FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Court enters final judgment against Defendants
The Securities and Exchange Commission ("Commission") announced today that the Honorable William J. Haynes, Jr., United States District Judge for the Middle District of Tennessee, entered final judgments on February 27, 2013 against J.C. Reed & Company ("JC Parent"), J.C. Reed Advisory Group ("JC Advisory") and Barron A. Mathis ("Mathis"). The final judgment against JC Parent and JC Advisory held them liable for disgorgement of $11,000,000 and prejudgment interest of $3,910,003.07, for a total of $14,910,003.07. The final judgment against Mathis restrained and enjoined him from future violations of 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 Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Mathis also was held liable for disgorgement of $11,000,000 and prejudgment interest of $4,944,175.39, for a total of $15,944,175.39.
The Commission's Complaint, filed on November 18, 2008, alleged that, at various times from no later than 2005 through at least September 2008, JC Parent, JC Advisory, John C. Reed ("Reed"), the founder of JC Parent and JC Advisory, and Mathis facilitated the offer and sale of more than $11 million of JC Parent stock in unregistered transactions to over 100 investors in several states. According to the Complaint, JC Parent, JC Advisory, and Reed misrepresented and omitted material facts to investors relating to the value of the investors' stock, JC Parent's revenues and profitability, the use of key man life insurance proceeds for redemptions of Reed's JC Parent stock, and undisclosed sales commissions. The Complaint also alleges that Mathis promoted JC Parent stock to advisory clients and misrepresented material facts to investors about undisclosed sales commissions. In addition, the Complaint alleges that JC Advisory used JC Parent's inflated stock values to falsely report assets under management as JC Advisory's basis for registration with the Commission and on reports filed with the Commission.
Showing posts with label SECURITIES LAWS. Show all posts
Showing posts with label SECURITIES LAWS. Show all posts
Friday, March 8, 2013
Monday, March 4, 2013
CHINA BASED INSURER CHARGED BY SEC WITH FAILING TO IMPLEMENT PROPER INTERNAL ACCOUNTING CONTROLS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission ("Commission") today charged Keyuan Petrochemicals, Inc., a China-based issuer formed through a reverse merger in April 2010, with violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC further charged Aichun Li, Keyuan’s former Chief Financial Officer, with aiding and abetting Keyuan’s reporting and books and records violations and for failing to implement internal accounting controls. Keyuan and Li have agreed to settle the SEC’s claims against them.
According to the SEC’s complaint, between May 2010 and January 2011, in what was its first year as a U.S. public company, Keyuan systematically failed to disclose in its SEC filings numerous material related party transactions, as required by U.S. Generally Accepted Accounting Principles ("GAAP") and Commission rules and regulations. The related parties included the company’s three founding and controlling shareholders, including its current Chief Executive Officer, entities controlled by or affiliated with these persons, and entities controlled by Keyuan’s management or their family members. The related party transactions included sales of products, purchases of raw materials, loan guarantees, and short term financing.
Keyuan also operated an off-balance sheet cash account that was kept off the company’s books by the former Vice President of Accounting. The account was used to pay for various items, including cash bonuses for senior officers and reimbursements to the CEO for business expenses, including travel, entertainment, and rent for an apartment. The account was also used to fund gifts—both cash and non-cash—for Chinese government officials. By failing to properly record these transactions on the company’s books and records, the company misstated its reported balances in its financial statements filed with the Commission.
The SEC further alleges that Keyuan’s then-CFO Aichun Li, a resident of North Carolina, played a role in the company’s failure to disclose the related party transactions. Li was hired to ensure the company’s compliance with U.S. accounting and financial reporting regulations, and she received information and encountered red flags that should have indicated that the company was not properly identifying or disclosing related party transactions. Despite such knowledge, Li signed Keyuan’s registration statements and quarterly reports that failed to disclose material related party transactions.
The SEC’s complaint, which was filed in federal court in Washington, D.C., charges Keyuan with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 12b-20 and 13a-13 thereunder. The SEC’s complaint further charges Li with violations of Section 13(b)(5) of the Exchange Act and aiding and abetting Keyuan’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.
Without admitting or denying the claims against them, Keyuan and Li have consented to the entry of a judgment permanently enjoining them from violations of the respective provisions of the Securities Act and Exchange Act. Keyuan has agreed to pay a civil penalty in the amount of $1,000,000. Li has agreed to pay a civil penalty in the amount of $25,000. Li also has consented to the issuance of a Commission order, pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending her from appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after two years. The proposed settlement is subject to approval by the court.
The Securities and Exchange Commission ("Commission") today charged Keyuan Petrochemicals, Inc., a China-based issuer formed through a reverse merger in April 2010, with violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC further charged Aichun Li, Keyuan’s former Chief Financial Officer, with aiding and abetting Keyuan’s reporting and books and records violations and for failing to implement internal accounting controls. Keyuan and Li have agreed to settle the SEC’s claims against them.
According to the SEC’s complaint, between May 2010 and January 2011, in what was its first year as a U.S. public company, Keyuan systematically failed to disclose in its SEC filings numerous material related party transactions, as required by U.S. Generally Accepted Accounting Principles ("GAAP") and Commission rules and regulations. The related parties included the company’s three founding and controlling shareholders, including its current Chief Executive Officer, entities controlled by or affiliated with these persons, and entities controlled by Keyuan’s management or their family members. The related party transactions included sales of products, purchases of raw materials, loan guarantees, and short term financing.
Keyuan also operated an off-balance sheet cash account that was kept off the company’s books by the former Vice President of Accounting. The account was used to pay for various items, including cash bonuses for senior officers and reimbursements to the CEO for business expenses, including travel, entertainment, and rent for an apartment. The account was also used to fund gifts—both cash and non-cash—for Chinese government officials. By failing to properly record these transactions on the company’s books and records, the company misstated its reported balances in its financial statements filed with the Commission.
The SEC further alleges that Keyuan’s then-CFO Aichun Li, a resident of North Carolina, played a role in the company’s failure to disclose the related party transactions. Li was hired to ensure the company’s compliance with U.S. accounting and financial reporting regulations, and she received information and encountered red flags that should have indicated that the company was not properly identifying or disclosing related party transactions. Despite such knowledge, Li signed Keyuan’s registration statements and quarterly reports that failed to disclose material related party transactions.
The SEC’s complaint, which was filed in federal court in Washington, D.C., charges Keyuan with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 12b-20 and 13a-13 thereunder. The SEC’s complaint further charges Li with violations of Section 13(b)(5) of the Exchange Act and aiding and abetting Keyuan’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.
Without admitting or denying the claims against them, Keyuan and Li have consented to the entry of a judgment permanently enjoining them from violations of the respective provisions of the Securities Act and Exchange Act. Keyuan has agreed to pay a civil penalty in the amount of $1,000,000. Li has agreed to pay a civil penalty in the amount of $25,000. Li also has consented to the issuance of a Commission order, pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending her from appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after two years. The proposed settlement is subject to approval by the court.
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