Misrepresentations

February 10, 2015

The SEC announced William Slater and Peter E. Williams III, former CFOs of Silicon Valley software company Saba Software, agreed to return nearly a half-million dollars in bonuses and stock sale profits they received while Saba was committing accounting fraud.  While not personally charged with the company’s misconduct, Slater and Williams are still required under the Sarbanes-Oxley Act to reimburse the company for bonuses and stock sale profits received while the fraud occurred.  Last year, the SEC charged Saba Software and two former executives responsible for the accounting fraud in which timesheets were falsified to hit quarterly financial targets.  SEC February

February 5, 2015

The SEC charged Chicago-area alternative energy company Broadwind Energy, along with its former CEO J. Cameron Drecoll and CFO Stephanie K. Kushner, for accounting and disclosure violations that prevented investors from knowing that reduced business from two significant customers had caused substantial declines in the company’s long-term financial prospects.  Broadwind Energy agreed to pay a $1 million penalty, and Drecoll and Kushner agreed to pay nearly $700,000 in combined disgorgement and penalties.  SEC

January 21, 2015

Standard & Poor’s Ratings Services agreed to pay $77M to settle fraud charges relating to its ratings of certain commercial mortgage-backed securities.  According to the Director of the SEC Enforcement Division Andrew J. Ceresney, “Standard & Poor’s elevated its own financial interests above investors by loosening its rating criteria to obtain business and then obscuring these changes from investors.  These enforcement actions, our first-ever against a major ratings firm, reflect our commitment to aggressively policing the integrity and transparency of the credit ratings process.”  SEC

January 15, 2015

The SEC announced charges against attorneys, auditors, and others allegedly involved in a microcap scheme under which fake mining companies were used for sham offerings of stock to investors.  According to the SEC, Canada-based attorney and stock promoter John Briner orchestrated the scheme with the assistance of Colorado-based attorney Diane Dalmy, Nevada-based audit firm De Joya Griffith LLC and Texas-based audit firm M&K CPAS PLLC.  SEC

January 12, 2015

Two exchanges formerly owned by Direct Edge Holdings and since acquired by BATS Global Markets (the EDGA Exchange and EDGX Exchange) have agreed to pay a $14M penalty to settle charges that their rules failed to accurately describe the order types being used on the exchanges.  The penalty is the SEC’s largest against a national securities exchange, and the case is the SEC’s first principally focusing on stock exchange order types.  SEC

December 22, 2014

Investment management firm F-Squared Investments agreed to pay $35M and admit wrongdoing to settle charges it defrauded investors through false performance advertising about its flagship index product AlphaSector.  The SEC separately charged the firm’s co-founder and former CEO Howard Present with making false and misleading statements to investors as the public face of F-Squared.  SEC

December 18, 2014

The SEC charged Staten Island, N.Y.-based firm Premier Links, Inc., along with its former president and two sales representatives, with participating in a fraudulent boiler room scheme targeting seniors to invest in speculative start-up companies.  According to the SEC, the company along with Dwayne Malloy, Chris Damon, and Theirry Ruffin “treated vulnerable older investors as their personal ATM machines” by using high-pressure sales tactics to convince them to invest in companies purportedly on the brink of conducting initial public offerings.  But they did not disclose that only a small fraction of the money would be transmitted to the promoted companies and that Premier Links diverted the funds to other entities controlled by the sales representatives or other associates.  SEC

December 16, 2014

The SEC charged Michael Crow and Alexandre Clug and their company Aurum Mining LLC with a gold mining investment scheme under which they promised investors a stake in so-called “quick-to-production” gold mines that Aurum Mining purported to own and operate in Brazil and Peru.  According to the SEC, despite highly optimistic statements that the gold mines would yield millions of dollars, the investors never received any money back from their investments, while Crow and Clug used a substantial amount of investor funds to cover their monthly salaries, rental of upscale apartments in Lima, and other living or travel expenses.  SEC

December 15, 2014

The SEC charged New Orleans-based oil-and-gas company Treaty Energy Corporation and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.  According to the SEC, Treaty Energy issued deceptive press releases touting drilling successes in Belize and Texas to induce investor demand for its unregistered stock, which was then illegally distributed to the public.  The SEC alleges that Treaty Energy’s founder Ronald Blackburn and four company officers – Andrew V. Reid, Bruce A. Gwyn, Lee C. Schlesinger, and Michael A. Mulshine – obtained at least $3.5 million in illicit profits from the scheme.  SEC

November 21, 2014

The SEC charged father-and-son executives Robert and Marc Benou at New Jersey-based penny stock company Conolog Corporation for issuing false and misleading press releases while secretly selling thousands of their own stock shares into the market.  They agreed to pay nearly $325,000 and accept officer-and-director bars to settle the SEC’s charges.  SEC