News Archives - Page 4 of 4 - The Law Offices of Jeff Petersen

CREDIT SUISSE AGREES TO PAY $90 MILLION PENALTY TO SEC

The SEC announced today that Credit Suisse AG agreed to pay a $90 million penalty and admit wrongdoing to settle charges of misrepresenting how it determined a key performance metric in its wealth management business. In addition, a former executive of Credit Suisse agreed to settle charges that he was a cause of the violations.

Failure to Disclose Methodology

The SEC alleged that its investigation found Credit Suisse strayed from its publicly disclosed methodology as to how it determined net new assets (NNA), the typical metric utilized by investors in financial institutions to measure success in attracting new business. Disclosures stated that Credit Suisse would individually assess assets based on each client’s intentions and objectives. But Credit Suisse instead at certain times utilized an undisclosed results-driven approach to determining NNA so that it could hit certain goals established by senior management.

Who’s Responsible?

The SEC charged that Rolf Bögli, who served as chief operating officer of the firm’s private banking division, pressured employees to classify certain high net worth client assets as NNA despite concerns raised by employees with knowledge about a particular client’s intent.

The SEC’s orders state that Credit Suisse violated Section 17(a)(2) and (3) of the Securities Act of 1933 and Section 13(a) and (b)(2)(A) of the Securities Exchange Act of 1934 and Rules 13a-1, 13a-16, and 12b-20. Bögli agreed to pay a monetary penalty, but neither admitted nor denied the SEC’s findings that he caused certain of the violations.

The SEC’s press release can be found here:

https://www.sec.gov/news/pressrelease/2016-210.html

SEC CHARGES OIL & GAS COMPANY WITH WIDESPREAD SECURITIES FRAUD

September 30, 2016/in News /by The Law Offices of Jeff Petersen Team

Aegis Oil, LLC and its CEO and President were charged by the SEC with widespread securities fraud in offering $35 million in unregistered stock to 250 investors across the country.

Misinterpretation Leads To Fraud

The SEC alleged that Aegis made oral and written misrepresentations about the use of the proceeds and the projected production of oil and income from the investment.

Aegis and its CEO agreed to settle the charges against them without admission of wrongdoing, consenting to a final judgment enjoining future violations, with Aegis agreeing to disgorgement of approximately $35 million, prejudgment interest of nearly $6 million and a civil penalty of $775,000.

The SEC’s press release can be found at the following link:

https://www.sec.gov/litigation/litreleases/2016/lr23663.htm

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a host of securities matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

BOFA AGREES TO $15.5 MILLION IN PENALTIES FOR MERRILL LYNCH “MINI FLASH CRASHES”

September 26, 2016/in News /by The Law Offices of Jeff Petersen Team

Bank of America agreed to pay a $12.5 million penalty to the SEC for its Merrill Lynch unit’s asserted failure to maintain effective trading controls and prevent erroneous orders that caused mini crashes, as well as agreeing to pay $3 million in fines to several exchanges, including the NYSE and NASDAQ, for the same purported failures.

Repetitive Violations Leading To Stock Failure

The SEC penalty was for alleged violations of the market access rule by Merrill Lynch from 2012 to the middle of 2014 on at least 15 occasions. The SEC said that Merrill’s internal controls in place to prevent erroneous or excessive trading orders were set at levels so high that they were ineffective.

How Do Those Numbers Work?

For example, the SEC said that Merrill Lynch applied a limit of 5 million shares per order for one stock that only traded around 79,000 shares a day, and had limits as high as 25 million shares, which were reduced to 50,000 shares after the SEC’s investigation began.

One notable crash involved Andarko Petroleum Corp. in 2013, which incurred a 99% drop, briefly losing $45 billion in market value before recovering.

The SEC penalty is the largest one ever imposed for violation of market access rules.

The SEC’s press release on the matter can be found at the below link:

https://www.sec.gov/news/pressrelease/2016-192.html

Jeff Petersen is an attorney licensed in California and Illinois who represents clients in a wide variety of SEC proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

SAN DIEGO ADVISER RAYMOND LUCIA ASKS FOR REHEARING ON CHALLENGE TO SEC IN-HOUSE COURTS

September 24, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

Last month, San Diego-based investment adviser Raymond Lucia suffered a rejection by a panel of the U.S. Court of Appeals for the District of Columbia Circuit of his request that the court consider his challenge to the constitutionality of the SEC’s use of in-house courts.

SEC v. Adviser

Lucia, a well-known investment adviser with a long career, was charged by the SEC with conducting misleading investment seminars that promoted a “buckets of money” investing strategy that was purportedly supported by empirical testing, when no such reliable testing had been done. The SEC proceeding resulted in what Lucia’s own attorneys described as a “career-ending lifetime industry bar”.

The basis for Lucia’s challenge, rejected by the panel, was that the SEC’s selection of administrative law judges violated the Appointments Clause of the Constitution. Lucia today petitioned the court for a rehearing on the matter before all judges of the court, in order to determine whether the panel’s decision was wrong.

Powerhouse Petition Calling On Precedent

Lucia is being represented by powerhouse securities lawyer Mark Perry of Gibson, Dunn & Crutcher. In the brief for rehearing en banc, Lucia argues that the panel erroneously concluded that the Appointments Clause does not apply to SEC ALJ’s because they are not “Officers” under that Clause. The panel relied on Circuit precedent that an ALJ without authority to issue final rulings cannot be deemed an Officer, but Lucia argues in his petition that such qualification flies in the face of prior U.S. Supreme Court precedent, and would remove a vast swath of administrative law judges across a number of federal government agencies from coverage under the Appointments Clause.

Lucia’s attorneys were not shy in the petition – calling the panel’s decision “at war” with Supreme Court precedent and the Constitution itself. We’ll see what judges in the D.C. Circuit may be inclined to agree if the petition for rehearing is granted.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

EXECS FOR THE “MOVIE STUDIO THAT WASN’T” CHARGED WITH FRAUD; FORMER NY GOVERNOR CHARGED WITH FAILING TO REPORT STOCK TRANSACTIONS AS DIRECTOR OF COMPANY

September 23, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

The guess here is that former New York Governor David A. Paterson regrets ever becoming involved with Moon River Studios, a microcap company whose executives have just been charged with defrauding investors in a supposed project to construct a movie studio in Georgia.

“Dummy Studio” Dramas

Paterson, a director in the company, was separately charged with failing to report his stock transactions in the company, and will pay $25,000 to settle the matter. Two other directors were charged with the same offense.

As for the movie studio exec’s, based on the SEC press release, it sounds as though there wasn’t much of a studio at all. The SEC charged that both the former and successor CEO of the company made false statements that the studio — purported to be the largest movie studio in North America – was under construction with projected completion dates when the exec’s knew there weren’t nearly enough funds to even begin construction, that they backdated promissory notes as part of a scheme to issue common stock in exchange for financing and that they used company funds to support lavish lifestyles in the process.

What’s Happening with Moon River?

It appears that, for now, Moon River will not be making any movie magic in the near future. The SEC press release announcing the charges is at the link below:

https://www.sec.gov/news/pressrelease/2016-191.html

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

JUDGE IN NEW TILTON CASE: WHY ARE WE HERE AGAIN?

September 22, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

Lynn Tilton filed an unsuccessful suit to enjoin the SEC proceeding against her and her company, on the grounds that the appointment of the SEC administrative law judges was unconstitutional.

Proceeding and Challenging

The Second Circuit ruled in June of this year that the federal district court lacked jurisdiction over that suit. Tilton’s SEC proceeding was therefore free to proceed as scheduled.

Tilton, however, recently filed another suit earlier this month again challenging the constitutionality of the SEC in-house tribunals, this time on the grounds that the lack of notice and opportunity to prepare for trial adequately and present a defense violates the Fifth Amendment. Tilton again sought to enjoin the SEC proceeding on the $200 million fraud action against her in this new action.

Although Tilton’s attorneys argued that the new case should be assigned to a court hearing another pending constitutional challenge in the Southern District of New York (Duka v. SEC, No. I 5-CV-357), the case has ended up with Judge Ronnie Abrams, who presided over Tilton’s initial action.

Justification to Challenge

Judge Abrams issued an order on September 20, 2016 in the action, stating that in light of the Second Circuit ruling in the first Tilton action that there is no federal district court jurisdiction over the constitutional challenge, Tilton had to submit a written explanation by no later than September 27, 2016 as to why this new action is not similarly barred.

The newly-filed action is Case No. 16-cv-07048.

Jeff Petersen is an attorney licensed in California and Chicago who represents clients in a wide variety of SEC enforcement proceedings. He can be contacted in California at 858.792.3666 and in Chicago at 312.583.7488.

FEDERAL JUDGE IN GEORGIA DISMISSES CONSTITUTIONAL CHALLENGES TO SEC ACTIONS

September 19, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

During eighteen months of legal wrangling over the constitutionality of the SEC’s in-house courts, individual respondents challenging such proceedings had found success in the district court in Georgia, where Judge Leigh May had found that the tribunals were constitutionally defective. This ruling went against the majority trend of rulings around the country on the issue.

What Exactly Happened

The 11th Circuit appellate court, however, recently put the issue to rest in Georgia – short of a U.S. Supreme Court opinion to the contrary in the future. The 11th Circuit declined to rehear its decision to overturn the ruling, and last week Judge May dismissed those constitutional challenges, pursuant to the order of the Eleventh Circuit panel hearing the SEC’s appeal.

What Does This Mean?

The takeaway from the 11th Circuit’s confirmation of its ruling is that, for now, the Circuit Courts have sided with the SEC that the agency’s in-house courts are constitutionally sound. We will keep readers apprised of future developments in this area.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC enforcement proceedings. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

BOTH SIDES IN INSIDER TRADING CASE WANT PHIL MICKELSON TESTIMONY

September 17, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

The SEC’s insider trading case against renowned sports bettor Billy Walters, and former Dean Foods director Thomas Davis, will feature deposition testimony by pro golfer Phil Mickelson one way or the other. as both the SEC and Walters have listed Mickelson as a witness for deposition in the discovery phase of the matter.

Details of the Case

The case involves allegations by the SEC that Walters used insider knowledge from Davis to benefit from the purchase of shares in Dean Foods, and urged Mickelson to place trades that would net large profits so that Mickelson could satisfy gambling debts owed to Walters.

Mickelson purportedly bought over $2 million in shares of Dean Foods and made over $900,000 in profits on a subsequent trade of the stock, paying Walters back in part with the proceeds on the trade. Mickelson was not named as a party-defendant and settled any claim by the SEC for relief arising from the trade by making payment of all profits from the trade.

Whether Mickelson ultimately ever testifies at any trial won’t be known for quite some time — discovery is not scheduled to close until August of 2017.

The case against Walters and Davis is pending in the Southern District of New York, No. 16-cv-3722.

SEC CHARGES MARIJUANA BUSINESSMEN WITH FRAUD

September 16, 2016/in Corporate Transactional Law, News /by The Law Offices of Jeff Petersen Team

Two men associated with Colorado marijuana company FusionPharm, Inc. were charged by the SEC with conspiracy to defraud on Friday.

Case Details

The SEC alleged that company CEO and founder Scott Dittman and William Sears engaged in a complicated scheme to place preferred shares of the company stocks in the name of another company (Microcap) to disguise its true ownership by an “Affiliate” of the company, in order to induce brokers into believing the stock was unrestricted, and could be sold after it was converted to common stock and placed in brokerage accounts under the false name. The SEC further alleged that the remainder of preferred shares in the Microcap name would then be transferred to other people or entities related to Sears, who would have the stock converted to common stock and sold to raise additional monies.

The SEC charged that the illegal sales of restricted stock were then used to fund company operations. Dittman and Sears both face one count of Conspiracy to Defraud the US in the action. The link to the SEC press release is below:

http://ow.ly/tuAT304iSuF

Jeff Petersen is an attorney with offices in San Diego and Chicago representing clients in all manner of SEC enforcement proceedings. He can be reached in San Diego at 858.792.3666, and in Chicago at 312.583.7488.

SEC GETS JURY VERDICT AGAINST CITY OF MIAMI

September 16, 2016/in News /by The Law Offices of Jeff Petersen Team

The SEC won a jury verdict this week against the City of Miami and former budget director, Michael Boudreaux. SEC v. City of Miami, Florida, Civil Action No. 1:13-cv-22600 (S.D. Fla. Verdict Sept. 14, 2016). The charges centered on fraudulent representations pertaining to three bond offerings.

In advance of three bond offerings in 2009, the City distributed financials and disclosure documents that were represented to be complete and reliable in all material aspects.

The bonds were not insured, but were instead secured by certain city tax revenues. Over $150 million in bonds were issued in 2009.

What Happens Next

However, the SEC charged the offering materials did not disclose that a series of transfers had been made from a restricted fund to the city’s general fund in order to conceal deficits in the general fund. The city had an established goal of maintaining $100 million in reserves in its general fund. The SEC charged that Boudreaux made misrepresentations about the funds to facilitate their transfer in light of applicable restrictions, and also made misrepresentation to credit rating agencies. The purpose of such misrepresentations, per the SEC, was to attain favorable ratings on the bond issuances. A future hearing date will determine the remedies to be issued in this action.