Securities Industry Commentator by Bill Singer Esq

May 4, 2021
In a Complaint filed in the United States District Court for the Northern District of Texas, the SEC charged Richard  Randall with violating the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities and Exchange Act and Rule 10b-5 thereunder; and, further, he is charged with aiding and abetting Wireless Power LLC's violations of Sections 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[R]andall and his recently deceased associate engaged in a fraudulent scheme to attract investors with a purported opportunity to invest in Wireless Power, LLC, which, in turn would invest in a revolutionary wireless technology for transmitting electricity, but then diverted most of the investor funds to themselves using shell companies that they controlled. According to the complaint, they raised approximately $17.2 million between March 2015 and July 2016 by selling units in Wireless Power. As alleged, Randall was involved in the development of the offering memorandum provided to investors, which falsely represented, among other things, that investor funds would be used by Wireless Power to acquire equity interests in companies developing the wireless technology and that this technology would generate "significant revenue streams" to investors. The Commission further alleges that Randall himself received or used for his own personal benefit approximately $5.3 million of investor funds.
In an Information filed in the United States District Court for the District of Massachusetts, Nicole Lescarbeau, a/k/a "Nicole Coulibaly" was charged with wire fraud and bank fraud.  As alleged in part in the DOJ Release:

In December 2019, Lescarbeau pleaded guilty to wire fraud, bank fraud, and aggravated identity theft in connection with a similar embezzlement scheme. While out on pre-trial release in the prior case, Lescarbeau was hired as an administrator at a small, Brookline-based non-profit organization. It is alleged that Lescarbeau did not tell the non-profit about her pending indictment and applied for the position using her married name in an effort to conceal the prior charges. From August 2019 until February 2020, Lescarbeau allegedly used her position to steal funds from the non-profit for her personal use. Specifically, Lescarbeau diverted checks to herself that the non-profit had issued for legitimate business by altering the name of the payee on the checks and then depositing them into her personal bank account. It is also alleged that Lescarbeau opened a PayPal account in the non-profit's name to make unauthorized wire transfers from the non-profit's bank account and made transfers directly from the non-profit's bank account to pay for her personal rent. In total, as a result of this scheme, Lescarbeau allegedly embezzled nearly $57,000 from the non-profit's bank account.
Without admitting or denying the findings in the SEC's Order, Under Armour, Inc. agreed to cease and desist from further violations of Section 17(a)(2) and (3) of the Securities Act and other reporting provisions, and to pay a $9 million penalty. As alleged in part in the SEC Release:

[B]y the second half of 2015, Under Armour's internal revenue and revenue growth forecasts for the third and fourth quarters of 2015 began to indicate shortfalls from analysts' revenue estimates. The order finds, for example, that the company was not meeting internal sales projections for North America, and warm winter weather was negatively impacting sales of Under Armour's higher-priced cold weather apparel. The order further finds that in response, for six consecutive quarters beginning in the third quarter of 2015, Under Armour accelerated, or "pulled forward," a total of $408 million in existing orders that customers had requested be shipped in future quarters. As stated in the order, Under Armour misleadingly attributed its revenue growth during this period to various factors without disclosing to investors material information about the impacts of its pull forward practices. The order finds that Under Armour failed to disclose that its increasing reliance on pull forwards raised significant uncertainty as to whether the company would meet its revenue guidance in future quarters. According to the order, using these undisclosed pull forwards, Under Armour was able to meet analysts' revenue estimates.
Imagine that you got a stockbroker. Imagine that you got an elderly customer. Imagine that the client drafts a Will. Now imagine how the intersection of the stockbroker and customer could raise all sorts of troubling issues and how difficult it becomes to police potential misconduct or prevent abuse. What's the best regulatory approach? What's the best compliance policy? What happens when a customer sincerely wants to bestow a benefit upon a stockbroker via a bequest? What if the stockbroker never had a clue? What if the stockbroker did?