Whistleblower Group

January 20, 2016

Ocwen Financial Corp. will pay $2 million to settle charges that it misstated financial results by using a flawed, undisclosed methodology to value complex mortgage assets.  Ocwen inaccurately disclosed to investors that it independently valued these assets at fair market value according to U.S. Generally Accepted Accounting Principles. In fact, Ocwen merely used, and failed to review, the valuation performed by a related party to which it sold the rights to service certain mortgages.  In addition, the SEC found that Ocwen’s internal controls failed to prevent conflicts of interest involving Ocwen’s executive chairman who played a dual role in many related party transactions.  As a result, Ocwen’s executive chairman was able to approve transactions from both sides, including a $75 million bridge loan to Ocwen from a company where he also served as chairman of the board.  SEC

January 19, 2016

Equinox Fund Management LLC, a Denver-based alternative fund manager, will pay over $6 million to settle charges that the firm overcharged management fees and misled investors about how it valued certain assets.  Equinox will refund investors approximately $5.4 million in excessive management fees collected during a seven-year period.  SEC

January 15, 2016

The SEC awards more than $700,000 to a whistleblower described as a “company outsider.”  The SEC says that the whistleblower provided a “detailed analysis” of the wrongdoing that lead to a successful SEC enforcement action.  SEC

January 14, 2016

Goldman, Sachs & Co. will pay $15 million to settle charges that its securities lending practices violating federal regulations.  The SEC’s order found that Goldman violated Regulation SHO by improperly providing “locates” — representations that the firm believes it can obtain a security necessary to settle a short sale — when it had failed to perform an adequate review of the securities to be located.  Specifically, Goldman employees routinely processed customer locate requests by relying on a function of Goldman’s order management system which allowed orders to be placed based on the start-of-day inventory reported to Goldman by large financial institutions.  However, this function allowed locates to be provided even when the automated system had already deemed the inventory depleted based on locate requests placed earlier in the day.  Additionally, when questioned about the firm’s lending practices by SEC examiners, Goldman Sachs provided incomplete responses that adversely affected and unnecessarily prolonged the SEC’s examination.  SEC

January 14, 2016

State Street Bank and Trust Company will pay $12 million to settle charges that it conducted a pay-to-play scheme to win contracts to service Ohio pension funds.  An SEC investigation found that Vincent DeBaggis, head of State Street’s public funds group, made a deal with Ohio’s then-deputy treasurer under which DeBaggis would make illicit cash payments and political campaign contributions in exchange for three lucrative contracts to safeguard certain funds’ investment assets and effect the settlement of their securities transactions.  DeBaggis will pay almost $275,000 to settle the SEC’s charges.  In related proceedings, attorney Robert Crowe, who worked as a lobbyist and fundraiser for State Street, was charged in federal court for his role in the scheme.  SEC

January 13, 2016

Nine of eleven high-ranking executives and board members of Superior Bank and its holding company have settled charged by the SEC based on their alleged involvement in various schemes designed to conceal the extent of loan losses experienced as the bank was faltering in the wake of the financial crisis.  The defendants propped up Superior’s financial condition through straw borrowers, bogus appraisals, and insider deals, allowing the bank to avoid impairment and the reporting of ever-increasing allowances for loan and lease losses.  As a result, Superior overstated its net income in public filings by 99 percent for 2009 and 50 percent for 2010.  The settling defendants will pay at least $2.8 million collectively and are all permanently barred from serving as officers or directors of a public company.  SEC

January 8, 2016

Steven Cohen, founder and manager of hedge fund S.A.C. Capital Advisors LLC, will be prohibited from supervising funds that manage outside money until 2018.  The SEC found that Cohen ignored red flags of insider trading and failed to supervise a former portfolio manager, Mathew Martoma, who engaged in insider trading in 2008 while employed at C.R. Intrinsic Investors, an investment advisory firm that was a wholly-owned subsidiary of S.A.C. Capital Advisors.  C.R. Intrinsic previously paid more than $600 million to settle SEC charges of insider trading.  Several of Cohen’s entities, including C.R. Intrinsic and S.A.C. Capital Advisors, previously paid $1.2 billion to resolve related criminal charges brought by the U.S. Attorney’s Office for the S.D.N.Y.  SEC

January 6, 2016

J.P. Morgan’s brokerage business will pay $4 million to settle charges that it falsely claimed that its advisors were compensated “based on our clients’ performance.”  An SEC investigation found that J.P. Morgan Securities LLCdid not pay representatives based on client performance.  Rather, advisors were paid a salary and a discretionary bonus based on a number of factors, none of which were tied to portfolio performance.  SEC