FORMER EXECUTIVE AT CHARLES SCHWAB & CO., AGREES TO SETTLE WITH SEC

The following excerpt is from the SEC website:
November 21, 2011
“The Securities and Exchange Commission today announced that Randall Merk consented to the entry of a permanent injunction, payment of a civil penalty, and a suspension in order to settle a Commission action related to the Schwab YieldPlus Fund. Merk was an Executive Vice President at Charles Schwab & Co., Inc., President of Charles Schwab Investment Management, and a Trustee of the Schwab YieldPlus Fund and other Schwab funds.
In January 2011, the Commission filed a complaint alleging that Merk and another official committed securities law violations in connection with the offer, sale, and management of the YieldPlus Fund. YieldPlus is an ultra-short bond fund that, at its peak in 2007, had $13.5 billion in assets and over 200,000 accounts, making it the largest ultra-short bond fund at the time. The fund suffered a significant decline during the credit crisis of 2007-2008 and saw its assets fall from $13.5 billion to $1.8 billion during an eight-month period.
According to the complaint, Merk misled or failed to inform investors adequately about the risks of investing in YieldPlus. The complaint also alleged that Merk approved other Schwab funds’ redemptions of their investments in YieldPlus at a time when he knew or was reckless in not knowing that a portfolio manager for those funds had received material, nonpublic information about YieldPlus without the authorization of the YieldPlus Fund’s board of trustees.
On November 21, 2011, the SEC filed a consent signed by Merk and a proposed final judgment against him. Without admitting or denying the Commission’s allegations, Merk consented to the entry of a final judgment permanently enjoining him from aiding and abetting violations of, or otherwise violating, Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The proposed final judgment also would enjoin Merk from future violations of Section 34(b) of the Investment Company Act of 1940, which prohibits the making of untrue statements of material fact, or material omissions, in documents filed with the Commission. Merk also agreed to pay a $150,000 civil penalty, which the Commission is seeking to have included in an existing Fair Fund for distribution to injured YieldPlus investors. The proposed judgment is subject to the Court’s approval.
If the Court enters the injunction, Merk also has agreed to settlement of a yet-to-be instituted administrative proceeding in which the Commission would suspend Merk for 12 months from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any penny stock offering.
The Commission previously entered into a $118 million settlement with three Schwab entities regarding the YieldPlus Fund and another bond fund. See
Press Release 2011-7 and Litigation Release No. 21806 (Jan. 11, 2011). Litigation continues against Kimon Daifotis, the former lead portfolio manager for the YieldPlus Fund and former Chief Investment Officer for Fixed Income for Charles Schwab Investment Management. See Litigation Release No. 21805 (Jan. 11, 2011).”

U.S. GOVERNMENT FILES SUIT AGAINST TELEMARKETING COMPANY

The following excerpt is from the Department of Justice website:

 

Tuesday, November 22, 2011

 

"WASHINGTON - The United States has filed suit against Sonkei Communications Inc., and its principal corporate officers, Peter Turpel and Joseph Turpel, the Justice Department announced today.   The government’s complaint, filed in U.S. District Court for the Central District of California, alleges that the defendants violated the Federal Trade Commission’s (FTC) Telemarketing Sales Rule (TSR) through their telemarketing service, which facilitates delivery of robocalls by telemarketers claiming to offer products and services to consumers throughout the United States, including home security systems, grant procurement programs, and credit card services.   Sonkei is based in Newbury Park, Calif.

The TSR established the National Do Not Call Registry for consumers who do not wish to receive certain telemarketing calls, and generally prohibits calling these consumers.   The TSR also prohibits “robocalls,” that is, telephone calls that deliver a prerecorded message if the seller has not first obtained the recipient’s consent to receive these calls.

The government’s complaint alleges that the defendants assisted and facilitated abusive practices by their telemarketing customers, including calling telephone numbers registered on the National Do Not Call Registry and placing unauthorized robocalls to consumers, in violation of the Telemarketing Sales Rule.

In addition, the complaint alleges that the illegal calls allegedly placed by the defendants’ customers have generated tens of thousands of complaints from consumers and businesses.   In its lawsuit, the government asks the court to impose civil penalties for the defendants’ conduct and to enjoin them from further TSR violations.   The complaint, which the Justice Department filed with the assistance of the FTC, is based on the FTC’s investigation of the defendants’ telemarketing service.

“The Telemarketing Sales Rule, including the Do Not Call Registry, aims to shield consumers from a barrage of sales calls they don’t want which push products they don’t need,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will work with the FTC to identify and penalize those who violate the rule and can’t take ‘no’ for an answer.”

Individuals who believe they have received calls in violation of the TSR should register their complaints with the FTC.   To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant (www.ftccomplaintassistant.gov/) or call 1-877-FTC-HELP (1-877-382-4357).   This case is being prosecuted by Department of Justice, Civil Division, Consumer Protection Branch attorneys Sondra Mills and Matthew Ebert."

HEDGE FUNDER AND HIS COMPANY GET INJUCTION FILED BY SEC

The following excerpt is from the SEC website:
November 22, 2011
“The Securities and Exchange Commission today announced that on November 18, it filed a civil injunctive action against Patrick G. Rooney (“Rooney”), a resident of Oakbrook, Illinois, and his company, Solaris Management, LLC (“Solaris Management”), the investment adviser to the Solaris Opportunity Fund, LP (“Solaris Fund”) for the fraudulent misuse of the Solaris Fund’s assets and other illegal conduct.
According to the SEC’s complaint, the Solaris Fund is purportedly a non-directional hedge fund with approximately 30 investors and reported assets of $16,277,780 as of December 2008. Contrary to the Solaris Fund’s offering documents and marketing materials, Rooney and Solaris Management allegedly made a radical change in the Solaris Fund’s investment strategy by becoming wholly invested in Positron Corp. (“Positron”), a financially troubled microcap company of which Rooney has been Chairman since 2004. Rooney, who has received compensation from Positron since September 2005, allegedly misused the Solaris Fund’s money by investing over $3.6 million in Positron through both private transactions and market purchases. Many of the private transactions were undocumented while other investments were loans to Positron at 0% interest. The complaint alleges that Rooney and Solaris Management hid the Positron investments and Rooney’s relationship with the company from the Solaris Fund’s investors for over four years. Although Rooney finally told investors about the Positron investments in a March 2009 newsletter, he allegedly lied by telling them he became Chairman to safeguard the Solaris Funds’ investment. The complaint further alleges that these investments benefited Positron and Rooney while providing the Solaris Fund with a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses.
The SEC’s complaint, filed in the United States District Court for the Northern District of Illinois, charges Rooney and Solaris Management with violating Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8(a)(1) and (a)(2) thereunder. The complaint also charges Rooney with aiding and abetting Solaris Management’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8(a)(1) thereunder, and Rooney and Solaris Management with aiding and abetting the Solaris Fund’s violation of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and Section 13(d)(1) of the Exchange Act and Rule 13d-1 thereunder.
The SEC is seeking permanent injunctions, disgorgement of any ill-gotten gains plus prejudgment interest and civil monetary penalties against Rooney and Solaris Management, and an officer and director bar against Rooney.”

AT CSK AUTO: COMPANY COOKS BOOKS AND CEO GIVES BACK PRIME RIB MAIN COURSE

RARE AND/OR WELL DONE!)
The following excerpt is from the SEC website:

“Washington, D.C., Nov. 15, 2011 –The Securities and Exchange Commission today announced that the former chief executive officer and chairman of CSK Auto Corporation has agreed to return $2.8 million in bonus compensation and stock profits that he received while the company was committing accounting fraud.
Maynard L. Jenkins of Scottsdale, Ariz., was not personally charged by the SEC for the company’s misconduct, however he is still required under Section 304 of the Sarbanes-Oxley Act (SOX) to reimburse CSK Auto for incentive-based compensation and stock sale profits that he received during the company’s fraudulent period. The SEC filed court papers against Jenkins in July 2009 saying he violated the SOX “clawback” provision by failing to reimburse the company. It marked the agency’s first SOX clawback case against an individual who was not alleged to have otherwise violated the securities laws.
"CEOs should know that they can be deprived of bonuses or stock profits they received while accounting fraud was occurring on their watch," said Robert Khuzami, Director of the SEC's Division of Enforcement.
Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office, added, “Jenkins received incentive-based pay while CSK Auto was fraudulently overstating its income to shareholders. His bonuses and stock profits are now being rightfully returned to the company for the benefit of the shareholders.”
The settlement with Jenkins is subject to court approval. Jenkins has agreed to reimburse $2,796,467 to O’Reilly Automotive Inc., which has since acquired CSK Auto.
The SEC previously charged four former CSK Auto executives who perpetrated the accounting fraud, and separately charged the company for filing false financial statements for fiscal years 2002 to 2004. The company settled the charges, and the litigation against three of the former executives is continuing (CSK’s former chief operating officer has since died). The U.S. Department of Justice brought a criminal indictment against those same executives, who have pleaded guilty to various charges. CSK Auto recently entered into a non-prosecution agreement with the DOJ in which it agreed to pay a $20.9 million penalty.
The SEC’s investigation was conducted by Dabney O’Riordan, Robert Conrrad, Rhoda Chang, Spencer Bendell, and Lorraine Echavarria in the Los Angeles Regional Office. The litigation effort was led by Donald Searles.
The SEC thanks the Department of Justice, Federal Bureau of Investigation, Internal Revenue Service, and U.S. Postal Service for their substantial assistance in the investigation.”