Securities Fraud

September 28, 2015

Trinity Capital Corporation and its wholly-owned subsidiary Los Alamos National Bank will pay $1.5 million to settle accounting fraud charges.  An SEC investigation found that Trinity materially misstated its provision for loan losses and its allowance for loan and lease losses in its SEC filings between 2010 and 2012.  In 2011, Trinity understated its net loss available to common shareholders by $30.5 million, reporting income of $4.9 million instead of a $25.6 million loss.  SEC

September 28, 2015

Credit Suisse Securities (USA) LLC will pay a $4.25 million penalty to settle charges by the SEC that over a two-year period, it made at least 593 deficient “blue sheet” submissions to the SEC, omitting more than 553,400 reportable trades representing 1.3 billion shares.  Broker-dealers like Credit Suisse are required to provide the SEC with information about trades by its customers, commonly referred to as “blue sheet data,” which the agency can use to identify and analyze trades in the course of investigations and other work.  As part of the settlement, Credit Suisse also has admitted it violated the recordkeeping and reporting provisions of the federal securities laws.  SEC

September 28, 2015

Tokyo-based conglomerate Hitachi, Ltd. will pay a $19 million penalty to settle SEC charges that it inaccurately recorded improper payments to South Africa’s ruling political party in connection with contracts to build two multi-billion dollar power plants in violation of the Foreign Corrupt Practice Act.  SEC

September 25, 2015

The SEC charged four former SMF Energy Corp. officers with financial fraud by vastly inflating SMF Energy’s revenues through a fraudulent billing scheme.  The SEC alleges that SMF Energy overbilled certain mobile fueling customers, including the U.S. Postal Service, by charging for fuel that was not delivered and adding surcharges that the customers’ contracts did not permit.  As a result, the SEC alleges that SMF Energy materially overstated its revenues, profit margins, shareholders’ equity and net income.  According to the SEC’s complaint, the overbilling began in 2004 as a minor contributor to SMF Energy’s financial performance but later made the difference between the company being profitable and posting net losses. SEC

September 24, 2015

Michael A. Glickstein and his new York-based investment advisory firm, G Asset Management LLC, will collectively pay $275,000 to settle fraud charges by the SEC.  The SEC alleged that Glickstein and G Asset issued a misleading press release announcing their offer to purchase a majority stake in retail bookseller Barnes & Noble which caused Barnes & Noble’s stock price to rise $1.94 per share.  The SEC’s order instituting a settled administrative proceeding found the press release to be misleading because it did not disclose that: (1) G Asset had no ability to finance its purported offer to purchase Barnes & Noble; and (2) that G Asset had recently purchased thousands of Barnes & Noble shares and short-term call options, intending to profit by selling the shares and options after issuing the press release.  SEC

September 23, 2015

The SEC announced and settled charges against two Philadelphia-area men, William Fretz and John Freeman, and their investment advisory firm, Covenant Capital Management Partners, L.P., for defrauding their friends and family in connection with their private equity fund, Covenant Partners, L.P.  The men sold partnership interests in the fund to family and friends but rather than investing the money as promised, they used it to benefit themselves and a failing business, Keystone Equities Group L.P.  Under the settlement, the respondents will owe approximately $6.8 million to the SEC which will distribute collected money to harmed investors.  SEC

September 22, 2015

R.T. Jones Capital Equities Management, a St. Louis-based investment adviser, will pay a $75,000 penalty to settle charges that it failed to establish required cybersecurity policies and procedures reasonably designed to protect customer records and information, in advance of a breach that compromised the personally identifiable information of approximately 100,000 individuals, including thousands of the firm’s clients.  SEC

September 22, 2015

Retailer Stein Mart Inc. will pay an $800,000 penalty to settle charges of materially misstating its pre-tax income due to improper valuation of inventory subject to price discounts.  An SEC investigation found that when Stein Mart offered its merchandise to customers at reduced prices, the value of the inventory subject to the markdowns was reduced at the time the item was sold rather than immediately at the time the markdown was applied.  As a result, Stein Mart materially misstated its pre-tax income in certain quarterly filings with the SEC, including an overstatement of almost 30 percent in the first quarter of 2012.  SEC

September 21, 2015

Investment advisor Eagle Investment Management and its affiliated distributor FEF Distributors will pay $40 million to settle SEC charges of improperly using mutual fund assets to pay for the marketing and distribution of fund shares.  This settles the first case brought by the SEC under its “Distribution-in-Guise” Initiative which protects mutual fund shareholders.  The money will be returned to the accounts of affected shareholders.  SEC

September 18, 2015

An attorney, two audit firms, and seven audit professionals have agreed to settle SEC charges filed in January alleging that they engaged in a microcap scheme that the agency stopped in its tracks when it suspended the registration statements used for sham offerings in 20 purported mining companies.  SEC