francisco, is quoted as saying in the article.

  • According to the SEC, Ching Hwa Chen of San Jose, overheard his wife, Informatica Corp.’s senior tax director, talk about the company’s quarterly results in June 2012. He learned they might miss their forecasts so Chen bought options and sold the company’s shares short, making $138,000 when the shares dropped after the company did not, in fact, make the forecast. His wife told Chen not to trade in company shares under any circumstances. He did so anyways, hiding the trades from her.  Chen, while denying wrongdoing, agreed to pay $280,523 to settle the case, according to the SEC.
  • In another legal complaint filed in San Jose, the SEC claims Tyrone Hawk of Los Gatos made $151,480 by selling shares of Acme Packet Inc. The agency alleges he bought shares after overhearing his wife, an Continue reading