Securities Fraud

February 24, 2016

New York, together with 21 other states, announced multimillion dollar settlements with Natixis Funding Corp. and Societe Generale for fraudulent and anticompetitive conduct in municipal bond derivative transactions with state and local government entities and nonprofits across the country. Natixis and Societe Generale will pay $29,950,000 and $26,750,000 respectively as part of a coordinated 22-state and private class settlement. Pursuant to the settlements, $53,865,000 will be paid into a Settlement Fund and largely applied to restitution for municipalities, counties, government agencies, school districts and nonprofits that the states allege were harmed when they entered into municipal derivatives contracts with Natixis or Societe Generale. NY, NJ, FL

February 16, 2016

Two subsidiaries of Massachusetts software company PTC Inc. agreed to pay a $14.54 million penalty to resolve charges of violating the Foreign Corrupt Practices Act by improperly providing recreational travel to Chinese government officials.  According to company admissions, Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd., through local business partners, arranged and paid for employees of various Chinese state-owned enterprises to travel to the U.S., ostensibly for training at PTC Inc.’s headquarters, but primarily for recreational travel to other parts of the country, including New York, Los Angeles, Las Vegas and Hawaii.  PTC paid more than $1 million through its business partners to fund these trips, while during the same time period, it entered into more than $13 million in contracts with the Chinese state-owned entities.  PTC settled related charges with the SEC by agreeing to pay $11,858,000 in disgorgement plus $1.764 million in prejudgment interest, bringing the company's total government payout to $28 million.  DOJ

February 16, 2016

New York announced the conviction and sentencing of Frederick E. Monroe, Jr., 59, of Queensbury, New York, for stealing over $5 million from investors by fraudulently soliciting them to reinvest their retirement monies. In December 2015, Monroe pleaded guilty in Albany County Court to Scheme to Defraud, Grand Larceny, Money Laundering and Securities Fraud for luring clients with whom he had established relationships with over his 20-year career as a financial planner, and then diverting their monies for his own personal use, as well as to pay back earlier investors he had defrauded. NY

February 11, 2016

Morgan Stanley agreed to pay a $2.6 billion penalty “for misleading investors about the subprime mortgage loans underlying the securities it sold” in the period leading up to the financial crisis.  As part of the agreement, Morgan Stanley admitted that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its residential mortgage-backed securities (RMBS) which ultimately caused investors, including federally insured financial institutions, to lose billions of dollars from investing in Morgan Stanley in the 2006-07 timeframe.  The $2.6 billion civil penalty resolves claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  In addition, the states of New York and Illinois announced their own settlements with Morgan Stanley for $550 million and $22.5 million, respectively.  When combined with prior settlements with other regulators -- $225 million to the National Credit Union Administration; $1.25 billion to the Federal Housing Finance Agency; $86.95 million to the Federal Deposit Insurance Corporation; and $275 million to the SEC -- this brings to almost $5 billion the total payout by Morgan Stanley in connection with its fraudulent sales of RMBS.  Whistleblower Insider

February 11, 2016

New York, in conjunction with members of a state and federal working group announced a $3.2 billion settlement with Morgan Stanley over the bank’s deceptive practices leading up to the financial crisis. The settlement includes $550 million – $400 million worth of consumer relief and $150 million in cash – that will be allocated to New York State. The resolution requires Morgan Stanley to provide significant community-level relief to New Yorkers, including loan reductions to help residents avoid foreclosure, and funds to spur the construction of more affordable housing. Additional resources will be dedicated to helping communities transform their code enforcement systems, invest in land banks, and purchase distressed properties to keep them out of the hands of predatory investors. NY

February 9, 2015

St. Louis-based agribusiness Monsanto Company will pay an $80 million penalty to settle charges that it violated accounting rules and misstated company earnings with respect to its flagship product Roundup.  In addition, three accounting and sales executives will pay $135,000 collectively to settle charges against them.  An SEC investigation found that Monsanto had insufficient internal controls to properly account for millions of dollars in rebates offered to retailers and distributors of Roundup after generic competition had undercut Monsanto’s prices and resulted in a significant loss of market share for the company.  Monsanto booked substantial revenue resulting from sales incentivized by the rebate programs but failed to recognize all of the related program costs at the same time.  Therefore, Monsanto materially misstated its consolidated earnings in corporate filings during a three-year period.   Monsanto’s CEO and former CFO reimbursed the company $3,165,852 and $728,843 respectively, for cash bonuses and certain stock awards received during the period when the company committed the accounting violations.  SEC

February 5, 2016

The SEC filed charges against Dennis Wayne Hamilton, an executive at Connecticut-based electronics company Harman International Industries, alleging that he made more than $130,000 in illegal profits by trading on nonpublic information he learned on the job in advance of Harman’s release of its fiscal year 2014 first quarter earnings.  In a parallel action, the U.S. Attorney’s Office for the District of Connecticut filed criminal charges against Hamilton.  SEC