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COMMISSION ANNOUNCEMENTSSEC Charges Alcatel-Lucent With FCPA ViolationsCompany to Pay More Than $137 Million to Settle SEC and DOJ ChargesThe Securities and Exchange Commission today charged Paris-based telecommunications company Alcatel-Lucent, S.A. with violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to foreign government officials to illicitly win business in Latin America and Asia. The SEC alleges that Alcatel’s subsidiaries used consultants who performed little or no legitimate work to funnel more than $8 million in bribes to government officials in order to obtain or retain lucrative telecommunications contracts and other contracts. Alcatel agreed to pay more than $45 million to settle the SEC’s charges, and pay an additional $92 million to settle criminal charges announced today by the U.S. Department of Justice. “Alcatel and its subsidiaries failed to detect or investigate numerous red flags suggesting their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Alcatel’s bribery scheme was the product of a lax corporate control environment at the company.” Glenn S. Gordon, Associate Director for Enforcement in the SEC’s Miami Regional Office, added, “The serious sanctions Alcatel has agreed to, including paying back all net profits made on the contracts Alcatel illegally obtained, should serve as a reminder that we are committed to enforcing the FCPA and a level playing field for companies seeking to obtain or retain business in other countries.” According to the SEC’s complaint filed in the Southern District of Florida, Alcatel’s bribes went to government officials in Costa Rica, Honduras, Malaysia, and Taiwan between December 2001 and June 2006. An Alcatel subsidiary provided at least $14.5 million to consulting firms through sham consulting agreements for use in the bribery scheme in Costa Rica. Various high-level government officials in Costa Rica received at least $7 million of the $14.5 million to ensure Alcatel obtained or retained three contracts to provide telephone services in Costa Rica. The SEC alleges that the same Alcatel subsidiary bribed officials in the government of Honduras to obtain or retain five telecommunications contracts. Another Alcatel subsidiary made bribery payments to Malaysian government officials in order to procure a telecommunications contract. An Alcatel subsidiary also made illegal payments to various officials in the government of Taiwan to win a contract to supply railway axle counters to the Taiwan Railway Administration. According to the SEC’s complaint, all of the bribery payments were undocumented or improperly recorded as consulting fees in the books of Alcatel’s subsidiaries and then consolidated into Alcatel’s financial statements. The leaders of several Alcatel subsidiaries and geographical regions, including some who reported directly to Alcatel’s executive committee, either knew or were severely reckless in not knowing about the misconduct. The SEC’s complaint charges that Alcatel violated Section 30A of the Securities Exchange Act of 1934 by making illicit payments to foreign government officials, through its subsidiaries and agents, in order to obtain or retain business. Alcatel violated Section 13(b)(2)(B) of the Exchange Act by failing to have adequate internal controls to detect and prevent the payments. Alcatel violated Section 13(b)(2)(A) of the Exchange Act by improperly recording the payments in its books and records. Alcatel violated Section 13(b)(5) of the Exchange Act when its subsidiaries knowingly failed to implement a system of internal controls and knowingly falsified their books and records to camouflage bribes as consulting payments. Without admitting or denying the SEC’s allegations, Alcatel has consented to a court order permanently enjoining it from future violations of these statutory provisions; ordering the company to pay $45.372 million in disgorgement of wrongfully obtained profits, and ordering it to comply with certain undertakings including an independent monitor for a three-year term. The settlement is subject to court approval. The SEC’s case was investigated by Ernesto Palacios and Thierry Olivier Desmet of the Division of Enforcement’s FCPA Unit and by Teresa J. Verges and Fernando Torres – all of the Miami Regional Office. The SEC acknowledges and appreciates assistance from the U.S. Department of Justice, Fraud Section; the Federal Bureau of Investigation; the Office of the Attorney General in Costa Rica, the Fiscalía de Delitos Económicos, Corrupción y Tributarios in Costa Rica; and the Service Central de Prévention de la Corruption in France. For more information about this enforcement action, contact: Glenn S. Gordon, Associate Director
(Press Rel. 2010-258) ENFORCEMENT PROCEEDINGSIn the Matter of Barry SchwartzOn Dec. 23, 2010, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Barry Schwartz (Schwartz). The Order finds that between 1993 and 1995, Schwartz was a registered representative with Barrett Day Securities, Inc. (Barrett Day), a broker-dealer registered with the Commission. The Order further finds that, on Dec. 10, 2003, Schwartz pled guilty to conspiracy to commit securities fraud in violation of Title 18 United States Code, Section 371, and conspiracy to commit money laundering in violation of Title 18, United States Code, Section 1956, before the United States District Court for the Eastern District of New York, in US v. Barry Schwartz, et al., Crim. Information No. 03-CR-290. The counts of the criminal indictment to which Schwartz pled guilty alleged, inter alia, that Schwartz, while associated with Barrett Day, used nominees to conceal his ownership of National Health and Safety (National Health) and Tera West Ventures, Inc. (Tera West), whose stocks were traded on the OTC Bulletin Board. The indictment alleged that Schwartz used his controlling interest in National Health and Tera West to arbitrarily set their stock prices and deceived the investing public by making it appear that the sales price was set by a market of multiple, independent shareholders selling their shares of National Health and Tera West. On May 15, 2009, a judgment in the criminal case was entered against Schwartz. Schwartz was sentenced to a prison term of 18 months followed by three years of supervised release. Schwartz also forfeited a total of $1,276,552. Based on the above, the Order bars Schwartz from association with any broker or dealer, and from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock. Schwartz consented to the issuance of the Order without admitting or denying any of the findings in the Order, except with respect to the findings that on Dec. 10, 2003, Schwartz pled guilty to conspiracy to commit securities fraud in violation of Title 18 United States Code, Section 371, and conspiracy to commit money laundering in violation of Title 18, United States Code, Section 1956, before the United States District Court for the Eastern District of New York, in United States v. Barry Schwartz, et al., Crim. Information No. 03-CR-290. (Rel. 34-63608; File No. 3-14102) Court Enters Final Judgment Against Bulverde, Texas Resident George “Lin” PhelpsThe Securities and Exchange Commission announced today that on Dec. 21, 2010, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Bulverde, Texas resident George L. Phelps (Phelps), also known as “Lin” Phelps and also doing business under the name “Safe Estate Plans.” The final judgment: (1) enjoined Phelps from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 promulgated thereunder; (2) ordered Phelps to pay disgorgement in the amount of $2,002,766.66, plus prejudgment interest of $919,732.93, for a total of $2,922,499.59; and (3) ordered Phelps to pay a civil penalty in the amount of $120,000. The SEC’s complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Phelps, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC’s complaint alleges that from 1999 until 2005, Kelly and others, including Phelps, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Phelps, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme, its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Phelps, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC’s action against the remaining defendants is pending. For further information, see Litigation Release Nos. 20267 (Sept. 5, 2007), 20573 (May 14, 2008) , 20578 (May 15, 2008), 20579 (May 15, 2008), 20664 (July 31, 2008), 20679 (Aug. 12, 2008), 20708 (Sept. 9, 2008); 20709 (Sept. 9, 2008), 20799 (Nov. 6, 2008), 21003 (April 15, 2009) and 21481 (April 8, 2010); 21583 (June 29, 2010); 21620 (Aug. 6, 2010); [SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois] (LR-21793) Court Freezes Assets Linked to Suspicious Securities Purchases Ahead of EU Committee for Medicinal Products for Human Use Recommendation Regarding InterMune, Inc. Drug EsbrietOn Dec. 23, 2010, the U.S. District Court for the Southern District of New York entered a Temporary Restraining Order freezing assets and trading proceeds of certain One of More Unknown Purchasers of Options of InterMune, Inc. (Unknown Purchasers) and prohibiting the Unknown Purchasers from disposing of the options or any proceeds from the sale of the options. The Commission filed a complaint alleging that the Unknown Purchasers engaged in illegal insider trading in call options of InterMune between December 7 and Dec. 13, 2010, prior to the public announcement on December 17 that one of InterMune’s development drugs, Esbriet, had been recommended for approval by the European Union’s Committee for Medicinal Products for Human Use (CHMP). InterMune is a biotechnology company headquartered in Brisbane, California focused on developing and commercializing innovative therapies in pulmonology and hepatology. Its common stock is listed on The NASDAQ Stock Market (symbol: ITMN). The options at issue traded on the Chicago Board Options Exchange and the Philadelphia Stock Exchange. The Commission’s complaint alleges that the Unknown Purchasers, through their insider trading, violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties. The Complaint alleges that the Unknown Purchasers bought a total of 637 call options contracts. According to the Complaint, the purchases on December 7 and 8, 2010 of four hundred of the option contracts cleared through UBS Securities LLC and the option contracts are currently held by UBS Securities LLC or UBS Securities Ltd. The Complaint further alleges that the options purchased comprised 100% and 57.2%, respectively, of the volume of transactions in the options series over these two days of trading. According to the Complaint, the purchases on Dec. 13, 2010 of the remaining 237 options contracts cleared through Barclays Capital in New York and the options contracts are currently held by Barclays Capital. The Complaint further alleges that the options purchased comprised approximately 66% of the volume in the series over that day’s trading. The Complaint alleges that, after the announcement of CHMP’s recommendation, the price of InterMune’s stock rose materially, approximately 144%, and the prices of the InterMune options at issue increased by as much as 466%. The Complaint further alleges that, as a result, the Defendant Unknown Purchasers were in a position to realize total profits of approximately $912,000 from the sale of their calls following the announcement. [SEC v. One or More Unknown Purchasers of Options of InterMune, Inc., 10 Civ. 9560 (GBD) (S.D.N.Y.)] (LR-21794) SELF-REGULATORY ORGANIZATIONSImmediate Effectiveness of Proposed Rule ChangeA proposed rule change filed by NASDAQ OMX PHLX to revise its floor qualification examination (SR-PHLX-2010-180) 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 December 27. (34-63603) Proposed Rule ChangeThe National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2010-18) under Section 19(b)(1) of the Securities Exchange Act of 1934 that would expand NSCC’s Insurance and Retirement Processing Service by providing a new Analytics Reporting Service in order to provide greater transparency to the insurance market. Publication is expected in the Federal Register during the week of December 27. (34-63604) Approval of Proposed Rule ChangeThe Commission has approved a proposed rule change filed by The Nasdaq Stock Market (SR-NASDAQ-2010-137) to provide special purpose acquisition companies the option to hold a tender offer in lieu of a shareholder vote on a proposed acquisition and other changes to the SPAC listing standards, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 27. (Rel. 34-63607) SECURITIES ACT REGISTRATIONSRECENT 8K FILINGS
http://www.sec.gov/news/digest/2010/dig122710.htm
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