BROOKSTREET SECURITIES CORP. FORMER CEO TO PAY $10 MILLION

The following excerpt is from the U.S. SEC website:

“On March 1, 2012, a federal judge ordered the former CEO of Brookstreet Securities Corp. to pay a maximum $10 million penalty in a securities fraud case related to the financial crisis.

In December of 2009, the U.S. Securities and Exchange Commission filed a civil injunctive action against Brookstreet Securities Corp. and Stanley C. Brooks, charging them with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. Brookstreet and Brooks developed a program through which the firm’s registered representatives sold particularly risky and illiquid types of Collateralized Mortgage Obligations (CMOs) to more than 1,000 seniors, retirees, and others for whom the securities were unsuitable. Brookstreet and Brooks continued to promote and sell the risky CMOs even after Brooks received numerous warnings that these were dangerous investments that could become worthless overnight. The fraud resulted in severe investor losses and eventually caused the firm to collapse.

On February 23, 2012, the Honorable David O. Carter entered an order granting summary judgment in favor of the Securities and Exchange Commission. He found Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. On March 1, 2012, the court entered a final judgment and ordered the financial penalty sought by the Securities and Exchange Commission. In addition to the $10,010,000 penalty, Brooks was ordered to pay $110,713.31 in disgorgement and prejudgment interest. The court’s judgment also enjoins both Brookstreet and Brooks from violating Section 10(b) of the Exchange Act as well as Rule 10b-5."

SEC FILES ACTION ALLEGING PUMP-AND-DUMP SCHEME BY PRIME STAR GROUP, INC.

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

Securities and Exchange Commission v. Prime Star Group, Inc., et al., Civil Action No. 2:12-cv-00371 (D. Nev.) (March 7, 2012)

The Securities and Exchange Commission filed a civil action in the United States District Court for the District of Nevada against Prime Star Group, Inc. and its chief executive officer Roger Mohlman of Las Vegas, Nevada, for violations of antifraud, registration, reporting, and books and records provisions, and against Danny Colon and Marysol Morera of Edgewater, New Jersey, Felix Rivera of Clifton, New Jersey, New Jersey limited liability company DC International Consulting LLC, Kevin Carson of Lake Worth, Florida, Esper Gullatt, Jr. of Aurora, Colorado, Minnesota corporation The Stone Financial Group, Inc., and Joshua Konigsberg of Palm Beach Gardens, Florida for registration violations.

According to the SEC’s complaint, Prime Star illegally distributed more than 18 million purportedly unrestricted Rule 144 shares pursuant to backdated consulting agreements or forged attorney opinion letters. The SEC alleges that in furtherance of a pump and dump scheme, Prime Star and Mohlman issued the shares to consultants Colon, Morera, Rivera, DC International Consulting LLC, Carson, The Stone Financial Group, Inc., and Konigsberg who liquidated Prime Star stock and either kept a portion of the sales proceeds or forwarded proceeds to promoters to tout Prime Star. The SEC’s complaint also alleges that Prime Star and Mohlman made false and misleading statements in Prime Star’s SEC filings and in various press releases during the relevant time period.

The SEC alleges that Prime Star and Mohlman violated 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, and that Prime Star violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The complaint further alleges that Mohlman violated Section 13(b)(5) of the Exchange Act and Rules 13a-14, 13b2-1 and 13b2-2 thereunder and aided and abetted Prime Star’s violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-1 and 13a-13 thereunder. The SEC also alleges Section 5(a) and 5(c) violations against Colon, Morera, Rivera, DC International Consulting LLC, Carson, Gullatt, The Stone Financial Group, Inc., and Konigsberg.

Without admitting or denying the allegations in the Commission’s complaint, and subject to court approval, Konigsberg has consented to the entry of a judgment that would enjoin him from future violations of Sections 5(a) and 5(c) of the Securities Act.

Separately, the Commission today issued an Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934 against Prime Star, to determine whether the registration of each class of its securities should be revoked or suspended for a period not exceeding twelve months based on its failure to file required periodic reports. The Division of Enforcement alleges that Prime Star has failed to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder by failing to file periodic reports required by these provisions. A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations of the Division contained in the Order are true, and to provide Prime Star an opportunity to respond to these allegations."

KANSAS REFINERY GETS $1 MILLION PENALTY FOR AIR EMISSION VIOLATIONS

The following excerpt is from an EPA e-mail:

“Kansas Refinery to Pay Nearly $1 Million Penalty for Environmental Violations Related to Air Emissions
WASHINGTON — The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced that Coffeyville Resources Refining & Marketing (CRRM) has agreed to pay a civil penalty of more than $970,000 and invest more than $4.25 million on new pollution controls and $6.5 million in operating costs to resolve alleged violations of air, superfund and community right-to-know laws at its Coffeyville, Kan. refinery. The settlement will benefit the environment and human health by requiring new and upgraded pollution controls, more stringent emission limits, and more aggressive leak-detection and repair practices to reduce emissions from refinery equipment and process units. Sulfur dioxide (SO2) and nitrogen oxide (NOx), two pollutants emitted from refineries, can cause respiratory problems like asthma and are significant contributors to acid rain, smog and haze.

“The Clean Air Act is designed to protect people’s health from emissions of harmful pollutants,” said Cynthia Giles, assistant administrator of EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement will protect residents living near the facility and ensure that the necessary pollution controls are installed to protect the residents of southeastern Kansas in the future.”

“This settlement puts CRRM on a level playing field with the more than 100 petroleum refineries that have agreed to implement aggressive pollution control measures, thereby reducing the threats posed by harmful emissions to area residents,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “The agreement reaffirms our commitment to ensure that the petroleum refining industry complies with the nation’s Clean Air Act.”

The settlement resolves alleged violations of the Clean Air Act (CAA), Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and Emergency Planning and Community Right-to-Know Act (EPCRA).Coffeyville allegedly made modifications to its refinery that increased emissions without first obtaining pre-construction permits and installing required pollution control equipment. The CAA requires major sources of air pollution to obtain such permits before making changes that would result in a significant emissions increase of any pollutant. The settlement also resolves violations in which CRRM failed to timely notify state and local emergency responders of releases of hydrogen sulfide and sulfur dioxide from the refinery, as required by the CERCLA and EPCRA.

Once fully implemented, the pollution controls required by the settlement will annually reduce an estimated 200 tons of NOx emissions and more than 110 tons of SO2 emissions. The settlement will also reduce emissions of volatile organic compounds, particulate matter, carbon monoxide and other pollutants that affect air quality. CRRM has also agreed to perform a voluntary environmental project at the refinery valued at more than $1.2 million. The project will benefit the environment and surrounding communities by reducing emissions of volatile organic compounds and hydrogen sulfide, reducing the frequency of future acid gas flaring incidents, and conserve 15 million gallons of water each year that would previously have come from the Verdigris River.

The settlement with CRRM is the 30th under an EPA initiative to improve compliance among petroleum refiners and to reduce significant amounts of air pollution from refineries nationwide through comprehensive, company-wide settlements. The first of EPA’s settlements was reached in 2000, and with today’s settlement, 107 refineries operating in 32 states and territories – more than 90 percent of the total refining capacity in the United States – are under judicially enforceable agreements to significantly reduce emissions of pollutants. As a result of the settlement agreements, refiners have agreed to invest more than $6 billion in new pollution controls designed to reduce emissions of sulfur dioxide, nitrogen dioxide and other pollutants by more than 360,000 tons per year.

CRRM’s refinery has the capacity to refine more than 115,000 barrels of crude oil per day, producing gasoline, diesel fuels, and propane.

The State of Kansas has joined in the settlement and will receive a portion of the civil penalty.

The consent decree, lodged in the U.S. District Court for the District of Kansas, is subject to a 30-day public comment period and court approval.”

FEDERAL COURT CLOSES DOWN EMPLOYEE BENEFIT TAX SCHEME

The following excerpt is from a Department of Justice website:

“Department of Justice  March 6, 2012
Federal Court in Illinois Shuts Down Nationwide “Employee Benefit Plan” Tax Scheme
A federal court has permanently barred Tracy L. Sunderlage, Linda Sunderlage and four companies from operating an alleged scheme to help high-income individuals attempt to avoid income taxes by funneling money through purported employee benefit plans, the Justice Department announced today.   Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois entered the permanent injunction orders, to which the defendants consented, against the Sunderlages, SRG International Ltd., of Nevis, West Indies, and three Illinois companies - SRG International U.S. LLC, Maven U.S. LLC and Randall Administration LLC.
                                 
 According to the government complaint , the defendants claimed to promote and operate plans that provide insurance benefits to participating companies’ employees, when in fact the scheme is simply a mechanism for the companies’ owners to receive purportedly tax-free or tax-deferred income for their personal use.   Tracy Sunderlage and the two SRG International companies allegedly marketed the scheme to high-income professionals who own small, closely held companies.  In the most recent version of the alleged scheme, each participant’s company made supposedly tax deductible payments to a purported benefit plan operated by Maven U.S. and Randall Administration.   The company’s contributions were then allegedly transferred to an account within a company based in the Caribbean island of Anguilla, in which they were allegedly invested until the owner terminated from the program and received the assets for his or her personal use.   The complaint alleged that many participants owned these accounts through offshore trusts, which Tracy Sunderlage and SRG International Ltd. often helped to establish.   The complaint alleged that participants from across the country have transferred at least $239 million as part of the scheme and that total contributions may exceed $300 million.

The injunction orders bar the defendants from operating or promoting any purported “welfare benefit plans.”   The court also ordered the defendants to provide the government with a list of their customers and to send copies of the injunction orders to their customers.”

MSHA FINDS BETTER INSPECTIONS OF UBB MINE COULD HAVE STOPPED DEADLY EXPLOSION

The following excerpt is from the U.S. Department of Labor

MSHA internal review team releases report on agency's actions prior to UBB blast
“ARLINGTON, Va. — The U.S. Department of Labor's Mine Safety and Health Administration today released the results of its internal review of the agency's actions prior to the April 5, 2010, explosion that killed 29 miners at the Upper Big Branch Mine in Raleigh County, W.Va. The internal review team, comprised of MSHA employees outside the district where the accident occurred, was charged with evaluating agency actions relative to the explosion and making recommendations to improve the agency's performance in order to better protect the nation's miners.

The team not only focused on MSHA enforcement and plan approval activities during the 18 months preceding the explosion, it looked much deeper. Where appropriate, it also evaluated the effectiveness of MSHA standards, regulations, policies and procedures in addressing the hazards that caused or contributed to the disaster.

"I directed my staff to conduct the most comprehensive internal review that has ever been done at MSHA, and I feel confident they have achieved that objective," said Joseph A. Main, assistant secretary of labor for mine safety and health. "Their final report is the culmination of nearly two years of a singularly focused effort, including interviews with nearly 90 current and former MSHA employees, and the examination of more than 12,500 pages of documents."

According to the accident investigation team's findings, which were released last December, Massey Energy, then-owner of UBB, violated widely recognized safety standards and failed to prevent or correct numerous hazards that ultimately caused the catastrophic explosion by using advance notice of inspections and intimidation of miners to hide violations from federal inspectors. Three independent reports corroborated MSHA's conclusions.

"While there was no evidence linking the actions of MSHA employees to this tragedy, we found instances where enforcement efforts at UBB were compromised because MSHA and District 4 did not follow established agency policies and procedures," said internal review team leader George Fesak.

The internal review team identified a number of shortcomings in the inspection and plan approval processes:
Due to inspectors' lack of MSHA experience, insufficient training, inadequate supervisory and managerial oversight, and deficiencies in the directives system, which disseminates written policies and procedures, District 4 personnel did not comply with all policies and procedures applicable to MSHA inspections, investigations and mine plan reviews.

Inspectors did not consistently identify deficiencies in the mine operator's program for cleaning up accumulations of loose coal, coal dust and float coal dust.
Inspectors did not use the operator examination books records effectively when determining the operator's negligence in allowing identified hazards to continue unabated.
Inspectors did not identify the extent of noncompliance with rock dust standards along belt conveyors.
Inspectors did not identify significant deficiencies in the operator's ventilation and roof control plans.
District 4 personnel did not intervene as Massey manipulated MSHA procedures to avoid complying with reduced standards for respirable coal mine dust and allowed the operator to significantly delay corrective action to reduce miners' exposures to unhealthy respirable dust concentrations after overexposures were identified.

A number of factors led to these shortcomings, according to the internal review team:
Lack of resources: Budgetary constraints prior to 2006 resulted in significant reductions in the inspection workforce and, despite district efforts to re-establish staffing levels, by the time of the explosion, the inspection and supervisory staff had not fully regained the level of experience it had lost.
Inspector experience: A newly-hired trainee needs approximately two years to complete classroom and on-the-job training to become a journeyman inspector. When new inspectors were hired after 2006, there were not enough experienced inspectors to mentor them or oversee their on-the-job training. Agency experience among lead UBB inspectors during the review period ranged from 13 to 52 months.
Management turnover: Between June 2003 and July 2004, four different MSHA personnel were temporarily assigned to the district manager position in District 4.

Supervisory and managerial oversight: Supervisors did not adequately review UBB inspection reports, identify significant deficiencies or recognize that some portions of the mine had not been inspected. The turnover of supervisors in the Mt. Hope field office, including untrained acting supervisors, contributed to the inadequate review of inspection reports.

"MSHA is responsible for its actions and will address each of the problems the team has specifically identified," said Main. "We take the deficiencies and recommendations outlined in this internal review extremely seriously. In fact, shortly after the tragedy at UBB, we began aggressively implementing a number of corrective actions, some of which directly address the internal review team's findings."
Corrective actions put in place after April 2010 include:

An emergency temporary standard, which became a final rule in June 2011, that increased the minimum combustible content of mine dust to at least 80 percent throughout a coal mine.
A strengthened potential pattern of violations program to hold mine operators more accountable for safety and health conditions.

Proposed rules that would revise the agency's existing regulation for pattern of violations, address the continuing risk of coal miners' exposure to respirable coal mine dust and require improved examination of work areas by underground coal mine operators.

Impact inspections that target mines with a history of noncompliance.
Program information bulletins on compliance with ventilation regulations, illegality of advance notification, the right of miners to make hazardous condition complaints and legal protections against discrimination.
The creation of District 12 to provide additional resources in conjunction with District 4 in southern West Virginia.

Mandatory and refresher training for field office supervisors and inspectors.
Upgrading computer systems and equipment at the National Air and Dust Laboratory in Mt. Hope, W.Va.
Creating top level oversight of special enforcement initiatives, including accountability audits, impact inspections, POV and flagrant violations, and a tool on all inspectors' laptop computers to flag potentially flagrant violations.

Since the tragedy at Upper Big Branch, one former UBB security director was convicted of lying to federal investigators and ordering the destruction of evidence. Another former employee was sentenced to jail time after he was convicted of faking a mine foreman's license and lying to federal investigators. And on Feb. 22, 2012, a UBB mine superintendent was charged in a criminal information for conspiracy to defraud the United States by engaging in a conspiracy to give advance notification of mine inspections, falsify examination record books and alter the mine's ventilation system before federal inspectors were able to inspect underground.”

CEO'S COMPANY SOLD CMO'S NOW CEO MUST PAY $10,000,000

The following excerpt is from the SEC website: 

"Washington, D.C., March 2, 2012 — The Securities and Exchange Commission today announced that a federal judge has ordered the former CEO of Brookstreet Securities Corp. to pay a maximum $10 million penalty in a securities fraud case related to the financial crisis.

The SEC litigated the case beginning in December 2009, when the agency charged Stanley C. Brooks and Brookstreet with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. Brookstreet and Brooks developed a program through which the firm’s registered representatives sold particularly risky and illiquid types of Collateralized Mortgage Obligations (CMOs) to more than 1,000 seniors, retirees, and others for whom the securities were unsuitable. Brookstreet and Brooks continued to promote and sell the risky CMOs even after Brooks received numerous warnings that these were dangerous investments that could become worthless overnight. The fraud caused severe investor losses and eventually caused the firm to collapse.

The Honorable David O. Carter in federal court in Los Angeles granted summary judgment in favor of the SEC on February 23, finding Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. The judge entered a final judgment in the case yesterday and ordered the financial penalty sought by the SEC.

“Brooks’ aggressive promotion and sale of risky mortgage products to seniors and other risk-averse investors deserves the maximum penalty possible, and that is what he got,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Those who direct such exploitative practices from the boardroom will be held personally accountable and face severe consequences for their egregious actions.”

Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office, added, “The CMOs that Brookstreet sold its customers were among the most risky of all mortgage-backed securities. This judgment highlights the responsibility of brokerage firm principals to ensure the suitability of the securities they sell to customers.”

In addition to the $10,010,000 penalty, Brooks was ordered to pay $110,713.31 in disgorgement and prejudgment interest. The court’s judgment also enjoins both Brookstreet and Brooks from violating Section 10(b) of the Exchange Act as well as Rule 10b-5.

The SEC is awaiting a court decision in a separate Brookstreet-related enforcement action filed in federal court in Florida. In that case, the SEC charged 10 former Brookstreet registered representatives with making misrepresentations to investors in the purchases and sales of risky CMOs. Two representatives settled the charges, and the SEC tried the case against the remaining eight representatives in October 2011.

The SEC has brought enforcement actions stemming from the financial crisis against 95 entities and individuals, including 49 CEOs, CFOs, and other senior officers.

EMPIRIAN PROPERTY MANAGEMENT INC., SETTLE WITH JUSTICE OVER SERVICE MEMBERS CIVIL RELIEF ACT

The following excerpt is from the Department of Justice website:
 March 1, 2012


"WASHINGTON – The Justice Department today announced that it had reached a settlement resolving allegations that Empirian Property Management Inc. refused to terminate residential leases entered into by active duty members of the U.S. Air Force assigned to Offutt Air Force Base in Sarpy County, Neb., after those servicemembers received permanent change of station orders.  The lawsuit alleged that Empirian, a Delaware corporation that manages over 30 apartment complexes nationwide, violated the Servicemembers Civil Relief Act (SCRA) by refusing to allow the servicemembers to terminate their leases early in order to comply with their military orders.


The SCRA provides certain protections to active duty servicemembers who must terminate residential leases to comply with military orders for a permanent change of station or for deployment.  The complaint, which was filed with the settlement, demonstrates the Justice Department’s ongoing commitment to enforcing the rights of our nation’s servicemembers.  Under the terms of the settlement, which must be approved by a federal court in Nebraska, Empirian must pay a total of $12,500 in damages to four identified servicemembers, and up to $20,000 to compensate any additional servicemembers harmed by Empirian’s actions.  Empirian is also prohibited from engaging in future violations of the SCRA.


“Our men and women in uniform make great sacrifices in order to protect our nation,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “When servicemembers move as a result of military orders, the law protects them from financial hardship.  The Civil Rights Division is strongly committed to protecting the rights of servicemembers through our enforcement of the SCRA.”


U.S. Attorney for the District of Nebraska, Deborah R. Gilg, said, “This settlement sends a strong message that the rights of our service personnel will be protected.  No service man or woman engaged in protecting all of us from harm should suffer financial damage from landlords who seek to thwart the protection our laws afford our service personnel.”
The Justice Department’s investigation of this matter originated with a referral to the Civil Rights Division from the Offutt Air Force Base Law Center.  Servicemembers who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office.”