Source: https://www.sec.gov/news/digest/2013/dig101013.htm
Timestamp: 2019-04-24 12:29:35+00:00

Document:
The Securities and Exchange Commission (Commission) today announced that Mark Kronforst has been named chief accountant of its Division of Corporation Finance.
"I am very pleased that Mark Kronforst has agreed to serve as the chief accountant in the Division of Corporation Finance," said Keith Higgins, Director of the Division of Corporation Finance. "Mark combines a deep knowledge of accounting and experience in the private sector with a broad understanding of the disclosure requirements of the federal securities laws. His skills and experiences will serve us well as we address important financial reporting issues."
Mr. Kronforst has been one of the division's associate directors for disclosure operations since October 2010. He previously served in several positions within the division including as the division's deputy chief accountant. Before joining the SEC, Mr. Kronforst was the director of financial reporting for Solectron Corporation and an audit senior manager at the accounting firm of KPMG LLP.
"I am honored to take on this important role. I am also excited to return to this office and work with the very talented staff to further the division's mission," Mr. Kronforst said.
Closed Meeting on Thursday, October 17, 2013 at 2:00 p.m.
The subject matter of the Closed Meeting will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; adjudicatory matters; and other matters relating to enforcement proceedings.
The Commission today announced that two brothers in Brazil have agreed to pay nearly $5 million to settle charges that they were behind suspicious trading in call options for H.J. Heinz Company the day before the company publicly announced its acquisition.
The SEC filed an emergency enforcement action earlier this year to freeze assets in a Swiss-based trading account used to reap more than $1.8 million from trading in advance of the Heinz announcement. The SEC's immediate move the day after the announcement ensured the illicit profits could not be released out of the account while the investigation into the then-unknown traders continued.
"Rodrigo and Michel Terpins obtained confidential information prior to any public awareness that a Heinz deal was in the works, and they exploited it to the disadvantage of all other traders in the marketplace," said Sanjay Wadhwa, Senior Associate Director for Enforcement in the SEC's New York Regional Office. "Those who use foreign accounts to commit insider trading in the U.S. markets should know that their activities can still be tracked and they will be held accountable by the SEC for their actions."
According to the SEC's amended complaint, Alpine Swift's brokerage account was used to purchase 2,533 out-of-the-money June $65 calls. This was effectively a wager that Heinz's stock would increase in value by approximately $5 per share. The trade was then executed through an omnibus account at Goldman Sachs' Zurich office. An omnibus account has the aggregate positions and transactions of a firm and its underlying customers without disclosing the identities of the beneficial owners or customers.
The SEC alleges that prior to the February 14 announcement that Berkshire Hathaway and 3G Capital agreed to acquire Heinz in a deal valued at $28 billion, Michel Terpins learned that an investment consortium including 3G Capital was about to announce a major acquisition. He found out that Heinz was the target. Michel Terpins then provided the non-public information to Rodrigo Terpins, who placed the trades on February 13. Rodrigo Terpins communicated with a broker who cautioned him that his firm rated Heinz a "sell." But Rodrigo Terpins instructed the broker to place the trade anyway. The timing, size, and profitability of the trades as well as the lack of a prior history of Heinz trading in the Alpine Swift account made the transactions highly suspicious in the wake of the Heinz announcement, hence the SEC's emergency action at the time.
Two Penny Stock Promoters Indicted for Securities Fraud Following the SEC's Investigation of ConnectAJet.com, Inc.
On September 11, 2013, the United States Attorney for the Northern District of Texas obtained a Grand Jury indictment against Jason Wynn and Martin Cantu for their role in a conspiracy to defraud prospective investors in a penny stock company that they controlled, ConnectAJet.com, Inc. ("ConnectAJet"). The indictment was unsealed on September 19. According to ConnectAJet's press releases, ConnectAJet was developing a first-of-its-kind online booking system for private jet charters. The indictment alleges that – to artificially boost demand for ConnectAJet stock – Wynn and Cantu issued several false public statements and advertisements that misled potential investors about (1) the progress and status of the company's real-time booking system, (2) ConnectAJet's relationships with other companies in the private jet industry, and (3) ConnectAJet's customer base. Based on that conduct, the indictment charges Wynn and Cantu with Conspiracy to Commit Securities Fraud in violation of Sections 10(b) and 32 of the Securities Exchange Act of 1934 (the "Exchange Act") and Aiding and Abetting Securities Fraud under those two provisions.
The allegations in the criminal indictment stem from the same misconduct underlying the Securities and Exchange Commission's (the "Commission's") prior investigation of ConnectAJet and the Commission's prior civil enforcement actions against Wynn and Cantu. On March 13, 2008, the Commission sued Jason Wynn and others for their role in a series of illegal, unregistered stock offerings in several penny stock companies, including ConnectAJet. SEC v. Reynolds, et al., Case No. 3:08-cv-00438-B (N.D. Tex.). In its Complaint, the Commission alleged that Wynn repeatedly engaged in a "pump and dump" of ConnectAJet and other companies. The Complaint alleged that for each company, Wynn and his fellow penny stock promoters (a) organized a reverse merger of the company into a public shell, (b) purchased large blocks of the company's stock at pennies per share in a bogus unregistered private offering, (c) created initial trading volume for the stock by selling some shares to a tightly controlled group of friends and family members, (d) touted the stock through spam e-mail, sham internet sites, and millions of direct mail advertisements, and then (e) dumped their shares on the investing public without the protection of registration at prices grossly inflated by their promotional activity. On October 13, 2011, the Court entered partial judgment against Jason Wynn based on his consent and ordered that Wynn be permanently enjoined from further violations of the antifraud and registration provisions of federal securities law and be permanently barred from participating in any offerings of penny stock. On July 11, 2013, the Court further ordered that Wynn and his corporate proxies pay $8,778,887 in disgorgement and prejudgment interest and $1,300,000 in civil penalties.
Commission Obtains Judgment by Consent Against Charles J. Dushek, Charles S. Dushek, and Capital Management Associates Inc.
On October 9, 2013, the Honorable Gary Feinerman of the United States District Court for the Northern District of Illinois entered judgments against defendants Charles J. Dushek, Charles S. Dushek, and Capital Management Associates, Inc. The judgments, to which the defendants consented without admitting or denying the allegations in the Complaint, permanently enjoin the defendants from future violations of certain antifraud provisions of the federal securities laws and order each defendant to pay disgorgement, prejudgment interest, and civil penalties in an amount to be determined by the court.
In its Complaint, the Commission alleges that the Dusheks used their Lisle, Illinois-based investment advisory firm, Capital Management Associates, Inc. (CMA), to defraud CMA clients by conducting a "cherry picking" scheme that garnered the Dusheks nearly $2 million in illicit profits. The Complaint alleges that the Dusheks placed millions of dollars in securities trades without designating in advance whether they were trading personal funds or client funds. They delayed allocating the trades so they could cherry pick winning trades for their personal accounts and dump losing trades on the accounts of unwitting clients at CMA. Meanwhile, CMA misrepresented the firm's proprietary trading activities to clients.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Mark Gasarch (Gasarch).
The Order finds that Gasarch, age 72, is an attorney licensed to practice law in the State of New York. The Order further finds that on September 26, 2013, a final judgment was entered against Gasarch, permanently enjoining him from aiding or abetting future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Petro-Suisse Ltd., et al., Civil Action Number 12-CV-6221 (AJN), filed in the United States District Court for the Southern District of New York. The court ordered Gasarch jointly and severally liable with Petro-Suisse Ltd. (Petro-Suisse) to pay $8,370,000 in disgorgement, deemed satisfied by the previous payments made by Petro-Suisse to Petro-Suisse limited partnership investors, and a $130,000 civil penalty.
The Commission's complaint alleged that, between 2003 and 2006, in connection with the purchase and sale of limited partnership interests offered by Petro-Suisse to finance the drilling of oil wells in Trinidad, Gasarch, as Petro-Suisse's legal counsel, drafted 21 private placements memorandums (PPMs) that contained materially false and misleading information. The complaint further alleges that Petro-Suisse solicited investments in the limited partnership interests using the PPMs that contained false and misleading statements.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions against John Lazorchak, CPA (Lazorchak).
The Order finds that Lazorchak is a certified public accountant licensed to practice in the state of New Jersey who, from 2007 until his termination in November 2012, served as Director of Financial Reporting at Celgene Corp., a biopharmaceutical company with a principal place of business in Summit, New Jersey. The Order further finds that, on October 7, 2013, judgment was entered against Lazorchak, permanently enjoining him, by consent, from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, in the civil action entitled SEC v. Lazorchak, et al.,Civil Action Number 12-7164 (KSH), in the United States District Court for the District of New Jersey.
The Order further finds that the Commission's complaint in SEC v. Lazorchak, et al. alleged, among other things, that, as part of an insider trading scheme, Lazorchak used his position at Celgene, and his access to the company's confidential information, to tip material, nonpublic information to downstream tippees, both directly and through an intermediary participant in the scheme. These tips included material, nonpublic information regarding Celgene's acquisitions of Pharmion Corp. and Abraxis Bioscience, Inc., Celgene's corporate earnings, and Celgene's withdrawal of a request to expand the use of the drug Revlemid. In addition, the complaint alleged that an insider at Stryker Corp., who was a friend of Lazorchak, tipped material, nonpublic information regarding Orthovita Inc.'s impending acquisition of Stryker Corp. to Lazorchak, and that Lazorchak again tipped that information both directly and through an intermediary to downstream tippees. The complaint further alleged that, as part of this scheme, Lazorchak received kickbacks in the form of cash payments in exchange for the information he tipped. Finally, the complaint alleged that in the spring of 2008, Lazorchak misled regulators during an inquiry into trading preceding the Celgene/ Pharmion transaction.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Mark S. Cupo, CPA (Cupo).
The Order finds that Cupo is a certified public accountant licensed to practice in the state of New Jersey. From 2002 until 2010, Cupo served as Senior Director of Accounting and Reporting at Sanofi, a pharmaceutical company incorporated in France with the principal office of its U.S. subsidiary located in Bridgewater, New Jersey. From 2010 to his resignation in November 2012, Cupo served as Director of Shared Services at Sanofi.
The Order finds that, on October 8, 2013, judgment was entered against Cupo, permanently enjoining him, by consent, from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, in the civil action entitled SEC v. Lazorchak, et al., Civil Action Number 12-7164 (KSH), in the United States District Court for the District of New Jersey.
The Order further finds that the Commission's complaint in SEC v. Lazorchak, et al. alleged, among other things, that, as part of an insider trading scheme, an insider at Celgene Corp. (Celgene) tipped material, nonpublic information to Cupo regarding Celgene's acquisitions of Pharmion Corp. and Abraxis Bioscience, Inc., Celgene's corporate earnings, and Celgene's withdrawal of a request to expand the use of the drug Revlemid. The complaint also alleged that Cupo, acting as the middle-man in this scheme, then tipped that information to two downstream tippees. In addition, the complaint alleged that an insider at Stryker Corp. tipped material, nonpublic information regarding Orthovita Inc.'s impending acquisition of Stryker Corp. indirectly to Cupo, and that Cupo tipped that information to two downstream tippees. Further, the complaint alleged that Cupo used his position at Sanofi, and his access to the company's confidential information, to tip material, nonpublic information regarding Sanofi's acquisition of Chattem, Inc. to two downstream tippees. Finally, the complaint alleged that, as part of this scheme, Cupo received kickbacks in the form of cash payments in exchange for the information he tipped.

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