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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.

September 25, 2014

Scottsdale, Arizona-based software company JDA Software Group Inc. agreed to pay a $750,000 penalty for having inadequate internal accounting controls over its financial reporting, which resulted in misstated revenues in public filings.  Specifically, the SEC found the company failed to properly recognize and report revenue from certain software license agreements it sold to customers because its internal accounting controls failed to consider information needed for determining a critical component of revenue recognition for software companies.  SEC

September 25, 2014

The SEC suspended trading for the following nine penny stocks as part of an ongoing enforcement initiative to combat microcap fraud: All Grade Mining Inc. (HYII); Bluforest Inc. (BLUF); DHS Holding Co. (DHSM); Essential Innovations Technology Corp. (ESIV); Global Green Inc. (GOGC); Inova Technology Inc. (INVA); mLight Tech Inc. (MLGT); Solar Thin Films Inc. (SLTZ); and Xumanii International Holdings Corp. (XUII).  SEC

September 24, 2014

The SEC charged Silicon Valley-based software company Saba Software, and two former Saba executives Patrick Farrell and Sajeev Menon, with accounting fraud involving falsified timesheets to hit quarterly financial targets.  An SEC investigation found that Farrell and Menon were atop a scheme at Saba in which managers based in the US directed consultants in India to either falsely record time they had not yet worked, or purposely fail to record hours worked during certain pay periods to conceal budget overruns from management and finance divisions.  This enabled Saba to achieve its quarterly revenue and margin targets by improperly accelerating and misstating virtually all its professional services revenue.  Saba agreed to pay $1.75 million to settle the SEC’s charges.  SEC

September 23, 2014

The SEC charged a Florida-based penny stock company Heathrow Natural Food & Beverage Inc. and its CEO Michael S. Pagnano with defrauding investors by issuing false and misleading press releases proclaiming large sales and fantastic revenue projections while the purported health food company actually was a failing enterprise.  According to the SEC, Heathrow touted sales of natural health food products that the company had not even manufactured as well as non-existent distribution agreements with major retail chains.  Meanwhile, Pagnano was prompting the illegal, unregistered distribution of billions of shares of company stock to several people or entities, including himself.  SEC

September 23, 2014

Barclays Capital Inc. agreed to pay $15 million for allegedly failing to maintain an adequate internal compliance system to ensure the firm did not run afoul of any federal securities laws after its wealth management business in the U.S. acquired the advisory business of Lehman Brothers in September 2008.  SEC

September 22, 2014

Wells Fargo Advisors LLC agreed to pay $5 million to settle charges it failed to maintain adequate controls to prevent one of its employees from insider trading based on a customer’s nonpublic information.  The SEC also charged Wells Fargo for unreasonably delaying its production of documents during the SEC’s investigation and providing an altered internal document related to a compliance review of the broker’s trading.  This was the first time the SEC brought charges against a broker-dealer for failing to protect a customer’s material nonpublic information.  SEC

September 22, 2014

The SEC announced an expected whistleblower award of more than $30 million.  It will be the largest award to date under the SEC whistleblower program established in 2012 under the Dodd-Frank Act.  It surpasses the $14 million award the SEC made roughly a year ago.  The new award will also be the fourth award to a whistleblower living in a foreign country.  Whistleblower Insider

September 22, 2014

New York-based investment advisory firm Lincolnshire Management agreed to pay more than $2.3 million to settle charges of breaching its fiduciary duty to a pair of private equity funds by sharing expenses between a company in one’s portfolio and a company in the other’s portfolio in a manner that improperly benefited one fund over the other.  SEC

September 19, 2014

The SEC charged Brooklyn resident Frank Tamayo with facilitating a $5.6 million insider trading scheme that typically involved the passing of illegal tips via napkins or post-it notes at Grand Central Terminal.  The SEC alleges that Tamayo received material nonpublic information from Steven Metro about 13 impending corporate deals involving clients of the law firm where Metro worked.  Tamayo then tipped his stockbroker Vladimir Eydelman, who used the confidential information to illegally trade for himself and for Tamayo and other customers.  SEC

September 18, 2014

Investment advisory firm Strategic Capital Group LLC agreed to pay nearly $600,000 to settle SEC charges it engaged in hundreds of principal transactions through its affiliated broker-dealer without informing clients or obtaining their consent.  The SEC also charged the company with distributing false and misleading advertisements to investors.  SEC
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