SEC CHARGES GLAXOSMITHKLINE SUBSIDIARY WITH FRAUD

The following excerpt is from a e-mail sent out by the SEC:

"12/12/2011 10:35 AM EST

FOR IMMEDIATE RELEASE
2011-261

Washington, D.C., Dec. 12, 2011 – The Securities and Exchange Commission today charged a subsidiary of pharmaceutical company GlaxoSmithKline and the subsidiary’s former chairman and CEO with defrauding employees and other shareholders in the company’s stock plan by buying back their stock at severely undervalued prices.
The SEC alleges that Stiefel Laboratories Inc., which was a family-owned business located in Coral Gables, Fla., prior to being purchased by GlaxoSmithKline two years ago, used low valuations for stock buybacks from November 2006 to April 2009. Stiefel Labs omitted key information that would have alerted employees that their stock was actually worth much more. Instead, the information was confined to then-CEO Charles Stiefel and certain members of his family as well as some senior management. At the time, Stiefel Labs was the world’s largest private manufacturer of dermatology products.
“Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, Stiefel Labs purchased more than 750 shares of company stock from shareholders between November 2006 and April 2007 at a price of $13,012 per share. Charles Stiefel knew that five private equity firms had submitted offers to buy preferred stock in November 2006 based on equity valuations of Stiefel Labs that were approximately 50 to 200 percent higher than the valuation later used for stock buybacks.
The SEC alleges that between late July 2007 and June 2008, Stiefel Labs purchased more than 350 additional shares of company stock from shareholders under the company’s employee stock plan at $14,517 per share. It also bought more than 1,050 shares from shareholders outside the plan at even lower stock prices. At the time of these buybacks, Charles Stiefel knew not only about the November 2006 private equity valuations, but that a prominent private equity firm had bought preferred stock based on an equity valuation for Stiefel Labs that was more than 300 percent higher than that used for stock buybacks.
The SEC’s complaint further alleges that between Dec. 3, 2008 and April 1, 2009, Stiefel Labs purchased more than 800 shares of its stock from shareholders at $16,469 a share even though Charles Stiefel knew that equity valuation was low and misleading, in part because he was negotiating the sale of the company. Beginning in late November 2008, Stiefel Labs decided to seek acquisition bids from several pharmaceutical companies. On Jan. 26, 2009, GlaxoSmithKline expressed interest in a Stiefel Labs acquisition and signed a confidentiality agreement two days later. As late as March 16, 2009, Charles Stiefel ordered that the ongoing negotiations not be disclosed to employees, and he misled shareholders to believe the company would remain family-owned. On April 20, 2009, Stiefel Labs announced that GlaxoSmithKline would acquire the company for a value that amounted to more than $68,000 per share. This price was more than 300 percent higher than the per share price that Stiefel Labs had been paying to buy back shares from its shareholders.
The SEC’s complaint alleges Stiefel Labs violated and Charles Stiefel violated and aided and abetted Stiefel Labs’ violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint seeks permanent injunctive relief, financial penalties, and the disgorgement of ill-gotten gains with prejudgment interest against both defendants, and an officer and director bar against Charles Stiefel.
The SEC’s investigation was conducted by attorney Drew D. Panahi and accountant Kathleen Strandell in the SEC’s Miami Regional Office under the supervision of Thierry Olivier Desmet. Christopher E. Martin of the Miami Regional Office will be litigating the SEC’s case.

BIG, BIG BANK AND THE RIGGED BID

The following excerpt is from the SEC website:
“Washington, D.C., Dec. 8, 2011
The SEC alleges that Wachovia generated millions of dollars in illicit gains during an eight-year period when it fraudulently rigged at least 58 municipal bond reinvestment transactions in 25 states and Puerto Rico. Wachovia won some bids through a practice known as “last looks” in which it obtained information from the bidding agents about competing bids. It also won bids through “set-ups” in which the bidding agent deliberately obtained non-winning bids from other providers in order to rig the field in Wachovia’s favor. Wachovia facilitated some bids rigged for others to win by deliberately submitting non-winning bids.
Wachovia agreed to settle the charges by paying $46 million to the SEC that will be returned to affected municipalities or conduit borrowers. Wachovia also entered into agreements with the Justice Department, Office of the Comptroller of the Currency, Internal Revenue Service, and 26 state attorneys general that include the payment of an additional $102 million. The settlements arise out of long-standing parallel investigations into widespread corruption in the municipal securities reinvestment industry in which 18 individuals have been criminally charged by the Justice Department’s Antitrust Division.
“Wachovia won bids by playing an elaborate game of ‘you scratch my back and I’ll scratch yours,’ rather than engaging in legitimate competition to win municipalities’ business.” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Elaine C. Greenberg, Chief of the SEC’s Municipal Securities and Public Pensions Unit, added, “Wachovia hid its fraudulent practices from municipalities by affirmatively assuring them that they had not engaged in any manipulative conduct. This settlement will result in significant payments to municipalities harmed by Wachovia’s unlawful actions.”
Wachovia Bank is now Wells Fargo Bank following a merger in March 2010.
When municipal securities are sold to investors, portions of the proceeds often are not spent immediately by municipalities but rather temporarily invested in municipal reinvestment products until the money is used for the intended purposes. These products are typically financial instruments tailored to meet municipalities’ specific collateral and spend-down needs, such as guaranteed investment contracts (GICs), repurchase agreements (repos), and forward purchase agreements (FPAs). The proceeds of tax-exempt municipal securities generally must be invested at fair market value, and the most common way of establishing that is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.
According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, Wachovia engaged in fraudulent bidding of GICs, repos, and FPAs from at least 1997 to 2005. Wachovia’s fraudulent practices and misrepresentations not only undermined the competitive bidding process, but negatively affected the prices that municipalities paid for reinvestment products. Wachovia deprived certain municipalities from a conclusive presumption that the reinvestment instruments had been purchased at fair market value, and jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted.
Without admitting or denying the allegations in the SEC’s complaint, Wachovia has consented to the entry of a final judgment enjoining it from future violations of Section 17(a) of the Securities Act of 1933 and has agreed to pay a penalty of $25 million and disgorgement of $13,802,984 with prejudgment interest of $7,275,607. The settlement is subject to court approval.
Financial institutions have now paid a total of $673 million in settlements resulting from the ongoing investigations into corruption in the municipal reinvestment industry. Others charged prior to Wachovia are:– The Securities and Exchange Commission today charged Wachovia Bank N.A. with fraudulently engaging in secret arrangements with bidding agents to improperly win business from municipalities and guarantee itself profits in the reinvestment of municipal bond proceeds.


Banc of America Securities LLC – $137 million settlement with SEC and other federal and state authorities on Dec. 7, 2010. UBS Financial Services Inc. – $160 million settlement with SEC and other federal and state authorities on May 4, 2011. J.P. Morgan Securities LLC – $228 million settlement with SEC and other federal and state authorities on July 7, 2011. In a related action to the Banc of America matter, the SEC today charged the firm’s former vice president and marketer Dean Pinard for his role in various improper bidding practices. Pinard is the beneficiary of a grant of conditional amnesty from criminal prosecution by the Department of Justice provided to Banc of America’s parent corporation. Pinard, who cooperated with the investigation, agreed to pay more than $40,000 to settle the SEC’s case without admitting or denying the findings. He is barred from association with any broker, dealer, investment adviser, municipal securities dealer, or municipal advisor.
The SEC’s investigation, which is continuing, has been conducted by Deputy Chief Mark R. Zehner and Assistant Municipal Securities Counsel Denise D. Colliers, who are members of the Municipal Securities and Public Pensions Unit in the Philadelphia Regional Office. The SEC thanks the other agencies with which it has coordinated this enforcement action, including the Antitrust Division of the U.S. Department of Justice, Federal Bureau of Investigation, Internal Revenue Service, Office of the Comptroller of the Currency, and 26 State Attorneys General.”

CHICAGO SETTLES WITH EPA AND DOG OVER UNTREATED SEWER DISCHARGES

The following excerpt is from the EPA website:

“CHICAGO (Dec. 14, 2011) – The U.S. Environmental Protection Agency (EPA), the Department of Justice (DOJ), and the State of Illinois announced a Clean Water Act (CWA) settlement with the Metropolitan Water Reclamation District of Greater Chicago (MWRD) to resolve claims that untreated sewer discharges were released into Chicago area waterways during flood and wet weather events. The settlement will safeguard water quality and protect people’s health by capturing stormwater and wastewater from the combined sewer system, which services the city of Chicago and 51 communities.

“This consent decree requires MWRD to invest in green roofs, rain gardens and other green infrastructure to prevent basement flooding in the neighborhoods that are most severely impacted by sewer overflows,” said EPA Region 5 Administrator Susan Hedman. “The enforceable schedule established by this consent decree will ensure completion of the deep tunnel and reservoir system to control untreated sewage releases into Chicago area rivers and Lake Michigan.”

“These much needed upgrades to Chicago’s sewer infrastructure will reduce combined sewage overflows and the public’s exposure to harmful pathogens,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “The use of innovative green infrastructure in the city’s urban core will reduce runoff and flooding, and improve the quality of the environment where people live.”

“This settlement mandates that MWRD make critical structural changes to improve the quality of Chicago’s waterways,” said Illinois Attorney General Lisa Madigan. “By requiring green infrastructure projects, the agreement will also help reduce runoff and flooding for Chicago area residents.”

Under the settlement, the Metropolitan Water Reclamation District (MWRD) will work to complete a tunnel and reservoir plan to increase its capacity to handle wet weather events and address combined sewer overflow discharges. The project will be completed in a series of stages in 2015, 2017 and 2029. The settlement also requires MWRD to control trash and debris in overflows using skimmer boats to remove debris from the water so it can be collected and properly managed, making waterways cleaner and healthier. MWRD is also required to implement a green infrastructure program that will reduce stormwater runoff in areas serviced by MWRD by distributing rain barrels and developing projects to build green roofs, rain gardens, or use pervious paving materials in urban neighborhoods. MWRD has also agreed to pay a civil penalty of $675,000.

Raw sewage contains pathogens that threaten public health, leading to beach closures and public advisories against fishing and swimming. This problem particularly affects older urban areas, where minority and low-income communities often live. Keeping raw sewage and contaminated stormwater out of the waters of the United States is one of EPA’s National Enforcement Initiatives for 2011 to 2013. The initiative focuses on reducing discharges from sewer overflows by obtaining cities’ commitments to implement timely, affordable solutions to these problems, including the increased use of green infrastructure and other innovative approaches“.

REFINING COMPANY TO PAY $12 MILLION FOR OBSTRUCTON OF JUSTICE AND VIOLATING THE CLEAN AIR ACT

The following excerpt is from the EPA website:

“WASHINGTON — Pelican Refining Company LLC, was sentenced to pay $12 million for felony violations of the Clean Air Act and to obstruction of justice charges in federal court in Lafayette, La. announced Cynthia Giles, assistant administrator for the U.S. Environmental Protection Agency’s Office of Enforcement and Compliance Assurance, and Ignacia S. Moreno, assistant attorney general of the Environment and Natural Resources Division of the Department of Justice.

“Facilities have a responsibility to protect their employees and local residents by following our nation’s environmental laws,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. "Corporations that choose to cut corners and ignore these critical safeguards will face significant consequences.”

“This corporation operated without even the most basic requirements of an environmental compliance plan and endangered the public and its own employees by implementing unsafe practices in violation of its permit and reporting requirements,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Today's plea demonstrates that the Justice Department will continue to vigorously prosecute those who violate environmental and workplace safety laws.”

Pelican was sentenced to pay a $12 million penalty, which includes a $10 million criminal fine and $2 million in community service payments that will go toward various environmental projects in Louisiana, including air pollution monitoring. The criminal fine is the largest ever in Louisiana for violations of the Clean Air Act. Pelican is also prohibited from future operations unless it implements an environmental compliance plan, which includes independent quarterly audits by an outside firm and oversight by a court-appointed monitor.

In a joint factual statement filed in court, Pelican, headquartered in Houston, Texas, admitted that the company had knowingly committed criminal violations of its operating permit at the refinery located in Lake Charles, La. The violations were discovered during a March 2006 inspection by the Louisiana Department of Environmental Quality (LDEQ) and the Environmental Protection Agency (EPA), which identified numerous unsafe operating conditions. Pelican also pleaded guilty to obstruction of justice for submitting materially false deviation reports to LDEQ, the agency that administers the federal Clean Air Act in Louisiana.

Pelican admitted to the following:

 Pelican had no company budget, no environmental department and no environmental manager;

 In order to comply with a permit issued under the Clean Air Act, the refinery was required to use certain key pollution prevention equipment, but that equipment was either not functioning, poorly maintained, improperly installed, improperly placed into service and/or improperly calibrated;

 It was a routine practice for over a year to use an emergency flare gun to re-light the flare tower at the refinery designed to burn off toxic gasses and provide for the safe combustion of potentially explosive chemicals; because the pilot light was not functioning properly, employees would take turns trying to shoot the flare gun to relight the explosive gasses;

 Sour crude oil was stored in a tank that was not properly placed into service and remained in the tank after the roof sank;

 A caustic scrubber designed to remove hydrogen sulfide from emissions was bypassed;

 A continuous emission monitoring system (CEMS) designed to measure the hydrogen sulfide levels in refinery emissions was not working properly, and

 Pelican provided false information to the State of Louisiana and the State of Texas concerning the laboratory testing of asphalt.

Byron Hamilton, the Pelican vice-president who oversaw operations at the Lake Charles refinery since 2005 from an office in Houston, Texas pleaded guilty on July 6, 2011, to negligently placing persons in imminent danger of death and serious bodily injury as a result of negligent releases at the refinery. Hamilton faces up to one year in prison and a $200,000 fine for each of the two Clean Air Act counts. On Oct. 31, 2011, Pelican’s former asphalt facilities manager, Mike LeBleu, also pleaded guilty to a negligent endangerment charge under the Clean Air Act.  

The government’s investigation of the Pelican Refinery continues. Under the Crime Victims’ Rights Act, crime victims are afforded certain statutory rights, including the opportunity to attend all public hearings and provide input to the prosecution. Any person adversely impacted is encouraged to learn more about the case and the Crime Victims’ Rights Act or contact the Victim Witness Coordinator for the U.S. Attorney’s Office, Western District of Louisiana.

The criminal investigation is being conducted by the EPA Criminal Investigation Division in Baton Rouge and the Louisiana State Police, with assistance from the Louisiana Department of Environmental Quality. The case is being prosecuted by U.S. Attorney Stephanie Finley, Richard A. Udell, Senior Trial Attorney of the Environmental Crimes Section of the Environment and Natural Resources Division of the U.S. Department of Justice, Trial Attorney Christopher Hale with the Environmental Crimes Section“.

AFTERMARKET AUTO LIGHTS MANUFACTURER IS INDICTED FOR PRICE-FIXING

The following excerpt is from the Department of Justice website:
Wednesday, November 30, 2011
“Taiwan Aftermarket Auto Lights Manufacturer and Its Chairman Indicted for Participation in Price-Fixing Conspiracy
WASHINGTON – A federal grand jury in San Francisco returned a superseding indictment yesterday against a Taiwan aftermarket auto lights manufacturer, its U.S.-based subsidiary distributor and its chairman for participating in an international conspiracy to fix the prices of aftermarket auto lights, the Department of Justice announced. Aftermarket auto lights are incorporated into an automobile after its original sale, often as repairs following a collision or as accessories and upgrades. 

The one-count felony superseding indictment, filed today in U.S. District Court in San Francisco, charges that Eagle Eyes Traffic Industrial Co. Ltd., which is based in Tainan County, Taiwan, participated in a conspiracy to fix the prices of aftermarket auto lights in the United States and elsewhere from about July 2001 to about September 2008. The indictment also charges Eagle Eyes’ highest-ranking officer, Chairman Yu-Chu Lin, aka David Lin, for his participation in the conspiracy from about July 2001 to about September 2008. Lin is a resident of Taiwan. E-Lite Automotive Inc., Eagle Eyes’ U.S. subsidiary based in Chino, Calif., is also charged in the indictment for its participation in the conspiracy from about March 2006 to about September 2008. Today’s indictment supersedes an indictment filed on July 19, 2011, against the second-highest-ranking officer of Eagle Eyes, Vice Chairman Homy Hong-Ming Hsu.
“The Antitrust Division will continue to crack down on international price-fixing conspiracies that target U.S. businesses and consumers,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. 

According to the indictment, Eagle Eyes, E-Lite, Lin, Hsu and co-conspirators participated in a conspiracy in which the participants met and agreed to charge prices of aftermarket auto lights according to jointly determined formulas. The participants in that conspiracy issued list price announcements to customers in accordance with the jointly determined price structure, and collected and exchanged information on prices for the purpose of monitoring and enforcing adherence to the conspiracy. The department said that the conspirators met in Taiwan and the United States for their discussions.

Including Eagle Eyes, E-Lite and Lin, four companies and four individuals have been charged to date in connection with the department’s ongoing investigation into the aftermarket auto lights industry. On Nov. 15, 2011, Maxzone Vehicle Lighting Corp., a U.S. distributor of aftermarket auto lights, pleaded guilty and was sentenced to pay a $43 million criminal fine for its participation in the conspiracy. On Oct. 4, 2011, Sabry Lee (U.S.A.) Inc., a U.S. distributor of aftermarket auto lights, pleaded guilty and was sentenced to pay a $200,000 criminal fine for its participation in the conspiracy. On March 29, 2011, Polo Shu-Sheng Hsu, the former president and CEO of Maxzone, was sentenced to serve 180 days in prison and to pay a $25,000 criminal fine for his role in the conspiracy. Chien Chung Chen, aka Andrew Chen, the former executive vice president of Sabry Lee, pleaded guilty for his participation in the conspiracy on June 7, 2011. He is currently scheduled to be sentenced on July 17, 2012.

Eagle Eyes, E-Lite and Lin are charged with price fixing in violation of the Sherman Act which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and $100 million fine for corporations. 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 fine.”

FORMER EXECS AT FREDDIE MACK AND FANNIE CHARGED BY SEC WITH ALLEGED SECURITIES FRAUD

The following excerpt is from the Securities and Exchange Commission website:

“Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission's litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.

Three former Fannie Mae executives - former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae's Single Family Mortgage business, Thomas A. Lund - were named in the SEC's complaint filed in U.S. District Court for the Southern District of New York.
The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."

The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others - between March 2007 and August 2008.

The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.
Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.

The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.

In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.

The SEC's complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the "Securities Act"); and that Mudd aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.
The SEC's complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.
The SEC's investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC's litigation efforts.”

CEMENT PLANT MANUFACTURER TO PAY OVER $1.4 MILLION TO RESOLVE CLEAN AIR VIOLATIONS CASE

The following excerpt is from an EPA e-mail:

“WASHINGTON – The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice (DOJ) announced that CalPortland Company (CPC), a major producer of Portland cement and building materials in the United States, has agreed to pay a $1.425 million penalty to resolve alleged violations of the Clean Air Act at its cement plant in Mojave, Calif. In addition to the penalty, CPC will spend an estimated $1.3 million on pollution controls that will reduce harmful emissions of nitrogen oxides (NOx) and sulfur dioxide (SO2), pollutants that can lead to childhood asthma and smog.

“Air pollution from cement plants can travel significant distances downwind, crossing state lines and creating region-wide air quality and health problems,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement will ensure the proper pollution controls are installed to reduce emission levels and protect communities across the Southwest.”

“This settlement will bring state of the art controls to a major source of air pollution and secures significant reductions in harmful pollutants,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “The Mojave plant is one of the largest emitters of nitrogen oxide pollution in California. As a result of the Clean Air Act compliance requirements in the consent decree, residents in the surrounding region will enjoy cleaner and healthier air.”

The $1.425 million penalty is one of the largest settlements for a single cement facility. The plant is located in Kern County, Calif., which has some of the worst air pollution in the country. The pollutants covered in the settlement contribute to the formation of ground-level ozone, or smog. Exposure to even low levels of ozone can cause respiratory problems, and repeated exposure can aggravate pre-existing respiratory diseases.

The government’s complaint alleges that CPC made significant modifications to its plant, resulting in increased emissions of NOx, SO2 and carbon monoxide, without first obtaining a Clean Air Act-required permit and without installing necessary pollution control equipment. Major sources of air pollution are required to obtain such permits before making changes that would result in a significant emissions increase of any pollutant.

The settlement ensures that the proper equipment, estimated to cost $1.3 million to install and $500,000 per year to operate, will be installed to reduce future emission levels. These measures are expected to reduce pollution each year from the plant by at least 1,200 tons of NOx and 360 tons of sulfur dioxide SO2.

Since 2005, EPA has been focusing on improving compliance with the new source review provisions of the Clean Air Act among industries that have the potential to cause significant amounts of air pollution, including the cement manufacturing industry.

EPA is continuing its commitment to reducing air pollution from cement plants by making it one of the National Enforcement Initiatives for 2011-2013. Sulfur dioxide and nitrogen oxides, two key pollutants emitted from cement plants, are converted in the air into fine particles of particulate matter that can cause severe respiratory and cardiovascular impacts, and premature death. Reducing these harmful air pollutants will benefit the communities located near the CalPortland facility, particularly communities disproportionately impacted by environmental risks and vulnerable populations, including children.

The proposed consent decree will be lodged with the U.S. District Court for the Eastern District of California, and will be subject to a 30-day public comment period.”

CASES FILED ALLEGEING KICKBACK SCHEMES IN THINLY TRADED STOCKS

The following excerpt is from the SEC website:
December 2, 2011
"The Securities and Exchange Commission announced that, on December 1, 2011, the Commission, U.S. Attorney for the District of Massachusetts, and Federal Bureau of Investigation filed parallel cases in federal court against several corporate officers, lawyers and a stock promoter alleging they used kickbacks and other schemes to trigger investments in various thinly-traded stocks. The Commission filed civil charges of securities fraud against ZipGlobal Holdings, Inc.; Microholdings US, Inc.; Michael Lee of Hingham, MA; James Wheeler of Camas, WA; Paul Desjourdy of Medfield, MA; and Edward Henderson of Lincoln, Rhode Island and alleging they used kickbacks to engage in fraudulent activity involving microcap stocks.
The criminal case charged 13 defendants who engaged in criminal activity in the midst of an undercover FBI operation. According to the charges filed in U.S. District Court, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies; the kickbacks were to be concealed through the use of sham consulting agreements. What the insiders and promoters did not know was that the purported investment fund representative was actually an undercover agent.
The charges follow a year-long investigation focusing on preventing fraud in the micro-cap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the Commission.
The Commission's complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaints seeks a permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties, penny stock and officer and director bars.”

SEC RESOLVES FRAUD-BASED LAWSUIT AGAINST CHICAGO-AREA HEDGE FUND ADVISER AND ITS OWNER

The following excerpt is from the SEC website:
“The Securities and Exchange Commission announced today that on November 17 Judge John F. Grady of the U.S. District Court for the Northern District of Illinois entered a final judgment against Jeffrey R. Neufeld (Neufeld) and Paridon Capital Management LLC (Paridon) of Elgin, Illinois for defrauding the TCM Global Strategy Fund (TCM Fund or the fund), a hedge fund, and its investors. Without admitting or denying the Commission’s allegations, Neufeld and Paridon consented to the entry of the final judgment which imposed a $75,000 civil penalty against Neufeld.
Previously, on April 27, 2011, the Court permanently enjoined Neufeld and Paridon from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Neufeld and Paridon also consented to pay disgorgement and prejudgment interest of $53,182.33 to an injured investor.
According to the Commission’s complaint, Paridon, an investment adviser, and its owner, Neufeld, fraudulently operated the TCM Fund since 2006. Neufeld and Paridon allegedly lied about the fund’s assets under management and reported inflated returns that were not based on actual trading. They also used fictitious returns to lure investors into the TCM Fund. The complaint also alleges that Neufeld and Paridon caused the fund to use a significant portion of its investor money to buy “debt securities” issued by Paridon. Although called debt securities, this investment was in reality a loan from the fund to Paridon. The debt securities were also not permitted investments for the fund, were not disclosed and consented to by the fund, and were improperly marked up by Neufeld and Paridon to offset and hide significant trading losses.”

SEC FILES CHARGES AGAINST DEFUNCT SOYO GROUP, INC. FOR SECURITIES FRAUD

The following excerpt is from the SEC website:
December 2, 2011
“The Securities and Exchange Commission (“Commission”) announced today that it filed charges against three individuals who participated in a securities fraud scheme at Soyo Group, Inc. (“Soyo”), a now defunct California-based consumer electronics and computer parts company.
The Commission’s civil injunctive complaint, filed in the U.S. District Court for the Central District of California on November 29, 2011, alleges that between January 2007 and November 2008, Soyo, through the actions of its chief financial officer, Nancy Shao Wen Chu, and members of her accounting staff, Elizabeth Tsang and Eric Jon Strasser, misled Soyo’s investors, primary lending bank, and auditor by materially overstating Soyo’s net revenues and understating its liabilities. According to the complaint, Chu and Tsang caused Soyo to book over $47 million in fraudulent sales revenues arising from at least 120 fictitious transactions with 21 customers, resulting in Soyo materially overstating its net revenues in its periodic filings by amounts ranging from 14.4 to 76.8 percent. The complaint also alleges that in order to obtain additional bank financing for Soyo and keep its existing line of credit from defaulting, Chu misled Soyo’s investors, primary lending bank, and auditor regarding a $6 million debt-for-equity transaction with a Soyo vendor that was never completed. The complaint further alleges that Strasser, a consultant who prepared Soyo’s filings with the Commission, was alerted to the falsity of the debt-for-equity transaction disclosures, but he failed to correct the misstatements or inform Soyo’s auditor prior to the next quarter’s filing.
The Commission’s complaint alleges that, as a result of their conduct, Chu and Tsang violated, and unless enjoined, will continue to violate, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Strasser aided and abetted an antifraud violation. The complaint also alleges that Chu violated, and unless enjoined, will continue to violate Section 17(a) of the Securities Act of 1933, and is liable as a control person for Soyo’s antifraud violations. As part of this action, the Commission seeks against each of the defendants an injunction against future violations of the provisions set forth above, disgorgement, pre-judgment interest, third tier civil money penalties and, as to Chu, an officer and director bar.”

FORMER SENIOR EXECUTIVES AT SIEMENS ARE CHARGED WITH $100 MILLION DOLLAR BRIBERY SCHEME

The following excerpt is from the Department of Justice website;
Tuesday, December 13, 2011
“Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme
WASHINGTON – Eight former executives and agents of Siemens AG and its subsidiaries have been charged for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara for the Southern District of New York and Ronald T. Hosko, Special Agent in Charge of the FBI, Washington Field Office’s Criminal Division.
The defendants charged in the indictment returned late yesterday are:
Uriel Sharef, a former member of the central executive committee of Siemens AG;
Herbert Steffen, a former chief executive officer of Siemens Argentina;
Andres Truppel, a former chief financial officer of Siemens Argentina;
Ulrich Bock, Stephan Signer and Eberhard Reichert, former senior executives of Siemens Business Services (SBS); and
Carlos Sergi and Miguel Czysch, who served as intermediaries and agents of Siemens in the bribe scheme. The indictment charges the defendants and their co-conspirators with conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the wire fraud statute, money laundering conspiracy and wire fraud.
“Today’s indictment alleges a shocking level of deception and corruption,” said Assistant Attorney General Breuer. “The indictment charges Siemens executives, along with agents and conduits for the company, with committing to pay more than $100 million in bribes to high-level Argentine officials to win a $1 billion contract. Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials. This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.”
“As alleged, the defendants in this case bribed Argentine government officials in two successive administrations and paid off countless others in a successful effort to secure a billion dollar contract,” said U.S. Attorney Bharara. “When the project was terminated, they even sought to recover the profits they would have reaped from a contract that was awarded to them illegitimately in the first place. Bribery corrupts economic markets and creates an unfair playing field for law-abiding companies. It is critical that we hold individuals as well as corporations accountable for such corruption as we are doing today.”
“Backroom deals and corrupt payments to foreign officials to obtain business wear away public confidence in our global marketplace,” said FBI Special Agent in Charge Hosko of the Washington Field Office’s Criminal Division. “The investigation into this decades-long scheme serves as an example that the FBI is committed to curbing corruption and will investigate those who try to advance their businesses through foreign bribery.”
According to the indictment, the government of Argentina issued a tender for bids in 1994 to replace an existing system of manually created national identity booklets with state of the art national identity cards (the DNI project). The value of the DNI project was $1 billion. In 1998, the Argentine government awarded the DNI project to a special-purpose subsidiary of Siemens AG.
The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means. For instance, Bock made cash withdrawals from Siemens AG general-purpose accounts in Germany totaling approximately $10 million, transported the cash across the border into Switzerland and deposited the funds into Swiss bank accounts for transfer to officials. Bock, Truppel, Reichert and other conspirators also allegedly caused Siemens to wire transfer more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract relating to the DNI project. Over the duration of the conspiracy, the conspirators allegedly relied on at least 17 off-shore shell companies associated with Sergi, Czysch and other intermediaries to disguise and launder the funds, often documenting the payments through fake consulting contracts.
In May 1999, according to the indictment, the Argentine government suspended the DNI project, due in part to instability in the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy allegedly committed Siemens to paying additional bribes to the incoming officials and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.
When the project was terminated in May 2001, members of the conspiracy allegedly responded with a multi-faceted strategy to overcome the termination. According to the indictment, the conspirators sought to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption.
In related actions, the indictment also alleges that members of the conspiracy continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration and to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. Conspirators continued to conceal these additional payments through various means. For example, Sharef, Truppel and other members of the conspiracy allegedly caused Siemens to transfer approximately $9.5 million through fictitious transactions involving a Siemens business division that had no role in the DNI project. They also caused Siemens to pay an additional $8.8 million in 2007 under the legal cover of a separate arbitration initiated in Switzerland by the intermediaries to enforce a sham $27 million contract from 2001 between SBS and Mfast Consulting, a company controlled by their co-conspirator intermediaries, which consolidated existing bribe commitments into one contract. The conspirators caused Siemens to quietly settle the arbitration, keeping all evidence of corruption out of the proceeding. The settlement agreement included a provision preventing Sergi, Czysch and another intermediary from testifying in, or providing information to, the Washington arbitration.
Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitral tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. On Aug. 12, 2009, following Siemens’ corporate resolutions with the U.S. and German authorities – new management of Siemens caused Siemens AG to forego its right to receive the award and, as a result, the company never claimed the award money.
The indictment charges the defendants with conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.
The charges announced today follow the Dec. 15, 2008, guilty pleas by Siemens AG and its subsidiary, Siemens S.A. (Siemens Argentina), to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.
In a parallel civil action, the Securities and Exchange Commission (SEC) announced charges against executives and agents of Siemens. The department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of these parallel investigations.
Today’s charges follow, in large part, the laudable actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the department after the Munich Public Prosecutor’s Office initiated an investigation. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation; cooperated extensively and authentically with the department in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.
The department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing this case. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The case is being prosecuted by Principal Deputy Chief Jeffrey H. Knox of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Jason P. Hernandez and Sarah McCallum of the U.S. Attorney’s Office for the Southern District of New York. The Fraud Section of the Justice Department’s Criminal Division and the Complex Frauds Unit of the U.S. Attorney’s Office for the Southern District of New York are handling the case. The case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.”

SCIENTIST SENTENCED FOR GRANT FRAUD USING PITSFIELD, MASS. COMPANY

The following excerpt is from the Department of Justice website:
Tuesday, November 29, 2011
“Former Massachusetts Scientist and Businessman Sentenced to Prison for Federal Grant Fraud
WASHINGTON - A former Massachusetts scientist and businessman was sentenced today by U.S. District Judge Rya W. Zobel in Boston to one year and one day in federal prison for executing a fraud scheme involving a multi-million dollar federal research grant.
The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Carmen M. Ortiz for the District of Massachusetts; William P. Offord, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (IRS-CI) - Boston Field Office; and Theodore L. Doherty III, Special Agent in Charge of the New England Regional Office of the U.S. Department of Transportation, Office of Inspector General (DOT-OIG).
Christopher D. Willson also w as sentenced to six months of supervised release following his prison term. In addition, Willson was ordered to pay restitution of $100,000 to the Federal Transit Administration (FTA). Willson was convicted at trial in June 2011 of one count of conspiracy to defraud the United States and to commit wire fraud, six counts of wire fraud and four counts of false claims.
According to the evidence presented at trial, Willson was the chief scientist and senior vice president of a Pittsfield, Mass., company called EV Worldwide LLC (EVW). From 2000 through 2005, a federal earmark directed the FTA to transfer approximately $4.3 million to EVW through a regional transit agency called the Pioneer Valley Transit Authority (PVTA). The funds were used by EVW to develop an electric battery that would be used in public transit buses. The federal grant required EVW to match the federal funds, dollar-for-dollar, with its own resources. For every dollar EVW spent on the project, the company could seek up to 50 percent reimbursement from the FTA.
From 2004 through 2005, W illson submitted 10 fraudulent invoices in which he falsely claimed that EVW was matching the FTA funds, when in fact EVW was millions of dollars in debt and had nearly no other non-public source of funds. Evidence and testimony presented at trial also showed that Willson repeatedly contacted and met with U.S. Congressman John Olver’s office and grant officials at the FTA and PVTA to discuss the company’s claimed progress and federal grant funding, but he never informed them of the company’s financial problems. As a result of this deception, Willson fraudulently obtained more than $700,000 in federal funds for EVW.
Willson used the money to pay himself approximately $100,000, to pay EVW’s CEO Michael Armitage approximately $250,000 and to provide approximately $110,000 to fund a separate research company that he and Armitage had founded in Canada called Hydrogen Storage Media Inc., among other things.
In October 2010, Armitage pleaded guilty to one count of conspiracy, one count of false claims and one count of endeavoring to obstruct a federal audit, as well as other unrelated crimes. On Nov. 15, 2011, Armitage was sentenced by U.S. District Judge for the District of Massachusetts Michael A. Ponsor to 66 months in federal prison to be followed by five years of supervised release and was ordered to pay restitution of $4.2 million to the FTA and $215,138 to the PVTA.
The case was investigated by IRS-CI and the DOT-OIG. The Defense Contract Audit Agency also assisted with the investigation. The case is being prosecuted by Assistant U.S. Attorney Steven H. Breslow for the District of Massachusetts and Trial Attorney Edward J. Loya Jr. of the Criminal Division’s Public Integrity Section.”

TENNESSEE CO. AND GEORGIA DEPARTMENT OF TRANSPORTATION AGREE TO PAY $1.5 MILLION PENALTY FOR CLEAN WATER VIOLATIONS

The following excerpt is from the U.S. Department of Justice website:

Monday, December 12, 2011
“Tennessee Construction Company and Georgia Department of Transportation Agree to Pay $1.5 Million Penalty to Resolve Clean Water Act Violations
WASHINGTON – Wright Brothers Construction Co., of Charleston, Tenn., and the Georgia Department of Transportation (GDOT) have agreed to pay a $1.5 million penalty and spend more than $1.3 million to offset environmental damages to resolve alleged violations of the Clean Water Act (CWA), the Department of Justice and the Environmental Protection Agency (EPA) announced today. The civil penalty is one of the largest ever under the CWA provisions prohibiting the unauthorized discharge of dredged or fill material into waters of the United States.
The complaint alleges that between 2004 and 2007, Wright Brothers, with approval from GDOT, piped and buried all or portions of seven primary trout streams in violation of the CWA. Wright Brothers was hired by GDOT to dispose of excess soil and rock generated during two GDOT highway expansion projects in northeast Georgia. The contracts between GDOT and Wright Brothers specifically required Wright Brothers to obtain written environmental clearance from GDOT prior to using any site as a fill site. GDOT approved sites that included streams considered to be waters of the United States.
Burying and piping streams can destroy valuable aquatic habitat and threatens water quality. The reduced water quality may have adversely impacted downstream trout populations, which are a major recreational resource to the region. All of the streams that were filled are tributaries of either Lake Burton or Tallulah Falls Lake.
“Construction projects, including important expansions of highway infrastructure, must be conducted in full compliance with the Clean Water Act, which protects our nation’s waterways, aquatic habitats and recreational resources from harm,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “This settlement will restore and mitigate pollution of area streams for the benefit of the people of Georgia.”
“Dumping dirt and waste rock into our nation’s waters threatens water quality and aquatic habitats,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement will restore damaged streams, protecting trout habitat and recreational opportunities for the people of northeastern Georgia.”
“Through this enforcement action, we are sending a strong message about the importance of protecting headwater streams in the Southeast,” said Gwendolyn Keyes Fleming, EPA Region 4 Regional Administrator. “The streams impacted by the violations are designated by the state of Georgia as primary trout streams, which provide essential cold water habitat for a variety of species, support the robust recreational fishing industry in north Georgia, and thereby impact the health and well-being of many families.”
In Atlanta, U.S. Attorney Sally Quillian Yates said, “The citizens of Rabun County deserve to have our tributaries and streams kept free of unauthorized fill material and similar pollutants. This significant monetary agreement underscores the commitment of this office and the Justice Department to our water supply, its life sources and the environment.”
Under the settlement, Wright Brothers and GDOT must perform injunctive relief measures, including purchasing 16,920 mitigation credits at an estimated retail cost of $1.35 million to offset the impacts to waters of the United States that cannot be restored. The credits must be purchased from mitigation banks servicing the area in which the violations occurred. A mitigation bank is a wetland, stream or other aquatic resource area that has been set aside for the purpose of providing compensation for impacts to aquatic resources that occurred under a federal, state or local permit.
Wright Brothers and GDOT will also remove piping from and restore the bed and bank of 150 feet of stream channel that was impacted from their disposal activities. The estimated cost of this work is $25,000. When complete, the restorative measures required under the settlement will mitigate the 2,800 feet of stream impacted by the CWA violations.
The settlement is subject to a 30 day comment period and final court approval.”

TEXAS HEALTH CARE COMPANY OWNER PLEADS GUILTY TO MEDICARE FRAUD

The following excerpt is from the Department of Justice website:
Tuesday, November 29, 2011
“Owner of Houston Health Care Company Pleads Guilty to Defrauding Medicare
WASHINGTON – The owner of a Houston health care company pleaded guilty today in connection with a Medicare fraud scheme involving durable medical equipment (DME), announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).
Akinsunbo Akinbile, 44, pleaded guilty before U.S. District Judge Keith P. Ellison in Houston to eight counts of health care fraud.
Akinbile admitted that he was the owner and operator of Hallco Medical Supply, a company that purported to provide DME to Medicare beneficiaries. According to court documents, Hallco submitted claims to Medicare for DME, including orthotic devices, that were medically unnecessary and/or never provided. Many of the orthotic devices were components of “arthritis kits,” and purported to be for the treatment of arthritis-related conditions. The arthritis kits generally contained a number of devices including braces for both sides of the body and related accessories such as heat pads. In total, from June 2007 through May 2009, Hallco submitted approximately $737,770 in fraudulent claims to Medicare.
At sentencing, scheduled for Feb. 15, 2012, Akinbile faces a maximum sentence of 10 years in prison.
Today’s guilty plea 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) and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).
The case was prosecuted by Trial Attorney Laura M.K. Cordova and Assistant Chief Sam S. Sheldon 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, Medicare Fraud 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.”

U.S. DISTRICT COURT ENTERS FINAL JUDGEMENT AGAINST CHINA VOICE HOLDING AND CO-FOUNDER

The following excerpt is from the SEC website:

“On December 5, 2011, the Securities and Exchange Commission announced that the Honorable Reed O’Connor, United States District Judge for the Northern District of Texas, entered a final judgment against David Ronald Allen, the co-founder and former Chief Financial Officer and President of China Voice Holding Corp., to settle charges that he made false and misleading statements and material omissions regarding China Voice, selectively disclosed material, non-public information regarding the company, aided and abetted an unregistered broker, and operated a Ponzi scheme. The court also entered final judgments against China Voice and a number of Allen’s related companies.

Allen agreed to entry of a final judgment permanently enjoining him from violating Sections 5 and 17(a) of the Securities Act of 1933, 10(b) and 15(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Regulation FD thereunder. The final judgment, entered on December 2, also orders Allen and his company, Winterstone Financial Ltd., to pay $225,468 in disgorgement and prejudgment interest and orders Allen to pay a civil penalty of $212,821. In addition, Allen is barred permanently from serving as an officer or director of a public company and from participating in an offering of a penny stock. Allen’s wife agreed to pay disgorgement and prejudgment interest of $146,162. The Allens and Winterstone Financial Ltd. agreed to the entry of these judgments without admitting or denying the allegations in the Commission’s complaint.
The Commission had filed an emergency action on April 28, 2011, alleging that Allen, with the assistance of Alex Dowlatshahi and Christopher Mills, and numerous related entities, launched what became a Ponzi scheme that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated businesses, including China Voice. The Commission’s complaint further charged Allen, China Voice, and China Voice’s former CEO and President, William Burbank, for a series of fraudulent statements about China Voice’s financial condition and business prospects and with selectively disclosing material, non-public information regarding the company to certain shareholders. In addition, the SEC charged China Voice shareholders Ilya Drapkin and Gerald Patera with financing stock promotion campaigns regarding China Voice, including a blast fax campaign conducted by Robert Wilson, and charged Patera with acting as an unregistered broker.
Five companies associated with Allen, Associates Funding Group, Inc., Associates Capital Leasing Joint Venture, D-Cap Associates Joint Venture, Development Capital Associates Joint Venture, and Townhome Communities Corp., also agreed to entry of a final judgment to settle the charges against them. Without admitting or denying the allegations in the Commission’s complaint, the five companies agreed to entry of a final judgment that permanently enjoins all of them from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and further enjoins D-Cap Associates Joint Venture, Development Capital Associates Joint Venture, and Townhome Communities Corp. from violating Sections 5 and 17(a) of the Securities Act. In addition, the Final Judgment orders the five companies to pay a civil penalty of $500,000.
Finally, China Voice agreed to entry of a final judgment permanently enjoining it from violations of Section 17(a) of the Securities Act and Sections 10(b) and 13(a) of the Exchange Act and Rule 10b-5 and Regulation FD thereunder. The judgment, which China Voice consented to without admitting or denying the allegations in the Commission’s complaint, also requires China Voice to hire an independent consultant to evaluate the company’s internal controls.

The Commission’s case is still pending against remaining defendants Wilson and two of his companies. The Commission previously entered into settlements with Burbank, Dowlatshahi, Drapkin, Mills, Patera, and various of their companies.”

OCEAN FREIGHT CARRIER AGREES TO PAY $14.2 MILLION IN FINES AND FORMER PRESIDENT OF COMPANY IS INDICTED

The following is an excerpt from the Department of Justice website:
“WASHINGTON — Sea Star Line LLC has agreed today to plead guilty and to pay a $14.2 million criminal fine for its role in a conspiracy to fix prices in the coastal water freight transportation industry, the Department of Justice announced. Additionally, a federal grand jury in San Juan, Puerto Rico, returned an indictment against Frank Peake, the former president of Sea Star Line, for his role in the same conspiracy.
According to a one-count felony charge filed today in U.S. District Court for the District of Puerto Rico, Sea Star Line, whose principal place of business is in Jacksonville, Fla., engaged in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico from as early as May 2002, until at least April 2008. According to a one-count indictment filed today in the same district, Peake participated in the conspiracy from at least as early as late 2005, until at least April 2008.
Sea Star Line transports a variety of cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico.
According to the court documents, Sea Star Line, Peake and co-conspirators carried out the conspiracy by agreeing during meetings and communications to allocate customers of Puerto Rico freight services and to rig bids and fix the rates and surcharges to be charged to purchasers of water transportation of freight between the continental United States and Puerto Rico. The department said that Sea Star Line, Peake and co-conspirators also engaged in meetings for the purpose of monitoring and enforcing adherence to the agreed-upon rates and sold Puerto Rico freight services at collusive and noncompetitive rates.
In addition to today’s charges, as a result of this investigation, on April 30, 2011, Horizon Lines LLC was sentenced to pay a $15 million criminal fine, and five former shipping executives from both Sea Star Line and Horizon Lines have been sentenced to pay a total of nearly $85,000 in criminal fines and to serve more than 11 years in prison, collectively.
Sea Star Line and Peake are charged with price fixing in violation of the Sherman Act, which carries a maximum fine of $100 million for corporations, and a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine 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 fine.
Today’s charges arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the coastal water freight transportation industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section; the Baltimore Resident Agency of the Department of Defense’s Office of the Inspector General, Defense Criminal Investigative Service (DCIS); the Miami Field Office of the Department of Transportation’s Office of Inspector General; and the Jacksonville Field Office of the FBI."  

DEPARTMENT OF JUSTICE AND COMPANY REACH $209 MILLION AGREEMENT IN BRIG BRANCH MINE EXPLOSION

Tuesday, December 6, 2011
“Alpha Natural Resources Inc. and Department of Justice Reach $209 Million Agreement Related to Upper Big Branch Mine Explosion
“WASHINGTON – Alpha Natural Resources Inc. has agreed to make payments and safety investments totaling $209 million in connection with the criminal investigation of the April 5, 2010, explosion at the Upper Big Branch mine (UBB) in Montcoal, W.Va., announced Attorney General Eric Holder, U.S. Attorney R. Booth Goodwin II for the District of West Virginia and officials with the FBI and Department of Labor’s Office of Inspector General.
The explosion at the UBB mine claimed the lives of 29 coal miners and injured two others. At the time of the explosion, the mine was owned by Massey Energy Company, whose operations came under Alpha’s control in a June 1, 2011, merger.
“The tragedy at Upper Big Branch will never be forgotten, and the families affected by it will never be made completely whole again. Today’s agreement represents the largest-ever resolution in a criminal investigation of a mine disaster and will ensure appropriate steps are taken to improve mine safety now and will fund research to enhance mine safety in the future,” said Attorney General Holder. “While we continue to investigate individuals associated with this tragedy, this historic agreement – one of the largest payments ever for workplace safety crimes of any type – will help to create safer work environments for miners in West Virginia and across the country.”
“There should never be another UBB, and this announcement is aimed squarely at that goal. For far too long, we've accepted the idea that catastrophic accidents are an inherent risk of being a coal miner. That mindset is unacceptable,” said U.S. Attorney Goodwin. “Collectively, these requirements will set a new standard for what can and should be done to protect miners. We look forward to a future in which coal mining is as safe as any other occupation.”
As part of the non-prosecution agreement, Alpha will invest at least $80 million in mine safety improvements at all of its underground mines, including those formerly owned by Massey. Alpha will also place $48 million in a mine health and safety research trust, to be used to fund academic and non-profit research that will advance efforts to enhance mine safety. In addition, the company will pay restitution of $1.5 million to each of the families of the 29 miners who died at UBB and to the two individuals who were injured, for a total restitution payment of $46.5 million. Alpha also will pay a total of up to $34.8 million in penalties owed to the Mine Safety and Health Administration (MSHA), including all penalties that arise from the UBB accident investigation.
The remedial safety measures included in the agreement include the following:
Installation of digital monitoring systems in all its underground mines to continuously monitor compliance with ventilation requirements and to ensure mines are free of potentially explosive methane gas;
Implementation of a plan to ensure that each of its underground mines has the personnel and resources necessary to meet all legal requirements concerning incombustible material and accumulations of coal dust and loose coal;
Purchase state-of-the-art equipment to monitor its mines for explosive concentrations of coal dust and use that equipment in all its underground mines;
Purchase next-generation rock dusting equipment (pending MSHA approval), further enhancing its ability to combat explosion hazards;
Installation of oxygen cascading systems to help miners make their way to safety if a serious accident should occur; and
Building of a state-of-the-art training facility and implementation of a full training curriculum to train Alpha miners, which will be available to other mining companies.The agreement announced today is the largest-ever resolution in a criminal investigation of a mine disaster. It addresses only the corporate criminal liability of the former Massey, not potential criminal charges for any individual. The criminal investigation of individuals associated with Massey remains ongoing.”