Securities: SEC goes hyperactive II

AIC, Inc., et al. (18 April, released 16 May)

The Securities and Exchange Commission announced today that it filed a civil action in the United States District Court for the Eastern District of Tennessee against AIC, Inc., a financial services holding company for three broker-dealers and an investment adviser based in Richmond, Virginia, and its President and CEO, Nicholas D. Skaltsounis. The Complaint alleges that Skaltsounis devised and orchestrated an offering fraud and Ponzi scheme by offering and selling more than $7.7 million in AIC promissory notes and stock. Also named in the Complaint are AIC’s subsidiary, Community Bankers Securities, LLC (“CB Securities”), a broker-dealer, along with associated stockbrokers John B. Guyette, of Greeley, Colorado, and John R. Graves, of Pensacola, Florida, who was also an investment adviser.

Robert Glenn Bard, et al. (18 April, released 16 May)

he Securities and Exchange Commission announced that on April 12, 2011, United States District Judge William C. Caldwell of the United States District Court for the Middle District of Pennsylvania entered a stipulated order finding defendant Robert Glenn Bard in contempt based on Bard’s receipt of funds, control of client accounts, and participation in income activities in the financial services sector in violation of two of the Court’s previous orders. The Court ordered Bard to provide a verified accounting listing his clients and assets acquired since August 11, 2009, and further ordered him to provide a notice to all clients informing them that he had been held in contempt, and that he was prohibited from controlling client money or working in the financial services sector.

David Ronald Allen, et al.

On April 28, 2011, the Securities and Exchange Commission obtained a court order freezing the assets of China Voice Holding Corp., which trades in over-the-counter markets and has claimed to have a portfolio of telecommunications products and services in both the U.S. and China. The SEC alleges that China Voice’s co-founder and his two associates are operating an $8.6 million Ponzi scheme and misusing its proceeds, in part, to help fund the company’s operations.

Francisco Illarramendi, Highview Point Partners, LLC and Michael Kenwood Capital Management, LLC, as Defendants, and Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., Highview Point LP, Michael Kenwood Asset Management, LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar, LP, as Relief Defendants

On May 10, 2011, the Securities and Exchange Commission charged Highview Point Partners, LLC, a Connecticut-based investment adviser, with engaging in a multi-year Ponzi scheme involving hundreds of millions of dollars. Highview was added as a defendant to a case the SEC previously filed in January 2011, and three hedge funds managed by Highview were named as relief defendants because, according to the SEC’s charges, they are in possession of funds tainted by the Ponzi scheme. After a hearing, the Honorable Janet Bond Arterton, U.S. District Judge for the District of Connecticut, entered a consented-to order on May 13, 2011 temporarily freezing the assets of Highview and the three hedge funds it advises. A hearing on the SEC’s motion for a preliminary injunction is set for May 23, 2011.

UBS Financial Services Inc.

The Securities and Exchange Commission today charged UBS Financial Services Inc. (UBS) with fraudulently rigging at least 100 municipal bond reinvestment transactions in 36 states and generating millions of dollars in ill-gotten gains. To settle the SEC’s charges, UBS has agreed to pay $47.2 million that will be returned to the affected municipalities. UBS and its affiliates also agreed to pay $113 million to settle parallel charges brought by other federal and state authorities.

Luis Felipe Perez

The Commission announced that on May 9, 2011, the Honorable Jose E. Martinez, United States District Court Judge for the Southern District of Florida, entered judgment of permanent injunction against Luis Felipe Perez. Perez consented to the entry of an injunction against future 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 thereunder. In addition, the Commission dismissed its claims for disgorgement, prejudgment interest, and a civil penalty against Perez based on his criminal sentences and restitution orders in Case Nos. 10-20584-CR and 10-20411-CR before the Southern District of Florida.

Louis W. Zehil, Strong Branch Ventures IV LP, and Chestnut Capital Partners II, LLC

On May 10, 2011, the Honorable Loretta A. Preska of the United States District Court for the Southern District of New York entered a final consent judgment against defendant Louis W. Zehil, and final default judgments against defendants Strong Branch Ventures IV LP and Chestnut Capital Partners II, LLC.

J. Kenneth Stringer III, et al. 26 April, released 16 May

The U.S. Securities and Exchange Commission announced today that on April14, 2011, the United States District Court for the District of Oregon entered a Final Judgment against J. Kenneth Stringer III in a pending civil action. The Final Judgment enjoins Stringer from violations of Sections 17(a)(2) and (a)(3) of the Securities Act of 1933 and Rules 13b2-1 and 13b2-2 of the Securities Exchange Act of 1934. In addition, the Court ordered Stringer to pay a civil penalty of $90,000 and permanently barred him from serving as an officer or director of a reporting company.

WG Trading Investors, L.P., et al.

On April 21, 2011, the court-appointed Receiver in the Commission’s case against defendants Paul Greenwood, Steven Walsh and their affiliated WG Trading entities made an initial distribution of approximately $792 million to investors injured in the investment fraud orchestrated by Walsh and Greenwood. On March 20, 2011, Judge George B. Daniels of the United States District Court for the Southern District of New York approved a pro rata net investment distribution plan proposed by the Receiver and recommended by the SEC and the Commodity Futures Trading Commission (CFTC). Today’s distribution marks the first distribution by the Receiver and constitutes a return to investors of nearly 85% of approved claims.

Brian D. Fox

On April 8, 2011, the Securities and Exchange Commission (Commission) filed a civil action in United States District Court in Tulsa, Oklahoma against Brian D. Fox (Fox), the former chairman, chief executive officer and chief financial officer of Powder River Petroleum International, Inc. (Powder River). The Commission’s complaint alleges that, from year-end 2004 through the first quarter of 2008, Fox misled the investing public by fraudulently inflating the revenue and omitting major liabilities of Powder River in Commission filings and by making other false and misleading public disclosures. Specifically, the complaint alleges that from year-end 2004, Powder River conveyed working interests in oil and gas leases to investors in Asia for over $43 million. The complaint further alleges that because Powder River promised full repayment of the working interest investors’ initial investment, with a 9% guaranteed annual return of principal, these transactions were, in reality, loans. Powder River, with Fox as its chairman, CEO and CFO, improperly recognized the loan proceeds as revenues that were incorporated in Powder River’s quarterly and annual public filings with the Commission.

Radical Bunny, LLC, Tom Hirsch, Berta Walder, Howard Walder, and Harish Shah (2 May, released 16 May)

The Securities and Exchange Commission announced today that it obtained summary judgment against four individuals who the Commission charged with securities fraud for orchestrating a mortgage lending scheme. On April 12, 2011, the United States District Court for the District of Phoenix issued an Order granting the Commission’s motion for summary judgment against defendants Tom Hirsch, of Peoria, Ariz., Berta Walder and Howard Walder, of Peoria, Ariz., and Harish P. Shah, of Phoenix. The Order found that the defendants, through their company, Radical Bunny LLC, pooled investor funds to make loans to Mortgages Ltd. and made material misrepresentations and omissions to investors. The Order found that the defendants violated the securities registration, antifraud, and broker-dealer registration provisions of the federal securities laws. The final judgment, entered on April 28, 2011, permanently enjoins the defendants from violating the securities registration, antifraud, and broker-dealer registration provisions, and further orders the defendants to disgorge their ill-gotten gains (Hirsch was ordered to disgorge $1,245,220, the Walders $1,245,217, and Shah $740,160) plus prejudgment interest, and each defendant was ordered to pay civil penalties of $120,000.

Jonathan Hollander (28 April, release 16 May)

The Securities and Exchange Commission today charged Jonathan Hollander, a former hedge fund professional, with insider trading in Albertson’s, LLC based on material nonpublic information regarding an impending acquisition of ABS that Hollander received from a friend who was employed by the financial advisor retained by ABS in connection with impending acquisition. The Complaint alleges that Hollander traded ABS securities on the basis of the material nonpublic information and also tipped a family member and another friend (the tippees) who also traded ABS securities. As a result of their trading, Hollander and his tippees generated $95,807 in illegal profits.

More from the SEC's marathon release of enforcement information tomorrow