Whistleblower Group

February 11, 2016

The FTC has charged two separate office supply operations with targeting non-profit organizations and small businesses, such as child care centers, educational institutions, churches, and hospitals, and tricking them into paying for overpriced office and cleaning supplies they never ordered. In the California case, Telestar Consulting Inc., also doing business as Kleritec and United Business Supply, and Karl Wesley Angel, allegedly used a variety of tactics to persuade consumers to pay for unordered merchandise. The defendants in the Maryland case are American Industrial Enterprises LLC, Easton Chemical Supply Inc., Lighting X-Change Company LLC, LMS Lighting & Maintenance Solutions LLC, Werner International Enterprises Inc., Benjamin Cox, Vincent Stapleton and John Tharrington. The complaint also names a relief defendant, TBC Companies Inc., that profited from the scheme. FTC

February 9, 2015

St. Louis-based agribusiness Monsanto Company will pay an $80 million penalty to settle charges that it violated accounting rules and misstated company earnings with respect to its flagship product Roundup.  In addition, three accounting and sales executives will pay $135,000 collectively to settle charges against them.  An SEC investigation found that Monsanto had insufficient internal controls to properly account for millions of dollars in rebates offered to retailers and distributors of Roundup after generic competition had undercut Monsanto’s prices and resulted in a significant loss of market share for the company.  Monsanto booked substantial revenue resulting from sales incentivized by the rebate programs but failed to recognize all of the related program costs at the same time.  Therefore, Monsanto materially misstated its consolidated earnings in corporate filings during a three-year period.   Monsanto’s CEO and former CFO reimbursed the company $3,165,852 and $728,843 respectively, for cash bonuses and certain stock awards received during the period when the company committed the accounting violations.  SEC

February 5, 2016

The SEC filed charges against Dennis Wayne Hamilton, an executive at Connecticut-based electronics company Harman International Industries, alleging that he made more than $130,000 in illegal profits by trading on nonpublic information he learned on the job in advance of Harman’s release of its fiscal year 2014 first quarter earnings.  In a parallel action, the U.S. Attorney’s Office for the District of Connecticut filed criminal charges against Hamilton.  SEC

February 4, 2016

Miami-based brokerage firm E.S. Financial Services, now known as Brickell Global Markets, will pay a $1 million penalty to settle charges that it violated anti-money laundering rules by allowing foreign entities to buy and sell securities without verifying the identities of non-U.S. citizens who beneficially owned them.  Federal law requires all financial institutions to maintain an adequate customer identification program to ensure they know their customers and do not become a conduit for money laundering or terrorist financing.  But during SEC examinations, the firm twice failed to provide required books and records identifying certain foreign customers whom they were soliciting directly and to whom they were providing investment advice.  An ensuing investigation found that the firm’s customer identification program failed to obtain and maintain documentation to verify the identities of 23 non-U.S. citizens, the beneficial owners of 13 non-U.S. corporate entities, who executed more than $23 million in securities transactions through a brokerage account opened by a Central American bank affiliated with the firm.  SEC

February 3, 2016

Manhattan-based lending company, American Growth Funding II LLC (AGF), and its owner, Ralph Johnson, have been charged with fraud for repeatedly lying to investors purchasing high-yield securities.  The SEC alleges that the defendants promised investors 12-percent annual returns, falsely claimed its financial statements were being audited each year, and concealed details about the deteriorating value of assets that could imperil full payment of returns to investors.  The SEC also charged Portfolio Advisors Alliance, the brokerage firm that acted as AGF’s placement agent, and two of its executives, for allegedly continuing to use AGF’s offering documents to solicit sales of its securities when they knew that the documents were inaccurate.  SEC

February 2, 2016

Fourteen municipal underwriting firms will pay civil penalties to settle charges under the SEC’s Municipalities Continuing Disclosure Cooperation (MCDC) initiative.  In all, 72 underwriters (comprising 96% of the municipal underwriting market) have been charged under the voluntary self-reporting program which targets material misstatements and omissions in municipal bond offering documents.  The settling firms and civil penalties paid by the settling firms are as follows: Barclays Capital Inc. ($500,000), Boenning & Scattergood Inc. ($250,000), D.A. Davidson & Co. ($500,000), First Midstate Inc. ($100,000), Hilltop Securities Inc. ($360,000), Janney Montgomery Scott LLC ($500,000), Jefferies LLC ($500,000), KeyBanc Capital Markets Inc. ($440,000), Mitsubishi UFJ Securities  (USA) Inc. ($20,000), Municipal Capital Markets Group Inc. ($60,000), Roosevelt & Cross Inc. ($250,0000), TD Securities (USA) LLC ($500,000), United Bankers’ Bank ($160,000), and Wells Fargo Bank N.A. Municipal Products Group ($440,000).  SEC

February 1, 2016

Software manufacturer SAP SE will disgorge $3.7 million from profits on its sales of software to the Panamanian Government to settle charges that it violated the Foreign Corrupt Practices Act when procuring business in Panama.  An SEC investigation found that SAP’s deficient internal controls allowed a former SAP executive, Vincente Garcia, to pay $145,000 in bribes to a senior Panamanian government official and offer bribes to two others in exchange for lucrative software contracts.  The bribery scheme involved providing large discounts of up to 82% to SAP’s Panamanian business partner, who used the excessive discounts to create a slush fund out of which it could pay bribes on Garcia’s behalf.  SEC

January 31, 2016

Barclays Capital Inc. and Credit Suisse Securities (USA) LLC will collectively pay $154.3 million to the SEC and New York Attorney General to settle separate cases finding that they violated federal securities laws while operating alternative trading systems known as dark pools and Credit Suisse’s Light Pool.  Barclays will pay $35 million in penalties to the SEC and $35 million in penalties to the New York Attorney General.  Credit Suisse will pay $30 million in penalties and $24.3 million in disgorgement and prejudgment interest to the SEC and $30 million in penalties to the New York Attorney General.  The settlements address misstatements by Barclays and Credit Suisse to subscribers about the material operations of their alternative trading systems.  SEC