Carl Ichan, Phil Michelson and William Walters Investigated for Insider Trading

The U.S. Federal Bureau of Investigation and the Securities and Exchange Commission are investigating possible insider trading involving billionaire investor Carl Icahn, golfer Phil Mickelson and Las Vegas gambler William Walters, a source familiar with the matter said.

Federal investigators are looking into whether Mickelson and Walters may have traded illegally on private information provided by Icahn about his investments in public corporations, the source told Reuters, confirming a report by the Wall Street Journal on Friday. Icahn, Mickelson and Walters were not immediately available for comment.

The investigation centers on suspicious trades in Clorox Co options days before Icahn announced a bid to acquire the company in 2011, according to the Journal, citing people briefed on the probe.

Icahn had accumulated a 9.1 percent stake in Clorox in February 2011. In July, the activist investor made an offer for the company that valued it at above $10 billion and sent its stock soaring. Investigators were also looking into trades that Mickelson and Walters made related to Dean Foods Co , the Journal cited the people as saying.

For more information, U.S. investigating Icahn, Mickelson in insider trading probe
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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and insider trading trials. We represent investors, financial professionals and investment firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or email us.

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Insider Trading Results in Bar for Corporate Board Member

The SEC has charged yet another insider with trading on material, non-public information. This time a board member of the company is accused of purchasing his company's stock ahead of the company's sale to a private equity firm. As a defense attorney, my inclination is to believe the SEC is wrongly accusing the insider. But then I learned that he and his tippees agreed to settle the SEC's charges by paying more than $500,000.

Trading on inside information can be costly. The SEC's demands are typically for a return of all profits, plus a penalty of two times those profits, plus interest, and a permanent injunction. In some cases, such as this one, the settlement also includes a provision that the defendant is prohibited from being an officer or director of a public company. Further compounding the issue is that the recent revisions to Regulation D will prevent him from being affiliated with a company who is taking advantage of the exemption.

SEC Charges Vitamin Company's Former Board Member and Brothers With Insider Trading

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Regions Bank Settles

A group of South Florida Attorneys, including Sallah Astarita & Cox, obtained a $13 million settlement against Regions Bank based on allegations that the bank had assisted a securities fraud by advising the fraudster on the design and content of marketing materials, had a role in drafting documents, participated in sales conventions and was paid as the trustee on the fraudster's trust accounts.

For more information,  -They Were Able To Get Regions Bank To Settle For $13 Million | Daily Business Review

--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Poor Planning Leads to Charges For Facilitating Trades For Unregistered Firm

Dealing with an unregistered broker-dealer is sometimes a problem for investors, and one that is easily avoided, simply by checking FINRA's website if the firm is not known. Dealing with an unregistered broker-dealer is less of a problem for broker-dealers, but when it happens, the penalties can be significant.

In a recent SEC case, a broker-dealer agreed to pay $850,000 to settle charges that it agreed to agreed to serve as the broker-dealer of record in name only for approximately 100 trades in asset-backed securities that were actually introduced by the unregistered firm.

According to the press release, while five of the unregistered firm's employees were registered with the BD but they performed their work in the offices of the unregistered firm, which retained sole authority over their trading decisions and determined their compensation. The BD had no involvement in the trading or compensation decisions while the registered representatives executed the trades through its systems on behalf of the unregistered firm. The BD did all of this for 15 percent of the compensation generated by these trades and sent the remaining balance to the unregistered firm.

This sort of arrangements raises a host of compliance and registration issues, which were exasperated by the fact that the BD did not perform routine supervisory functions over the 5 reps. It did not preserve communications with them and did not insure that the unregistered firm performed such recordkeeping duties either. According to the SEC, due in part to the lack of recordkeeping, one of the registered representatives was able to conceal two trades.

While I was not involved in the underlying case, I have assisted firms in entering into agreements which accomplish the same goals, which are legal and compliant. Once again, hiring a securities attorney to assist in non-traditional transactions might have some upfront costs, but it is certainly better than paying back all of your profits, plus hundreds of thousands of dollars in interest and penalties.

The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Marijuana Related Investment Warning and Trading Suspension

The Securities and Exchange Commission today cautioned investors about the potential for fraud in microcap companies that claim their operations relate to the marijuana industry after the agency suspended trading in the fifth such company within the past two months.

The SEC issued an investor alert warning about possible scams involving marijuana-related investments, noting that fraudsters often exploit the latest growth industry to lure investors with the promise of high returns. "For marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company's management, products, services, and finances," the SEC's alert says. "When publicly available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors."

As the markets opened today, the SEC suspended trading in Denver-based FusionPharm Inc., which claims to make a professional cultivation system for use by cannabis cultivators among others. According to the SEC's order, the trading suspension was issued "because of questions that have been raised about the accuracy of assertions by FusionPharm" concerning the company's assets, revenues, financial statements, business transactions, and financial condition.

"Recent changes in state laws concerning medical and recreational marijuana have created new opportunities for penny stock fraud," said Elisha Frank, co-chair of the SEC Enforcement Division's Microcap Fraud Task Force. "Wherever we see incomplete or misleading disclosures, we act quickly to protect investors."

Other marijuana-related companies in which the SEC recently suspended trading are Irvine, Calif.-based Cannabusiness Group Inc., Woodland Hills, Calif.-based GrowLife Inc., Colorado Springs-based Advanced Cannabis Solutions Inc., and Bedford, Texas-based Petrotech Oil and Gas Inc.

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met. More information about the trading suspension process is available in an SEC investor bulletin on the topic.

"We know from experience that fraudsters follow the headlines," said Lori J. Schock, director of the SEC's Office of Investor Education and Advocacy, which prepared the investor alert. "Given the attention that marijuana-related companies have attracted recently, we urge investors to exercise caution when looking at investments in this space. Always thoroughly research the company – and the person selling the investment – before making a decision."

For more information - SEC Warns Investors About Marijuana-Related Investments Amid Recent Trading Suspensions

Penson Executives Face SEC Charges of SHO Violations

The Securities and Exchange Commission today announced charges against four former officials at clearing firm Penson Financial Services for their roles in Regulation SHO violations.

An SEC investigation found that Penson’s securities lending practices intentionally and systematically violated Rule 204 under Reg. SHO.  The SEC’s Enforcement Division alleges that Penson’s chief compliance officer Thomas R. Delaney II had direct knowledge that the firm’s procedures for sales of customer margin securities were resulting in rule violations, yet he didn’t take steps to bring Penson into compliance and instead affirmatively assisted the violations.  Penson’s president and CEO Charles W. Yancey ignored significant red flags about Delaney’s involvement in the violations and the fact that he was concealing them from FINRA and the SEC.

Penson has since filed for bankruptcy.

Two former Penson securities lending officials – Michael H. Johnson and Lindsey A. Wetzig – were charged in administrative proceedings and agreed to settle the charges.  The SEC Enforcement Division will litigate the charges against Delaney and Yancey in a separate proceeding.

For more information visit SEC.gov | SEC Announces Charges Against Four Former Officials at Clearing Firm Penson Financial Services for Regulation SHO Violations 

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Retirement Plan Managers - Be Warned - How Will Your Investments Look If They Lose Money

When you are acting as a retirement plan administrator, you take on a fiduciary responsibility to manage the funds placed in your care in a reasonable and prudent manner. You need to be careful about this, because when there are losses, someone is going to look at where you invested, and if they, with hindsight, decide that the investments were in appropriate, you could find yourself on the wrong side of a bunch of SEC charges.

A Utah-based retirement plan administrator is being accursed of defrauding investors in self-directed individual retirement accounts (IRAs), causing them to lose millions of dollars of savings.

The SEC alleges that American Pension Services Inc. (APS) and its founder, president and CEO Curtis L. DeYoung squandered more than $22 million of investor funds on high-risk investments. DeYoung hid the losses by issuing inflated account statements, allowing him to continue collecting fees and further victimizing his customers.

"This misconduct jeopardized retirement security for thousands of APS customers," said Karen L. Martinez, director of the SEC's Salt Lake Regional Office.

According to the SEC's complaint unsealed yesterday in federal court in Salt Lake City, DeYoung's scheme dates back to at least 2005 and targeted customers with retirement accounts holding non-traditional assets typically not available through traditional 401(k) retirement plans or other IRA custodians. Although APS has no authority to direct customer trades, DeYoung allegedly used forged letters and signatures to invest on behalf of customers, including in promissory notes issued by a friend whose businesses never turned a profit. DeYoung continued to recommend that APS customers invest in the notes, and he sent customer funds to the friend until at least April 2013 without disclosing to investors that the friend had defaulted on the notes in 2010 and DeYoung had forgiven the debt.

The SEC further alleges that investments in other bankrupt ventures, including an office building in Wichita, Kan., caused APS customers to lose more money. APS concealed those losses and issued account statements that inflated the value of customer holdings, allowing APS to levy fees based on the full value of the holdings even when they were worthless.

According to the SEC's complaint, when DeYoung was questioned by the SEC about a $22 million gap between actual holdings and those showing on account statements, he invoked his Fifth Amendment privilege against self-incrimination and refused to answer.

The Honorable Robert J. Shelby granted the SEC's request for a temporary restraining order to freeze the assets of APS and DeYoung. The court appointed Diane Thompson of Ballard Spahr LLP as the receiver in this case to recover investor assets. The receiver can be reached at info@apsreceiver.com and has created a website for more information: www.apsreceiver.com

SEC Charges Utah-Based Retirement Plan Administrator With Defrauding Investors

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Insider Trading Tips - It is also a Crime

More hints for avoiding an insider trading charge. According to the SEC, three Qualcomm executives decided to purchase the securities of an acquisition target after reading work emails and discussing the trades by telephone.

The SEC charged three former sales managers at San Diego-based Qualcomm Inc. with insider trading ahead of a major acquisition announcement. As news leaked about the impending acquisition and the two companies subsequently announced it in a joint news release, Atheros' stock price jumped 20 percent. The executive sold their securities to realize quick profits.

Anyone who reads this blog, or who follows insider trading cases knows that this is a classic case of insder trading - assuming the allegations to be true. However, what some folks don't realize, is that it is a crime as well. These defendants are now aware of it - the U.S. Attorney's Office for the Southern District of California today announced criminal charges against two of them.

The SEC alleges that after learning confidentially that Atheros was the target of a Qualcomm acquisition, all three sales managers proceeded to purchase Atheros securities on Jan. 4, 2011. None of them had ever previously traded in Atheros securities. News of the acquisition began leaking out through media reports that same afternoon, and the two companies formally announced the merger agreement on January 5. After selling all of the securities they had purchased, Cohen's illegal trading profits mounted to more than $200,000, and Herman and Fleischli made profits of $30,000 and $3,000 respectively.

The SEC's complaint charges Cohen, Herman, and Fleischli with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions.

For more information: SEC Charges Three Sales Managers With Insider Trading Ahead of Major Acquisition

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Stock Promoter Charged with Fraud in Florida Real Estate Venture

The Securities and Exchange Commission today filed fraud charges against a former Florida-based stock promoter currently serving a two-year prison sentence for lying to SEC investigators.

A fake post office in Laguna Beach, Florida that was part of a real estate fraud scheme for several years. Authorities shut it down in 1946. (Photo credit: Wikipedia)

The SEC's complaint filed in U.S. District Court in the Southern District of Florida alleges that Robert J. Vitale defrauded investors in a Florida real estate venture, sold unregistered securities, and acted as an unregistered broker-dealer. Vitale and his firm Realty Acquisitions & Trust Inc. raised at least $8.7 million from investors, including many senior citizens. Vitale allegedly told investors their funds were "100% protected" when they were not, and he claimed to be a financial expert with a business degree from Notre Dame when he never attended college after graduating from Notre Dame High School in West Haven, Conn.

The SEC alleges that although Vitale told investors his success rested on his "great honesty and integrity," he failed to tell them that he was charged by the SEC in 2004 for participating in a pump-and-dump market manipulation scheme or that he later settled the charges and was barred from the brokerage industry as part of the settlement.

Vitale is now an inmate at the Federal Detention Center in Miami. He was sentenced in September 2013 after being convicted of obstruction of justice and providing false testimony in the SEC's investigation that led to the charges filed today.

"We are gratified that the criminal authorities held Mr. Vitale responsible for his attempts to derail our investigation," said Andrew J. Ceresney, director of the SEC's Division of Enforcement. "His prison sentence and our determination to uncover and charge his underlying misconduct notwithstanding his obstruction show how seriously we and our law enforcement partners take our missions."

The SEC is seeking the return of allegedly ill-gotten gains with interest, a monetary penalty, and a permanent injunction against Vitale. The SEC's complaint also charges Coral Springs Investment Group Inc. as a relief defendant, alleging the company holds assets that came from defrauded investors that should be returned.

"Vitale hid the truth from investors just as he tried to hide his assets during our investigation," said Stephen L. Cohen, associate director of the SEC's Division of Enforcement. "When individuals barred from the industry continue their wrongdoing, we pursue them aggressively and seek to return their ill-gotten gains to investors."

For more informatino visit SEC Charges Former Stock Promoter With Defrauding Investors in Florida Real Estate Venture



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