$228 MILLION TO BE PAID BY CITIGROUP TO SETTLE SEC CHARGES OF MISLEADING INVESTORS

Citigroup To Pay $285 Million to Settle SEC Charges For Misleading Investors About CDO Company Profited From Proprietary Short Position Former Citigroup Employee Sued For His Role In Transaction

The following is an excerpt from the SEC website:

"The Securities and Exchange Commission (SEC) today charged Citigroup Global Markets Inc. (Citigroup), the principal U.S. broker-dealer subsidiary of Citigroup Inc., with misleading investors about a $1 billion collateralized debt obligation (CDO) called Class V Funding III (Class V III). At a time when the U.S. housing market was showing signs of distress, Citigroup structured and marketed Class V III and exercised significant influence over the selection of $500 million of the assets included in the CDO. Citigroup then took a proprietary short position with respect to those $500 million of assets. That short position would provide profits to Citigroup in the event of a downturn in the United States housing market and gave Citigroup economic interests in the Class V III transaction that were adverse to the interests of investors. Citigroup did not disclose to investors the role that it played in the asset selection process or the short position that it took with respect to the assets that it helped select. Without admitting or denying the SEC’s allegations, Citigroup has consented to settle the Commission’s action.
The SEC today also brought a litigated civil action against Brian Stoker (Stoker) and instituted settled administrative proceedings against Credit Suisse Asset Alternative Capital, LLC (formerly known as Credit Suisse Alternative Capital, Inc.) (CSAC), Credit Suisse Asset Management, LLC (CSAM), and Samir H. Bhatt (Bhatt), based on their conduct in the Class V III transaction. Stoker was the Citigroup employee primarily responsible for structuring the Class V III transaction. CSAM is the successor in interest to CSAC, which was the collateral manager for the Class V III transaction, and Bhatt was the portfolio manager at CSAC primarily responsible for the Class V III transaction. Without admitting or denying the Commission’s findings, CSAM, CSAC, and Bhatt have agreed to settle the Commission’s proceedings.

According to the SEC's complaints, filed in the U.S. District Court for the Southern District of New York (SDNY), in or around October 2006, personnel from Citigroup’s CDO trading and structuring desks had discussions about possibly having the trading desk establish a short position in a specific group of assets by using credit default swaps (CDS) to buy protection on those assets from a CDO that Citigroup would structure and market. Following the institution of discussions with CSAC about having CSAC act as the collateral manager for a proposed CDO transaction, Stoker sent an e-mail to his supervisor in which he stated that he hoped that the transaction would go forward and described the transaction as the Citigroup trading desk head’s “prop trade (don’t tell CSAC). CSAC agreed to terms even though they don’t get to pick the assets.”
As further set forth in the complaints, Citigroup and CSAC agreed to proceed with the Class V III transaction. During the time when the transaction was being structured, CSAC allowed Citigroup to exercise significant influence over the selection of assets included in the Class V III portfolio. The Class V III transaction marketed primarily through a pitch book and an offering circular. Stoker was primarily responsible for these documents. Both the pitch book and the offering circular included disclosures that CSAC, the collateral manager, had selected the collateral for the Class V III portfolio and that Citigroup would act as the initial CDS counterparty. The disclosures, however, did not provide any information about the extent of Citigroup’s interest in the negative performance of the Class V III collateral or that, by the times when the pitch book and the offering circular were prepared, Citigroup already had short positions in $500 million of the collateral. The pitch book and the offering circular were materially misleading because they failed to disclose that Citigroup had played a substantial role in selecting the assets for Class V III, Citigroup had taken a $500 million short position in the Class V III collateral for its own account, and Citigroup’s short position was comprised of names it had been allowed to select, while Citigroup did not short names that it had no role in selecting. Nothing in the disclosures put investors on notice Citigroup had interests that were adverse to the interests of investors.
According to the complaints, the Class V III transaction closed on February 28, 2007. One experienced CDO trader characterized the Class V III portfolio as “dogsh!t” and “possibly the best short EVER!” and an experienced collateral manager commented that “the portfolio is horrible.” On November 7, 2007, a credit rating agency downgraded every tranche of Class V III, and on November 19, 2007, Class V III was declared to be in an Event of Default. The approximately 15 investors in the Class V III transaction lost their entire investments in Class V III. Citigroup received fees of approximately $34 million for structuring and marketing the transaction and realized net profits of at least $160 million from its short position on $500 million of the collateral.
As a result of their conduct, the Commission has alleged that Citigroup and Stoker each violated Sections 17(a)(2) and (3) of the Securities Act of 1933. Without admitting or denying the allegations in the Commission’s complaint, Citigroup has agreed to settle by consenting to the entry of a final judgment that (i) enjoins it from violating these provisions, (ii) requires it to pay $160 million in disgorgement, plus $30 million in prejudgment interest, and $95 million as a penalty, for a total of $285 million, which will be returned to investors through a Fair Fund distribution, and (iii) requires remedial action by Citigroup in its review and approval of offerings of certain mortgage-related securities. The settlement is subject to Court approval. With respect to Stoker, the SEC is seeking an injunction, disgorgement with prejudgment interest, and a civil money penalty.

In the related administrative proceedings instituted against CSAM, CSAC, and Bhatt, the SEC found that, as a result of the roles that they played in the asset selection process and the preparation of the pitch book and the offering circular for the Class V III transaction, CSAM and CSAC violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 17(a)(2) of the Securities Act and that Bhatt violated Section 17(a)(2) of the Securities Act and caused the violations of Section 206(2) of the Advisers Act by CSAC. Without admitting or denying the SEC’s findings, CSAM and CSAC consented to the issuance of an order directing each of them to cease and desist from committing or causing any violations, or future violations, of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and requiring them to pay disgorgement of $1 million in fees that it received from the Class V III transaction plus $250,000 in prejudgment interest, and requiring them to pay a penalty of $1,250,000. Without admitting or denying the SEC’s findings, Bhatt consented to the issuance of an order directing him to cease and desist from committing or causing any violations, or future violations, of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and suspending him from association with any investment adviser for a period of 6 months.

PFIZER INC. AGREES TO PAY $14.5 MILLION TO RESOLVE ALLEGATIONS OF ILLEGAL MARKETING OF DETROL

The following excerpt is from the Department of Justice website:
Friday, October 21, 2011
“Pfizer to Pay $14.5 Million for Illegal Marketing of Drug Detrol
Settlement Involves False Claims Act Lawsuit Not Resolved at the Time of the Government’s $2.3 Billion Dollar Settlement with Pfizer in 2009
WASHINGTON – American pharmaceutical company Pfizer Inc. has agreed to pay $14.5 million to resolve False Claims Act allegations related to its marketing of the drug Detrol, the Justice Department announced today. The settlement resolves the last of a group of 10 qui tam, or whistleblower, suits that were filed in the District of Massachusetts and two other districts, beginning in 2003. The other nine suits were settled or dismissed in 2009 as part of the government’s global resolution with Pfizer, under which the company agreed to pay $2.3 billion dollars to resolve civil claims and criminal charges regarding multiple drugs.
The current settlement addresses allegations that Pfizer illegally marketed Detrol, a drug for the treatment of overactive bladder, for use in male patients suffering from benign prostatic hypertrophy and several allied conditions, notably lower urinary tract symptoms and bladder outlet obstruction – all uses for which the Food and Drug Administration (FDA) had not approved the drug as safe and effective. Under the terms of the settlement, the $14.5 million recovery will be divided between the United States and participating state Medicaid programs, with $11,878,846 going to the federal government and $2,621,154 going to state Medicaid programs. Under the qui tam provisions of the False Claims Act, whistleblowers will receive a $3,282,019 share of the federal recovery.
“Whistleblowers play an important role in protecting taxpayer funds from fraud and abuse,” said Tony West, Assistant Attorney General of the Justice Department’s Civil Division. “Settlements like this one help maintain the integrity of FDA’s drug approval process and support important federal and state health care programs.”
“The United States is pleased that Pfizer has agreed to resolve the last of the pending cases that were not settled as part of the 2009 resolution and plea,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts. “We hope and expect that this is indicative of a commitment to move forward in compliance with the law, and we will continue to watch vigilantly to ensure that Pfizer complies with the law in its sales and marketing of drugs sold to the public.”
The case is U.S. ex rel. Wetherholt and Drimer v. Pfizer, which the United States declined to intervene in and was independently litigated by the relators. The United States subsequently participated closely in efforts to resolve the case.
This settlement is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $6.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 exceed $8.1 billion.”

TWO COMPANIES AND A MAN ALLEGEDLY PUMPED AND STOCK FOR FINANCIAL GAIN

 
The following excerpt is from the SEC website:
October 18, 2011
“The Securities and Exchange Commission announced today that on October 14, 2011, the U.S. District Court for the Northern District of Texas entered a judgment against Jason Wynn, of Plano, Texas, and two companies under his control – Wynn Holdings LLC and Wynn Industries LLC. The Commission’s amended complaint alleged that Wynn and his companies violated the antifraud and registration provisions of the federal securities laws through a scheme to pump and dump the stock of four issuers: Beverage Creations, Inc., My Vintage Baby, Inc., ConnectAJet.com, Inc. and Alchemy Creative, Inc.
The Commission alleged that Jason Wynn and his companies (1) purchased tens of millions of shares directly from the issuers for pennies per share, (2) touted the stock to investors through a nationwide marketing campaign, and (3) immediately dumped their shares into the public market at grossly inflated prices when no registration statement was filed or in effect. Wynn created artificial demand for the stocks through various ad campaigns, emails and misleading promotional mailers. While the promotional mailers disclosed that the Wynn companies received the stock being touted, they did not disclose that Wynn and his companies intended to sell that stock into the artificially inflated market created by the promotions.
The judgment permanently enjoins Wynn, Wynn Holdings, LLC and Wynn Industries, LLC from violating Section 5 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also bars Wynn and his companies from participating in any penny stock offerings and provides that they will be ordered to pay disgorgement and civil penalties determined by the district court at a later date. Wynn and his companies consented to the entry of the judgment without admitting or denying the allegations in the Commission’s amended complaint.
Previously, on January 3, 2011, the district court entered a judgment against stock promoter Carlton Fleming and certain entities under his control – Regus Investment Group LLC and Thomas Wade Investments, LLC. The Commission’s case against the remaining defendants – Ryan Reynolds and companies under his control – is pending. The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”

SEC FILES INJUNCTIVE ACTION AGAINST OPTIONS TRAINING TRADING COMPANY

The following excerpt is from the SEC website:
“On October 18, 2011, the Securities and Exchange Commission filed a settled civil injunctive action against Long Term-Short Term Inc., d/b/a BetterTrades, and Freddie Rick, the Company's co-founder and president. Without admitting or denying the allegations in the complaint, the defendants consented to judgments enjoining them from violating the antifraud provisions of the federal securities laws. The Company and Rick also agreed to pay, respectively, civil penalties of $750,000 and $150,000, and agreed to continue enforcing internal compliance guidelines designed to prevent future violations. BetterTrades sells products designed to teach how to trade options, including seminars, workshops and software that facilitates options trading. The Commission's complaint alleges that from at least 2007 and continuing through at least 2008, certain BetterTrades instructors falsely claimed to be highly successful options traders using the strategies taught by BetterTrades. In marketing materials, the defendants also claimed that certain Company instructors were successful, active traders. The complaint alleges that the defendants acted recklessly in making these claims without verifying their accuracy, despite red flags that the claims were false. The complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5.
The complaint also alleges that certain Company marketing materials claimed that Rick became wealthy through his options trading. According to the complaint, the Company knew or was reckless in not knowing that Rick's wealth came primarily from Company operations. The complaint also alleges that Rick allowed infomercials to air that incorrectly implied that his wealth came from trading.
In determining to accept the defendants' settlement offers, the SEC took into account the defendants' voluntary remediation efforts. The Company retained counsel to review how it promoted and sold its classes, products and services, and it adopted policies that set forth standards of behavior expected from instructors, including mandatory instructor training on Company policies and interpretive guidelines, collection of instructor trading records, and vetting of any instructor claims of trading success against trading records. The Company also instituted policies and detailed guidelines regarding, among other things, review and revision of marketing materials, and required student claims of trading success to be vetted against trading records. The Company also took disciplinary actions against instructors who failed to adhere to Company policies.
The Commission's settlements with the defendants are subject to the approval of the U.S. District Court for the Eastern District of Virginia.”

CFTC GETS DEFAULT JUDGMENT AND PERMANENT INJUNCTION AGAINST FOREIGN CURRENCY FIRM

The following is an excerpt from the CFTC website:
“Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Western District of North Carolina entered an order of default judgment and permanent injunction against Barki, LLC of Mint Hill, N.C.
The order, entered on September 30, 2011, stems from a CFTC enforcement action filed on March 17, 2009 that charged Barki and Bruce C. Kramer (Kramer) with fraudulent solicitation and misappropriation in a $38 million leveraged foreign currency (forex) Ponzi scheme perpetrated by Kramer (see CFTC New Release 5635-09, March 18, 2009).
The court’s order imposes restitution of $19,960,649 and a civil monetary penalty of $20,944,707 on Barki and imposes permanent trading and registration bans against Barki, among other sanctions. The order also requires relief defendant Forest Glen Farm, LLC of North Carolina, a company Kramer registered to purchase his residence and a horse farm, to disgorge $1.35 million in ill-gotten gains it received as a result of Kramer’s fraudulent conduct.
In addition, the CFTC obtained a federal court consent order from the same court requiring disgorgement from relief defendant Rhonda Kramer (R. Kramer) for any customer funds she obtained through Kramer’s fraudulent conduct. The consent order, entered on September 27, 2011, recognizes that the Receiver appointed by the court in this case had collected funds from R. Kramer which satisfies her disgorgement obligations under the consent order.
The Default Order Finds that Kramer Fraudulently Solicited Least $38 Million from 79 Customers by Touting his Success in Trading ForexThe default order finds that, from June 2004 through February 2009, Kramer fraudulently solicited at least $38 million from 79 customers by touting his success in trading forex. Of the $38 million solicited, Kramer deposited approximately $17.5 million for trading forex and sustained trading losses of $10 million, the order finds. Kramer used the bulk of the funds to pay purported profits and to return principal to customers, and for extravagant personal uses, such as a 48-acre horse farm, a 6,000 square foot residence, artwork, luxury automobiles including a Maserati, and extravagant parties, the order finds. Kramer concealed his fraud by issuing false account statements to customers. His fraud became known upon his death in February 2009.
Joseph W. Grier, III was appointed Receiver in this action and has distributed $3,250,369 in receivership funds to Barki customers.”

OWNERS OF PLUMBING COMPANY PLEAD GUILTY TO CONSPIRING TO STEER BUSINESS

The following is an excerpt from the Department of Justice website:


“WASHINGTON —Two Virginia contractors pleaded guilty today to participating in a scheme to steer contracts for repair and maintenance work at healthcare and nursing home facilities owned by Medical Facilities of America Inc. (MFA) to their now defunct plumbing business, the Department of Justice announced.
Donald R. Holland, a resident of Hardy, Va., and Larry R. Sumpter, a resident of Roanoke, Va., pleaded guilty in U.S. District Court in Roanoke to conspiring with another individual to steer contracts for repair and maintenance at MFA healthcare and nursing home facilities. According to a one-count felony charge filed today, from about June 1998 until at least December 2006, Holland and Sumpter, former co-owners of Virginia-based Hardy Plumbing & Heating Corp., conspired with an MFA employee who oversaw the bidding process for repair and maintenance contracts at MFA facilities in North Carolina and Virginia. The department said that the MFA employee steered contracts to Hardy Plumbing in return for kickbacks.
According to the court documents, Holland, Sumpter and the MFA employee created fictitious competitor bids that were higher than the quotes submitted by Hardy Plumbing to create the appearance of competition. The MFA employee also specified the amount Hardy Plumbing should quote to MFA as well as the amount of the kickback on each of the contracts. As a result of the kickback scheme, Holland and Sumpter paid more than $250,000 to the MFA employee and received gross revenues totaling more than $3 million in connection with MFA contracts that were subject to the scheme to defraud. The department said that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. According to the plea agreements, Holland and Sumpter have agreed to cooperate with the department’s ongoing investigation.
Holland and Sumpter are charged with conspiracy to commit mail fraud for the kickback scheme, which carries a maximum sentence of 20 years in prison and a $250,000 criminal fine. The maximum fines may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum.
The pleas are the second and third to arise out of the department’s ongoing fraud investigation into the award of repair and maintenance contracts at facilities owned by MFA. On April 4, 2011, Edward T. Fodrey, a contractor and resident of Norfolk, Va., pleaded guilty in U.S. District Court in Norfolk to conspiring with others to steer contracts for repair, maintenance and renovation at MFA healthcare and nursing home facilities.”

TOP MANAGEMENT AND FIRM GETS CHARGED BY SEC FOR VIOLATION OF ANTI-FRAUD LAWS

The following is an excerpt from the SEC website:
“On October 4, 2011, the Securities and Exchange Commission (SEC) filed a complaint in United States District Court for the Northern District of New York charging StratoComm Corporation, its CEO Roger D. Shearer, and its former Director of Investor Relations, Craig Danzig, with violating the antifraud provisions of the securities laws and with illegally selling securities in unregistered transactions. On October 3, 2011, the SEC filed a complaint in United States District Court for the Southern District of Florida alleging that attorney Stewart A. Merkin, StratoComm’s outside counsel, also committed securities fraud.
The SEC’s complaint filed in Albany, New York alleges that StratoComm, acting at Shearer’s direction and with Danzig’s assistance, issued and distributed public statements falsely portraying the company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC’s complaint also alleges that StratoComm, Shearer and Danzig sold investors approximately $3 million worth of StratoComm stock in unregistered transactions. Shearer used much of that money for his own purposes, including paying a substantial part of the restitution he owed in connection with his guilty plea in a prior criminal proceeding.
The SEC’s complaint charges StratoComm with 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 thereunder. It charges Shearer with violating Sections 5(a) and 5(c) of the Securities Act, aiding and abetting StratoComm’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and with being liable as a control person for StratoComm’s violations. The SEC’s complaint charges Danzig with violating Sections 5(a), 5(c), and 17(a) of the Securities Act, with violating Section 15(a) of the Exchange Act, and with aiding and abetting StratoComm’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC’s complaint seeks permanent injunctions, disgorgement of unlawful proceeds plus prejudgment interest, and a financial penalty from all defendants. It also seeks an order prohibiting Shearer from serving as an officer or director of a public company and prohibiting Shearer and Danzig from participating in the offering of a penny stock.
The SEC’s complaint filed in Miami, Florida alleges that Merkin wrote four attorney representation letters for posting on the website of Pink Sheets LLC and its successor, Pink OTC Markets, Inc. In those letters Merkin disclaimed knowledge of any investigation into possible violations of the securities laws by StratoComm or any of its officers or directors. However, the SEC’s complaint also alleges that Merkin was representing StratoComm and several individuals in connection with the SEC’s investigation at the time. Nevertheless, in order that StratoComm’s shares would continue to be quoted, the SEC’s complaint alleges that Merkin falsely stated that to his knowledge StatoComm was not under investigation. The SEC’s complaint charges Merkin with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. It seeks a permanent injunction, disgorgement of unlawful proceeds plus prejudgment interest, a financial penalty, and an order prohibiting Merkin from participating in the offering of a penny stock.”

FDA SAYS DON'T BUY A CERTAIN WEIGHT LOSS PRODUCT THAT MAKES YOUR BLOOD PRESSURE RISE

The following excerpt is from the Food and Drug Administration website:

"[October 18, 2011] The Food and Drug Administration (FDA) is advising consumers not to purchase or use “Slender Slim 11,” a product for weight loss sold on various websites and in some retail stores.
FDA laboratory analysis confirmed that “Slender Slim 11” contains sibutramine. Sibutramine is a controlled substance that was removed from the U.S. market in October 2010 for safety reasons. The product poses a threat to consumers because sibutramine is known to substantially increase blood pressure and/or pulse rate in some patients and may present a significant risk for patients with a history of coronary artery disease, congestive heart failure, arrhythmias, or stroke. This product may also interact in life threatening ways with other medications a consumer may be taking.
Consumers should stop using this product immediately and throw it away. Consumers who have experienced any negative side effects should consult a health care professional as soon as possible.
Healthcare professionals and patients are encouraged to report adverse events or side effects related to the use of this product to the FDA's MedWatch Safety Information and Adverse Event Reporting Program.”

FDA ADVISES CONSUMERS NOT TO USE A WEIGHT LOSS PRODUCT

The following excerpt is from the FDA website:

“October 18, 2011] The Food and Drug Administration (FDA) is advising consumers not to purchase or use “Lishou,” a product for weight loss sold on various websites and in some retail stores, and manufactured by Yunnan Bai’an Medicinal Science & Technology Co. Ltd.
FDA laboratory analysis confirmed that “Lishou” contains sibutramine. Sibutramine is a controlled substance that was removed from the U.S. market in October 2010 for safety reasons. The product poses a threat to consumers because sibutramine is known to substantially increase blood pressure and/or pulse rate in some patients and may present a significant risk for patients with a history of coronary artery disease, congestive heart failure, arrhythmias, or stroke. This product may also interact in life threatening ways with other medications a consumer may be taking.
Consumers should stop using this product immediately and throw it away. Consumers who have experienced any negative side effects should consult a health care professional as soon as possible.
Healthcare professionals and patients are encouraged to report adverse events or side effects related to the use of this product to the FDA's MedWatch Safety Information and Adverse Event Reporting Program:”

CFTC ANNOUNCES FRAUD ACTIONS

The following excerpt is from the CFTC website:
“The Division’s mission to protect market participants from fraud is reflected by the 55 fraud actions filed in fiscal year 2011 alone, and by the numerous federal court orders obtained by the Division against more than 75 defendants, imposing civil monetary penalties and restitution and disgorgement obligations. In one notable fraud case, CFTC vs Walsh, et al, the Court ordered an initial distribution and return of approximately $792 million to commodity pool investors stemming from an alleged $1.3 billion Ponzi scheme that was the subject of CFTC and Securities and Exchange Commission (SEC) charges in a prior fiscal year.
The Division also took action against so-called gatekeepers, charging an accounting firm and two of its partners in two separate cases, for failing to apply generally accepted auditing standards (GAAS) when conducting audits of futures commission merchants that had produced misstated financial statements. See In the Matter of G. Victor Johnson II, McGladrey & Pullen, LLP and Altshuler, Melvoin & Glasser, LLP, CFTC Docket No. 11-01 (October 4, 2010 ) and In the Matter of David Shane and McGladrey & Pullen, LLP, CFTC Docket No. 11-23 (September 22, 2011).
Foreign Exchange Currency (Forex) EnforcementThe Division of Enforcement filed 23 actions enforcing new regulations that resulted from the Dodd-Frank Act, and that require foreign exchange dealers and introducing brokers to register with the Commission. Separately, and as part of the Division’s prosecution of retail forex fraud, the Division prevailed in a federal jury trial in the United States District Court for the Middle District of Florida, which imposed more than $17 million in sanctions and other relief against Capital Blu Management, LLC and several other defendants.
Cooperating with Law Enforcement PartnersThe Division of Enforcement continues to actively engage in cooperative enforcement with federal and state criminal and civil law enforcement authorities. During FY 2011, more than 70 indictments and convictions were obtained in criminal cases related to CFTC enforcement actions.
The Division also engages in cooperative enforcement with international authorities in a wide range of matters from retail fraud to market manipulation. Requests and referrals to and from foreign authorities continued to grow during FY 2011. The Division handled over 530 international requests and referrals, an approximate 20 percent increase over FY 2010. “

JUDGE ASSIGNS PENALTIES AGAINST INDIVIDUAL AND COMPANIES

The following excerpt is from the SEC website:
October 17, 2011
The Securities and Exchange Commission announced that on October 14, 2011, the United States District Court for the Middle District of Florida entered a final judgment against Daniel W. Nodurft permanently restraining and enjoining him from future violation of Section 5 and Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”). The Court also ordered Nodurft to pay a civil penalty in the amount of $50,000.
The Commission’s complaint alleged that Nodurft, a resident of Louisiana and the former vice-president and general counsel of Aerokinetic Energy Corporation (“Aerokinetic”), a Sarasota-based company purportedly in the business of developing and marketing alternative power technologies and products, violated the registration and antifraud provisions of the securities laws in connection with Aerokinetic’s fraudulent unregistered securities offering. On July 24, 2008, the U.S. District Court for the Middle District of Florida issued a temporary restraining order against Aerokinetic and its then president, Randolph E. Bridwell in a related case (Securities and Exchange Commission v. Aerokinetic Energy Corporation, Case No. 8:08-cv-1409-T27TGW). On January 19, 2011, the Court entered a final judgment against Aerokinetic and Bridwell imposing disgorgement of ill-gotten proceeds, jointly and severally, in the amount of $555,000, plus prejudgment interest in the amount of $59,571.09. Additionally, Aerokinetic and Bridwell were ordered to pay civil penalties of $250,000 and $130,000, respectively. Aerokinetic’s judgment was upheld on appeal to the Eleventh Circuit Court of Appeals.”

RELIEF DEFENDANTS: COMPANY AND INDIVIDUAL TO PAY OVER $19 MILLION IN PENALTIES AND DISGORGEMENT

The following excerpt is from the CFTC website:
“Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained federal court consent orders resolving its remaining claims against defendants Ray M. White and CRW Management LP (CRW) and relief defendants Christopher R. White and Hurricane Motorsports, LLC, all of Mansfield, Texas.
The claims arose from a CFTC complaint filed on March 4, 2009, in the U.S. District Court for the Northern District of Texas, charging the defendants with operating a multi-million dollar off-exchange foreign currency Ponzi scheme (see CFTC Press Release 5626-09, March 5, 2009). The relief defendants were named in the lawsuit because they received funds as a result of the defendants’ fraudulent conduct and had no legitimate entitlement to those funds.
One consent order, entered on October 5, 2011, requires defendants jointly and severally to pay $9,548,365 in disgorgement and requires Ray White to pay a $9,548,365 civil monetary penalty.
An earlier consent order of permanent injunction, entered by the court on October 1, 2009, resolved liability against defendants and permanently barred defendants from engaging in any commodity-related activity and from registering with the CFTC in any capacity. This earlier consent order found that, from at least November 2006 through at least November 2008, defendants solicited more than $11.9 million from approximately 411 customers for the purported purpose of trading forex. To carry out their scheme, defendants informed customers and prospective customers that, because of CRW’s purported success in trading forex, it would be able to and, in fact, purportedly did generate tremendous returns for customers, ranging between approximately five and eight percent a week (or an annual rate of return between 260 and 416 percent), according to the order. However, CRW never traded forex, and Ray White lost money in his limited forex trading, operated a Ponzi scheme, and misappropriated millions of dollars of customer funds, the order found.
Another consent order, entered by the court on September 27, 2011, requires relief defendants Christopher White and Hurricane Motorsports to pay more than $380,000 in disgorgement and to give up their rights to funds and other assets (including certain real estate) held by the court-appointed receiver, Timothy A. Mack.
In a related criminal matter, filed in the U.S. District Court for the Northern District of Texas as part of President Barack Obama’s Financial Fraud Enforcement Task Force, Ray White pleaded guilty to one count of commodities fraud and on May 24, 2011, was sentenced to 10 years in federal prison.
The CFTC thanks the Fort Worth Regional Office of the Securities and Exchange Commission for its assistance."

PENNY STOCK COMPANY AND PRINCIPALS GET BANNED FROM PENNY STOCK DEALING

The following excerpt is from the sec website:
On October 13, 2011 the U.S. District Court for the Southern District of Florida entered judgments against a group of penny-stock promoters arising out of their repackaging of “news” issued by a series of sham energy companies. The judgments, which the defendants consented to as part of a settlement with the Commission, require them to pay penalties and to disgorge profits from their illicit activities. The judgments also permanently ban the defendants from touting and other dealings involving penny stocks.
The judgments came in a civil action that the Commission filed earlier this year against Miami-based stock-touting company Wall Street Capital Funding LLC (WSCF) and its principals – owners Philip Cardwell and Roy Campbell and their associate Aaron Hume. In its Complaint initiating the action, the SEC alleged that the defendants were in the business of distributing promotional materials styled as “Wall Street News Alerts” for penny-stock companies. According to the SEC, one such company, PrimeGen Energy Corp., purported to have great success in drilling for oil in 2009 and 2010. The SEC alleged, however, that PrimeGen was phony: its corporate headquarters were a rented mailbox in a UPS Store opened with a do-not-forward instruction; its phone line was unattended; and its web page was generated by copying the source code from another company’s web site. As alleged in the Complaint, WSCF’s “investment opinions,” emails, and web profiles typically expressed positive opinions about penny-stock companies, their business prospects, and the future direction of their stock price. WSCF, according to the Complaint, created the misleading appearance of an independent basis for its statements even though it was merely repeating the penny-stock companies’ claims. Moreover, the SEC alleged, even when the defendants received ample warning signs that a scam was afoot, they always did the same thing: they closed their eyes and published.
The SEC’s Complaint was filed February 7, 2011 in the U.S. District Court for the Southern District of Florida. The Complaint charged Wall Street Capital Funding LLC, Philip Cardwell, Roy Campbell, and Aaron Hume with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, which prohibit fraudulent conduct in connection with securities transactions. Judge Donald L. Graham presided over the action, No. 11-cv-20413-DLG. The judgments imposed by Judge Graham require the defendants, among other things, to pay penalties and disgorgement totaling $300,000, and permanently bar them from promotional activities and other dealings involving penny stocks. The defendants consented to the judgments without admitting or denying the SEC’s allegations.”

HEALTH CARE COMPANY OWNER SENTENCED TO PRISON FOR MEDICARE FRAUD

The following excerpt is from the Department of Justice website:
Wednesday, October 12, 2011
“WASHINGTON – The owner and operator of a Houston durable medical equipment (DME) company was sentenced yesterday in Houston federal court to 33 months in prison for his role in a Medicare fraud scheme, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).
Bassey Monday Idiong, 32, of Humble, Texas, was sentenced by U.S. District Judge Vanessa D. Gilmore. In addition to his prison term, Idiong was sentenced to two years of supervised release and was ordered to pay $527,023 in restitution.
Idiong pleaded guilty on March 1, 2010, to one count of conspiracy to commit health care fraud and five counts of health care fraud. Idiong owned and operated B.I. Medical Supply LLC.
According to court documents, Idiong paid patient recruiters kickbacks in exchange for the names of beneficiaries for whom bills could be submitted to Medicare. B.I. Medical billed Medicare for expensive, rigid orthotics and braces that were packaged together and referred to as an “arthritis kit,” at a cost of approximately $4,000 per kit. B.I. Medical then supplied the beneficiaries with different, less expensive products that were not medically necessary. Court documents indicate that in one instance, B.I. Medical billed Medicare for an arthritis kit that included two knee braces for a beneficiary who had only one leg. In total, B.I. Medical submitted approximately $846,000 in fraudulent claims to Medicare.
The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-In-Charge Stephen L. Morris of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG), Office of Investigations; Joseph J. Del Favero, Special Agent-in-Charge of the Chicago Field Office of the Railroad Retirement Board Office of Inspector General; and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).
The case was prosecuted by Trial Attorneys Laura Cordova, Katherine Houston and Jennifer Saulino of the Criminal Division’s Fraud Section. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since their inception in March 2007, Strike Force operations in nine locations have charged more than 1,140 defendants who collectively have falsely billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.”

CONGO CONFLICT MINERALS TO BE DISCUSSED AT SEC ROUNDTABLE OCTOBER 18, 2011

The following is an excerpt from an SEC e-mail:
“Washington, D.C., Sept. 29, 2011 — The Securities and Exchange Commission today announced that it will host a public roundtable next month to discuss the agency’s required rulemaking under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which relates to reporting requirements regarding conflict minerals originating in the Democratic Republic of the Congo and adjoining countries.
The event will take place on October 18 from 12:30 p.m. to 5:15 p.m. and will provide a forum for various stakeholders to exchange views and provide input on issues related to the SEC’s required rulemaking. The panel discussions will focus on key regulatory issues such as appropriate reporting approaches for the final rule, challenges in tracking conflict minerals through the supply chain, and workable due diligence and other requirements related to the rulemaking.
“We are committed to writing an effective rule as soon as possible, and the roundtable will help us do that,” said Meredith Cross, Director of the SEC’s Division of Corporation Finance.
Roundtable panelists are expected to reflect the views of different constituencies, including affected issuers, human rights organizations, and other stakeholders. A final agenda including a list of participants will be announced closer to the date of the roundtable.
The roundtable will be held in the auditorium at the SEC’s headquarters at 100 F Street NE in Washington D.C. The roundtable will be open to the public with seating on a first-come, first-served basis, and the discussion also can be viewed via live webcast on the SEC website.”