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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.

				

			

			
						
					
			

	
		
		

			

				
				
November 9, 2016

				 The SEC charged former movie producer and self-proclaimed private equity executive David R. Bergstein with defrauding hedge fund investors and siphoning off investment funds to support his extravagant lifestyle.  The SEC alleges that Bergstein, through a series of intricate transactions by Weston Capital Asset Management and two of its unregistered hedge funds, Weston Capital Partners Master Fund II Ltd. and Wimbldeon Fund SPC Class Tt Segregated Portfolio, misappropriated over $5 million meant, in large part, for investment in medical-billing businesses.  The SEC alleges that Bergstein used the stolen millions for purchases from a firearms dealer, an antique watch and jewelry retailer, and a bonsai tree nursery.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 31, 2016

				 The SEC charged Ryan Gilbertson, co-founder of Minnesota-based energy company Dakota Plain Holdings, with manipulating its stock price and concealing his control of the company to attain lucrative financial payouts.  Gilbertson co-founded Dakota Plains with Michael Reger, who has agreed to pay $8 million to settle related charges brought by the SEC.  The SEC alleges that Gilbertson hatched and orchestrated a scheme to secretly siphon millions of dollars from Dakota Plains by installing his father and Reger’s father as figurehead executives of the company, allowing them to secretly wield control of the company and issue millions of shares of stock to themselves, friends, and family.  They allegedly caused the company to enter into an agreement to borrow money from them on generous terms that included extra bonus payments to them based on the price of Dakota Plains stock after 20 days of trading following a reverse merger into a company with publicly-traded shares.  According to the SEC’s complaint, Gilbertson enlisted friends and associates to choreograph extensive sales and purchases of Dakota Plains stock, causing the price to skyrocket from $0.30 to $1.10 per share during the 20-day period.  The inflated stock price obligated Dakota Plains to make bonus payments totaling $32 million to Gilbertson, Reger, and others.  Reger will pay $8 million to settle charges that he obtained illicit payments and skirted public disclosure requirements by spreading his Dakota Plains stock holdings among 10 accounts in different names to conceal that he owned more than one-fifth of the company’s shares.  SEC				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 31, 2016

				 The SEC announced proceedings against PricewaterhouseCoopers audit partner Adrian D. Beamish for alleged failures in connection with the independent audit of a venture capital fund for which he served as the engagement partner.  The SEC alleges that Beamish failed to scrutinize millions of dollars taken from Burrill Life Sciences Capital Fund III in related party transactions under the guise of “advanced” management fees.  Beamish allegedly failed to determine whether the fund’s adviser had proper authorization and rationale for taking the money and failed to ensure that the transactions were properly disclosed in the fund’s financial statements.  SEC				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 31, 2016

				 New York-based audit firm PFK O’Connor Davies and a senior partner of the firm, Domenick F. Consolo, will pay $555,000 collectively to settle charges that they issued fraudulent audit reports in connection with municipal bond offerings by the town of Ramapo, N.Y. and its local development corporation.  The SEC’s order finds that PFK and Consolo allowed Ramapo to record a $3.08 million receivable in its general fund for a property sale that Consolo knew had not occurred.  Consolo ignored red flags and relied on false representations by Ramapo officials about certain other receivables, transfers, and liabilities.  PFK failed to take appropriate steps to mitigate the risk of material misstatements even after senior management became aware that Ramapo’s financial statements were the subject of multiple law enforcement investigations and Consolo received complaints about possible fraud.  SEC				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 27, 2016

				 The SEC charged Los Angeles-based investment advisory firm Broidy Wealth Advisors and its owner Marc D. Broidy with fraudulently overbilling clients and stealing assets from client trust accounts to pay for personal expenses including a home mortgage, overseas trips, and leases on two Mercedes-Benz vehicles.  The SEC alleges that Broidy obtained more than $1.4 million in ill-gotten gains since February 2011.  Broidy allegedly billed clients approximately $643,000 in excess fees and covered it up by altering the amount of management fees recorded on forms issued by brokerage firms before sending the forms to his clients.  The SEC further alleges that Broidy fraudulently took approximately $865,000 from clients’ trust accounts on which he was trustee to pay personal expenses.  SEC				 					 

						
Tagged in:
													  Housing and Mortgage Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 24, 2016

				 Brazilian aircraft manufacturer Embraer S.A. will pay more than $205 million to the SEC, DOJ, and Brazilian authorities to resolve alleged violations of the Foreign Corrupt Practices Act (FCPA).  The SEC’s complaint alleges that Embraer made more than $83 million in profits as a result of bribe payments from its U.S.-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique to secure business in those countries.  Embraer also engaged in an alleged accounting scheme in India, in which $5.76 million was paid to an agent in India in connection with the sale of three highly-specialized military aircraft for India’s air force and the payments were falsely recorded in Embraer’s books and records as part of a consulting agreement that was not legitimate.  SEC				 					 

						
Tagged in:
													  FCPA, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 21, 2016

				 The SEC charged Tennessee-based lawyer James C. Cope with insider trading based on information he obtained through his position on the Board of Directors at Nashville-based Pinnacle Financial Partners.  The SEC alleges that Cope learned confidential details about Pinnacle’s planned merger with Avenue Financial Holdings prior to the banks’ joint public announcement of the merger.  During, and within an hour after, the board meeting at which Cope learned the details of the merger, he placed five orders for securities in Avenue Financial.  Cope allegedly made more than $56,000 through these purchases.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 20, 2016

				 Houston-based technology solutions company FMC Technologies will pay a $2.5 million penalty to settle charges that it overstated profits in one of its business segments.  Former Controller, Jeffrey Favret, and business unit controller, Steven Croft, will pay $40,000 collectively to settle charges that they caused these accounting violations in order to meet internal targets.  The SEC’s order finds that after being pressured to improve performance in the Energy Infrastructure Segment at FMC, Favret and Croft artificially reduced the value of a liability the company recorded for employee paid time off, thus overstating the segment’s pre-tax operating profits by $800,000.  This enabled an internal target to be met for the first quarter of 2013.  The SEC’s order also found that Croft failed to comply with internal accounting controls when he directed that his business unit switch to a new accounting system without taking reasonable steps to ensure that errors would not arise.  Errors did occur, causing the overstatement  of the segment’s results in two consecutive quarters in 2014.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 18, 2016

				 Israel-based Bank Leumi will pay $1.6 million and admit wrongdoing to settle charges that it provided investment advice and induced securities transactions for U.S. customers for more than a decade without registering as an investment-advisor or broker-dealer as required under U.S. securities laws.  The SEC’s order found that Bank Leumi maintained several hundred securities accounts that were beneficially owned by U.S. customers and managed more than $500 million in securities assets for U.S. customers.  To mitigate the risk of violating U.S. laws, Bank Leumi began exiting the U.S. cross-border business in 2008.  But approximately 100 U.S. customer securities accounts remained open with the bank three years later and bank employees continued to have contact with U.S. customers.  The SEC’s order finds that Bank Leumi made about $3.37 million in profits from its U.S. cross-border business.  Bank Leumi disgorged about $3.3 million of those profits in a deferred prosecution agreement with the Department of Justice in 2014.  Bank Leumi will disgorge the remainder to the SEC in addition to paying a $1.5 million penalty.  SEC				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
October 18, 2016

				 Ernst & Young will pay more than $11.8 million to settle charges related to failed audits of oil services client Weatherford International.  Weatherford previously paid $140 million to settle charges that it used deceptive income tax accounting to inflate earnings.  The SEC’s order found that despite placing Weatherford audits in a high-risk category, Ernst & Young’s audit team repeatedly failed to detect the company’s fraud until it had been going on for more than four years.  The audit team was aware of post-closing adjustments that Weatherford made to significantly lower its year-end provision for income taxes each year, but it relied on Weatherford’s unsubstantiated explanations for the adjustments rather than performing the required audit procedures to scrutinize the company’s accounting.  The Ernst & Young partner who coordinated the audits, Craig Fronckiewicz, and a tax partner who was part of the audit team, Sarah Adams, agreed to suspensions to settle charges that they disregarded significant red flags during the audits.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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