CFTC FILES COMPLAINT AGAINST PEREGRINE FINANCIAL GROUP, INC.

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Files Complaint Against Peregrine Financial Group, Inc. and Russell R. Wasendorf, Sr. Alleging Fraud, Misappropriation of Customer Funds, Violation of Customer Fund Segregation Laws, and Making False Statements
Commission Seeks an Order Freezing Assets and Restitution of Customer Funds.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed a complaint in the United States District Court for the Northern District of Illinois against Peregrine Financial Group Inc. (PFG), a registered futures commission merchant, and its owner, Russell R. Wasendorf, Sr.(Wasendorf).  The Complaint alleges that PFG and Wasendorf committed fraud by misappropriating customer funds, violated customer fund segregation laws, and made false statements in financial statements filed with the Commission.

The National Futures Association (NFA) is PFG’s Designated Self-Regulatory Organization and is responsible for monitoring and auditing PFG for compliance with the minimum financial and related reporting requirements. According to the Complaint, in July 2012 during an NFA audit, PFG falsely represented that it held in excess of $220 million of customer funds when in fact it held approximately $5.1 million.
The Commission’s action alleges that from at least February 2010 through the present, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations.  The Complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges.
According to the Complaint, Wasendorf attempted to commit suicide yesterday, July 9, 2012.  In the aftermath of that incident, the staff of the NFA received information that Wasendorf may have falsified certain bank records.

In the litigation, the CFTC seeks a restraining order to freeze assets, appoint a receiver and preserve records.  Further, the litigation seeks restitution, disgorgement, and civil monetary penalties among other appropriate relief.

The following CFTC Division of Enforcement staff members are responsible for this case: William Janulis, Jon Kramer, Thaddeus Glotfelty, Melissa Glasbrenner, Rosemary Hollinger, Scott Williamson, Richard Wagner.

TELECOMMUNICATIONS FIRM PAYS $1 MILLION TO SETTLE TRADE AGREEMENTS ACT CASE

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, July 9, 2012
Telecommunications Firm to Pay Us $1 Million to Settle Alleged Violations of the Trade Agreements Act.

ADC Telecommunications Inc. will pay the United States $1 million to resolve allegations that the company submitted false claims to federal agencies when it sold telecommunications goods manufactured in countries prohibited by the Trade Agreements Act (TAA).  

From October 2005 through December 2008, ADC manufactured and sold telecommunications hardware, such as communication modems, extender modules and shelf adapters to various federal agencies through its General Services Administration (GSA) Multiple Award Schedule contract.   This settlement resolves allegations disclosed by the company that it knowingly manufactured and sold products from countries such as China that do not have reciprocal trade agreements with the United States and are not on the list of designated countries.   The client government agencies included a number of federal agencies, including the Departments of Defense, Homeland Security and Interior.
Compliance with the TAA is required by GSA Multiple Award Schedule

contracts.   Goods purchased under these contracts must be manufactured in one of a list of designated countries deemed to trade fairly with the United States.

“Protecting the federal procurement process is central to the mission of the Department of Justice,” said Stuart Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division.   “It is incumbent upon contractors that supply products to federal agencies to abide by the legal requirements designed to protect U.S. trade interests.”

“This settlement demonstrates this office’s commitment to ensure that products sold to the government are made in countries that respect and adhere to our nation’s trade policies,” said Ronald C. Machen Jr., the U.S. Attorney for the District of Columbia.   “We expect all companies who do business with the United States to understand and comply with the laws that govern their transactions.”

GSA Inspector General Brian Miller stated “We appreciate ADC's cooperation in the OIG’s investigation of this matter.”

This matter was jointly handled by the GSA Office of the Inspector General, the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Columbia.

CORPORATION AND OWNER ORDERED TO PAY $9.3 MILLION FOR COMMITTING FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION
Federal Court in Texas Orders Robert Mihailovich, Sr. and Growth Capital Management LLC to Pay over $9.3 Million in CFTC Anti-fraud Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained an order of permanent injunction against defendants Robert Mihailovich, Sr. (Mihailovich, Sr.) of Rockwall, Texas, and Growth Capital Management LLC (GCM) requiring Mihailovich, Sr. and GCM to make restitution to defrauded customers, disgorge ill-gotten gains, and pay a civil monetary penalty together, totaling over $9.3 million for fraudulently soliciting over $30 million from customers to trade commodity futures contracts and foreign currency (forex). The order also imposes permanent trading and registration bans against the defendants.

The court’s order, entered on June 26, 2012, arises out of a CFTC complaint filed on July 27, 2010, against Mihailovich, Sr., GCM, and Robert Mihailovich, Jr. (Mihailovich, Jr.), Mihailovich, Sr.’s son. As alleged in the complaint, Mihailovich, Sr. was convicted and incarcerated on federal wire fraud charges, served 27 months, and while on a three-year supervised release, fraudulently solicited and accepted more than $30 million from approximately 93 customers to open managed trading accounts. The complaint also alleged that Mihailovich, Jr., at the time of GCM’s initial registration, failed to disclose Mihailovich, Sr.’s involvement with GCM, and failed to disclose in CFTC registration filings that his father was a controlling principal of GCM.

Previously, the federal court had entered an order of default judgment against GCM on March 15, 2011. The federal court later also entered an order of default judgment against Mihailovich, Sr. on November 22, 2011, as a sanction for discovery violations.

The federal court’s June 26, 2012, order finds that during discovery Mihailovich, Sr. engaged in a pattern of willfulness and bad faith. Mihailovich, Sr. failed to attend a number of court-ordered hearings, repeatedly failed to abide by court orders, failed to communicate with plaintiff CFTC, failed to appear or respond to his scheduled deposition, and failed to respond to written discovery requests, according to the order.

The June 26, 2012 order imposes sanctions against Mihailovich, Sr. and GCM arising out of the prior default judgments against them. The order requires Mihailovich, Sr. and GCM jointly and severally to pay $3,475,112 in restitution, to disgorge $389,006 in ill-gotten gains, and to pay a civil monetary penalty of $5,440,000. The order also permanently prohibits the defendants from violating the Commodity Exchange Act and CFTC regulations, as charged, and from engaging in certain commodity-related activities, including personal trading and applying for registration or claiming exemption from registration with the CFTC.

The CFTC previously obtained a consent order against Mihailovich, Jr., that imposed a $40,000 civil monetary penalty and banned him from seeking registration with the CFTC for 10 years and from engaging in certain commodity-related activities, including trading, for 5 years.  The CFTC thanks the U.S. Attorney’s Office for the Northern District of Texas, the Securities and Exchange Commission’s Fort Worth Regional Office, and the National Futures Association for their assistance.

COMPANY CITED BY OSHA FOR EXPOSING WORKERS TO "AMPUTATION HAZARDS"

FROM:  U.S. DEPARTMENT OF LABOR
US Department of Labor's OSHA cites Spa Pipe and Supply of Abilene, Texas, for exposing workers to electrical and machine guarding hazards

ABILENE, Texas – The U.S. Department of Labor’s Occupational Safety and Health Administration has cited Spa Pipe and Supply LP, doing business as Smith Pipe of Abilene, with six serious and six repeat violations for exposing workers to electrical, compressed gases and amputation hazards. The citations follow an investigation by OSHA’s El Paso Area Office that began in January under the agency’s Site-Specific Targeting Program that directs enforcement resources to high-hazard workplaces where high injury and illness rates occur. Proposed penalties total $129,800.

The serious violations are failing to properly utilize electrical components as labeled, ensure electrical circuits were adequately maintained, provide required machine guarding, and ensure the labeling of compressed gases. A serious citation is issued when there is substantial probability that death or serious physical harm could result from a hazard about which the employer knew or should have known.

The repeat violations include failing to ensure compressed gas cylinders and valves were properly secured, install and properly adjust work rests and tongue guards on bench grinders, and repair or replace damaged welding leads. A repeat violation exists when an employer previously has been cited for the same or a similar violation of a standard, regulation, rule or order at any other facility in federal enforcement states within the last five years. Similar violations were cited in 2011.

“This is not the first time this company has jeopardized the safety of its workers by exposing them to potential hazards,” said Joann Figueroa, OSHA’s area director in El Paso. “OSHA’s standards must be followed to safeguard the workplace, and prevent injury and illness.”

The citations can be viewed at http://www.osha.gov/ooc/citations/SPAPipeandSupply_315714493.pdf.
Abilene-based Spa Pipe and Supply, an oil tank manufacturing company that employs about 385 workers statewide, has 15 business days from the receipt of the citations to comply, request an informal conference with OSHA’s area director in El Paso or contest the citations and proposed penalties before the independent Occupational Safety and Health Review Commission.

To ask questions, obtain compliance assistance, file a complaint, or report workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA’s toll-free hotline at 800-321-OSHA (6742) or call the agency’s El Paso office at 915-534-6251.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA’s role is to ensure these conditions for America’s working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.

DEFAULT JUDGEMENT ENTERED AGAINST THE TRADE TECH INSTITUTE, INC., AND OTHERS

FROM:  COMMODITY FUTURES TRADING COMMISSION
CFTC Obtains Default Judgment against The Trade Tech Institute, Inc., Technology Trading International, Inc., and Robert Sorchini for Fraudulent Solicitation of Managed Commodity Trading Accounts and Obtains Consent Judgment against Richard Carter as Controlling Person of Both Companies

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Central District of California entered an order of default judgment and permanent injunction against The Trade Tech Institute, Inc. (Trade Tech), Technology Trading International, Inc. (Tech Trading), and Robert Sorchini (Sorchini), all of Los Angeles, Calif. The same Court previously entered a consent order of permanent injunction against Richard Carter (Carter), also of Los Angeles, Calif.

The default order, entered on June 19, 2012, and the consent order, entered on February 29, 2012, both stem from a CFTC enforcement action filed jointly with the Commissioner of Corporations of the State of California on March 15, 2011, that charged defendants with fraudulently promoting and selling to the public several commodity trading systems pursuant to which customer managed accounts were traded (see CFTC News Release 6005-11, March 21, 2011).

The orders find that from at least 2007 until the CFTC complaint was filed in March 2011, Trade Tech, by and through Sorchini, Carter and other employees, fraudulently promoted and marketed a variety of systems to the public to be used for trading futures contracts and options on futures contracts in managed accounts. Trade Tech’s systems included Trade Tech Analytics, Paradigm, Optimum, Expeditor, MAC, Hybrid, Daytona and Pioneer. The orders also find that beginning in April 2010, Sorchini, Carter and others formed Tech Trading to continue their fraudulent promotion and selling of systems. The orders find that Carter and Sorchini were controlling persons of Trade Tech and Tech Trading.

The default order also finds that while selling these systems, Trade Tech, Tech Trading and Sorchini made fraudulent representations to prospective and existing clients about the systems’ purported past and potential future profitability and track records, failed to adequately warn clients of the risks inherent in trading futures and options, failed to disclose to clients the systems’ losing performance records in client managed accounts and made fraudulent performance-based guarantees. In addition, the default order and consent order find that Trade Tech published a misleading testimonial on its website and failed to inform clients or obtain clients’ consent when switching clients’ managed accounts between systems.

The court’s default order requires Trade Tech and Tech Trading to disgorge $2,910,245.10 and $423,140, respectively, of ill-gotten gains the companies received. The order imposes restitution on Trade Tech and Tech Trading of $2,386,970.38 and $38,847.99, respectively, and civil monetary penalties of $8,730,735.30 and $1,269,420, respectively. Additionally, the order requires Sorchini to disgorge $764,250.97 of ill-gotten gains he received from his fraudulent conduct, imposes joint and several liability on Sorchini for $2,251,766.50 of Trade Tech’s and Tech Trading’s restitution obligations, and a civil monetary penalty of $2,292,752.91.

The court’s consent order requires Carter to disgorge $992,352.93 of ill-gotten gains and imposes a civil monetary penalty of $496,176.46.

The orders permanently bar Trade Tech, Tech Trading, Sorchini and Carter from engaging in any commodity-related activity, including trading and registering or seeking exemption from CFTC registration, and from violating the anti-fraud provisions of the Commodity Exchange Act.

The CFTC Division of Enforcement staff members responsible for this case are Jeff Le Riche, Jo Mettenburg, Peter Riggs, Jennifer Chapin, Stephen Turley, Rick Glaser and Richard Wagner.