The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
March 13, 2019
https://www.justice.gov/usao-ma/pr/arrests-made-nationwide-college-admissions-scam-alleged-exam-cheating-athletic
William “Rick” Singer, 58, of Newport Beach, Calif., the owner/operator of Edge College & Career Network LLC (the "Key") was charged with racketeering conspiracy, money laundering conspiracy and obstruction of justice. Between approximately 2011 and February 2019, Singer allegedly conspired with dozens of parents, athletic coaches, a university athletics administrator, and others, to use bribery and other forms of fraud to secure the admission of students to colleges and universities including Yale University, Georgetown University, Stanford University, the University of Southern California, and Wake Forest University, among others. Also charged for their involvement in the scheme are 33 parents and 13 coaches and associates of Singer’s businesses, including two SAT and ACT test administrators.
From Bill Singer, the Publisher of the Securities Industry Commentator and the BrokeAndBroker.com Blog: For those of you wondering, "NO," I am not William "Rick" Singer. I am the older but more debonair Bill (not "William" and not "Rick") Singer. And for the really annoying trolls among you, "NO" I have never owned and never operated the Edge College & Career Network LLC or served as CEO of the Key Worldwide Foundation; and I never met and don't know William "Rick" Singer. For the even more intrigued among you, I am also not the Bill Singer a/k/a the "Singer Throwing Machine," who was a two-time MLB All Star and the pitcher of a No Hitter. That Bill Singer is older than me and much taller, but I may have a better breaking ball (in my dreams). I'm also not the Bill Singer who ran for Mayor of Chicago in 1975 but lost to Richard Daley (I did run for Student Council in High School and got elected).
SEC Charges Lumber Liquidators With Fraud (SEC Release)
https://www.sec.gov/news/press-release/2019-29
-and-
https://www.justice.gov/usao-edva/pr/lumber-liquidators-agrees-33-million-penalty-securities-fraud
Lumber Liquidators consented to an SEC Order
https://www.sec.gov/litigation/admin/2019/34-85291.pdf finding that the company violated the antifraud provisions in Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Section 13(a) of the Exchange Act related rules, which require periodic filings with the Commission to contain all material information. Lumber Liquidators agreed to cease and desist from future violations of the charged provisions and cooperate fully with any further investigation, litigation or other proceeding by SEC. Also, the company agreed to pay over $6 million in disgorgement and prejudgment interest as part of its settlement. As set forth in part in the SEC Release:
https://www.sec.gov/litigation/admin/2019/34-85291.pdf finding that the company violated the antifraud provisions in Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Section 13(a) of the Exchange Act related rules, which require periodic filings with the Commission to contain all material information. Lumber Liquidators agreed to cease and desist from future violations of the charged provisions and cooperate fully with any further investigation, litigation or other proceeding by SEC. Also, the company agreed to pay over $6 million in disgorgement and prejudgment interest as part of its settlement. As set forth in part in the SEC Release:
The SEC’s order finds that in early 2015, Lumber Liquidators, a discount retailer of hardwood flooring, made public statements in response to a “60 Minutes” news program episode that showed undercover video of Lumber Liquidators’ suppliers stating that they provided the company with products that did not comply with regulatory requirements. In its response, Lumber Liquidators fraudulently informed investors that third-party test results of its flooring products proved compliance with formaldehyde emissions standards and that it had discontinued sourcing materials from suppliers that were unable to meet these standards. In reality, Lumber Liquidators knew that its largest Chinese supplier had failed third-party formaldehyde emissions testing and was unable to produce documentation showing regulatory compliance. The SEC’s order further finds that despite having evidence confirming that the individuals in the “60 Minutes” undercover video were factory employees of its suppliers, Lumber Liquidators falsely stated that its suppliers were not depicted in the video.
Pursuant to an
Information https://www.justice.gov/usao-edva/press-release/file/1142986/download andDeferred Prosecution Agreement https://www.justice.gov/usao-edva/press-release/file/1142991/download
FINRA Finds (AGAIN!) That Ameriprise Stockbroker Altered and Concealed Evidence in Customer Arbitration
(BrokeAndBroker.com Blog)
(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4484/FINRA-Tysk-Ameriprise/
Presented for your consideration is a regulatory odyssey. This rambling, shambling tale sort of begins in 2008 with an unhappy customer complaining about his Ameriprise stockbroker. That takes us to a 2010 FINRA Arbitration by the unhappy customer against Ameriprise and the stockbroker. As a result of some shenanigans that may or may not have gone on in preparation for and during that arbitration, we wind up with a 2014 FINRA Office of Hearing Officers Decision, which suspends the stockbroker for three months and fines him $50,000. On appeal, in 2016, FINRA's National Adjudicatory Council increases the suspension to one year. Not taking his punishment without more of a fight, the stockbroker appeals to the Securities and Exchange Commission, which, in 2017, remands the regulatory case back to FINRA. Now, in 2019, FINRA's NAC re-visits the entire mess via the SEC's remand and, well, what can I say: here we go again.
https://www.justice.gov/usao-ndal/pr/father-and-son-conviceted-multimillion-dollar-investment-fraud-scheme
A federal jury in the United States District Court for the District of Alabama convicted Donald Watkins Sr. on seven counts of wire fraud, two counts of bank fraud and one count of conspiracy; and his son, Donald Watkins Jr. on one count of wire fraud and one count of conspiracy in connection with their investment fraud and bank fraud schemes in which they stole over $10 million from individual investors—including multiple former professional athletes—and Alamerica Bank of Birmingham, Alabama. As set forth in stunning detail in the DOJ Release:
[B]etween approximately 2007 and 2013, Donald Watkins Sr. sold "economic participations" and promissory notes connected with Masada Resource Group, a company that he ran as manager and CEO. Investors paid millions of dollars after Donald Watkins Sr. and Donald Watkins Jr. falsely represented that the money would be used to grow Masada, which Donald Watkins Sr. described as a “pre-revenue” company that supposedly had technology that could convert garbage into ethanol. Instead of investing the money into Masada, however, Donald Watkins Sr. and Donald Watkins Jr. diverted funds to pay personal bills and the debts of their other business ventures. The evidence showed that victim money was used to pay for Donald Watkins Sr.’s alimony, hundreds of thousands of dollars in back taxes, personal loan payments, a private jet and clothing purchased by Donald Watkins Jr. and his wife. Emails introduced at trial also showed that Donald Watkins Jr. and Donald Watkins Sr. planned to obtain millions of dollars for these purposes from one victim on multiple occasions, when they knew that their victims trusted them to put their money to use in growing Masada. The defendants’ scheme eventually grew to include another business venture, Nabirm Global, a company that Donald Watkins Sr. claimed held mineral rights in Namibia.Donald Watkins Sr. also defrauded Alamerica Bank, an entity in which Donald Watkins Sr. was the largest shareholder, the evidence showed. In order to pay hundreds of thousands in litigation expenses associated with another one of Donald Watkins Sr.’s business ventures, Donald Watkins Sr. executed a plan to use a straw borrower to take out money from Alamerica Bank and give it to them. This straw borrower—Donald Watkins Sr.’s long-time mentor and a prominent figure in the Birmingham community—took over $900,000 in loans from Alamerica Bank and then immediately permitted Donald Watkins Sr. and Donald Watkins Jr. to use those funds for their personal benefit.
SEC Charges Texas Radio Host "The Money Doctor," Halts Ponzi Scheme Targeting Elderly Investors (SEC Release)
https://www.sec.gov/litigation/litreleases/2019/lr24420.htm
In a Complaint filed in the United States District Court for the Northern District of Texas https://www.sec.gov/litigation/complaints/2019/comp24420.pdf , the SEC charged alleged that radio personality "Money Doctor" William Neil "Doc" Gallagher and his companies Gallagher Financial Group, Inc. and W. Neil Gallagher, Ph.D. Agency, Inc. had violated Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder and Section 206 of the Investment Advisers Act of 1940. The Court entered orders at the SEC's request, freezing their assets and placing them into receivership and temporarily enjoining the defendants from further violations. The SEC is seeking preliminary, permanent, and conduct-based injunctions as well as disgorgement, prejudgment interest, and civil penalties against the defendants. In a related case, the Dallas County District Attorney's Office obtained an indictment against Gallagher on March 4, 2019, for securities-fraud and other criminal charges stemming from the scheme. As set forth in part in the SEC Release:
The SEC's complaint, which was filed under seal on March 7, 2019, alleged that Gallagher made frequent religious references on his radio shows to establish his standing among a target audience of retired Christian investors. From December 2014 through January 2019, he raised at least $19.6 million from approximately 60 senior citizens. Falsely claiming to be a licensed investment adviser, he offered an investment that he called a Diversified Growth and Income Strategy Account, in which he promised to acquire income-generating assets for his clients in five specified categories. He promised investors that they would receive guaranteed, risk-free returns in their accounts ranging from 5% to 8% per year. In reality, except for one $75,000 annuity purchase, Gallagher purchased no assets in any of the five categories and no other assets to back the promised returns. Instead, he exhausted virtually all investor funds on spending unrelated to the accounts, including misappropriating significant portions for personal and company expenses and to make Ponzi payments to investors. To lull investors and conceal the scheme, Gallagher provided investors phony account statements showing false account balances.
https://www.justice.gov/usao-mdfl/pr/pinellas-man-sentenced-seven-years-prison-telemarketing-scam
Mark Boring pled guilty in the United States District Court for the Middle District of Florida to one count of conspiracy to commit wire fraud and one count of aggravated identity theft, and he was sentenced to seven years in prison, and ordered to pay a 75,000 money judgment, and $895,011.03 in restitution. As set forth in part in the DOJ Release:
[F]rom 2016 through at least 2018, Boring conspired with others to take money from victims throughout the United States who wanted to sell their timeshare properties or other parcels of land. Boring and others placed telephone calls to these victims impersonating real estate professionals. They misled the timeshare owners to believe the conspirators had identified buyers for the victims’ timeshares and other property. The conspirators further advised the victims that the timeshare and property sales could be completed if the victims made one or more advanced payments to the conspirators for various fees purportedly associated with the sales, such as closing costs, courier services, title searches, transfer fees, and legal fees. Once the victims agreed to pay the bogus fees, the conspirators directed the victims to send funds via wire transfers to one of the conspirators. That conspirator then withdrew the fraud proceeds and shared them with the others, based on each conspirator’s role in the fraudulent transaction. The conspirators often repeatedly re-contacted their victims and fraudulently advised them that additional fees were needed in order to complete the sales, and they continued to dupe the victims into sending bogus advanced fees until the victims either ran out of money or became aware of the scam.
Three defendants and an India-based call center indicted in phone scam targeting U.S. victims (DOJ Release)
https://www.justice.gov/usao-ndga/pr/three-defendants-and-india-based-call-center-indicted-phone-scam-targeting-us-victims
In an Indictment filed in the United States District Court for the Northern District of Georgia, Mohit Devendrabhai Sharma, Julliette Belle Carter, Kunal Jagdishbhai Sharma, and Skyz International Outsourcing BPO are charged with conspiracy to commit wire fraud and wire fraud. Further, Mohit Devendrabhai Sharma and Julliette Belle Carter are charged with conspiracy to commit money laundering. As set forth in part in the DOJ Release, using lists of US residents personal information, callers impersonated officials from the Internal Revenue Service and would:
threaten potential victims with prosecution or arrest if they did not pay alleged tax debts immediately. After the victims agreed to pay, the callers would instruct the victims to send the money electronically using banks or money transmitters, such as MoneyGram, to defendants Mohit Devendrabhai Sharma, Julliette Belle Carter, and others. Victims, including residents of Georgia, believed the threats and sent money. Defendants Mohit Devendrabhai Sharma and Julliette Belle Carter retrieved the fraud proceeds from various MoneyGram locations in states such as Illinois, Ohio, Michigan, and Wisconsin.
Love (and customer complaints) mean never having to say you're "sorry" In the Matter of the Arbitration Between Evan Robin Guido, Claimant, v. Robert W. Baird & Co. Incorporated, Respondent (FINRA Arbitration Decision Case Number: 18-02141 / March 11, 2019)
http://www.finra.org/sites/default/files/aao_documents/18-02141.pdf
In a FINRA Arbitration Statement of Claim filed in June 2018, associated person Claimant Guido sought $1 in compensatory damages and the expungement of a customer complaint from his Central Registration Depository record ("CRD"). The FINRA Decision asserts in part that the complaining customer had alleged that Claimant had "improperly advised him to purchase "A" shares in asset-based fee accounts and failed to provide him with the benefit of breakpoints." Respondent Robert W. Baird & Co. did not file a Statement of Answer. Although notified of the expungement hearing, the customer did not participate in the hearing and did not contest the requested relief. In recommending expungement, the sole FINRA Arbitrator found that the customer's claim, allegations, or information is false. The Arbitrator provided the following rationale:
The original complaint made against Claimant was never officially filed. It was never signed by the attorney who was to have represented the underlying customer. FINRA never assigned a case number. The attorney sent a complaint to Respondent, and they in turn sent a reply to the attorney explaining the way the account was set up. Claimant then had a telephone conversation with the customer explaining how the account had been handled. The customer and the attorney then just walked away from the claim and abandoned it. No formal withdrawal of any kind was filed. However, because the customer had made contact with Respondent, a complaint was automatically filed in Claimant’s CRD.When the customer opened his two accounts, they were set up with a special costing arrangement that was suggested by the customer’s own accountant. Claimant set up the accounts exactly as the customer’s accountant had suggested and the customer himself ordered. This special arrangement was somewhat complicated but it involved moving the costs from one account to the other so that the customer could claim the costs against his income taxes.During the telephone conversation between the customer and Claimant, it is Claimant’s sworn testimony that it was obvious that the customer was confused and did not fully understand the arrangement himself. Once the arrangement was fully explained to the customer, the customer said he was sorry and would withdraw the claim.The customer’s accountant had advised Claimant to set up the accounts in a special way. The customer had authorized that to be done without fully understanding it. Claimant did as he was instructed. Therefore, the expungement should be granted because the allegation is false. This expungement will have no adverse effect on investor protection. . .