Archive

March 10, 2016

Texas-based oil company Magnum Hunter Resources Corporation as well as two former senior officers and two consultants will pay $290,000 collectively to settle charges of deficient evaluation of, and failure to maintain control over, Magnum Hunter’s internal controls over financial reporting (ICFR) between December 2011 and September 2013.  ICFR refers to a company’s process for providing reasonable assurance to the public regarding the reliability of its financial reporting.  SEC rules require company management to evaluate and annually report on the effectiveness of ICFR, including disclosing any identified material weaknesses that create a reasonable possibility that the company will not timely prevent or detect a material misstatement of its financial statements.  According to the SEC’s orders, Magnum Hunter enjoyed rapid growth in 2010 and significant acquisitions in 2010 and 2011 which strained its accounting resources.  Despite assessments that there was inadequate control over the financial reporting process, a material weakness was not reported.  SEC

March 9, 2016

Uni-Pixel Inc., a developer of technologies for touchscreen devices, has agreed to pay $750,000 to settle charges it misled investors about the production status and sales agreements for a key product.  The SEC alleged that Uni-Pixel began publicly touting sales of a touchscreen sensor product  supposedly in speedy high-volume commercial production when in fact only a few samples had been manually completed.  The misrepresentations caused Uni-Pixel’s stock price to more than double, enabling then-CEO Reed Killion and then-CFO Jeffrey Tomz to make more than $2 million in personal profits from selling their own shares of company stock.  Uni-Pixel also announced multi-million dollar sales agreements in 2012 and 2013 that highlighted potential revenues but omitted material conditions the company had to meet to actually receive those revenues.  The SEC also filed charges against Killion and Tomz and entered into a deferred prosecution agreement with Uni-Pixel’s former chairman of the board.  SEC

March 9, 2016

Florida man Jay Y. Fung has agreed to pay $760,000 to settle charges by the SEC that he traded on inside information by purchasing stock and call options in Pharmasset Inc. based on a friend’s tip that it was about to be acquired.  The SEC previously charged Fung’s friend and tipper, Kevin Dowd, who has agreed to pay back the cash kickbacks he received from Fung and has pled guilty in a parallel criminal case.  SEC

March 9, 2016

The SEC charged California’s largest agricultural water district, the Westlands Water District, as well as its general manager and former assistant general manager, with misleading investors about Westlands’ financial condition in connection with a $77 million bond offering.  The SEC’s order instituting settled administrative proceedings alleged that Westlands had agreed to maintain a 1.25 debt service coverage ratio.  But when drought conditions reduced the water supply, preventing it from generating enough revenue to maintain the ratio, Westlands used extraordinary accounting transactions to reclassify funds from reserve accounts to record additional revenue.  When the Westlands issued the $77 million bond offering in 2012 it represented to investors that it met or exceeded the 1.25 ratio for each of the prior five years.  Absent the reclassifications and adjustments, Westlands’ ratio for 2010 would have been .11.  Westlands and the charged managers agreed to pay $195,000 collectively to settle the SEC’s charges.  SEC

March 9, 2016

Cyprus-based company Banc de Binary Ltd., its founder Oren Shabat Laurent, and three affiliates, will pay $11 million to settle charges of illegally selling binary options to U.S. investors.  The SEC’s 2013 complaint alleged that the defendants failed to register the offering before soliciting U.S. customers and failed to register as a broker-dealer before communicating directly with U.S. clients.  Binary options differ from more conventional options contracts because the payout typically depends entirely on whether the price of a particular asset underlying the option will rise above or fall below a specified amount.  The defendants will pay about $9 million to the SEC and $2 million to the CFTC which filed a parallel action.  A fair fund has been established to distribute money to the harmed investors.  SEC  

March 8, 2016

The SEC charged fund manager Steven Zoernack and his firm EquityStar Capital Management with operating without registration, providing false and misleading data to investors, and actively hiding Zoernack’s checkered past, including two felony fraud convictions and a bankruptcy filing.  SEC

March 7, 2016

The SEC charged the Rhode Island state agency now known as the Rhode Island Commerce Corporation and its bond underwriter Wells Fargo Securities with defrauding investors in connection with a municipal bond offering to finance a start-up video game company called 38 Studios.  The Rhode Island agency loaned $50 million in bond proceeds to 38 Studios.  However, the bond offering documents produced by the agency and Wells Fargo failed to disclose that 38 Studios had conveyed it needed at least $75 million in funding to produce a particular video game.  Therefore, investors were not fully informed that 38 Studios faced a funding shortfall even with the loan proceeds.  When 38 Studios was unable to obtain additional financing, the company defaulted on the loan.  The SEC also charged Wells Fargo’s lead banker on the deal and two Rhode Island agency executives with aiding and abetting the fraud.  The SEC’s complaint further alleges that Wells Fargo and the lead banker on the 38 Studios deal failed to disclose that Wells Fargo had a side deal with 38 Studios which enabled it to receive nearly double the amount of compensation disclosed in offering documents.  SEC

March 28, 2016

A company that purchased income streams from veterans and other pensioners has agreed to provide more than $2 million in debt relief to resolve allegations that it made predatory and illegal loans to Massachusetts consumers. Under the terms of the assurance of discontinuance, Future Income Payments, LLC (FIP), which was formerly known as Pensions, Annuities and Settlements, LLC, has agreed to convert its current contracts with consumers into interest-free loans. Through this alleged scheme, the 85 affected Massachusetts consumers who entered into contracts with FIP received upfront payments ranging from $1,800 to more than $40,000. In exchange, FIP accessed the consumers’ bank accounts each month to deduct a portion of their pension payments. The AG’s investigation revealed that FIP was charging consumers interest rates that far exceeded the statutory limit, many exceeding 100 percent. Under the terms of the settlement, any consumer who has already paid in excess of the principal balance borrowed will receive a refund for any overpayments. MA

March 23, 2016

Gilbert G. Lundstrom, the former CEO of TierOne Bank -- a $3 billion publicly-traded commercial bank formerly headquartered in Lincoln, Nebraska -- was sentenced to 132 months in prison and to pay a $1.2 million fine for orchestrating a scheme to defraud TierOne’s shareholders and to mislead regulators by concealing more than $100 million in losses on loans and declining real estate.  DOJ

March 23, 2016

JPMorgan Ventures Energy Corp. and JPMorgan Chase Bank, N.A.  have agreed to pay a $225,000 penalty to resolve charges of failing to comply with their obligations to submit accurate large trader reports for physical commodity swap positions.  CFTC