SEC CHARGES COMPANY AND TOP OFFICERS WITH FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Imaging Diagnostic Systems, Inc., Its Ceo, and Cfo with Fraud

The Securities and Exchange Commission today filed an enforcement action in the U.S. District Court for the Southern District of Florida charging Imaging Diagnostic Systems, Inc. (“Imaging”), a Florida-based medical technology company, Linda Grable, its CEO, and Allan Schwartz, its CFO, for making material misstatements and omissions in Imaging’s filings concerning the timing of its Food and Drug Administration (“FDA”) application and concerning Imaging’s failure to remit payroll taxes to the Internal Revenue Service (“IRS”).

Imaging is engaged in the development and testing of a breast imaging system, the CTLM®, which purportedly uses a laser to detect breast cancer.  Imaging to date has failed to obtain FDA approval to market and sell the CTLM® in the United States.  The SEC’s complaint alleges from October 2008 to December 2009, Imaging repeatedly disclosed in filings and letters to shareholders that it expected to file, by specific deadlines identified in these public statements, a Premarket Approval (“PMA”) application with the FDA to obtain permission to market and sell the CTLM®.  Each time, Imaging failed to meet its projected deadline.  The complaint alleges that Grable and Schwartz knew there was no basis for the projections because Imaging did not have enough cancer cases to finish its clinical trials and could not pay for the clinical sites.  

In addition, according to the complaint, beginning in the quarter ended March 31, 2010, Imaging stopped remitting payroll to the IRS for its employees.  The complaint alleges that Imaging’s failure to pay payroll taxes constituted a known commitment, event, or uncertainty of the type that should have been disclosed in the Management’s Discussion and Analysis of Imaging’s periodic filings, which were signed by Grable and Schwartz.   However, Imaging did not publicly disclose that it failed to remit payroll taxes until over 16 months later, when on May 18, 2011 it filed a Form 10-Q.  Even then, Imaging failed to disclose the risks associated with its failure to pay payroll taxes and in fact failed to provide any disclosure of the risks until it filed an Amended Form 10-K on November 29, 2011.

Finally, the complaint alleges that Grable and Schwartz failed to file beneficial ownership reports in 2009, 2010, and 2011 despite having received stock and options.

The SEC’s complaint charges that Imaging, Grable, and Schwartz violated Section 17(a)(2) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5(b) thereunder.  The complaint also alleges that Imaging violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; Imaging and Grable violated Section 14(a) of the Exchange Act and Rule 14a-9 thereunder; Grable and Schwartz violated Section 16(a) of the Exchange Act and Rules 13a-14, 13b2-1, and 16a-3 thereunder; and Grable and Schwartz aided and abetted Imaging’s violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-1 and 13a-13 thereunder.  The SEC seeks financial penalties and permanent injunctions.  The SEC also seeks penny stock bars and officer-and-director bars against Grable and Schwartz.

The SEC’s investigation was conducted by Jenny A. Trotman, Senior Counsel, and Kathleen Strandell, Staff Accountant, of the Miami Regional Office.  The investigation was supervised by Thierry Olivier Desmet, Assistant Regional Director.  Robert Levenson, Regional Trial Counsel, will lead the SEC’s litigation.

Statement at Open Meeting Regarding Municipal Advisors and Pay Ratio Disclosure

Statement at Open Meeting Regarding Municipal Advisors and Pay Ratio Disclosure

PEST CONTROL COMPANY AND OWNER CHARGED WITH UNLAWFUL APPLICATION OF PESTICIDES

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, September 11, 2013
Pest Control Company and Its Owner Charged with Unlawful Application of Pesticides and Falsification

A pest control services company and its owner have been charged today in the U.S. District Court for the Middle District of Georgia with conspiracy, unlawful use of pesticides, false statements, falsification of records and mail fraud, announced Robert G. Dreher, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division and Michael J. Moore, U.S. Attorney for the Middle District of Georgia.

Steven A. Murray, 54, of Pelham, Ala., and his company, Bio-Tech Management Inc., were charged in a felony indictment with one count of conspiracy, 10 counts of making false statements, 20 counts of falsifying records, 10 counts of mail fraud and 10 counts of unlawful use of a pesticide.

The indictment alleges that from October 2005 to June 2009, Steven Murray and Bio-Tech repeatedly misapplied the registered pesticide Termidor SC in nursing homes in the state of Georgia and falsified documents to conceal the unlawful use.  The indictment further alleges that Murray and Bio-Tech sent invoices through the U.S. Mail to their nursing home clients to solicit payment for the unlawful pesticide applications.  

According to the indictment, Steve Murray and Bio-Tech provided monthly pest control services to nursing homes in Georgia by spraying pesticides in and around their clients’ facilities.  The indictment alleges that, at the direction of Murray, Bio-Tech employees routinely applied the pesticide Termidor indoors more than twice a year, contrary to the manufacturer’s label instructions.  The indictment further alleges that after the Georgia Department of Agriculture made inquiries regarding Bio-Tech’s misuse of Termidor and other pesticides, Murray directed several of his Bio-Tech employees to alter company service reports with the intent to obstruct an investigation.        

U.S. Environmental Protection Agency (EPA) regulations require that all pesticides be registered, properly labeled, and applied as specified by manufacturer’s labeling to protect public health and the environment.

A criminal indictment is not a finding of guilt.  An individual or company charged by criminal indictment is presumed innocent unless and until proven guilty in a court of law.

The falsifying records and mail fraud charge carry a maximum sentence of 20 years in prison and $250,000 fine per count.  The false statements charges each carry a maximum sentence of five years in prison and a $250,000 fine.

These cases are being investigated by Special Agents of the EPA’s Criminal Investigations Division in Atlanta and prosecuted by Trial Attorneys Richard J. Powers and Adam C. Cullman of the Justice Department’s Environment and Natural Resources Division, Environmental Crimes Section.

PEST CONTROL COMPANY CHARGED WITH UNLAWFUL APPLICATION OF PESTICIDES

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, September 11, 2013
Pest Control Company and Its Owner Charged with Unlawful Application of Pesticides and Falsification

A pest control services company and its owner have been charged today in the U.S. District Court for the Middle District of Georgia with conspiracy, unlawful use of pesticides, false statements, falsification of records and mail fraud, announced Robert G. Dreher, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division and Michael J. Moore, U.S. Attorney for the Middle District of Georgia.

Steven A. Murray, 54, of Pelham, Ala., and his company, Bio-Tech Management Inc., were charged in a felony indictment with one count of conspiracy, 10 counts of making false statements, 20 counts of falsifying records, 10 counts of mail fraud and 10 counts of unlawful use of a pesticide.

The indictment alleges that from October 2005 to June 2009, Steven Murray and Bio-Tech repeatedly misapplied the registered pesticide Termidor SC in nursing homes in the state of Georgia and falsified documents to conceal the unlawful use.  The indictment further alleges that Murray and Bio-Tech sent invoices through the U.S. Mail to their nursing home clients to solicit payment for the unlawful pesticide applications.  

According to the indictment, Steve Murray and Bio-Tech provided monthly pest control services to nursing homes in Georgia by spraying pesticides in and around their clients’ facilities.  The indictment alleges that, at the direction of Murray, Bio-Tech employees routinely applied the pesticide Termidor indoors more than twice a year, contrary to the manufacturer’s label instructions.  The indictment further alleges that after the Georgia Department of Agriculture made inquiries regarding Bio-Tech’s misuse of Termidor and other pesticides, Murray directed several of his Bio-Tech employees to alter company service reports with the intent to obstruct an investigation.        

U.S. Environmental Protection Agency (EPA) regulations require that all pesticides be registered, properly labeled, and applied as specified by manufacturer’s labeling to protect public health and the environment.

A criminal indictment is not a finding of guilt.  An individual or company charged by criminal indictment is presumed innocent unless and until proven guilty in a court of law.

The falsifying records and mail fraud charge carry a maximum sentence of 20 years in prison and $250,000 fine per count.  The false statements charges each carry a maximum sentence of five years in prison and a $250,000 fine.

These cases are being investigated by Special Agents of the EPA’s Criminal Investigations Division in Atlanta and prosecuted by Trial Attorneys Richard J. Powers and Adam C. Cullman of the Justice Department’s Environment and Natural Resources Division, Environmental Crimes Section.

MSHA OPINION ON MACH MINING VENTILATION PLAN

FROM:  U.S. LABOR DEPARTMENT
MSHA praises court decision involving Mach Mining ventilation plan

ARLINGTON, Va. — The U.S. Department of Labor's Mine Safety and Health Administration today applauded an Aug. 26, 2013, ruling by the U.S. Court of Appeals for the Seventh Circuit. The court held that an MSHA district manager has broad discretion to disapprove a mine operator's proposed ventilation plan for an underground coal mine, and may do so as long as the decision is not arbitrary and capricious. The court rejected the contention that an operator may ask the Federal Mine Safety and Health Review Commission to substitute its judgment for MSHA's in approving or disapproving a ventilation plan MSHA determines is inadequate to address health and safety requirements and the particular conditions of the mine.
"Both the commission and the Court of Appeals recognized that it is appropriate to leave determinations on the sufficiency of highly technical mine plans to MSHA," said Joseph A. Main, assistant secretary of labor for mine safety and health. "We believe the court made the appropriate decision in this case."
At issue in the case was a ventilation plan proposed by Mach Mining LLC for its # 1 Mine, an underground coal mine in Williamson County, Ill. Despite extended good-faith discussions by MSHA, the parties were not able to reach agreement on the contents of the plan.
Following a hearing, an administrative law judge ruled that: the district manager had negotiated in good faith, the district manager's decision to withhold approval of the plan was not arbitrary and capricious, he had not abused his discretion in determining that the plan was unsuitable and the changes to the plan requested by the district manager were suitable.
After Mach Mining appealed the administrative law judge's ruling, a 3-2 majority of the commission affirmed. Mach Mining subsequently filed a petition to the Court of Appeals for review, and the Court of Appeals denied Mach Mining's petition and affirmed the commission's decision.

COMPANY CITED AFTER WORKER INJURED IN TRENCH COLLAPSE

FROM:  U.S. DEPARTMENT OF LABOR 
Taylor’s Drain and Sewer Service cited by US Labor Department’s OSHA after worker injured in trench collapse at Lincoln, Neb., job site

LINCOLN, Neb. — Taylor's Drain and Sewer Service has been cited by the U.S. Department of Labor's Occupational Safety and Health Administration for 10 safety violations, including two willful. OSHA found that the company failed to protect workers from cave-ins during trenching operations at two separate jobs sites in Lincoln, leading to a worker suffering a serious injury. OSHA has proposed penalties of $194,000.

On March 22 at 5600 S. 90th St., a worker was buried waist-deep when a trench approximately 9-feet-deep collapsed, and he required surgery to recover from his injuries. And on April 11 at a separate job site located at 4530 Adams St., two other workers were observed in a 10-foot-deep trench without protection. Taylor's Drain and Sewer Service Inc. was installing water and sewer lines at both locations in Lincoln.

"Cave — ins are the leading cause of injury and death during excavations," said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels. "Taylor Drain and Sewer Service failed to provide basic safety precautions, which led to the serious injury of one of its workers. This employer had no excuse for noncompliance."

At 5600 S. 90th St. job site, the company was cited for six serious violations, including failing to: develop and implement a written hazardous communication program, provide workers with hazard recognition training, protect workers from exposed underground utilities, provide a means of safe access and egress during trenching and excavation work, provide a competent person for trench inspection prior to worker entry and provide trench cave-in protection. An OSHA violation is serious if death or serious physical harm could result from a hazard an employer knew or should have known existed.

During OSHA's inspection at the 4530 Adams St. job site, two willful and two serious violations were cited. The willful violations involve failing to provide cave-in protection to workers in a trench more than 5-feet-deep and to provide a competent person for trench inspection prior to worker entry. A willful violation is one committed with intentional, knowing or voluntary disregard for the law's requirement or plain indifference to employee safety and health. The two serious violations cited include failing to provide a means of safe access and egress during trenching and excavation work and to protect workers from struck-by hazards, including spoil piles of soil placed less than two feet from the edge of the trench. Only two workers were at this job site.

OSHA standards mandate that all excavations 5-feet or deeper be protected against collapse. Detailed information on trenching and excavation hazards is available at http://www.osha.gov/SLTC/trenchingexcavation/index.html.
The citations can be viewed at: Http://www.osha.gov/ooc/citations/TaylorsDrain_897301_0912_13.pdf and http://www.osha.gov/ooc/citations/TaylorsDrain_900012_0912_13.pdf.
OSHA has placed Taylor's Drain and Sewer Services Inc. in its Severe Violator Enforcement Program as a result of these inspections. The program mandates targeted follow-up inspections to ensure compliance with the law. The program focuses on recalcitrant employers that endanger workers by committing willful, repeat or failure-to-abate violations.

The company has 15 business days from receipt of the citations to comply, request an informal conference with OSHA's area director or contest the citations and penalties before the independent Occupational Safety and Health Review Commission.

To ask questions, obtain compliance assistance; file a complaint or report workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA's toll-free hotline at 800-321-OSHA (6742) or the agency's Omaha, Neb., office at 402-553-0171.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA's role is to ensure these conditions for America's working men and women by setting and enforcing standards, and providing training, education and assistance.

INDIVIDUALS, COMPANIES RECEIVE BANS FROM ENGAGING IN DEBT COLLECTION AND INTEREST RATE REDUCTION SCHEMES

FROM:  U.S. FEDERAL TRADE COMMISSION 
FTC Settlement Bans Defendants from Engaging in Debt Collection and Interest Rate Reduction Schemes
Debt Collection Defendants Allegedly Worked with Callers from India to Bilk Consumers

Under settlements with the Federal Trade Commission, the defendants in two Tampa, Florida-area operations that allegedly bilked consumers of millions of dollars are banned from providing various types of financial services used in their schemes. In the spring of 2012, at the request of the FTC, a court shut down the two operations.

According to the FTC, the defendants used phony debt collection calls from India and bogus claims that they would reduce consumers’ credit card interest rates to bilk consumers. Brett Fisher, a repeat offender who settled charges with the FTC in 2009 in a scam involving both advance-fee credit cards and bogus interest-rate reduction claims, masterminded both schemes, the FTC alleged.

The settlements impose a $25.3 million judgment against Fisher, and require other settling defendants to surrender available assets to satisfy their monetary judgments. Defendants Pro Credit Group, LLC, Consumer Credit Group, LLC, and My Success Track, LLC, are not parties to these settlements, are not currently represented, and are facing default judgments.

Debt Collection Scheme: The Defendants Took More Than $5 Million Consumers Did Not Owe to Them, or Did Not Owe at All

The FTC alleged that between January 2010 and August 2011, defendants Fisher, Andre Keith Sanders, Pro Credit Group, LLC, and Sanders Legal Group, P.A. set up U.S.-based financial accounts for a call center operation based in India to unfairly collect payday loan debts from consumers who either did not owe them, or owed them to somebody else. The operation’s callers used threats, lies, and abusive tactics to collect debts from consumers who had previously applied for or received loans from online payday loan companies and had supplied sensitive personal financial information that later found its way into the hands of those involved with the scam.

Once consumers agreed to pay, Fisher and attorney Sanders used Sanders Legal Group, P.A. to process at least $5 million from consumers whom the India-based callers had misled. Although numerous consumers complained to the local Better Business Bureau chapter about the abusive tactics of the callers, and many consumers tried unsuccessfully to get refunds, the defendants continued processing consumers’ payments.

The FTC has brought two similar cases involving allegedly phony debt collectors, American Credit Crunchers and Broadway Global Masters, as well as a case involving an allegedly phony payday loan brokering service, Vantage Funding.

According to the FTC, from at least January 2010 until it brought its action, defendants Fisher, Sanders, Dale Robinson, William Balsamo, and five companies they controlled – Pro Credit Group, Sanders Law, Consumer Credit Group, LLC, My Success Track, LLC, and First Financial Asset Services, Inc. – deceived consumers by offering a bogus service to negotiate lower interest rates. As part of their scheme, defendants allegedly used prerecorded telemarketing robocalls, including one from “Rachel” at “cardholder services” that urged consumers to press a number and speak to a live representative in order to obtain lower interest rates. According to the complaint, defendants’ telemarketers falsely represented that they had established relationships with consumers’ lenders and often assured consumers that, if they did not see the promised results, they would receive full refunds.

According to the FTC, the defendants violated the Telemarketing Sales Rule by allegedly charging consumers between $695 and $995 up front for their bogus service and failing to obtain written approval from consumers before sending them robocalls. The agency halted five similar robocall operations in November 2012.

The settlements include the following provisions:

Impose a $25.3 million judgment on Fisher, which he agrees will not be discharged as a result of his pending bankruptcy filing.
Ban Fisher from telemarketing, promoting financial goods and services, and debt collecting.
Ban Sanders, Sanders Legal Group, P.A., and Sanders Law P.A. from debt collection and telemarketing – with narrow exceptions that allow him to continue practicing law. He is required to turn over available assets to satisfy a $23.8 million judgment.
Ban Robinson from telemarketing and debt relief services, and require him to turn over available assets to satisfy a $7.2 million judgment.
Ban Balsamo and First Financial Asset Services, Inc. from providing debt relief services; and prohibit them from making or helping others with making robocalls, making or helping others with making outbound sales calls unless they document and record them, and helping anyone outside the United States who telemarkets to U.S. consumers. Balsamo is required to turn over available assets to satisfy an $11.2 million judgment.
For consumer information about avoiding financial scams, see Fake Debt Collectors and Credit Card Interest Rate Reduction Scams.

The Commission vote approving the proposed consent decrees was 4-0. The FTC filed the proposed consent decrees in the U.S. District Court for the Middle District of Florida, Tampa Division, and they were entered by the court on September 5, 2013.

NOTE: Consent decrees have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.