FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced today that it filed a civil injunctive action alleging fraud in connection with the unregistered offer and sale of securities by Michael A. Bodanza ("Bodanza"), the former chief financial officer and a founding member of Preferred Financial Holdings Co., LLC ("Preferred Holdings"), a company formed in 2006 to engage in oil and gas exploration, drilling, and leasing through operating subsidiaries.
In the complaint, filed in the U.S. District Court for the Northern District of Ohio, the Commission alleges that, from June 2007 to August 2010, Defendants Bodanza and Preferred Holdings raised $6,769,635 from at least 61 investors through the unregistered sale of Preferred Holdings promissory notes. During this period, Preferred Holdings experienced through its operating subsidiaries a series of material operational problems and suffered significant losses, including net losses of $1.0 million in 2007, $2.2 million in 2008, $1.8 million in 2009, and $1.3 million in 2010, according to consolidated financial statements prepared in 2011. Bodanza nonetheless depicted Preferred Holdings’ oil and gas operations in a positive light and failed to disclose to most investors that the company had suffered significant losses from 2007 through 2010. Further, Bodanza failed to disclose the following material facts to several investors: (i) Preferred Holdings removed one of its founding members and its chief operating officer in early 2008 and sued him for causing Preferred Holdings to suffer between $3 million to $4 million in damages; (ii) the only operating drilling rig held by Preferred Holdings’ drilling subsidiary suffered an irreparable breakdown in August 2008; (iii) Preferred Holdings was embroiled in an insurance coverage dispute to recover $1 million in losses and expenses incurred as a result of the rig breakdown; (iv) Preferred Holdings’ drilling subsidiary incurred $260,000 in drilling expenses above its original cost estimates in connection with a significant joint venture in 2009; and (v) Preferred Holdings’ subsidiary had failed to acquire certain property in Tennessee that could be used to drill and sell gas from its own producing wells. Finally, Bodanza also failed to disclose to at least three individuals who purchased promissory notes in 2010 that their investment proceeds would be used to make payments to other investors. The complaint further alleges that Preferred Holdings has failed to repay most of the investors whose notes have already come due and likely will default on a significant number of additional notes which come due in 2012. The complaint names Preferred Holdings’ subsidiaries, Preferred Drilling Co., LLC, Preferred Financial Investment Co., LLC, Preferred Financial Leasing Co., LLC, and Preferred Well Management Co., LLC as Relief Defendants based on their receipt or benefit from the funds raised through the unregistered, fraudulent offering.
The Defendants and Relief Defendants consented to entry of judgments against them without admitting or denying the allegations in the SEC’s complaint. Bodanza consented to a judgment permanently enjoining him from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and ordering disgorgement of $359,656 and prejudgment interest of $50,551, but waiving payment of all but $154,000 and not imposing a civil penalty based upon his financial condition. Preferred Holdings consented to a judgment permanently enjoining it from violations of 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 ordering disgorgement of $4,485,647 and prejudgment interest of $268,143, jointly and severally with the Relief Defendants. Each of the Relief Defendants consented to a judgment ordering disgorgement of $4,485,647 and prejudgment interest of $268,143, jointly and severally with Preferred Holdings.
Saturday, August 4, 2012
Friday, August 3, 2012
COURT FREEZES ASSETS IN FOREIGN CURRENCY TRADING CASE
FROM: COMMODITY FUTURES TRADING COMMISSION
Federal court issues order freezing defendants’ assets and protecting books and records
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on July 27, 2012, The Honorable Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California entered an emergency order freezing the assets of defendants Victor Yu (Yu) of San Jose, Calif., and his company, VFRS, LLC (VFRS), based in Alameda, Calif. The court’s order also prohibits the destruction or alteration of books and records, and grants the CFTC immediate access to such documents. The judge set a hearing on the CFTC’s motion for a preliminary injunction for August 10, 2012.The order arises out of a civil enforcement action filed by the CFTC on July 26, 2012, charging defendants Yu and VFRS with defrauding at least 100 clients in connection with off-exchange foreign currency (forex) trading. The CFTC’s complaint also charges Yu with failure to register with the CFTC as a commodity trading advisor (CTA).
According to the CFTC complaint, since at least August 2009 to the present the defendants’ clients invested more than $5 million in forex trading accounts and lost more than $2 million, while defendants received fees of more than $270,000 from their clients.
The defendants allegedly fraudulently solicited clients to open forex accounts that allowed the defendants to place trades in their accounts using trading software that Yu claimed to have developed. Further, defendants misrepresented to clients that the trading software made forex trading “extremely safe,” prevented clients from ever reaching certain loss thresholds, and guaranteed that clients will not have a losing trade, according to the complaint. In addition, defendants allegedly misrepresented to some prospective customers that their trading software had shown positive returns on every trade it had ever made and has successfully predicted activity in the currency markets back to the 1920s.
To solicit new clients, Yu and VFRS, by and through Yu, held face-to-face meetings with prospective clients in various clients’ homes, obtaining leads primarily through word-of-mouth, according to the complaint. Yu allegedly promised existing clients a referral fee or a percentage of any profits earned in the new clients’ forex accounts. When opening accounts, clients signed agreements promising to pay the defendants a service fee of 30 percent of their net profits, and the defendants provided log-in and password information so that clients could “hook up” to the defendants’ trading software. The complaint alleges that by this conduct, Yu acted as a CTA and was required to register with the CFTC.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.
Thursday, August 2, 2012
CFTC SEEKS TO REVOKE REGISTRATIONS BECAUSE OF FRAUDULANT ACTIONS
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
July 24, 2012
CFTC Seeks to Revoke Registrations of Brian Kim and his Company, Liquid Capital Management, LLC
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed a notice of intent to revoke the registrations of Brian Kim and Liquid Capital Management, LLC (LCM). LCM is a registered Commodity Pool Operator and Commodity Trading Advisor. Kim is registered as an Associated Person of LCM and is the sole principal of LCM.
The notice, filed on July 24, 2012, alleges that Kim and LCM are subject to statutory disqualification from CFTC registration based on a default judgment and permanent injunction entered by the U.S. District Court for the Southern District of New York on April 15, 2011 (see CFTC News Release 6028-11, April 21, 2011). That injunction prohibits defendants from committing further fraud, among other violations. Additionally, the default judgment includes findings that Kim fraudulently misappropriated at least $2 million of pool participant funds, fraudulently solicited prospective pool participants, and made material false statements to pool participants.
In the default judgment order, Kim and LCM were held liable for fraud in connection with operating a Ponzi scheme. The court also ordered that Kim and LCM pay $3,129,161 in restitution to victims of the fraud and a $9,387,483 civil monetary penalty.
The registration revocation action is further based on Kim’s and LCM’s multiple felony convictions in state criminal actions arising out of the operation of the Ponzi scheme (see People v. Brian Kim, case No. 05965-2009 (N.Y. Sup. Ct.); People v. Brian Kim and Liquid Capital Management, LLC, Case No. 00086-2011 (N.Y. Sup. Ct.) and a federal criminal action against Kim for making a false statement in a passport application (see United States v. Kim, 1:11-cr-00642-CM-1 (S.D.N.Y.)).
Kim and LCM each entered guilty pleas in connection with the various criminal charges against them. Kim was sentenced to federal and state prison terms totaling more than 16 years.
CFTC Division of Enforcement staff members responsible for this action are Lara Turcik, Manal M. Sultan, Lenel Hickson Jr., Stephen J. Obie, and Vincent A. McGonagle.
July 24, 2012
CFTC Seeks to Revoke Registrations of Brian Kim and his Company, Liquid Capital Management, LLC
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed a notice of intent to revoke the registrations of Brian Kim and Liquid Capital Management, LLC (LCM). LCM is a registered Commodity Pool Operator and Commodity Trading Advisor. Kim is registered as an Associated Person of LCM and is the sole principal of LCM.
The notice, filed on July 24, 2012, alleges that Kim and LCM are subject to statutory disqualification from CFTC registration based on a default judgment and permanent injunction entered by the U.S. District Court for the Southern District of New York on April 15, 2011 (see CFTC News Release 6028-11, April 21, 2011). That injunction prohibits defendants from committing further fraud, among other violations. Additionally, the default judgment includes findings that Kim fraudulently misappropriated at least $2 million of pool participant funds, fraudulently solicited prospective pool participants, and made material false statements to pool participants.
In the default judgment order, Kim and LCM were held liable for fraud in connection with operating a Ponzi scheme. The court also ordered that Kim and LCM pay $3,129,161 in restitution to victims of the fraud and a $9,387,483 civil monetary penalty.
The registration revocation action is further based on Kim’s and LCM’s multiple felony convictions in state criminal actions arising out of the operation of the Ponzi scheme (see People v. Brian Kim, case No. 05965-2009 (N.Y. Sup. Ct.); People v. Brian Kim and Liquid Capital Management, LLC, Case No. 00086-2011 (N.Y. Sup. Ct.) and a federal criminal action against Kim for making a false statement in a passport application (see United States v. Kim, 1:11-cr-00642-CM-1 (S.D.N.Y.)).
Kim and LCM each entered guilty pleas in connection with the various criminal charges against them. Kim was sentenced to federal and state prison terms totaling more than 16 years.
CFTC Division of Enforcement staff members responsible for this action are Lara Turcik, Manal M. Sultan, Lenel Hickson Jr., Stephen J. Obie, and Vincent A. McGonagle.
Wednesday, August 1, 2012
CHEMICAL COMPANIES RECEIVE EPA FINES FOR FAILING TO REPORT DATA
FROM: U.S. ENVIRONMENTAL PROTECTION AGENCY
EPA Fines Violators for Failure to Report Chemical Data
WASHINGTON – The U.S. Environmental Protection Agency (EPA) has issued complaints seeking civil penalties against three companies for alleged violations of the reporting and recordkeeping requirements under the Toxic Substances Control Act (TSCA). The alleged violations involved the companies’ failure to comply with EPA’s TSCA section 8 Inventory Update Reporting (IUR) regulations, which require companies to submit accurate data about the production and use of chemical substances manufactured or imported during a calendar year. Under TSCA, penalties can be assessed up to $37,500 per day, per violation.
Formerly known as the IUR, the TSCA Chemical Data Reporting Rule requires the collection of information about existing chemicals on the market by requiring periodic reports about the production and use of chemicals to help understand the risks they may pose to human health and the environment. The data collected by EPA is the most comprehensive source of information for chemicals currently in commerce in the U.S.
The reporting deadline for the 2006 IUR rule ended in March of 2007. EPA’s enforcement efforts have led to 43 civil enforcement actions and approximately $2.3 million dollars in civil penalties against companies that failed to report required chemical data information. The reporting deadline for the 2012 submission period of the Chemical Data Reporting Rule is August 13, 2012.
The three most recent cases are against Chemtura Corporation, Bethlehem Apparatus Company, and Haldor Topsoe, Inc., and resulted in penalties totaling $362,113.
The Chemtura Corporation is headquartered in Philadelphia, Pa. and has a facility located in El Dorado, Arizona. In a May 31, 2012 complaint, EPA alleged that the facility failed to report two chemicals pursuant to the 2006 IUR rule and assessed a penalty of $55,901. The company corrected the violations, paid the penalty and a final order was issued by the Environmental Appeals Board (EAB) on June 25, 2012.
During an inspection of the Bethlehem Apparatus Company, located in Hellertown, Pa., EPA found that the facility was in violation of the 2006 IUR Rule for one chemical substance. EPA also determined during the inspection that the company had failed to comply with the export notification requirements as required under TSCA section 12(b) and the import certification requirements as required under TSCA section 13 on a number of occasions for the same chemical substance. The company corrected the violations and paid a $103,433 penalty proposed in a May 31, 2012 complaint.
Haldor Topsoe, Inc., headquartered in Houston, Texas, is subject to a TSCA complaint that was filed on June 20, 2012. The complaint alleged that that the company had violated the 2006 IUR rule for 13 chemical substances. The complaint assessed a proposed penalty of $202,779, which the company paid on July 2, 2012.
EPA Fines Violators for Failure to Report Chemical Data
WASHINGTON – The U.S. Environmental Protection Agency (EPA) has issued complaints seeking civil penalties against three companies for alleged violations of the reporting and recordkeeping requirements under the Toxic Substances Control Act (TSCA). The alleged violations involved the companies’ failure to comply with EPA’s TSCA section 8 Inventory Update Reporting (IUR) regulations, which require companies to submit accurate data about the production and use of chemical substances manufactured or imported during a calendar year. Under TSCA, penalties can be assessed up to $37,500 per day, per violation.
Formerly known as the IUR, the TSCA Chemical Data Reporting Rule requires the collection of information about existing chemicals on the market by requiring periodic reports about the production and use of chemicals to help understand the risks they may pose to human health and the environment. The data collected by EPA is the most comprehensive source of information for chemicals currently in commerce in the U.S.
The reporting deadline for the 2006 IUR rule ended in March of 2007. EPA’s enforcement efforts have led to 43 civil enforcement actions and approximately $2.3 million dollars in civil penalties against companies that failed to report required chemical data information. The reporting deadline for the 2012 submission period of the Chemical Data Reporting Rule is August 13, 2012.
The three most recent cases are against Chemtura Corporation, Bethlehem Apparatus Company, and Haldor Topsoe, Inc., and resulted in penalties totaling $362,113.
The Chemtura Corporation is headquartered in Philadelphia, Pa. and has a facility located in El Dorado, Arizona. In a May 31, 2012 complaint, EPA alleged that the facility failed to report two chemicals pursuant to the 2006 IUR rule and assessed a penalty of $55,901. The company corrected the violations, paid the penalty and a final order was issued by the Environmental Appeals Board (EAB) on June 25, 2012.
During an inspection of the Bethlehem Apparatus Company, located in Hellertown, Pa., EPA found that the facility was in violation of the 2006 IUR Rule for one chemical substance. EPA also determined during the inspection that the company had failed to comply with the export notification requirements as required under TSCA section 12(b) and the import certification requirements as required under TSCA section 13 on a number of occasions for the same chemical substance. The company corrected the violations and paid a $103,433 penalty proposed in a May 31, 2012 complaint.
Haldor Topsoe, Inc., headquartered in Houston, Texas, is subject to a TSCA complaint that was filed on June 20, 2012. The complaint alleged that that the company had violated the 2006 IUR rule for 13 chemical substances. The complaint assessed a proposed penalty of $202,779, which the company paid on July 2, 2012.
Tuesday, July 31, 2012
AIRCRAFT MAINTAINANCE COMPANY AGREES TO PAY $2 MILLION TO SETTLE FOREIGN CORRUPT PRACTICES CHARGES
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, July 17, 2012
The Nordam Group Inc. Resolves Foreign Corrupt Practices Act Violations and Agrees to Pay $2 Million Penalty
WASHINGTON – The NORDAM Group Inc., a provider of aircraft maintenance, repair and overhaul (MRO) services based in Tulsa, Okla., has entered into an agreement with the Department of Justice to pay a $2 million penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
According to the agreement, NORDAM, its subsidiaries and affiliates paid bribes to employees of airlines created, controlled and exclusively owned by the People’s Republic of China in order to secure contracts to perform MRO services for those airlines. The bribes were paid both directly and indirectly to the airline employees. In an effort to disguise the bribes, three employees of NORDAM’s affiliate entered into sales representation agreements with fictitious entities and then used the money paid by NORDAM to those entities to pay bribes to the airline employees.
In addition to the monetary penalty, NORDAM agreed to cooperate with the department for the three-year term of the agreement, to report periodically to the department concerning NORDAM’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.
The department entered into a non-prosecution agreement with NORDAM as a result of NORDAM’s timely, voluntary and complete disclosure of the conduct, its cooperation with the department and its remedial efforts. In addition, the agreement recognizes that a fine below the standard range under the U.S. Sentencing Guidelines is appropriate because NORDAM fully demonstrated to the department, and an independent accounting expert retained by the department verified, that a fine exceeding $2 million would substantially jeopardize the company’s continued viability.
The case is being handled by Trial Attorneys Daniel S. Kahn and Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section. The division’s Office of International Affairs provided assistance. Assistant U.S. Attorney Kevin Leitch from the Northern District of Oklahoma also provided assistance in the case. The case was investigated by the FBI’s Washington Field Office’s team of special agents dedicated to the investigation of foreign bribery cases.
Tuesday, July 17, 2012
The Nordam Group Inc. Resolves Foreign Corrupt Practices Act Violations and Agrees to Pay $2 Million Penalty
WASHINGTON – The NORDAM Group Inc., a provider of aircraft maintenance, repair and overhaul (MRO) services based in Tulsa, Okla., has entered into an agreement with the Department of Justice to pay a $2 million penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
According to the agreement, NORDAM, its subsidiaries and affiliates paid bribes to employees of airlines created, controlled and exclusively owned by the People’s Republic of China in order to secure contracts to perform MRO services for those airlines. The bribes were paid both directly and indirectly to the airline employees. In an effort to disguise the bribes, three employees of NORDAM’s affiliate entered into sales representation agreements with fictitious entities and then used the money paid by NORDAM to those entities to pay bribes to the airline employees.
In addition to the monetary penalty, NORDAM agreed to cooperate with the department for the three-year term of the agreement, to report periodically to the department concerning NORDAM’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.
The department entered into a non-prosecution agreement with NORDAM as a result of NORDAM’s timely, voluntary and complete disclosure of the conduct, its cooperation with the department and its remedial efforts. In addition, the agreement recognizes that a fine below the standard range under the U.S. Sentencing Guidelines is appropriate because NORDAM fully demonstrated to the department, and an independent accounting expert retained by the department verified, that a fine exceeding $2 million would substantially jeopardize the company’s continued viability.
The case is being handled by Trial Attorneys Daniel S. Kahn and Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section. The division’s Office of International Affairs provided assistance. Assistant U.S. Attorney Kevin Leitch from the Northern District of Oklahoma also provided assistance in the case. The case was investigated by the FBI’s Washington Field Office’s team of special agents dedicated to the investigation of foreign bribery cases.
Monday, July 30, 2012
PONZI COMMODITY POOL COMPANIES AND OWNER ORDERED TO PAY $41 MILLION
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
July 16, 2012
Federal Court in California Orders Las Vegas Resident Gordon A. Driver and His Companies to Pay over $41 Million in Restitution and Penalties in Commodity Pool Ponzi Scheme
Court permanently bars defendants from commodities industry
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Central District of California entered a final judgment and permanent injunction order against defendants Gordon A. Driver of Las Vegas, Nev., Axcess Automation LLC (Axcess Automation), and Axcess Fund Management LLC (Axcess Fund), both Nevada companies owned and controlled by Driver, in connection with a commodity pool Ponzi scheme in which the defendants defrauded over 100 participants in the United States and Canada of over $14 million. Axcess Fund is registered with the CFTC as a Commodity Pool Operator (CPO), and Driver is registered as an Associated Person of Axcess Fund.
The court’s final judgment order, entered on July 12, 2012, by Judge Otis D. Wright, II, imposes permanent trading and registration bans against the defendants and requires them jointly and severally to pay restitution of over $9.5 million to defrauded pool participants and a $31.8 million civil monetary penalty. The order also permanently prohibits the defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged. The order stems from a CFTC complaint filed on May 14, 2009, that charged the defendants with fraud, misappropriation, and other CEA violations (see CFTC Press Release 5704-09).
The July 12 order is based on the court’s July 5, 2012, summary judgment order, which finds that from between at least February 2006 and May 2009, Driver fraudulently solicited approximately $14,319,905 from over 100 participants by telling pool participants that Driver had a successful software program for trading E-mini S&P 500 futures; had profitable returns averaging one to five percent per week (or 20 percent per month); had profitable returns in seven or eight out of 10 trades; and minimized risk by terminating trading after three losing trades in one day. However, the order finds that Driver’s trading was "abysmally unprofitable," and that Driver traded only $3.7 million of the $14.3 million in pool funds he had received and lost 94 percent of those funds.
The summary judgment order also finds that the defendants never disclosed the actual losses to their participants and instead sent pool participants false account statements depicting profits, and that the defendants misappropriated more than $10 million from the pool to pay personal and business expenses. Such expenses, according to the order, included payment of $9.7 million to several pool participants as purported profits to conceal trading losses; however, these purported profits were not actual profits, but rather money invested by other pool participants. Driver used an additional $1.6 million of pool funds on gambling in Las Vegas casinos, rent, meals, travel, entertainment, car payments,computer equipment, clothing, and cash withdrawals, according to the summary judgment order.
The summary judgment order also finds that Driver and Axcess Automation acted as CPOs but failed to register as CPOs with the CFTC, as required by the CEA, and that the defendants commingled pool funds with non-pool property and Axcess Fund failed to timely comply with a CFTC document request. In related actions, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Driver and Axcess Automation on May 14, 2009 (SEC v. Driver, et al., case no. 09cv3410 ODW, Central District of California), and the Ontario Securities Commission (OSC) filed an enforcement action against Driver and others on August 12, 2010. Both cases are currently pending.
July 16, 2012
Federal Court in California Orders Las Vegas Resident Gordon A. Driver and His Companies to Pay over $41 Million in Restitution and Penalties in Commodity Pool Ponzi Scheme
Court permanently bars defendants from commodities industry
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Central District of California entered a final judgment and permanent injunction order against defendants Gordon A. Driver of Las Vegas, Nev., Axcess Automation LLC (Axcess Automation), and Axcess Fund Management LLC (Axcess Fund), both Nevada companies owned and controlled by Driver, in connection with a commodity pool Ponzi scheme in which the defendants defrauded over 100 participants in the United States and Canada of over $14 million. Axcess Fund is registered with the CFTC as a Commodity Pool Operator (CPO), and Driver is registered as an Associated Person of Axcess Fund.
The court’s final judgment order, entered on July 12, 2012, by Judge Otis D. Wright, II, imposes permanent trading and registration bans against the defendants and requires them jointly and severally to pay restitution of over $9.5 million to defrauded pool participants and a $31.8 million civil monetary penalty. The order also permanently prohibits the defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged. The order stems from a CFTC complaint filed on May 14, 2009, that charged the defendants with fraud, misappropriation, and other CEA violations (see CFTC Press Release 5704-09).
The July 12 order is based on the court’s July 5, 2012, summary judgment order, which finds that from between at least February 2006 and May 2009, Driver fraudulently solicited approximately $14,319,905 from over 100 participants by telling pool participants that Driver had a successful software program for trading E-mini S&P 500 futures; had profitable returns averaging one to five percent per week (or 20 percent per month); had profitable returns in seven or eight out of 10 trades; and minimized risk by terminating trading after three losing trades in one day. However, the order finds that Driver’s trading was "abysmally unprofitable," and that Driver traded only $3.7 million of the $14.3 million in pool funds he had received and lost 94 percent of those funds.
The summary judgment order also finds that the defendants never disclosed the actual losses to their participants and instead sent pool participants false account statements depicting profits, and that the defendants misappropriated more than $10 million from the pool to pay personal and business expenses. Such expenses, according to the order, included payment of $9.7 million to several pool participants as purported profits to conceal trading losses; however, these purported profits were not actual profits, but rather money invested by other pool participants. Driver used an additional $1.6 million of pool funds on gambling in Las Vegas casinos, rent, meals, travel, entertainment, car payments,computer equipment, clothing, and cash withdrawals, according to the summary judgment order.
The summary judgment order also finds that Driver and Axcess Automation acted as CPOs but failed to register as CPOs with the CFTC, as required by the CEA, and that the defendants commingled pool funds with non-pool property and Axcess Fund failed to timely comply with a CFTC document request. In related actions, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Driver and Axcess Automation on May 14, 2009 (SEC v. Driver, et al., case no. 09cv3410 ODW, Central District of California), and the Ontario Securities Commission (OSC) filed an enforcement action against Driver and others on August 12, 2010. Both cases are currently pending.
Sunday, July 29, 2012
CFO ASSISTED FACILITY CHAIN PLEADS GUILTY TO COOKING THE BOOKS TO AVOID TAXES
FROM: U.S. DEPARTMENT OF JUSTICE, ASSISTED LIVING FACILITY CHAIN, TAX FRAUD CONSPIRACY
Wednesday, July 18, 2012
Former CFO of North Carolina Assisted Living Facility Chain Pleads Guilty to Tax Fraud Conspiracy
Michael R. Elliott, former chief financial officer of Caremerica Inc., pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS), the Justice Department and IRS announced.
On Nov. 15, 2011, a grand jury sitting in Raleigh, N.C., returned an indictment charging Elliott with the following tax offenses: one count of conspiring to defraud the IRS, 25 counts of failing to pay over employment taxes, one count of filing a false tax return, and one count of obstructing the due administration of the tax laws.
According to the charging document, Elliott co-owned and operated a chain of assisted living facilities (ALFs) in North Carolina. The ALFs were managed by Caremerica Inc., a company based in Leland, N.C., that Elliott also partly owned and operated. Elliott was the Chief Financial Officer for Caremerica, the Caremerica ALFs, and other related companies (Caremerica companies). As a corporate officer, Elliott was responsible for ensuring that the Caremerica companies collected, reported, and paid over federal employment taxes to the IRS. However, with Elliott as the chief financial officer, the Caremerica companies accrued more than $4.5 million in employment tax liabilities between approximately 2003 and 2006. Elliott failed to comply with his employment tax obligations by filing, and causing to be filed, false IRS forms and failing to pay the employment taxes due.
The indictment further alleges that in 2003, Elliott acquired partial ownership of Partners Pharmacy Services Inc. (PPS), which provided prescription drug and related services to the Caremerica ALFs. In March 2005, Elliott sold PPS to a subsidiary of Omnicare Inc. At the closing, Elliott received $1.4 million, which he directed to be deposited into a bank account in someone else’s name.
At his hearing before Judge James C. Fox, sitting in Wilmington, N.C., Elliott agreed that he should be ordered to pay restitution of $4.8 million. His sentencing is set for the court’s term beginning Nov. 5, 2012.
This case was investigated by IRS-Criminal Investigation. It is being prosecuted by Trial Attorneys Adam Hulbig, Todd Ellinwood and Kevin Lombardi of the Justice Department’s Tax Division.
Wednesday, July 18, 2012
Former CFO of North Carolina Assisted Living Facility Chain Pleads Guilty to Tax Fraud Conspiracy
Michael R. Elliott, former chief financial officer of Caremerica Inc., pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS), the Justice Department and IRS announced.
On Nov. 15, 2011, a grand jury sitting in Raleigh, N.C., returned an indictment charging Elliott with the following tax offenses: one count of conspiring to defraud the IRS, 25 counts of failing to pay over employment taxes, one count of filing a false tax return, and one count of obstructing the due administration of the tax laws.
According to the charging document, Elliott co-owned and operated a chain of assisted living facilities (ALFs) in North Carolina. The ALFs were managed by Caremerica Inc., a company based in Leland, N.C., that Elliott also partly owned and operated. Elliott was the Chief Financial Officer for Caremerica, the Caremerica ALFs, and other related companies (Caremerica companies). As a corporate officer, Elliott was responsible for ensuring that the Caremerica companies collected, reported, and paid over federal employment taxes to the IRS. However, with Elliott as the chief financial officer, the Caremerica companies accrued more than $4.5 million in employment tax liabilities between approximately 2003 and 2006. Elliott failed to comply with his employment tax obligations by filing, and causing to be filed, false IRS forms and failing to pay the employment taxes due.
The indictment further alleges that in 2003, Elliott acquired partial ownership of Partners Pharmacy Services Inc. (PPS), which provided prescription drug and related services to the Caremerica ALFs. In March 2005, Elliott sold PPS to a subsidiary of Omnicare Inc. At the closing, Elliott received $1.4 million, which he directed to be deposited into a bank account in someone else’s name.
At his hearing before Judge James C. Fox, sitting in Wilmington, N.C., Elliott agreed that he should be ordered to pay restitution of $4.8 million. His sentencing is set for the court’s term beginning Nov. 5, 2012.
This case was investigated by IRS-Criminal Investigation. It is being prosecuted by Trial Attorneys Adam Hulbig, Todd Ellinwood and Kevin Lombardi of the Justice Department’s Tax Division.
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