 |
Home | Previous Page | |
|
||
 |
|
|
|
||
 |
|
|
|
|
|||||||||||||||
|
|
|||||||||||||||
|
|
COMMISSION ANNOUNCEMENTSSEC Charges Private Equity Firm and Money Manager for Defrauding Detroit-Area Public Pension FundsThe Securities and Exchange Commission today charged a private equity firm, a money manager and his friend with participating in a fraudulent scheme through which they stole more than $3 million invested by three Detroit-area public pension funds. The SEC alleges that Detroit-based Onyx Capital Advisors LLC and its founder Roy Dixon, Jr., raised $23.8 million from the three pension funds for a start-up private equity fund created to invest in small and medium-sized private companies. Often to cover overdrafts in his bank accounts, Dixon illegally withdrew money invested by the pension funds from the bank accounts of the private equity fund. Assisting in the scheme was Dixon's friend Michael A. Farr, who controls three companies in which the Onyx fund invested millions of dollars. Farr diverted money invested in these entities to another company he owned, withdrew the money from that bank account, and gave the cash to Dixon. Farr also kept some money for himself, and used investor funds to make payments to contractors building a multi-million dollar house for Dixon, who lives primarily in Atlanta. The SEC's complaint, filed in federal district court in Detroit, also alleges that Dixon and Onyx Capital made a number of false and misleading statements to defraud the three pension funds about the private equity fund and the investments they were making. "These public pension funds provided seed capital to the Onyx fund, and Dixon betrayed their trust by stealing their money," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "Farr assisted Dixon by making large bank withdrawals of money ostensibly invested in Farr's companies, and together they treated the pension funds' investments as their own pot of cash." According to the SEC's complaint, shortly after the three pension funds made their first contributions to the Onyx fund in early 2007, Dixon and Onyx Capital began illegally siphoning money. Dixon and Onyx Capital took more than $2.06 million under the guise of management fees, and Farr assisted in diverting approximately $1.05 million through the Onyx fund's purported investments in companies Farr controlled. Dixon used the money to pay personal and business expenses, including construction of his house in Atlanta and mortgage payments on more than 40 rental properties Dixon owns in Detroit and Pontiac, Mich. Under the partnership agreement for the Onyx fund, Onyx Capital was entitled to receive an annual management fee of 2 percent of the committed capital within the fund, or $500,000 per year, payable on a quarterly basis. The SEC alleges that instead of deducting management fees on a quarterly basis, Dixon withdrew money whenever he desired from the Onyx fund's bank accounts under his control. According to the SEC's complaint, Onyx Capital invested more than $15 million from the Onyx fund in three related entities controlled by Farr - Second Chance Motors, SCM Credit LLC, and SCM Finance LLC. Farr diverted a portion of the pension fund investments in Farr's companies to 1097 Sea Jay LLC, another entity that Farr controlled. Farr then withdrew large sums of cash and provided most of it to Dixon while retaining at least $229,000 for his own benefit. Farr also used Sea Jay's bank accounts to make at least $522,000 in payments to construction companies performing work on Dixon's house in Atlanta. The SEC further alleges that Dixon and Onyx Capital made numerous false and misleading statements to Onyx Capital's public pension fund clients. For example, one pension fund had concerns about Dixon's inexperience in private equity. To allay the concerns and ultimately convince the pension fund to fund the investment, Dixon sent a letter falsely stating that a purported joint owner of Onyx Capital with substantial experience evaluating private equity investments would devote all of his efforts to the Onyx fund. The letter contained a forged signature of that individual, who had reviewed certain investment opportunities for the Onyx fund during his spare time, but has never owned or been employed by Onyx Capital. He instead had been working full-time for another company since 1996. As alleged in the SEC's complaint, Dixon and Onyx Capital violated and Farr aided and abetted violations of the antifraud provisions of the federal securities laws. The SEC is seeking a court order for emergency relief, including temporary restraining orders, asset freezes and accountings. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains and financial penalties. This case was investigated by Jedediah B. Forkner, Edward W. Holland, Tina Diamantopoulos, Paul N. Mensheha and Anne C. McKinley. John J. Sikora, Jr., an Assistant Director in the Asset Management Unit of the SEC's Enforcement Division, also participated in the investigation. (Press Rel. 2010-64) Commission MeetingsClosed Meeting on Thursday, April 29, 2010 at 2:00 p.m.The subject matter of the Closed Meeting scheduled for Thursday, April 29, 2010, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; and other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400. ENFORCEMENT PROCEEDINGSCommission Revokes Registration of Securities of Guinness Telli-Phone Corp. for Failure to Make Required Periodic FilingsOn April 22, 2010, the Commission revoked the registration of each class of registered securities of Guinness Telli-Phone Corp. (TELI) for failure to make required periodic filings with the Commission. Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, TELI consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Guinness Telli-Phone Corp. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of TELI's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against TELI in In the Matter of AB Liquidating Corp. (f/k/a Adaptive Broadband Corp.), et al., Administrative Proceeding File No. 3-13844. Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows: No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . . For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of AB Liquidating Corp. (f/k/a Adaptive Broadband Corp.), et al., Administrative Proceeding File No. 3-13844, Exchange Act Release No. 61836 (April 5, 2010). (Rel. 34-61956; File No. 3-13844) Commission Revokes Registration of Securities of Universal Beverages Holdings Corp. for Failure to Make Required Periodic FilingsOn April 22, 2010, the Commission revoked the registration of each class of registered securities of Universal Beverages Holdings Corp. (UVBV) for failure to make required periodic filings with the Commission. Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, UVBV consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Universal Beverages Holdings Corp. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of UVBV's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against UVBV in In the Matter of Corridor Communications Corp., et al., Administrative Proceeding File No. 3-13805. Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows: No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . . For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Corridor Communications Corp., et al., Administrative Proceeding File No. 3-13805, Exchange Act Release No. 61638 (March 3, 2010). (Rel. 34-61957; File No. 3-13805) District Court Enters Permanent Injunction and Other Relief Against Defendant Richard KarpThe Commission announced that on April 20, 2010, the United States District Court for the Middle District of Florida entered a Final Judgment of Permanent Injunction and Other Relief against Defendant Richard Karp. The final judgment enjoins Karp from violating Section 17(a) of the Securities Act of 1933 and Sections 9(a)(4) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to injunctive relief, the Court ordered Karp to pay disgorgement of $27,966, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest in the amount of $1,991, and a civil penalty in the amount of $27,966. Karp consented to the entry of the final judgment without admitting or denying any of the allegations in the Commission's complaint. The Commission filed a complaint against Karp on May 20, 2009, alleging violations of the anti fraud and anti manipulation provisions of the federal securities laws in connection with offering and selling the stock of WCI Communities, Inc. (WCI), a Southwest Florida homebuilder. The Commission alleged that Karp wrote and disseminated a fake press release that, when reported in the media, caused WCI's stock price to soar and allowed Karp to reap thousands of dollars in illicit profits. Karp allegedly created the phony press release as an announcement from WCI and faxed it to media outlets in an effort to manipulate the stock price of WCI, whose stock was traded on the New York Stock Exchange. The bogus press release falsely stated that WCI's board of directors had received a buyout offer potentially worth $220 million. [SEC v. Richard Karp, Case No. 02-09-cv-332-FtM-29DNF (M.D. Fla.)] (LR-21496) SEC Charges Chicago-Area Investment Adviser for Fraudulent Operation of Hedge FundThe Securities and Exchange Commission today announced that it has obtained a preliminary injunction against Paridon Capital Management LLC, an investment adviser, and its principal Jeffrey R. Neufeld, both of Elgin, IL. In its complaint, the SEC charged Paridon and Neufeld with fraudulently operating the TCM Global Strategy Fund, a hedge fund, since 2006. According to the complaint, Paridon and Neufeld, age 35, reported false and fictitious rates of return to prospective and actual investors. From the inception of the hedge fund, Paridon and Neufeld reported inflated returns as well as returns that were generated by "paper" trading in a model portfolio rather than by actual trading. The complaint alleges that Paridon and Neufeld reported these returns, as well as inflated figures for assets under management, in connection with offering and selling interests in the TCM Global Strategy Fund. Although the fund had total investments of $250,000, Neufeld and Paridon at one point claimed assets of $1.07 million. Investors in the fund also received false performance data in monthly and quarterly statements. In addition, according to the complaint, Paridon and Neufeld caused the fund to use a significant portion of its investor funds to purchase alleged "debt securities" issued by Paridon. These "debt securities" were not permitted investments for the fund according to its offering documents, were not properly disclosed and consented to by the fund, and were improperly marked up by Paridon and Neufeld to offset certain trading losses. The Honorable John F. Grady, United States District Judge in the Northern District of Illinois, entered a preliminary injunction which prevents Paridon and Neufeld from violating certain provisions of the securities laws, orders the preservation of documents, and requires Paridon and Neufeld to fully assist the Commission in performing an accounting of the TCM Global Fund and any other funds created or controlled by the defendants, including the Paridon Currency Fund, LP. Paridon and Neufeld consented to entry of the relief. The SEC's complaint charges Paridon and Neufeld with violating 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 (Exchange Act) and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(3) of the Investment Advisers Act of 1940 (Advisers Act) as well as Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. In addition to the preliminary relief, the SEC's complaint seeks permanent injunctions, disgorgement, prejudgment interest, and financial penalties against all defendants. [SEC v. Jeffrey R. Neufeld and Paridon Capital Management LLC f/k/a Tritone Capital Management, LLC, United States District Court for the Northern District of Illinois, Case No. 10-cv-02399] (LR-21497) INVESTMENT COMPANY ACT RELEASESRMR Real Estate Income Fund, et al.An order has been issued on an application filed by RMR Real Estate Income Fund, et al. under Section 6(c) of the Investment Company Act of 1940 (Act) for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order permits certain registered closed-end management investment companies to make periodic distributions of long-term capital gains (i) with respect to their common stock as part of a managed distribution plan as frequently as twelve times each year, and (ii) with respect to their preferred stock as frequently as required by the terms of such preferred stock. (Rel. IC-29213 - April 20) Orders of Deregistration Under the Investment Company ActOrders have been issued under Section 8(f) of the Investment Company Act declaring that each of the following has ceased to be an investment company:
Legg Mason Partners Equity Trust, et al.An order has been issued on an application filed by Legg Mason Partners Equity Trust, et al., under Section 12(d)(1)(J) of the Investment Company Act for an exemption from Sections 12(d)(1)(A) and (B) of the Act, and under Sections 6(c) and 17(b) of the Act for an exemption from Section 17(a) of the Act. The order permits certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies. (Rel. IC-29255 - April 21) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangeA proposed rule change filed by Chicago Board Options Exchange (SR-CBOE-2010-032) to remove a feature and revise outdated text regarding certain execution rules 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 April 26. (Rel. 34-61946) Approval of Proposed Rule ChangeThe Securities and Exchange Commission has issued an order approving a proposed rule change (SR-NYSE-2010-018) filed by the New York Stock Exchange to amend the By-laws of NYSE Euronext. Publication is expected in the Federal Register during the week of April 26. (Rel. 34-61947) Withdrawal of Proposed Rule ChangeThe Commission issued notice of withdrawal of a proposed rule change (SR-NYSEArca-2010-07) submitted by NYSE Arca pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, relating to listing of AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF. Publication is expected in the Federal Register during the week of April 26. (Rel. 34-61953) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig042210.htm
|