Market reform was a key topic on capital hill this week as the House Financial Services Committee reported out and sent to the floor a major piece of market form legislation. During the week House committees also heard additional testimony on the necessity for comprehensive regulation of the derivatives markets. [...]
When the newly hired General Counsel of Canopy Financial, Inc. contacted a friend at KPMG for assistance with a search for a new CFO last month, he discovered the opinion stating the accounting firm had audited the company financial statements was false. In fact, KPMG had never audited the financial [...]
The Supreme Court agreed to hear the Second Circuit’s “foreign-cubed” decision, Morrison v. National Australia Bank Ltd., Case No. 08-1191. In that case, the circuit court affirmed the dismissal of a securities fraud complaint for lack of jurisdiction, as discussed here. The decision by the Supreme Court could have [...]
Merck & Co. v. Reynolds, Case No. 08-905, argued yesterday before the high court, will resolve an important question regarding the application of the statute of limitations in private securities damage actions. The case focuses on an interpretation of the limitations period added to the securities laws as part of [...]
Securities enforcement in recent weeks has been dominated by insider trading investigations and charges. The case which began with the founder of Galleon has already spawned multiple criminal cases, several guilty pleas and civil actions by the SEC. With the investigation continuing and a stream of confidential witness, there is [...]
From Capital Hill, the SEC heard expressions of concern this week about the fact that its proposed rules regarding high speed trading, dark pools and market structure will not take effect until next summer. The Commission also received evidence about its renewed insider trading investigation into Pequot Capital Management.
Securities [...]
The jury gave the SEC a split verdict in an insider trading case earlier this week. On November 20, 2009, following a week long trial, the jury returned a verdict finding former Fidelity trader David Donovan, Jr. liable of insider trading. The jury rejected Commission claims that Mr. Donovan had [...]
Ponzi schemes, insider trading and discussions about the vitality of the enforcement program are the staples of SEC enforcement these days.
First, the Ponzi scheme. SEC v. Capital Mountain Holding Corp., Civ. Action No. 3:09-CV-02222-F (N.D. Tex. Filed Nov. 23 2009) names as defendants Capital Mountain Holding Corporation, its president [...]
The SEC continued its almost endless stream of investment fraud cases on Friday, filing an action against Shidaal Express, Inc. and its principal, Mohamud Abdi Ahmed. SEC v. Shidaal Express, Inc., Case No. 09 cv 2610 (S.D. Cal. Filed Nov. 19, 2009). As in many of these cases, the complaint [...]
The Financial Fraud Task Force replaced the 2002 Corporate Fraud Task Force this week. The new group, created by executive order, is composed of a broad array of federal departments and regulatory agencies. Like its predecessor, it is charged with rooting out and prosecuting financial fraud.
The SEC continued to [...]
Post-Madoff, the SEC seems to have brought an almost endless stream of Ponzi scheme cases. The once virtually impossible-to-detect frauds appear to be surfacing everywhere. When that happens, the SEC and at times DOJ and the CFTC, have been there to file actions. Whether this is the result of the [...]
The SEC filed two cases yesterday stemming from an alleged financial fraud at Tvia, Inc., a Silicon Valley semiconductor company. One was against Benjamin Silva, III, the former Vice President of World Wide Sales at the company. SEV v. Silva, Case No. 09-5395 (N.D. Cal. Filed Nov. 17, 2009). This [...]
In the stream of Ponzi scheme and other investment fund fraud cases that have been brought by DOJ, the SEC, the CFTC and private litigants, there is frequently a mad scramble for the money. The SEC and CFTC typically seek a freeze order. Frequently, a receiver will be appointed to [...]
FCPA enforcement continues to be a key Justice Department priority. This year, there have been three trials of FCPA cases and three guilty verdicts. Two of the defendants have been sentenced with Frederic Bourke receiving one year and a day, discussed here, and former congressman William Jefferson 13 years [...]
The first major market crisis cases to go to trial resulted in acquittals this week, dealing the government a serious setback. Two former Bear Stearns hedge fund managers were found not guilty of securities fraud charges by a jury in a matter of hours, rejecting government claims that the cases [...]
Insider trading continues to be a key enforcement priority for prosecutors, as well as the SEC. Earlier this week, Michael Koulouroudis, who received inside tips from former UBS Director of Mergers and Acquisitions Nicos Stephanou, pleaded guilty to one count of conspiracy to commit securities fraud and one count [...]
The government suffered a significant loss yesterday when a jury in the Eastern District of New York returned not guilty verdicts on all counts in the trial of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin. U.S. v. Cioffi, Case No. 1:08-cr-00415 (E.D.N.Y. Filed June 18, 2008). [...]
The SEC prevailed at trial in an insider trading case against Gregory Gunn in SEC v. Tedder, Case No. 3:08-CV-1013 (N.D. Tex. Filed Jun. 17, 2008). The complaint named two insiders as defendants, employees Robert Tedder and Brian Carr, and two individuals alleged to have been tipped by Mr. Tedder, [...]
Securities litigation last week was dominated by the filing of new criminal charges in the on-going investigation by the U.S. Attorney’s Office in the Southern District of New York. Insider trading charges were filed against fourteen individuals, in addition to those lodged against five individuals who pleaded guilty. Like the [...]
The USAO in New York continues to unfold the results of its blockbuster insider trading investigation with an assist from the SEC. Overall, eight new defendants were charged, with five others having pleaded guilty. Three new criminal cases were brought, U.S. v. Goffer, Case No. 09 Mag 2438 (S.D.N.Y. [...]
The Commission brought two more actions in a series of civil and criminal cases arising out of the payments made by a brokerage firm to obtain municipal bond underwriting and interest rate swap agreement business in Jefferson County, Alabama. The criminal case is resolved. Two of the Commission’s actions are [...]
David Friehling, auditor through his CPA firm of Bernard L. Madoff Investment Securities LLC and its predecessor, pleaded guilty to a nine-count criminal information and agreed to certain forfeitures. Mr. Friehling also entered into a cooperation agreement with the government. Comments at the time of the plea suggest he [...]
In affirming the district court’s certification of the class in In re Constar International Inc. Sec. Litig., No. 08-2461 (3rd Cir. Oct. 29. 2009), the circuit court drew a sharp distinction between the requirements of a claim under Securities Act Section 11 and Exchange Act Section 10(b). The court rejected [...]
Hedge funds and insider trading are recurring themes in SEC enforcement these days. The SEC and DOJ recently brought a blockbuster set of insider trading cases involving the founder of Galleon fund, discussed here. Insider trading has, of course, been an SEC enforcement priority since the early 1980’s when [...]
This week SEC enforcement stayed with their staples, actions involving insider trading and investment fund fraud. DOJ’s cases involved insider trading and a Ponzi scheme. The circuit courts however, turned to other subjects, handing down decisions regarding D&O coverage for an SEC enforcement action and the availability of state law [...]
In many instances, the impact of the allegations in an SEC enforcement action reach beyond the immediate claims in the suit. Rivelli v. Twin City Fire Ins. Co., Case No. 08-1480 (10th Cir. Decided Oct. 26, 2009) is a case where the plaintiffs were not only named as defendants in [...]
The SEC is facing another dilemma in Judge Rakoff’s courtroom in the Southern District of New York. The question this time does not involve SEC v. Bank of America, discussed here, which is on its way to trial. This dilemma involves its recently filed insider trading case against Galleon [...]
The SEC continued its war on insider trading, filing another settled enforcement action. SEC v. Spaugy, Civil Action No. 09-CV-687 (N.D. Okla. Filed Oct. 23, 2009). Defendant Don Spaugy was the Vice President of Financial Services for SemGroup, LP.
Between late May and July 15, 2008, SemGroup suffered a severe [...]
The insider trading case against Raj Rajaratnam, founder of Galleon Fund, and others, discussed here, is being heralded as the most significant in years, leading some to ask if its signals the rejuvenation of SEC enforcement. The significance of the case, and whether it eclipses those such as Guttenberg, [...]
As Congress considered comprehensive legislation to regulate OTC derivates in the house, the SEC added management capability to the enforcement division, considered regulation for dark pools and issued a report on harmonization with the CFTC.
Enforcement, in conjunction with the USAO in the Southern District of New York brought what [...]
Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), discussed here, requiring that a securities law plaintiff plead and prove facts establishing loss causation continues to have a significant impact on securities litigation. The High Court’s recent constriction of the Rule 8 pleading standards, first discussed in Dura and [...]
The SEC filed two settled administrative proceedings based on selling short in advance of an offering. While the cases themselves are routine, read in conjunction with others, they may confirm that enforcement has adopted a different approach on this issue. In the Matter of First New York Securities [...]
The SEC and the CFTC released “A Joint Report of the SEC and CFTC on Harmonization of Regulation” on Friday, October 16, 2009. The report was prepared pursuant to the Treasury White Papers released last June, and discussed here, which called for the two agencies to work together [...]
The largest insider trading cases in history involving a hedge fund, and the first to be based intercepted conversations from a wire tap, were filed on Friday by the U.S. Attorney’s Office for the Southern District of New York and the SEC following a joint news conference in New York. [...]
The Commission’s suit against Bank of America received a boost this week when the NY AG secured an agreement with the bank to produce privileged material in his investigation. Under the agreement, the material will be made available to the SEC. The Commission also brought enforcement actions alleging insider trading, [...]
The president, CEO and Chairman of the Executive Committee of broker and investment advisor Melhado, Flynn & Associates, George Motz, pleaded guilty to securities fraud charges earlier this week. U.S. v. Motz, Case No. 08-598 (E.D.N.Y. Filed Aug. 27, 2008). The indictment also named the firm as a defendant.
According [...]
The court rejected the proposed settlement in SEC v. Bank of America in part because the truth about what happened had not emerged. The SEC essentially said it could not find the truth, claiming the bank asserted privilege. The bank claimed it told the truth to its shareholders in the [...]
The SEC and Bank of America are preparing for a trial on the proxy fraud case, discussed here. Pretrial orders are being filed. The SEC has demanded a jury. The Commission and the Bank are both undoubtedly deep in trial preparation. Neither wanted a trial. There seems to be [...]
The Commission resolved insider trading charges with three more defendants in the case many heralded as the most significant since the 1980’s and the days of Ivan Boesky, Dennis Levine and others. SEC v. Guttenberg, Case No. 07 CV 1774 (S.D.N.Y. Filed March 1, 2007). The fourteen defendants, largely Wall [...]
The new Supreme Court term opened this week with a slate of important business cases. SEC enforcement continued its aggressive posture in insider trading cases, appealing one high profile loss and filing a settled case. The industry-wide inquiry into fraudulent transactions in the stock lending business continued with another indictment, [...]
The SEC appealed from the decision dismissing its insider trading case against Mark Cuban. SEC v. Cuban, No. 08-2050 (N.D. Tex. July 17, 2009). Previously, the Commission rejected an opportunity to amend its complaint.
The decision to appeal Cuban is emblematic of the aggressive posture the SEC has consistently taken [...]
The U.S. Attorney’s Office for the Eastern District of New York unsealed its latest indictment in an on-going investigation of fraudulent fees, sham transactions and kickbacks in the stock loan business. The case unsealed this week names as a defendant Ronald Garcia, who did business as Independent Investor Services, [...]
The nature of the relationship between attorneys conducting an internal investigation for the company and corporate officers, if any, can present difficult questions. All too often, a company seeking to waive privilege encounters a claim by the officer that he or she has a confidential and privileged relationship with the [...]
The Supreme Court begins its term this week with all eyes on new Justice Sonia Sotomayor. Business organizations, together with directors, officers and general counsels should focus on the slate of cases before the High Court which may have a significant impact on the securities industry, the business community and [...]
The staple of SEC enforcement appears to be investment fund fraud cases with five new actions brought this week. The Commission also settled with former executives of General Re and filed a settled administrative proceeding based on a failure to have adequate procedures. Finally, the SEC filed a settled FCPA [...]
The FCPA continues to be an enforcement priority for the SEC and DOJ. This year alone there are record-setting settlements and a record number of trials. Increasingly, the cases involve foreign regulators. With over 120 open investigations at DOJ, it is clear that these trends are going to continue.
SEC [...]
Investment fraud cases with consumers losing their hard earned cash keep on surfacing. On Monday, the SEC brought two of these cases. On Tuesday, the Commission and the U.S. Attorney’s Office for the Southern District of Florida filed cases involving what the SEC labeled as “boiler room fraud” that [...]
Once, it was thought that various kinds of investment frauds and Ponzi schemes were difficult to detect. Market regulators such as the SEC were hard pressed to find them. The market crisis, Madoff and now Stanford seem to have changed all that. Now, these schemes seem to be a staple [...]
With the passage of the Sarbanes Oxley Act, Congress imposed an array of duties on corporate executives. Section 302 for example requires the CEO and CFO to file certifications regarding the financial information of the company. Section 304(a) requires those same individuals to repay certain incentive-based compensation and stock trading [...]
Congress continued to consider financial market reform this week with additional testimony from SEC Chairman Schapiro and others. SEC enforcement filed a settled administrative proceeding based on claimed violations of Regulation FD, an insider trading action, and a settled case charging a bank with aiding and abetting the fraudulent conduct [...]
