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SEC Enforcement Actions

The Securities and Exchange Commission (SEC) is the United States agency with primary responsibility for enforcing federal securities laws. Whistleblowers with knowledge of violations of the federal securities laws can submit a claim to the SEC under the SEC Whistleblower Reward Program, and may be eligible to receive  monetary rewards and protection against retaliation by employers.

Below are summaries of recent SEC settlements or successful prosecutions. If you believe you have information about fraud which could give  rise to an SEC enforcement action and claim under the SEC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

April 2, 2019

Former CEO of Jumio, Daniel Mattes, will pay more than $17 million to settle SEC charges of defrauding investors in the Silicon Valley based private mobile payments company. The SEC complaint alleges that Mattes exaggerated Jumio’s 2013 and 2014 revenues while selling his personal shares to investors in the private, secondary market. When Jumio filed for bankruptcy in 2016, the shares became worthless and investors lost everything. Mattes is barred from being an officer or director of a publicly traded company in the U.S. Further, he must pay more than $16 million in disgorgement and prejudgment interest plus a $640,000 penalty. The SEC also settled separate proceedings against Jumio’s former CFO, Chad Starkey, for failing to exercise reasonable care concerning the financial statements and signing stock transfer agreements that falsely implied that the board of directors had approved Mattes’ sales. SEC

March 29, 2019

A German provider of dialysis products and services has agreed to pay a total of $231 million to the DOJ and SEC for violating the Foreign Corrupt Practices Act (FCPA). Fresenius Medical Care AG & Co. KGaA (FMC) admitted to paying $30 million in bribes to government officials throughout Africa, the Middle East, and other regions, in order to procure business that eventually earned it over $140 million in profits. Although it voluntarily self-disclosed the misconduct in 2012, the misconduct continued in certain countries until 2016. As part of the resolution, Fresenius has entered into a non-prosecution agreement with the DOJ and will pay $85 million in criminal penalties to the DOJ, as well as $147 million in disgorgement and interest to the SEC. DOJ; SEC; USAO MA

March 20, 2019

Wells Fargo Securities has been ordered to pay over $800,000 in civil penalties to the SEC for failing to disclose that a video game development project being financed by a bond it underwrote still faced a significant shortfall in funding. The lead banker on the deal, Peter Cannava, was additionally accused of failing to disclose the fees being paid to the firm by startup video game company, 38 Studios. SEC

March 12, 2019

Lumber Liquidators agreed to pay $33 million in criminal fines and forfeitures for knowingly making false and misleading statements regarding formaldehyde emissions from laminate flooring imported by the company from China.  In March, 2015, 60 Minutes reported that laminate flooring sold by Lumber Liquidators in the United States did not meet California Air Resources Board (CARB) emission standards for formaldehyde and featured undercover videos and laboratory test results.  The company filed an SEC Form 8-K broadly denying the allegations in the 60 Minutes episode and asserting that Lumber Liquidators complied with CARB regulations. The statement, however, omitted material facts known to the company. The company also entered into a deferred prosecution agreement, agreeing to implement internal control procedures and cooperate with ongoing investigations.   In a separate agreement with the SEC, Lumber Liquidators will also disgorge over $6 million in profits and prejudgment interest, which amount will be credited against the criminal penalties.  DOJ; SEC; USAO ED VA.

March 11, 2019

Investment advisers that placed their clients in higher-cost mutual fund share classes, and received a share of the higher 12b-1 fees charged by those investments, but failed to adequately disclose the conflicts of interest where a lower-cost share class was available, will collectively return more than $125 million to their clients, the majority of whom are retail investors.  Seventy-nine investment advisors have agreed to refund the improperly disclosed fees collected by them to individual clients, with interest, as well as to undertake additional compliance procedures.  SEC

March 6, 2019

A Russian telecommunications provider agreed to pay $100 million to the SEC to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) in seeking to win business in Uzbekistan. Over a period of eight years, Mobile TeleSystems PJSC (MTS) allegedly paid at least $120 million in bribes to an Uzbek official who held sway over the country's telecommunications regulatory authority, resulting in more than $2.4 billion in company revenues. In a related matter with the DOJ, MTS has agreed to pay $850 million, with a $100 million credit for its payment to the SEC. DOJ; SEC; USAO SDNY

March 5, 2019

BB&T Securities, the North Carolina-based successor in interest to Valley Forge Asset Management, has agreed to pay more than $5 million in restitution to investors defrauded by Valley Forge. According to the SEC, Valley Forge misled would-be investors into choosing them as a broker by false promising a 70% discount from its supposed retail commission rate. In reality, however, Valley Force was charging about 4.5 times more than what customers would have paid elsewhere. SEC

February 15, 2019

Cognizant Technology Solutions Corporation will pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) in paying a $3.6 million in bribes to government officials in India in connection with construction of facilities for Cognizant in Chennai.  Cognizant’s president, Gordon Coburn, and chief legal officer, Steven E. Schwartz, have been charged by the SEC for authorizing payment and concealment of the bribe.  SEC
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