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ENFORCEMENT PROCEEDINGSSecurities and Exchange Commission Orders Hearing on Registration Revocation or Suspension Against Eight Public Companies for Failure to Make Required Periodic FilingsOn June 11, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eight companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the eight issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-60100; File No. 3-13516) Commission Declares Decision as to Bagdad Chase, Inc., FinalThe decision of an administrative law judge with respect to Bagdad Chase, Inc., has become final. The law judge found that Bagdad Chase, Inc., violated Section 12(j) of the Securities Exchange Act of 1934 by failure to file timely annual and quarterly reports for the periods ended June 30, 2000, Sept. 30, 2000, Dec. 31, 2000, March 31, 2001, Sept. 30, 2008 and Dec. 31, 2008. The law judge also found that, although Bagdad Chase, Inc., made an effort to file many of its required periodic reports, many of its filings were materially deficient. (Rel. 34-60104; File No. 3-13385) In the Matter of Elizabeth Monrad, CPAOn June 11, the Commission issued an Order of Forthwith Suspension Pursuant to Rule 102(e)(2) of the Commission's Rules of Practice (Order) against Elizabeth Monrad, CPA (Monrad) based on a judgment of criminal conviction entered against her in United States v. Elizabeth Monrad, et al, No. 06 CR 137 (CFI). The Order forthwith suspends Monrad from appearing or practicing before the Commission effective immediately. On April 14, 2009, the United States District Court for the District of Connecticut entered a judgment of conviction against Monrad, finding her guilty of sixteen felony counts, including 1 count of conspiracy to violate the Federal securities laws and to commit mail fraud, 7 counts of securities fraud, 5 counts of making false statements to the Commission, and 3 counts of mail fraud. The criminal charges against Monrad resulted from her participation in a scheme to help American International Group, Inc. (AIG) structure two sham reinsurance transactions. These sham transactions were a fraudulent device by which AIG added a total of $500 million in phony loss reserves to its balance sheet, $250 million in the fourth quarter of 2000 and another $250 million in the first quarter of 2001. The court sentenced Monrad to 18 months imprisonment followed by 24 months of supervised release and ordered her to pay a fine of $250,000. Monrad was licensed as a certified public accountant in Massachusetts from 1983 to June 30, 1993, when her licensed expired. She was the chief financial officer of General Re Corporation (Gen Re) from June 2000 until July 2003 when she left Gen Re to become the chief financial officer of another company. From May 2002 through July 2003, Monrad also was a member of the executive committee of Gen Re's board of directors. From 1997, Monrad was the chief financial officer of Gen Re's North American Operations. (Rel. 34-60098; AAE Rel. 2989; File No. 3-13515) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Seven Public Companies for Failure to Make Required Periodic FilingsToday the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission. In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-60105; File No. 3-13517) SEC v. Aura Financial Services, Inc., Ronald E. Hardy, Jr., Peter C. Dunne, Qais R. Bhavnagari, Dipin Malla, Sandeep Singh, and Raymond RapagliaThe Securities and Exchange Commission announced today that on June 11, 2009, it filed a Complaint in the United States District Court for the Southern District of Florida against Aura Financial Services, Inc. (Aura), an Alabama corporation headquartered in Birmingham, Alabama, and six of its current and former registered representatives, Ronald E. Hardy, Jr. (Hardy), Peter C. Dunne (Dunne), Qais R. Bhavnagari (Bhavnagari), Dipin Malla (Malla), Sandeep Singh (Singh), and Raymond Rapaglia (Rapaglia). The Complaint alleges that, from approximately October 2005 through at least April 2009, the Defendants used fraudulent sales practices to induce customers to open and fund Aura brokerage accounts. The Complaint also alleges that the Defendants rampantly "churned" these accounts of at least fifteen customers by causing numerous trades to be executed which enriched Defendants through brokerage commissions and, in some cases, mark-ups, while depleting the customers' balances through trading losses and excessive transaction costs. In addition, the Complaint alleges that many of the trades effected by Defendants were unauthorized by the customers. The Complaint alleges that during 2008, Defendants' churning generated total gross commissions of over $1 million, while the accounts of the fifteen customers suffered a combined loss of over $3.5 million. The Complaint alleges that the Defendants have violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Complaint seeks (1) preliminary injunctions against Aura and the four individual defendants still affiliated with it as registered representatives, Hardy, Bhavnagari, Malla, and Singh; (2) permanent injunctions against future violations; (3) disgorgement of ill-gotten gains with prejudgment interest; and (4) imposition of civil penalties. The Commission worked closely in this matter with the Alabama Securities Commission (ASC), which simultaneously issued an Amended Order to Show Cause against Aura and three of its senior officers. The ASC Order alleges that the firm and named officers violated their supervision and compliance responsibilities under the Alabama securities laws. The Commission additionally thanks the State of Florida Office of the Attorney General (Division of Economic Crimes) and the State of Wisconsin Department of Financial Institutions for their assistance in this matter. [SEC v. Aura Financial Services, Inc., Ronald E. Hardy, Jr., Peter C. Dunne, Qais R. Bhavnagari, Dipin Malla, Sandeep Singh, and Raymond Rapaglia, Civil Action No. 09-21592-CV-Moreno (S.D.Fl)] (LR-21081) SEC Obtains Emergency Relief Against Alleged Perpetrators of Prime Bank SchemeOn June 11, the Securities and Exchange Commission filed a civil action in the United States District Court for the Middle District of Florida against Morgan European Holdings ApS, a/k/a Money Talks, Inc. ApS (MEH), John Morgan, Marian Morgan, Bowman Marketing Group, Inc. (BMG), Stephen E. Bowman, and Thomas D. Woodcock, Jr., for soliciting investments in fictitious prime bank trading programs. MEH is based in Denmark and in Sarasota, Florida, where John Morgan and Marian Morgan also reside. BMG is located in Omaha, Nebraska, where Bowman resides. Woodcock is a resident of Rockwall, Texas. According to the Complaint, during 2006 and 2007, the defendants raised millions of dollars from investors to participate in a fictitious investment program involving the trading of financial instruments among top financial institutions. The defendants told investors that their principal was guaranteed or never placed at risk. However, the defendants used investor funds for various undisclosed purposes, including Bowman's gambling expenses, mortgage payments by the Morgans, and Ponzi payments to some investors. The SEC claims that John Morgan, Marian Morgan, and Stephen Bowman have continued to lull investors into remaining complacent by promising the imminent payment of their principal and returns. None of the relevant offerings was registered with the Commission, nor were any of the defendants registered as a broker-dealer or associated with a registered broker-dealer. The Complaint claims that, based on this conduct, all of the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Complaint also claims that John Morgan, Marian Morgan, Bowman, and Woodcock violated Exchange Act Section 15(a). On the Commission's motion, the Court issued a Temporary Restraining Order, Asset Freeze and Other Equitable Relief (Order) on June 11, 2009. Among other things, the Court's Order froze the assets of defendants John Morgan, Marian Morgan, MEH, Bowman, and BMG, wherever located, which are derived from, or reasonably traceable to, any investor funds. [SEC v. John S. Morgan, Marian I. Morgan, Morgan European Holdings ApS a/k/a Money Talks, Inc., ApS, Stephen E. Bowman, Bowman Marketing Group, Inc., and Thomas D. Woodcock, Jr., USDC, MDFL, Case 8:09-cv-01093-RAL-EAJ] (LR-21082) SEC Charges Penny Stock Company and Canadian Citizen With Illegal Stock Distribution Through Corporate SpinoffsThe Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of New York against penny stock company Blackout Media Corporation, formerly known as First Canadian American Holding Corporation (First Canadian), and its former principal Sandy Winick, a resident of Toronto, Canada. The SEC alleges that First Canadian and Winick engaged in a scheme to create publicly traded companies through illegal distribution of the securities of more than 50 First Canadian subsidiaries. The SEC's complaint alleges that from April 2002 to May 2004, First Canadian spun off 59 subsidiaries through unregistered distribution of their securities to shareholders. As alleged in the complaint, these spinoffs had no legitimate business purpose and were instead a means to create publicly traded companies without providing the disclosure required by registration. According to the complaint, while conducting the spinoffs, First Canadian never filed periodic reports with the Commission, and made no meaningful disclosure about the financial and business operations of First Canadian or any of the subsidiaries. The complaint alleges that while First Canadian "reported" the spinoffs on Forms 8-K and proxy statements on Schedule 14A, these filings failed to disclose the true nature of the spinoff transactions and that Winick had control over 16.5% of First Canadian's stock through his wife, his friends, and affiliated entities. The complaint further alleges that, as a result of the spinoffs, Winick assembled an inventory of public company shells for sale and later sold many of them. In addition, the complaint alleges that Winick traded in the shares of some of these companies and profited by at least $3.2 million from 2004 through 2007. The SEC's complaint charges Blackout Media and Winick with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 14(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 14a-9 thereunder. The complaint also charges Blackout Media with violating, and Winick with aiding and abetting violations of, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder; and Winick with violating Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1 and 16a-3 thereunder. The Commission seeks permanent injunctions and civil penalties against Blackout Media and Winick, and seeks from Winick an accounting, disgorgement, a penny stock bar, and the surrender of all stock he owns or controls in the companies spun off by First Canadian or their successors. Also today, the Commission filed an action in the Northern District of California alleging fraud and registration violations against one of the companies First Canadian spun off, Pearl Asian Mining Industries, Inc. (now known as ZNext Mining Corporation), and its principal, Elvira Gamboa (also known as Pearl Asian). (LR-21084) The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) and the Ontario Securities Commission. [SEC v. Blackout Media Corporation and Sandy Winick, United States District Court for the Southern District of New York, Civil Action No. 09 CV 5454 (GBD)] (LR-21083; AAE Rel. 2990) SEC Sues ZNext Mining and its Principal for Fraud and Registration ViolationsThe Securities and Exchange Commission today filed a complaint in the United States District Court for the Northern District of California against penny stock company ZNext Mining Corporation, Inc., formerly known as Pearl Asian Mining Industries (PAIM), and its principal, Elvira G. Gamboa. The SEC's complaint alleges that from as early as 2004 through 2008, Gamboa caused PAIM to issue numerous materially false and misleading press releases and other disclosures, which gave the impression that PAIM owned and operated a viable gold mining operation in the Philippines. In reality, as alleged in the complaint, PAIM was and currently is nothing but a shell used by Gamboa to generate stock sale profits, and any gold mining operations that do exist belong to a separate Philippine company of the same name owned almost entirely by Gamboa. The SEC's complaint further alleges that Gamboa issued the false and misleading disclosures to artificially sustain demand for PAIM stock. According to the complaint, from 2006 through March 2008, PAIM sold at least 1.9 billion shares of purportedly unrestricted PAIM stock to a penny stock promoter. Gamboa allegedly knew the buyer acquired PAIM shares for immediate resale and facilitated such resales by issuing stock certificates without restrictive legends and at times providing the buyer advance copies of PAIM press releases. The complaint alleges that Gamboa profited from her misconduct by at least $1 million through misappropriation of PAIM's stock sale proceeds and an arrangement to sell 1.5 billion of her PAIM shares through the company's investor relations officer. The SEC's complaint charges ZNext Mining and Gamboa with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks permanent injunctions and civil penalties from ZNext Mining and Gamboa, and seeks from Gamboa an accounting, disgorgement, a penny stock bar, and an order barring her from serving as an officer or director of any public company. PAIM was formerly a subsidiary of First Canadian American Holding Corporation, now known as Blackout Media Corporation, that was spun off in November 2003. Also today, the Commission sued Blackout Media and its former principal, Sandy Winick, in the Southern District of New York for illegal distribution of stock through such spinoffs. (LR-21083) The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) and the Philippine Securities and Exchange Commission. [SEC v. ZNext Mining Corporation, Inc. and Elvira G. Gamboa, United States District Court for the Northern District of California, Civil Action No. CV 09-2611 (VRW)] (LR-21084) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangesA proposed rule change filed by the Options Clearing Corporation (SR-OCC-2009-10) to change the definition of the term "Eligible Contracts" as used in the cross-margining agreement between OCC and the Chicago Mercantile Exchange Inc. and delete Exhibit A to that agreement has become effective pursuant to Section 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60063) A proposed rule change filed by NYSE Amex, (NYSEAmex-2009-22) implementing schedule of fees and charges for Exchange services has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60077) A proposed rule change filed by the International Securities Exchange relating to fee changes (SR-ISE-2009-33) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60087) A proposed rule change filed by New York Stock Exchange to adopt a fee for use of a hand held device configured to provide only opening and closing order imbalance data (SR-NYSE-2009-56) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60088) A proposed rule change filed by the Chicago Board Options Exchange, (SR-CBOE-2009-036) relating to the Options Regulatory Fee has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication of the proposal is expected to be made in the Federal Register during the week of June 15. (Rel. 34-60093) A proposed rule change filed by the NASDAQ Stock Market (SR-NASDAQ-2009-049) to amend the NASDAQ listing rules to reflect changes to the rules of the Commission has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60094) A proposed rule change filed by the Depository Trust Company (SR-DTC-2009-10) relating to replacing the Participant Inquiry Notification System with the new Web Inquiry Notification System has become immediately effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60096) Proposed Rule ChangesThe Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-030) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend Rules 6440 and 6540 to, among other things, require members to create a contemporaneous record of certain customer and order information. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60085) The Commission noticed a proposed rule change (SR-CHX-2009-02) submitted by the Chicago Stock Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the rejection of undisplayed odd-lot orders from the Exchange's Matching System. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60083) Approval of Proposed Rule ChangesThe Commission approved a proposed rule change (SR Phlx-2009-37) submitted under Rule 19b-4 by NASDAQ OMX PHLX relating to quoting requirements for Streaming Quote Traders, Remote Streaming Quote Traders, and specialists. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60084) The Commission approved a proposed rule change submitted by the Financial Industry Regulatory Authority, (SR-FINRA-2009-023) adopting FINRA Rule 2320 in the Consolidated FINRA Rulebook. Publication is expected in the Federal Register during the week of June 15. (Rel. 34-60086) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2009/dig061209.htm
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