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September 18, 2018

Clovis Oncology Inc., along with its CEO, Patrick Mahaffy, and former CFO, Erle Mast, have agreed to pay civil penalties totaling over $20 million to resolve allegations that it violated the Securities Act and Securities Exchange Act by misleading investors about the efficacy of a lung cancer drug that it was developing. According to the complaint, in 2015, the company reported to investors that the drug was 60% effective and continued to do so for months after it learned that the drug was really only 28% effective, which allowed it to raise about $298 million at a public stock offering. With the disclosure of its true efficacy, however, Clovis's stock value dropped by approximately 70%, and the drug ceased to be developed in 2016. To compensate investors harmed by the misinformation, the SEC will create a Fair Fund to distribute penalties. SEC

Tagged in: Misrepresentations, Securities Fraud,

September 18, 2018

SeaWorld and its former CEO, James Atchison, have agreed to pay a combined total of $5 million to settle charges of violating the antifraud provisions of federal securities laws. In a complaint filed by the SEC in New York, the defendants were alleged to have mislead investors about how the 2013 documentary, Blackfish—which condemned the company for allegedly mistreating orcas—had led to a drop in attendance numbers and negatively affected its business. Another employee, former VP of communications, Frederick D. Jacobs, will pay a lower fine of $100,000 for his significant contributions to the investigation. SEC

Tagged in: Misrepresentations, Securities Fraud,

August 14, 2018

New Mexico is seeking lead plaintiff status for its Public Employees Retirement Association (PERA) in a bid to recover nearly $4 million lost by the fund when Pacific Gas and Electric Company (PG&E)'s stock took a tumble after the Northern California wildfires last year. The lawsuit alleges that PG&E misled investors about its compliance with California safety laws and subsequent risk of wildfire. NM AG

Tagged in: Misrepresentations, Securities Fraud,

August 14, 2018

In the largest civil penalty imposed by the Justice Department for FIRREA violations leading up to the 2008 financial crisis, the Royal Bank of Scotland Group plc (RBS) will pay $4.9 billion to resolve claims that it knowingly misled investors of its residential mortgage-backed securities (RMBS), including Fannie Mae and Freddie Mac. According to a statement of facts included with settlement details, RBS knew from its own reviews that its loans carried a high risk of default but failed to disclose that to investors. Furthermore, it allowed its due diligence process to become a total sham by not requiring that loan originators correct errors, instructing due diligence vendors to waive defects, and self-imposing caps on the number of faulty loans it removed from a RMBS. DOJ; USAO MA

Tagged in: Financial Institution Fraud, FIRREA, Housing and Mortgage Fraud, Misrepresentations, Securities Fraud,

August 2, 2018

Aurora Loan Services, LLC, a subsidiary of Lehman Brothers Holdings, Inc., has agreed to pay a civil penalty of $41 million to settle allegations of FIRREA violations in the loans it sold between 2004 and 2008. The mortgage originator gave preferential treatment to five "Platinum" lenders by allowing them to underwrite their own loans and freeing them from quality control standards that were imposed on other lenders. The resulting decline in loan quality was linked to a higher rate of default, hurting investors who bought residential-based mortgage securities from Lehman Brothers. USAO CO

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, FIRREA, Housing and Mortgage Fraud, Misrepresentations, Securities Fraud,

August 1, 2018

Wells Fargo Bank has agreed to pay a civil penalty of $2.09 billion to settle allegations that it knowingly misrepresented the quality of its mortgage loans to investors, in violation of FIRREA, in order to double its production of subprime and Alt-A loans. Nearly half of those loans subsequently defaulted, leading to billions of dollars in losses for investors, including federally insured financial institutions. DOJ; USAO NDCA

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, FIRREA, Misrepresentations, Securities Fraud,

July 24, 2018

The SEC announced New York entrepreneur William Z. McFarland has agreed to a permanent officer-and-director bar and disgorgement of $27.4 million to settle charges of fraudulently inducing investments into his companies Fyre Media, Inc., Fyre Festival LLC, and Magnises, Inc. SEC

Tagged in: Misrepresentations, Securities Fraud,

July 13, 2018

William Liberman of Florida was sentenced to 84 months in prison for his role in a stock pump-and-dump scheme.  Liberman and his co-conspirators made false representations about the performance of multiple companies of which he was an officer, in order to drive up the value of the stock and enrich themselves.  Liberman earned more the $1.2 million through the scheme, which left 12,000 investors with a total loss of $19 million.  He also failed to report the income, evading over $400,000 in federal taxes, which he has been ordered to pay, along with $5.3 million in restitution to investors.  USAO CT

Tagged in: Misrepresentations, Securities Fraud,

July 10, 2018

A man who had pretended to be a Navy SEAL as part of a scheme to defraud investors was sentenced to 60 months in prison and ordered to pay $1.4 million in restitution.  Edward Campbell had promised investors he would use their funds to buy historical bonds in China and to exchange currency from Papua New Guinea.  Instead, he converted the funds for personal use.  USAO SDOH

Tagged in: Misrepresentations, Securities Fraud,

July 10, 2018

Colorado man Frank Morelli was sentenced to seven years in prison for his role in a seven-person scheme to defraud the SEC and investors.  With his co-conspirators, Morelli had manipulated the stock price of a company they controlled through false press releases, organized insider trading, and bribery.  The fraud had generated several million dollars in profits before it was stopped.  USAO EDPA

Tagged in: Insider Trading, Misrepresentations, Securities Fraud,

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