Source: https://www.sec.gov/news/digest/2013/dig040813.htm
Timestamp: 2019-04-19 22:39:06+00:00

Document:
The Securities and Exchange Commission (Commission) today charged a former employee at a California-based medical device manufacturer with illegally tipping confidential financial data to her brother, who illegally traded in the company’s stock and enabled his hedge fund clients to do the same.
The SEC alleges that ThanhHa Bao, who worked in the finance department at Abaxis Inc., regularly provided material nonpublic information to Tai Nguyen, whose insider trading in advance of the company’s quarterly earnings announcements generated $144,910 in illicit profits. Nguyen, who was charged by the SEC last year, also passed confidential information to clients of his equity research firm Insight Research, including hedge fund managers.
To settle the SEC’s charges, Bao has agreed to pay $144,910 and be barred from serving as an officer or director of a public company for five years.
The SEC’s charges stem from its ongoing investigations into expert networks that have uncovered widespread insider trading at several hedge funds and other investment advisory firms. The investigations have so far resulted in enforcement actions against 40 entities or individuals who have reaped more than $430 million in alleged insider trading gains.
According to the SEC’s amended complaint filed in federal court in Manhattan, Bao regularly passed Abaxis quarterly earnings data to Nguyen from 2006 to 2009. Besides illegally trading in his own account, Nguyen passed the inside information to hedge fund managers Barai Capital Management and Sonar Capital Management, which were paying Insight Research tens of thousands of dollars per month as clients. These hedge fund managers traded Abaxis securities based on the inside information provided by Nguyen for more than $7.2 million in illicit gains for the hedge funds. Those who caused the trading at these hedge funds were later charged by the SEC with insider trading.
In a parallel criminal proceeding, Nguyen pleaded guilty and has been sentenced to a year and a day in prison. He also agreed to a criminal forfeiture of $400,000.
The SEC’s amended complaint charges Bao with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The settlement, which is subject to court approval, requires Bao to pay $144,910 in penalties and be barred from serving as an officer or director of a public company for a period of five years. She also would be permanently enjoined from future violations of the federal securities laws.
On April 4, 2013, the Commission filed an enforcement action against Inter Reef Ltd., doing business as Profitable Sunrise, as a defendant and Melland Company S.R.O., Color Shock S.R.O., Solutions Company S.R.O. and Fortuna-K S.R.O. as relief defendants. The Commission’s complaint was filed in the United States District Court for the Northern District of Georgia.
The Commission announced today that final judgment was entered on April 5, 2013 in its civil injunctive action against David Affeldt, filed in the United States District Court of Massachusetts. Among other things, the judgment orders Affeldt to pay a total of over $200,000 in disgorgement of ill-gotten gains plus pre-judgment interest and a civil penalty.
The Commission’s complaint alleged that Affeldt promoted the offering and sale of unregistered securities issued by Inofin, Inc., a Massachusetts-based consumer finance company. As alleged in the complaint, Inofin through its former executives Michael J. Cuomo of Plymouth, Massachusetts, Kevin Mann, Sr. of Marshfield, Massachusetts and Melissa George of Duxbury, Massachusetts illegally raised at least $110 million from hundreds of investors in 25 states and the District of Columbia through the sale of unregistered notes. According to the SEC’s complaint, Inofin, along with Cuomo, Mann and George, materially misrepresented how the Company was using investor money and the Company’s financial performance. Along with Affeldt the SEC charged Thomas K. (Kevin) Keough – alleging that they promoted the offering and sale of Inofin’s unregistered securities. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
Without admitting or denying the allegations in the complaint, Affeldt consented to entry of a permanent injunction prohibiting him from violating Sections 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Sections 5(a) and 5(c) of the Securities Act of 1933 (“Securities Act”).
The final judgment also orders Affeldt to pay disgorgement of $147,039.00, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $12,064.48 for a total of $159,103.48 plus a civil penalty in the amount of $50,000.
In The Matter Of Koninklijke Philips Electronics N.V.
The Commission announced the issuance of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order and Disgorgement against Koninklijke Philips Electronics N.V. (Philips). The Order finds that Philips failed to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected transactions and dispositions of its assets in violation of the books and records and internal controls provisions of the Foreign Corrupt Practices Act of 1979 (FCPA). The Order finds that Philips’ violations took place through its operations in Poland from at least 1999 through 2007. The violations related to improper payments by employees of Philips’ Polish subsidiary, Philips Polska sp. z o.o. (Philips Poland) to healthcare officials in Poland regarding public tenders proffered by Polish healthcare facilities to purchase medical equipment.
As further described in the Commission’s Order, although Philips failed to implement a system of FCPA compliance and internal controls, upon becoming aware of the violations of Philips Poland in August 2007, the company conducted an internal audit and, in early 2010 self-reported the results of its investigation to the staff of the Commission and the Department of Justice. Philips cooperated with the Commission staff’s investigation. The company also undertook numerous remedial measures.
In the Matter of Eddie Douglas Austin, Jr., Esq.
The Commission announced today that it has suspended Eddie Douglas Austin, Jr. from appearing or practicing before the Commission. This action follows Austin’s permanent resignation from the practice of law in Louisiana in lieu of discipline.
The Louisiana Office of Disciplinary Counsel investigated Austin regarding allegations of professional misconduct relating to misuse of client funds. In April 2011, Austin petitioned the Supreme Court of Louisiana for Permanent Resignation from the Practice of Law in Lieu of Discipline per Supreme Court Rule XIX §20.1. On May 3, 2011 the Supreme Court of Louisiana granted Austin’s request for permanent resignation and further permanently barred him from practicing law in Louisiana or any other jurisdiction.
The Commission announced that on April 3, 2013, Chief Judge Norman A. Mordue of the United States District Court for the Northern District of New York entered a final judgment, against Prime Rate and Return, LLC (“Prime Rate”), individually and doing business as American Integrity Financial Company.
Without admitting or denying the allegations of the complaint, Prime Rate, through its court-appointed receiver, Paul A. Levine, Esq., consented to the entry of a final judgment permanently enjoining it from 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. The final judgment orders Prime Rate to pay disgorgement of $6.5 million and prejudgment interest of $616,662, but deems disgorgement satisfied by the $71,927 recovered by the receiver plus any additional amount the receiver recovers, after certain court-approved payments and fees, from the sale of a property in which Prime Rate owns an interest.
The Commission filed a complaint on May 3, 2010, alleging that from at least 2002, Ryan and Prime Rate, using a fictional entity called “American Integrity Financial Company” had raised more than $6.5 million from investors — many of them elderly — by promising them “guaranteed” fixed rates of return ranging from 3.85% to 9% annually. Ryan obtained these investments by fostering the false impression that American Integrity was a legitimate, substantial financial services firm, with numerous employees and for which he was merely an employee, and by offering safe, even guaranteed, investments, including qualified individual retirement accounts (“IRAs”).
The Commission today announced it has filed a civil injunctive action against Glenn Hoppes, of Clearwater, Florida, and four companies he controls, United States Energy Corp., TN-KY Development Fund LP, TN-KY Development Fund II LP and TN-KY Development Fund III LP, for fraudulently offering unregistered investments in oil drilling projects.
The SEC’s complaint alleges Hoppes hired Joseph Hilton to sell limited partnership units in three oil drilling projects in 2011 and 2012 and financially supported Hilton’s boiler room despite knowing Hilton was barred from acting as a broker by a 2008 SEC enforcement action and was using an alias to avoid association with the prior SEC action. Through Hilton’s efforts, US Energy raised approximately $2.5 million from approximately 100 investors. The US Energy securities offerings were not registered with the SEC as required under the federal securities laws.
According to the SEC’s complaint, Glenn Hoppes also made misrepresentations to investors in the sale of the units. Hoppes misled investors about US Energy’s oil well assets and omitted information from offering material concerning his personal bankruptcy and the prior SEC action against Hilton. The SEC brought an emergency action against Hilton in 2012 for violations of the antifraud and registration provisions of the federal securities laws in connection with his conduct at US Energy and at a subsequent company he founded.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against, Sean Nathan Healy. The Order finds that on April 15, 2010, in a civil action entitled Securities and Exchange Commission v. Sean Nathan Healy, Civil Action Number 1:09-CV-1330 (SEC v. Healy), the United States District Court for the Middle District of Pennsylvania entered a judgment against Healy permanently enjoining him from future violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Section 17(a) of the Securities Act of 1933 [15 U.S.C. § 77q(a)]. The Order further finds that on November 23, 2009, Healy tendered a guilty plea in United States v. Sean Nathan Healy, CR-09-319 (MDP)(SHR) (U.S. v. Healy) to two counts of wire fraud in violation of Title 18 United States Code Sections 1341 and 1342, and one count of unlawful monetary transactions in violation of Title 18 United States Code Section 1957.
According to the Order, the Commission’s complaint in SEC v. Healy and the indictment in U.S. v. Healy were based on Healy’s conduct in orchestrating a Ponzi scheme between 2004 and July 2009. In his guilty plea allocution, Healy admitted that he raised approximately $17 million from investors by promising them that he would use those funds to purchase stocks and commodities on their behalf. Healy further admitted that rather than investing those funds as promised, he funded a lavish lifestyle for himself and his wife, which included the purchase of a $2.4 million waterfront mansion; $2 million of in-home improvements; $1.5 million in men’s and women’s jewelry; and numerous exotic vehicles and sport cars, including a Bentley, several Ferraris, Lamborghinis and Porsches worth over $2.3 million. Healy also admitted that he used some of the funds to make Ponzi payments to investors.
The Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions ("Order") against Timothy J. Roth ("Roth"). The Order finds that on March 21, 2013, a Final Judgment was entered by consent against Roth, permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder in the civil action entitled Securities and Exchange Commission v. Timothy J. Roth, et al., Civil Action Number 11-cv-02079, in the United States District Court for the Central District of Illinois. Roth consented to the entry of the Final Judgment in the civil action.
The Commission’s complaint in the civil action alleged that while he was associated with Comprehensive Capital Management, Inc., ("CCM"), a registered investment adviser, Roth and CCM served as investment advisers for the deferred compensation plans of several small businesses located nationwide ("Plans"). The complaint further alleges that from October 2010 through February 2011, Roth stole millions of dollars’ worth of mutual fund shares from the Plans by a) transferring the Plans' mutual fund shares into an account he controlled even though no such transfer had been requested or authorized by the Plans or their participants, then b) selling or redeeming the shares, and c) funneling the money to various companies and accounts under his control or for his benefit. Finally, the complaint alleged that Roth did not tell the Plans or their participants about the unauthorized transfers.
On October 25, 2011, Roth pled guilty to one count of mail fraud in violation of 18 U.S.C. §§ 1341 and 1349 and one count of money laundering in violation of 18 U.S.C. §§ 1957 and 2 before the United States District Court for the Central District of Illinois, in United States v. Timothy J. Roth, No. 11-cr-20048. In connection with that plea, Roth admitted the facts set out in his Plea Agreement and Stipulation of Facts. On January 31, 2013, Roth was sentenced to a prison term of 151 months and ordered to make restitution in the amount of $16,151,964.

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