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ENFORCEMENT PROCEEDINGSIn the Matter of Thrasher Capital Management, LLC and James PerkinsNovember 16, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 (Advisers Act) Making Findings, Imposing Remedial Sanctions and a Cease-and-Desist Order (Order). The Order finds that Thrasher Capital Management, LLC (Thrasher) willfully violated Sections 204(a) and 207 of the Advisers Act and that James Perkins (Perkins) willfully aided and abetted and caused Thrasher's violations of Sections 204(a) and 207 of the Advisers Act. Based on the above, the Order requires Thrasher and Perkins to cease and desist from committing or causing any violations or future violations of Sections 204(a) and 207 of the Advisers Act, suspends Perkins from association with any investment adviser for a period of nine months, effective on the second Monday following the entry of this Order, and revokes Thrasher's registration as an investment adviser. The Commission is not imposing a monetary penalty against Perkins based on his inability to pay, consistent with Perkins' sworn financial statement. Thrasher and Perkins consented to the issuance of the Order without admitting or denying any of the findings of the Order. (Rel. IA-3108; File No. 3-14124) In the Matter of The Buckingham Research Group, Inc., Buckingham Capital Management, Inc., and Lloyd R. KarpOn November 17, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order). The Order finds that Buckingham Capital Management, Inc. (BCM), a registered investment adviser, and its registered broker dealer parent, The Buckingham Research Group, Inc. (BRG), failed to have adequate policies and procedures to protect material nonpublic information, including forthcoming research and pending customer and portfolio trades, and that their chief compliance officer, Lloyd Karp, aided and abetted and caused those failures. The Order also finds that, while preparing for a 2006 examination by Commission staff, BCM discovered that it was missing pre-approval forms for more than 100 employee trades. However, instead of producing the incomplete employee trading records to the exam staff, BCM altered the records produced by creating and adding forms, and produced the existing records along with the added forms to the Commission examination staff without disclosing that the records had been altered. In addition, BCM discovered that its compliance review logs for 2005 and 2006 were incomplete. Instead of producing the incomplete compliance logs, BCM staff altered the firm's records by replacing the incomplete logs with newly-created ones. The SEC found that BCM then produced the newly created replacement logs to the Commission examination staff without disclosing what had been done. Without admitting or denying the findings in the Commission's order, BRG agreed to pay a penalty of $50,000, BCM agreed to pay a penalty of $75,000, and Karp agreed to pay a penalty of $35,000. The respondents consented to an order that: censures all of the respondents; requires BRG to cease and desist from committing or causing any violations or future violations of Section 15(f) of the Securities Exchange Act of 1934; requires BCM to cease and desist from committing or causing any violations and any future violations of Sections 204(a), 204A and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder; and requires Karp to cease and desist from causing any violations and any future violations of Section 15(f) of the Exchange Act and Sections 204A and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. The order also requires that both firms engage an independent consultant to review and make recommendations regarding their policies and procedures. (Rels. 34-63323; IA-3109; File No. 3-14125) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Three Public Companies for Failure to Make Required Periodic FilingsOn November 17, 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 three companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the three 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 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. 34-63326; File No. 3-14126) Securities and Exchange Commission Orders Hearing on Registration Revocation Against Two Public Companies for Failure to Make Required Periodic FilingsOn November 17, 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 two companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that the two 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 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. 34-63327; File No. 3-14127) In the Matter of Walter W. KnitterOn November 17, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against Walter W. Knitter. The Order finds that on October 29, 2010, a final judgment was entered by consent against Knitter permanently enjoining him from future violations of the antifraud and registration provisions of the federal securities laws in United States Securities and Exchange Commission v. Integrity Financial AZ, LLC, et al., Civil Action No. 1:10-CV-00782, filed in the United States District Court for the Northern District of Ohio. The Commission's complaint in that action alleged that Knitter, who is based in Chicago and who was working for Integrity Financial AZ, LLC, promoted an unregistered offering of securities in the form of promissory notes purportedly secured by real estate in Arizona. The complaint further alleged that Knitter and the other defendants made multiple fraudulent misrepresentations regarding the safety of the investment, including telling prospective investors that 100% of investor funds would be used to build houses in Tonopah, Arizona and that the investment was "FDIC insured." Based on the above, the Order bars Knitter from association with any broker or dealer. Knitter consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-63328; File No. 3-14128) SEC v. Scott M. RossThe Commission announced that on Nov. 2, 2010, the United States Attorney's Office for the Northern District of Illinois filed a criminal information against Scott M. Ross, charging him with 3 counts of mail fraud in connection with his role in an investment fraud scheme. U.S. v. Scott M. Ross, Criminal Action No. 10-cr-0925 (N.D. Ill.). Ross is accused of misusing money he raised from investors for his own benefit - including paying himself a $319,000 salary and purchasing a $70,000-per-year sky box at the stadium of the Indianapolis Colts - and also to make Ponzi-type payments to certain investors. The criminal investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The United States Attorney's Office acknowledged the assistance of the Commission in the investigation conducted by the Federal Bureau of Investigation. Previously, on Feb. 3, 2009, the Commission filed a civil injunctive complaint against Ross based upon admissions Ross made to the Commission's staff. The Commission's complaint alleged that, after raising at least $10 million from approximately 300 investors, Ross misappropriated investors' money, took undisclosed commissions, and used investors' money from one fund to pay returns to investors in another fund. On the same day that the Commission sued Ross, the court entered a Partial Final Judgment and Order of Permanent Injunction, Asset Freeze and Other Relief, which permanently enjoined Ross from future violations of Sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. [SEC v. Scott M. Ross, Civil Action No. 1:09-cv-00683 (N.D. Ill.) (Zagel, J.)] (LR-21744) Former CEO of Kmart Ordered to Pay $5.5 MillionThe Commission announced today that on Nov. 15, 2010, the United States District Court for the Eastern District of Michigan entered an Amended Final Judgment against Charles C. Conaway, the former Chief Executive Officer of Kmart Corporation, ordering that he pay disgorgement of $3 million, representing part of a retention loan paid to him by Kmart, and a civil penalty of $2.5 million. On Aug. 23, 2005, the Commission charged Conaway with misleading investors about Kmart's financial condition in the months preceding the company's bankruptcy. On June 1, 2009, a jury returned a verdict in the SEC's favor on all charges following a three-week trial in Ann Arbor, Michigan, before Magistrate Judge Steven D. Pepe. On March 3, 2010, the court ordered Conaway to pay disgorgement in the amount of $5 million, together with prejudgment interest thereon in the amount of $2.85 million, and a civil penalty of $2.5 million. The Amended Final Judgment represents a compromise of that judgment reached while Conaway's case was on appeal. For additional information, see Litigation Release Nos. 21745 (Nov. 17, 2010); 21438 (Mar. 5, 2010), 21065 (June 1, 2009), and 19344 (Aug. 23, 2005). [SEC v. Charles C. Conaway and John T. McDonald, Jr., 05 Civ. 40263 (E.D. Michigan)] (LR-21745) SEC Obtains Permanent Injunctions Against Sorenson and Brost in Merendon Mining Ponzi SchemeOn November 12, the U.S. District Court Western District of Washington entered a default judgment, asset freeze, and permanent injunction against defendants Gary Sorenson and Milowe Brost, of Calgary, Alberta, Canada, enjoining them Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and ordering them to pay disgorgement of over $210 million obtained from operating a Ponzi scheme and a civil penalty of $100 million jointly and severally. The court barred Sorenson and Brost from serving as officers or directors of public companies. On August 30, 2010, the court permanently enjoined Bradley Regier of Calgary, from violating Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, and barred him from serving as an officer or director of a public company. The court also entered default judgment against nominal defendant Thelma Sorenson, the wife of Gary Sorenson, ordering her to pay disgorgement of $959,560 received out of proceeds from the fraudulent conduct. Final judgments against these defendants will be entered at a later date. Pending determination of the case on the merits, the court also entered preliminary injunctions against the corporate defendants, Merendon Mining (Nevada), Inc., Syndicated Gold Depository Inc., Institute For Financial Group of Companies, Inc. (IFFL) and Merendon Mining Corporation Ltd., and against individual defendants, Larry Lee Adair and Martin M. Werner, both Florida attorneys, and Ward K. Capstick, a resident of Seattle, Washington, preliminarily enjoining all of them from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5, and also enjoining IFFL and Capstick from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act. The SEC's complaint alleged that Brost and Sorenson were the primary architects and beneficiaries of a Ponzi scheme that persuaded more than 3,000 investors across the U.S. and Canada to invest. Brost and his sales team presented themselves as an independent financial education firm operating under the name IFFL that had discovered profitable investment opportunities with companies involved in gold mining. They held seminars where they promised investors could earn 18 to 36 percent annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold. The complaint alleged that unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson. Investors' funds were transferred through numerous bank accounts, and then used to make fictitious "interest payments" to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme. A trial has been set to begin June 4, 2012 to resolve issues remaining in the case. [SEC v. Merendon Mining (Nevada) Inc., Larry Lee Adair, Milowe Allen Brost a/k/a Milo Brost, M.B. Gonne or Phillip K. Collins, Ward K. Capstick, Bradley Dean Regier, Gary Allen Sorenson a/k/a Don Grey Fox, Martin M. Werner, Syndicated Gold Depository Inc., now known as Bahama Resources Alliance Ltd., Merendon Mining Corp. Ltd., Institute For Financial Learning Group of Companies, Inc. [Case 2:10-cv-00955]] (LR-21746) SEC Charges Operator of Diamond Themed Ponzi SchemeOn November 16, the Securities and Exchange Commission filed an emergency civil action in the United States District Court for the District of Colorado against Richard Dalton and Universal Consulting Resources LLC (UCR) in connection with a Ponzi scheme. The Commission is also seeking an order to freeze the assets of Dalton's wife, Marie Dalton, who is named as a relief defendant. The Commission alleges that from about March 2007 through about June 2010, the Ponzi scheme raised approximately $17 million from 130 investors in 13 states. Dalton and his company, UCR, solicited investors for two fraudulent offerings that were generally referred to as the "Trading Program" and the "Diamond Program" and promised returns of between 60% to 120% per year. The Commission alleges that investors in both programs received monthly payments which Dalton told them were profits from successful trading. However, the majority of funds that came into UCR bank accounts were from new investors, not from any actual profit-generating activity. The complaint alleges that Dalton, who had no other employment or legitimate source of income, funded his personal life at the expense of investors and also transferred more than $900,000 in order to purchase a home in the name of his wife. The SEC's complaint alleges that Dalton and UCR violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also names Marie Dalton as a relief defendant in order to recover investor assets now in her possession. In addition to seeking an immediate asset freeze and temporary restraining order, the SEC will also seek permanent injunctions, disgorgement plus pre-judgment interest, and financial penalties against Dalton and UCR, and disgorgement from Marie Dalton. [SEC v. Richard Dalton and Universal Consulting Resources LLC, Defendants, and Marie Dalton, Relief Defendant, Civil Action No. 10-CV-02794-JLK-KLM (D. Colo.)] (LR-21747) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig111710.htm
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