LCD MAKER FOUND GUILTY OF PRICE FIXING

The following excerpt is from the Department of Justice website:
TAIWAN-BASED AU OPTRONICS CORPORATION, ITS HOUSTON-BASED
SUBSIDIARY AND FORMER TOP EXECUTIVES CONVICTED FOR ROLE IN
LCD PRICE-FIXING CONSPIRACY
Jury Holds Companies Responsible for at Least $500 Million in Illicit Gains
WASHINGTON — Following an eight-week trial, a federal jury in San Francisco today convicted the largest Taiwan liquid crystal display (LCD) producer, its Houston-based subsidiary and their two former top executives for their participation in a five-year conspiracy to fix the prices of thin-film transistor-liquid crystal display (TFT-LCD) panels sold worldwide, the Department of Justice announced. The jury also found that the ill-gotten gain to the conspirators as a result of the fixed sales in the United States was at least $500 million.

AU Optronics Corporation and its American subsidiary, AU Optronics Corporation America, were found guilty today in the U.S. District Court in San Francisco. The trial began on Jan. 9, 2012. AU Optronics Corporation is based in Hsinchu, Taiwan. AU Optronics Corporation America is headquartered in Houston. The companies and individuals were indicted on June 9, 2010. The indictment charged that AU Optronics Corporation participated in the worldwide price-fixing conspiracy from Sept. 14, 2001, to Dec. 1, 2006, and that its subsidiary participated at various times during the conspiracy.
Former AU Optronics Corporation president Hsuan Bin Chen and former AU Optronics Corporation executive vice president Hui Hsiung were also found guilty. The department said that both executives participated in the conspiracy from Oct. 19, 2001, to Dec.1, 2006.

In addition to today’s convictions, seven companies have pleaded guilty to date to charges arising out of the department’s ongoing investigation and have been sentenced to pay criminal fines totaling more than $890 million. In addition to the individuals convicted today, 17 executives have been charged. Ten of the executives have pleaded guilty and have been sentenced to serve a combined total of 2,681 days in prison.

“The jury finding $500 million in ill-gotten gains by members of the cartel demonstrates the harmful effect of this price-fixing conspiracy on American businesses and consumers,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “The jury’s decision to hold not only the companies but also their top executives accountable for their anticompetitive actions should send a strong deterrent message to board rooms around the world.”

TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. By the end of the conspiracy period, the worldwide market for TFT-LCD panels was valued at $70 billion annually. Companies directly affected by the LCD price-fixing conspiracy include some of the largest computer manufacturers in the world, including Apple, Dell and Hewlett Packard.

At trial, the department said that the convicted companies and former executives fixed the prices of LCD panels sold into the United States. The prices were fixed during monthly meetings with their competitors secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan. The indictment alleged that the conspiracy lasted for more than five years before it was detected.
Also today, the jury found two AU Optronics Corporation employees not guilty--Lai-Juh Chen, former director of the Desktop Display Business Group, and Tsannrong Lee, former senior manager of the Notebooks Business Group. A mistrial was declared against Hsiu Lung Leung, former AU Optronics Corporation senior manager of Desktop Display Business Group.
The maximum penalty for a Sherman Act violation for an individual is 10 years in prison and a $1 million fine. Since the jury found that the gain derived from the conspiracy was at least $500 million, the maximum fine for the corporations is $1 billion.

Today’s charges are the result of a joint investigation by the Department of Justice Antitrust Division’s San Francisco Field Office and the FBI in San Francisco.

BIZJET INTERNATIONAL RESOLVES FOREIGN CORRUPT PRACTICES ACT INVESTIGATION

The following excerpt is from the U.S. Department of Justice website:
Wednesday, March 14, 2012
Bizjet International Sales and Support Inc., Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $11.8 Million Criminal Penalty
WASHINGTON – BizJet International Sales and Support Inc., a provider of aircraft maintenance, repair and overhaul (MRO) services based in Tulsa, Okla., has agreed to pay an $11.8 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for bribing government officials in Latin America to secure contracts to perform aircraft MRO services for government agencies, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.

The department filed a one-count criminal information today charging BizJet with conspiring to violate the FCPA’s anti-bribery provisions and a deferred prosecution agreement in U.S. District Court for the Northern District of Oklahoma.
 
According to court documents, BizJet paid bribes to officials employed by the Mexican Policia Federal Preventiva, the Mexican Coordinacion General de Transportes Aereos Presidenciales, the air fleet for the Gobierno del Estado de Sinaloa, the air fleet for the Gobierno del Estado de Sonora and the Republica de Panama Autoridad Aeronautica Civil.  In many instances, BizJet paid the bribes directly to the foreign officials.  In other instances, BizJet funneled the bribes through a shell company owned and operated by a BizJet sales manager.  BizJet executives orchestrated, authorized and approved the unlawful payments.

Under the terms of the department’s agreement with BizJet, the department agreed to defer prosecution of BizJet for three years.  In addition to the monetary penalty, BizJet agreed to cooperate with the department in ongoing investigations, to report periodically to the department concerning BizJet’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.  If BizJet abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the agreement’s term expires.

In addition, BizJet’s indirect parent company, Lufthansa Technik AG, itself a German provider of aircraft-related services, entered into an agreement with the department in connection with the unlawful payments by BizJet and its directors, officers, employees and agents.  The department has agreed not to prosecute Lufthansa Technik provided that Lufthansa Technik satisfies its obligations under the agreement for a period of three years.  Those obligations include ongoing cooperation and the continued implementation of rigorous internal controls.

The agreements acknowledge BizJet’s and Lufthansa Technik’s voluntary disclosure of the FCPA violations to the department and their extraordinary cooperation, including conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing and organizing voluminous evidence and information for the department.  In addition, BizJet and Lufthansa Technik engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments, enhancing their due-diligence protocol for third-party agents and consultants, and heightening review of proposals and other transactional documents for all BizJet contracts.

The case is being prosecuted by Trial Attorneys Daniel S. Kahn and Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section.  Assistant U.S. Attorney Kevin Leitch from the Northern District of Oklahoma has provided assistance in the case.  The department has also worked closely with its law-enforcement counterparts in Mexico and Panama in this matter and is grateful for their assistance.  The ongoing investigation is being assisted by the FBI’s Washington Field Office.

BLUE CROSS BLUE SHIELD OF TENNESSEE SETTLE POTENTIAL HEALTH CARE RULE VIOLATIONS

The following excerpt is from a U.S. Department of Health and Human Services e-mail:
Blue Cross Blue Shield of Tennessee (BCBST) has agreed to pay the U.S. Department of Health and Human Services (HHS) $1,500,000 to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules, Leon Rodriguez, Director of the HHS Office for Civil Rights (OCR), announced today.  BCBST has also agreed to a corrective action plan to address gaps in its HIPAA compliance program.  The enforcement action is the first resulting from a breach report required by the Health Information Technology for Economic and Clinical Health (HITECH) Act Breach Notification Rule.

SEC ACCUSES SENIOR MANAGEMENT OF FILING FRAUDULENT INCOME REPORT

The following excerpt is from the SEC website: 
March 13, 2012
SEC Files Civil Injunctive Action Against Senior Management of Thornburg Mortgage, Inc. for Alleged Fraudulent Overstatement of Thornburg’s Income
On March 13, 2012, the Securities and Exchange Commission filed securities fraud charges in the United States District Court for the District of New Mexico against Larry Goldstone, the former chief executive officer and president, Clarence Simmons, the former chief financial officer and senior executive vice-president, and Jane Starrett, the former chief accounting officer of Thornburg Mortgage, Inc. (“Thornburg”), currently TMST, Inc., for allegedly materially misrepresenting the financial condition and liquidity of Thornburg, formerly the country’s second largest independent mortgage company. Goldstone, Simmons, and Starrett reside in Santa Fe, New Mexico.

The Complaint alleges that Thornburg, through Goldstone, Simmons, and Starrett, fraudulently overstated its quarterly income by more than $420 million in its 2007 annual report filed with the Commission. As a result, the Complaint alleges that Thornburg fraudulently reported a profit rather than a loss for the quarter. According to the Complaint, in the two weeks leading to the filing of its annual report, Thornburg received more than $300 million in margin calls from its lenders that severely drained its liquidity. The Complaint further alleges that, unable to meet its margin calls on a timely basis, Thornburg violated three of its lending agreements, and received a reservation of rights letter from one lender in which the lender reserved its right to declare Thornburg in default at any time. Accordingly, the Complaint alleges that in the days before Thornburg filed its annual report, the collateral it used for its lending agreements, adjustable rate mortgage (“ARM”) securities, was subject to being seized and sold by its lenders. According to the Complaint, given the circumstances of Thornburg’s liquidity crisis, circumstances that were misrepresented to, and concealed from, the company’s auditor, Goldstone, Simmons, and Starrett each knew, or was reckless in not knowing, that Thornburg did not have the intent or ability to hold its ARM securities until maturity or until their value recovered in the market. The Complaint concludes that the individual defendants also knew, or were reckless in not knowing, that this meant Thornburg was required to recognize on its income statement approximately $428 million of losses associated with the company’s ARM securities, and that the proper accounting treatment for these securities would have resulted in Thornburg reporting a loss rather than a profit for the quarter.

The Complaint claims that, based on this conduct, the defendants violated or aided and abetted the violation of, or in the case of Goldstone and Simmons are liable as control persons under Section 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) for Thornburg’s violation of, Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13b2-1, and 13b2-2 thereunder. The Complaint also claims that Goldstone and Simmons violated Rule 13a-14 of the Exchange Act. As part of this action, the Commission seeks against each of the defendants an injunction against future violations of the provisions set forth above, officer and director bars, and third tier civil money penalties.

EPA ADDS 10 SITES TO NATIONAL PRIORITIES LIST

The following excerpt is from an EPA e-mail:
WASHINGTON - The U.S. Environmental Protection Agency (EPA) is adding nine new hazardous waste sites that pose risks to people’s health and the environment to the National Priorities List (NPL) of Superfund sites, and is proposing to include 10 additional sites. Superfund is the federal program that investigates and cleans up the most complex, uncontrolled or abandoned hazardous waste sites in the country.

“Protecting human health and the environment and restoring contaminated properties to environmental and economic vitality are EPA priorities," said Mathy Stanislaus, assistant administrator for EPA’s Office of Solid Waste and Emergency Response. “When property is cleaned up and revitalized, the reuse may result in new income to the community in the form of taxes, jobs to local residents, increases to the values of properties nearby cleaned up sites, or it may provide recreational or other services to make the community a better place to live.”

Since 1983, 1,661 sites have been listed on the NPL. Of these sites, 359 sites have been cleaned up resulting in 1,302 sites currently on the NPL (including the nine sites added today). There are 62 proposed sites (including the 10 announced today) awaiting final agency action.

Contaminants found at the sites include arsenic, benzene, cadmium, chromium, copper, creosote, dichloroethene (DCE), lead, mercury, polynuclear aromatic hydrocarbons (PAHs), polychlorinated biphenyls (PCBs), tetrachloroethylene (PCE), pentachlorophenol (PCP), trichloroethane (TCA), trichloroethylene (TCE), toluene, uranium and zinc.

With all NPL sites, EPA works to identify companies or people responsible for the contamination at a site, and require them to conduct or pay for the cleanup. For the newly listed sites without viable potentially responsible parties, EPA will investigate the full extent of the contamination before starting significant cleanup at the site. Therefore, it may be several years before significant EPA clean up funding is required for these sites.

The following nine sites have been added to the National Priorities List:
           Continental Cleaners (former dry cleaners) in Miami, Fla.;
           Sauer Dump (inactive dump) in Dundalk, Md.;
           Compass Plaza Well TCE (contaminated ground water plume) in Rogersville, Mo.;
           Chemfax, Inc. (former manufacturer of synthetic resins and waxes) in Gulfport, Miss.;
           Southeastern Wood Preserving (former wood treating operation) in Canton, Miss.;
           CTS of Asheville, Inc. (former electronics components manufacturer) in Asheville, N.C.;
           Eighteenmile Creek (contaminated creek) in Niagara County, N.Y.;
           Metro Container Corporation (former drum recycler) in Trainer, Pa.; and
           Corozal Well (contaminated ground water plume) in Corozal, Puerto Rico;

The following 10 sites have been proposed for addition to the National Priorities List:
           Cedar Chemical Corporation (former chemical manufacturer) in West Helena, Ark.;
           Fairfax St. Wood Treaters (former wood treating operation) in Jacksonville, Fla.;
           Macon Naval Ordnance Plant (former ordnance manufacturer) in Macon, Ga.;
           Bautsch-Gray Mine (former lead and zinc mine) in Galena, Ill.;
           EVR-Wood Treating/Evangeline Refining Company (former wood treating operation) in Jennings, La.;
           Holcomb Creosote Co (former wood treating operation) in Yadkinville, N.C.;
           Orange Valley Regional Ground Water Contamination (contaminated ground water plume) in Orange/West Orange, N.J.;
           Jackpile-Paguate Uranium Mine (former uranium mine) in Laguna Pueblo, N.M.;
           West Troy Contaminated Aquifer (contaminated ground water plume) in Troy, Ohio; and
           Circle Court Ground Water Plume (contaminated ground water plume) in Willow Park, Texas.

EPA is also withdrawing its earlier proposal to add the Arnold Engineering Development Center site in Coffee and Franklin Counties, Tennessee to the NPL. This site is being addressed under the Resource Conservation and Recovery Act (RCRA) program. Cleanup is progressing successfully, the migration of contaminated ground water is under control and measures have been taken that are protective of human health.

DEVON ENERGY TO PAY $3.5 MILLION TO RESOLVE ROYALTY UNDERPAYMENT CASE

The following excerpt is from the Department of Justice website:

Monday, March 12, 2012
Devon Energy to Pay U.S. $3.5 Million to Resolve Allegations of Royalty Underpayments from Federal and Indian Lands
Devon Energy Corporation and its affiliates have agreed to pay the United States $3,492,463 to resolve claims that PennzEnergy, a predecessor to Devon, violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian lands, the Justice Department announced today.   Devon is an independent oil and natural gas exploration and production company with operations focused onshore in the United States and Canada.

PennzEnergy, formerly known as Pennzoil Company, was acquired by Devon in May 1999.  Prior to the merger, PennzEnergy was involved in the production of natural gas from federal leases offshore in the Gulf of Mexico and onshore in the Gulf Coast.

 Congress has authorized federal and Indian lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas that is produced.   Each month companies are required to report and pay to the U.S. Department of the Interior the amount of royalty that is due.   This settlement resolves claims by the United States under the False Claims Act that PennzEnergy improperly deducted from royalty values costs associated with boosting gas up to pipeline pressures and failed to report and pay royalties on gas used to fuel boosting compressors.

“Natural gas royalties are an important source of income for the United States, Native Americans, and various states, and they help support critical programs from which we all benefit,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “Through cases such as this, we continue to make certain that companies that lease public and Indian lands, and that extract non-renewable resources from those lands, pay their full share of royalties.”

“This settlement demonstrates that the Department remains committed to ensuring that energy companies accurately report production and pay the required royalties,” said Greg Gould, Interior’s Acting Deputy Assistant Secretary for Natural Resources Revenue.  Gould added that ONRR “will continue to pursue every dollar due to taxpayers and the Federal Government from extracting these precious natural resources from Federal and American Indian lands.”

The resolution of this matter is one of the last in a series of settlements arising out of qui tam, or whistleblower, litigation that has been pending for over a decade.

Today’s settlement arises from a lawsuit filed by Harrold Wright under the False Claims Act.  Under the qui tam, or whistleblower, provisions of the False Claims Act, private citizens may file actions on behalf of the United States and share in any recovery.   Because Mr. Wright is deceased, his heirs will receive $908,040.38 or 26 percent of the settlement.

The United States has intervened against Devon for the purpose of completing this settlement.  The Department of Justice previously intervened against several other defendants in the Wrightlawsuit.   Settlements in the case to date exceed $300 million.   The claims in the complaint are merely allegations and do not constitute a determination of liability.

The investigation and settlement of this matter was jointly handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Texas and the Department of the Interior’s Office of Natural Resource Revenue, Office of the Solicitor and Office of the Inspector General.  

DEPARTMENT OF JUSTICE, HUD, STATE ATTORNEY GENERALS ANNOUNCE FILING $25 BILLION MORTGAGE SETTLEMENT WITH BANKS

The following excerpt is from the U.S. Department of Justice website:
Monday, March 12, 2012
$25 Billion Mortgage Servicing Agreement Filed in Federal Court
WASHINGTON – The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.
The federal government and state attorneys general filed in U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law.    

The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.

The consent judgments provide the details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement regarding mortgage loan servicing and foreclosure practices; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith Jr.
The consent judgments require the servicers to collectively dedicate $20 billion toward various forms of financial relief to homeowners, including: reducing the principal on loans for borrowers who are delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth; refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth; forbearance of principal for unemployed borrowers; anti-blight provisions; short sales; transitional assistance; and benefits for service members.

The consent judgments’ consumer relief requirements include varying amounts of partial credit the servicers will receive for every dollar spent on the required relief activities.  Because servicers will receive only partial credit for many of the relief activities, the agreement will result in benefits to borrowers in excess of $20 billion.  The servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.

In addition to the $20 billion in financial relief for borrowers, the consent judgments require the servicers to pay $5 billion in cash to the federal and state governments.  Approximately $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008, and Dec. 31, 2011, and who meet other criteria.
The court documents filed today also provide detailed new servicing standards that the mortgage servicers will be required to implement.  These standards will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections.  The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.  The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first.  Servicers will be restricted from foreclosing while the homeowner is being considered for a loan modification.  The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials.  Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.

The consent judgments provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA).  In addition, the servicers have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any service members were foreclosed or improperly charged interest in excess of 6 percent on their mortgage in violation of SCRA.

The oversight and enforcement authorities of the settlement’s independent monitor are detailed in the court documents filed today.  The monitor will oversee implementation of the servicing standards and consumer relief activities required by the agreement and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.  The consent judgments require servicers to remediate any harm to borrowers that are identified in quarterly reviews overseen by the monitor and, in some instances, conduct full look-backs to identify any additional borrowers who may have been harmed.  If a servicer violates the requirements of the consent judgment it will be subject to penalties of up to $1 million per violation or up to $5 million for certain repeat violations.

The consent judgments filed today resolve certain violations of civil law based on mortgage loan servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers.  The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group.  In the servicing agreement, the United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan; the United States also resolved certain Federal Housing Administration (FHA) origination claims with Bank of America as part of this filing and with Citibank in a separate matter.  The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.  State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.

Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, the Special Inspector General for the Troubled Asset Relief Program and the Federal Housing Finance Agency-Office of the Inspector General.  The Department of the Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.

The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

KOSS CORPORATION , CEO AND CFO AGREE TO KEEP BETTER BOOKS IN SETTLEMENT

The following excerpt is from the SEC website:
March 9, 2012
“On February 22, 2012, the Honorable Rudolph T. Randa, U.S. District Judge for the Eastern District of Wisconsin, approved the settlement of the Securities and Exchange Commission’s Complaint against Koss Corporation (“Koss”), located in Milwaukee, Wisconsin, and Michael J. Koss, its CEO and former CFO. The case is based on Koss Corporation’s preparation of materially inaccurate financial statements, book and records, and lack of adequate internal controls from fiscal years 2005 through 2009. The S.E.C. responded to a letter dated December 20, 2011, in which the District Judge Randa requested that the S.E.C. address concerns about the proposed settlement. Based on the S.E.C.’s response, District Judge Randa stated the Court was “satisfied that the injunctions are sufficiently specific… [and] that the proposed final judgments are fair, reasonable, adequate, and in the public interest.” The Injunctive Orders:

(1) Enjoin Koss from violating and Michael J. Koss from aiding and abetting violations of the reporting, books and records and internal controls provisions (Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-11 and 13a-13) of the federal securities laws and Michael J. Koss from violating the certification provision (Section 13a-14 of the Exchange Act) and

(2) Order Michael J. Koss to reimburse Koss $242,419 in cash and 160,000 of options pursuant to Section 304 of the Sarbanes-Oxley Act. This bonus reimbursement, together with his previous voluntary reimbursement of $208,895 in bonuses to Koss Corporation represents his entire fiscal year 2008, 2009 and 2010 incentive bonuses.

The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of Wisconsin, the Federal Bureau of Investigation and the Public Company Accounting Oversight Board. The Commission considered the cooperation of Koss Corporation and Michael J. Koss in determining to accept their settlement.”