Securities Industry Commentator by Bill Singer, Esq.

October 30, 2017

READ the FULL TEXT U.S. v. George Papadopoulos  Information, Plea, and Statement of Offense (1:17-cr-182, District of Columbia). Papdopoulos pled guilty on October 5, 2017 to making false statements to FBI agents. The case was unsealed on Oct. 30, 2017: United States of America v. Paul J. Manafort, Jr. and Richard W. Gates III, Defendants (Indictment, United States District Court for the District of Columbia, 17-CR-00201 / October 27, 2017):

Count One: Conspiracy Against the United States
Count Two: Conspiracy to Launder Money
Counts Three - Six: Failure to File Reports of Foreign Bank and Financial Accounts for Calendar Years 2011 - 2014 (Manafort)
Counts Seven - Nine: Failure to File Reports of Foreign Bank and Financial Accounts for Calendar Years 2011 - 2013 (Gates)
Count Ten: Unregistered Agent of a Foreign Principal
Count Eleven: False and Misleading FARA Statement
Count Twelve: False Statements

So-called "wrongful termination" cases often involve allegations of defamation and frequently prompt counter-claims, cross-claims and the back-and-forth of dueling motions. By the time these disputes come to trial/hearing, the puddle of bad blood has often expanded to that of an ocean. In today's Blog's featured intra-industry FINRA arbitration, the former employee Claimant sought between roughly $64 million to $97 million in damages. That's quite a range. Those are breathtaking amounts. All of which makes for a fascinating knock-down-drag-out fight between the employee and UBS. READ

UBS To Pay $3.5 Million in SEC Mutual Fund Charges Settlement

In anticipation of the institution of proceedings by the Securities and Exchange Commission ("SEC") but without admitting or denying the findings, UBS Financial Services Inc., submitted an Offer of Settlement, which the federal regulator accepted.  In the Matter of UBS Financial Services Inc., Respondent (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; '34 Act Rel. No. 10433; '34 Act Rel. No. 81974; Invest. Adv. Act Rel. No. 4803; Admin. Proc. File No. 3-18270 / October 27, 2017). As set forth in the "Summary" portion of the Order

1. From at least January 2010 through June 2015 (the "Relevant Period"), UBS  disadvantaged certain retirement plan and charitable organization brokerage customers ("Eligible
Customers")by failing to ascertain that they were eligible for a less expensive share class, and recommending and selling them more expensive share classes in certain open-end registered investment companies ("mutual funds") when less expensive share classes were available. UBS did so without disclosing that it would receive greater compensation from the Eligible Customers' purchases of the more expensive share classes. Eligible Customers did not have sufficient information to understand that UBS had a conflict of interest resulting from compensation it received for selling the more expensive share classes. Specifically, UBS recommended and sold these Eligible Customers Class A shares with an up-front sales charge, or Class B or Class C shares with a back-end contingent deferred sales charge ("CDSC") (a deferred sales charge the purchaser pays if the purchaser sells the shares during a specified time  period following the purchase) and higher ongoing fees and expenses, when these Eligible Customers were eligible to purchase load-waived Class A and/or no-load Class R shares. UBS omitted material information concerning its compensation when it recommended the more expensive share classes. UBS also did not disclose that the purchase of the more expensive share classes would negatively impact the overall return on the Eligible Customers' investments, in light of the different fee structures for the different fund share classes.

2. In making those recommendations of more expensive share classes while omitting material facts, UBS violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. These provisions prohibit, respectively, in the offer or sale of securities, obtaining money or  property by means of an omission to state a material fact necessary to make statements made not misleading, and engaging in a course of business which operates as a fraud or deceit on the purchaser.

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Footnote  1 :  The term "Eligible Customers" may include, among other things, customers that held the following type of retirement accounts: 401(k) plans, 403(b) plans, profit-sharing plans, defined  benefit plans, and certain IRA accounts. Eligible Customers also include accounts held by tax exempt, non-profit organizations.

In determining to accept UBS' Offer, the SEC considered the firm's remedial acts, its undertaking and cooperation afforded the Staff. Accordingly, the SEC Censured UBS, ordered it to cease and desist from committing or causing any violations and any future violation the Securities Act, and ordered the firm to pay a $3.5 million civil money penalty.

New Port Richey Residents Plead Guilty To Extortion And Money Laundering Conspiracy  (United States Department of Justice Press Release)

According allegations by the United States Department of Justice, Andrew Corrigan, 24, and David Owen, 39:

recruited individuals to open bank accounts (straw account owners) for the purpose of depositing money extorted from victims of tax impersonation calls, and to conceal their involvement in the fraud. The money was deposited by victims who were contacted by callers who falsely represented themselves as officials with the IRS, Canadian tax authorities, or as local law enforcement officers. The callers demanded payment for federal income taxes or other financial obligations and stated that if the victims failed to pay, they or their family members would face arrest, prosecution, or other legal consequences.
With online access provided by the straw account owners, Owen and Corrigan monitored the straw bank accounts in order to verify victims' deposits and ensure timely withdrawals by the straw account owners. In order to make the withdrawals at the bank, Owen and Corrigan provided the straw account owners with the victims' names, locations, and amounts of the deposits. They then directed the straw account owners to withdraw the funds in cash, and turn it over to them, often less a payment for their role in the scheme.

To facilitate the telemarketing fraud scheme, Owen recruited an individual to "operate" a business and open bank accounts in that business's name for the purpose of depositing the proceeds of a sweepstakes fraud. Owen's conspirators called elderly victims and falsely represented that they were with the Publisher's Clearinghouse lottery, informing the victim that they had won the lottery for millions of dollars. The callers then induced the victims to provide financial information and to send large cashier's checks to the Florida company, falsely claiming that advance taxes had to be paid in order to collect the full amount of the alleged lottery winnings. Owen, and others, then laundered the proceeds of this fraud scheme.

On October 27, 2017, Corrigan and Owen pleaded guilty to conspiring to commit money laundering and extortion.

Corrigan faces a maximum penalty of 20 years in federal prison on each count.

Owen also pleaded guilty to a separate telemarketing mail fraud and money laundering scheme, that involved sweepstakes fraud targeting elderly victims. He faces a maximum penalty of 20 years in federal prison for each of the 12 counts of conspiracy, extortion, and mail fraud. He also faces up to 10 years' imprisonment on each of the 4 money laundering counts.
At sentencing, the United States will seek:
  • at least an $870,652.66 money judgment;
  • the proceeds of the money laundering and extortion conspiracies; and
  • $315,000 in connection with the sweepstakes fraud.
Separately, Owen has purportedly agreed to about a $94,000 administrative forfeiture of the fraud proceeds seized from him.