Securities Industry Commentator by Bill Singer Esq

August 22, 2018

Michael Cohen Pleads Guilty In Manhattan Federal Court To Eight Counts, Including Criminal Tax Evasion And Campaign Finance Violations / Plea Follows Filing of Eight Count Criminal Information Alleging Concealment of More Than $4 Million in Unreported Income, $280,000 in Unlawful Campaign Contributions (DOJ Release)
https://www.justice.gov/usao-sdny/pr/michael-cohen-pleads-guilty-manhattan-federal-court-eight-counts-including-criminal-tax
Michael Cohen pled guilty in the United States District Court for the Southern District of New York to an eight-count Information charging him with tax evasion, making false statements to a federally-insured bank, and campaign finance violations. Cohen had concealed over $4 million in personal income from the IRS, made false statements to a federally-insured financial institution in connection with a $500,000 home equity loan, and, in 2016, caused $280,000 in payments to be made to silence two women who otherwise planned to speak publicly about their alleged affairs with a presidential candidate, thereby intending to influence the 2016 presidential election. READ the FULL TEXT Michael Cohen INFORMATION: https://www.justice.gov/usao-sdny/press-release/file/1088966/download

Will Shareholders Lose the Right to Sue Over Corporate Fraud? (The Intercept by Susan Antilla in partnership with the Investigative Fund)
https://theintercept.com/2018/08/21/sec-mandatory-arbitration-shareholders/
Veteran reporter Susan Antilla pens another provocative article in which she considers the consequences of the current wave of deregulation. As Antilla notes:

[E]arlier this month, Securities and Exchange Commissioner Hester Peirce told Politico that she "absolutely" thinks that public companies should have the option to require arbitration, which would strip shareholders of their right to bring lawsuits like the one Kacouris filed. The comments by Peirce, a Donald Trump nominee who took office in January, amplified previous remarks by other SEC officials. Commissioner Michael Piwowar, for example, who departed his post in July, told an audience at the conservative Heritage Foundation last year that he would "encourage" companies to come talk to the SEC about putting mandatory arbitration clauses in their charters. 

http://www.brokeandbroker.com/4148/busacca-finra-coo/ 
Chief Executive Officer of the Broker Dealer Exchange John Busacca warns the FINRA member firm community about the ramifications of  the recent requirement to designate a Chief Operations Officer (COO). As Busacca notes, most small firms utilize a part time or Rent-a-FINOP to handle their monthly or quarterly FOCUS reports; and, as is often dictated by the economics of small broker-dealer life, those part time FINOPS often act as the firm's CFO or COO. An interesting read for those in the trenches of Small FINRA broker-dealers.

California Man Claiming to Be a Billionaire Financier Sentenced to More Than Five Years in Prison in Multimillion-Dollar Fraud Scheme (DOJ Release)
https://www.justice.gov/opa/pr/california-man-claiming-be-billionaire-financier-sentenced-more-five-years-prison
Following his jury conviction on one count each of conspiracy to commit mail and wire fraudm mail fraud, conspiracy to commit money laundering, and laundering monetary instruments; two counts of engaging in monetary transactions in property derived from specified unlawful activity; and five counts of wire fraud, Kenneth Brewington was sentenced in the United States District Court for the District of Colorado to five years in prison, three years supervised release, and ordered to pay $563,526.78 in restitution. Brewington falsely told investors that he was a billionaire who, in exchange for up-front fees, could access certain financing, including hundreds of millions in cash in an overseas bank account. Brewington and his co-conspirators sold promissory notes to victims, including through a financial-services marketing company based in Denver called Compass Financial Solutions (CFS).  The conspirators converted the fees towards Ponzi-like payments to other investors and for personal expenses. Former CFS CEO Brian G. Elrod and former Corporate Counsel William E. Dawn pled guilty for their roles, and Elrod was sentenced to 41 months in prison, three years of supervised release, and ordered to pay $2,440,051.29 restitution; and Dawn was sentenced to time served and ordered to pay $366,752.01 restitution.

SEC Charges Former Online Marketing Company Executives With Inflating Operating Metrics (SEC Release 2018-161)
https://www.sec.gov/news/press-release/2018-161
Endurance International Group Holdings Inc.former chief executive Hari Ravichandran and former chief financial officer Waruna Ellawala agreed to settle SEC charges without admitting or denying them and pay $1.38 million and $34,000 respectively in disgorgement, interest, and penalties.  They also agreed to cease and desist from further violations of various antifraud, reporting, books and records, and internal controls provisions of the federal securities laws. In a Complaint filed in the United States District Court for the District of Massachusetts, the SEC alleged that former Constant Contact (which became an Endurance subsidiary in 2016) CFO Harpreet Grewal hid the company's slowing customer growth from investors and inflated its publicly reported subscriber numbers.  READ the FULL TEXT:
Grewal SEC Complaint https://www.sec.gov/litigation/admin/2018/33-10534.pdf
Ellawala SEC Order  https://www.sec.gov/litigation/admin/2018/33-10534.pdf
Ravichandran SEC Order https://www.sec.gov/litigation/admin/2018/33-10533.pdf

https://www.sec.gov/litigation/litreleases/2018/lr24238.htm
The United States. District Court for the Southern District of Georgia entered a default judgment against now-defunct microcap issuer and former movie studio Medient Studios, Inc., also known as Moon River Studios, Inc.that enjoins the company from future violations of antifraud, reporting, registration, and proxy statement provisions of the federal securities laws. The default judgment orders Medient to pay $885,000 in disgorgement, $54,368 in prejudgment interest, and a an $885,000 civil penalty. Further, the court entered a final judgment by consent against Joel A. "Jake" Shapiro, a former CEO and director of Medient and its successor company, Fonu2, Inc. In that earlier judgment by consent, Shapiro agreed to settle with the SEC, and without admitting or denying the allegations in the complaint, consented to the entry of a final judgment that enjoins him from future violations of antifraud, reporting, registration, and disclosure provisions of the federal securities laws. The consent judgment prohibits Shapiro from acting as an officer or director of a public company or participating in an offering of penny stock for five years and orders him to pay disgorgement of $21,456, prejudgment interest thereon of $2,385, and a $75,000 civil penalty. The SEC's Complaint alleged in part that Shapiro, along with Medient's founder and former chairman, Manu Kumaran, had schemed to make an assortment of false and misleading statements in Medient's press releases and corporate filings, and that Shapiro, Kumaran, and others backdated and falsified promissory notes as part of a scheme to issue Medient's and Fonu2's common stock in exchange for financing.The SEC's litigation is ongoing with respect to Kumaran/ and to the amount of monetary relief owed by Fonu2 and its former CEO, Roger Miguel. READ THE FULL TEXT:
SEC Complaint - Medient Complaint https://www.sec.gov/litigation/complaints/2018/comp24238-medient.pdf
SEC Complaint - Shapiro Complaint https://www.sec.gov/litigation/complaints/2018/comp24238-shapiro.pdf

Westchester Attorney Indicted For Fraud And False Statement Charges Arising From His Attempt To Embezzle From A Decedent's Estate For Which He Was Court-Appointed Administrator (DOJ Press Release)
https://www.justice.gov/usao-sdny/pr/westchester-attorney-indicted-fraud-and-false-statement-charges-arising-his-attempt
Attorney Guy Parisi was indicted in the United States District Court for the Southern District of New York on conspiracy, mail fraud and false statements arising from his alleged attempt to embezzle funds from a decedent's estate for which he served as a court-appointed administrator. As alleged in part in the Indictment, on behalf of the estate, Parisiretained Stokes Asset Recovery Services  as the estate's abandoned property location service in exchange for a 15% fee on the value of the estate's assets held by the NYS Comptroller. Allegedly not disclosed and actively concealed was that that Stokes was owned a relative of Parisi's with whom he had formed the asset recovery business less than two weeks before he notified the Comptroller of his retention of the company. READ the FULL TEXT INDICTMENT https://www.justice.gov/usao-sdny/press-release/file/1088626/download

Greenville Man Sentenced to 46 Months for $700,000 Fraud Scheme (DOJ Press Release)
https://www.justice.gov/usao-sc/pr/greenville-man-sentenced-46-months-700000-fraud-scheme
Pursuant to his guilty plea to conspiracy to commit wire fraud, Calvert J. Drummond, Jr. was sentenced in the United States District Court for the District of South Carolina to 46 months in prison and ordered o pay $742,000 in restitution. Drummond represented that he could obtain alternative financing for various projects, and in exchange for a fee of several hundred thousand dollars, promised to secure bank guarantees worth millions.In  fact his promises of alternative financing were pure fiction and he converted the fees for personal expenses, travel, jewelry, and other items. Sadly, this is a well-worn scam that never seems to get old or fall out of use. If it's too good to be true, it's too good to be true. I can't tell you how many victims have come to me over the decades with tales about the same fraud, and, trust me, the results of these scams are often devastating.