Posts

SEC Freezes Swiss Assets in H.J. Heinz Questionable Trades

/in /by

The SEC obtained an emergency court order to freeze assets in a Zurich, Switzerland trading account that was used to reap more than $1.7 million from trading in advance of last week’s public announcement about the acquisition of H.J. Heinz Company.

The SEC’s immediate action ensures that potentially illegal profits cannot be siphoned out of this account while the agency’s investigation of the suspicious trading continues.

In a complaint filed in federal court in Manhattan, the SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire H.J. Heinz Company in a deal valued at $28 billion, unknown traders took risky bets that Heinz’s stock price would increase.

The traders purchased call options the very day before the public announcement. After the announcement, Heinz’s stock rose nearly 20 percent and trading volume increased more than 1,700 percent from the prior day, placing these traders in a position to profit substantially.

“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information,” said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “Despite the obvious logistical challenges of investigating trades involving offshore accounts, we moved swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want their assets unfrozen.”

The SEC alleges that the unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement. The timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Overall trading activity in Heinz call options several days before the announcement had been minimal.

The emergency court order obtained by the SEC freezes the traders’ assets and prohibits them from destroying any evidence. The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the emergency relief, the SEC is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and be permanently barred from future violations.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

South Florida Farnell Brothers Sentenced for Tax Evasion

/in /by

Michael Farnell and James Farnell, residents of Boca Raton, Fla., were sentenced to prison terms last week for income tax evasion following an April indictment, according to the Justice Department and Internal Revenue Service (IRS). Judge William P. Dimitrouleas sentenced Michael Farnell to a term of 18 months in prison. His brother James Farnell was sentenced to a term of 42 months.

Michael and James Farnell sold stock in a privately held Florida-based technology company between 2004 and 2006 and failed to report the capital gains or pay taxes on the capital gains from those stock sales. In 2004, the U.S. Securities and Exchange Commission (SEC) filed suit against the Farnell brothers for securities violations at another company that they operated the year 2000. A majority of the stock sales at issue in this case violated the injunction from the SEC’s lawsuit.

According to public documents and statements made in court, the Farnell brothers held their stock in this Florida-based technology company in the name of nominee trusts. The proceeds of the stock sales were deposited into bank accounts titled in the name of these nominee trusts. Neither brother filed tax returns in 2004 and 2005. James Farnell also failed to file a 2006 tax return. As part of the sentencing, Michael Farnell and James Farnell both agreed that they failed to report additional income paid to them by this Florida-based technology in 2001 through 2003.

Michael Farnell was ordered to pay restitution of $448,128 and James Farnell was ordered to pay restitution of $434,115, both to the IRS.

Farnell Brothers Subject of 2006 SEC Litigation

Details of earlier SEC actions are outlined in SEC Litigation Release No. 19604, dated March 9, 2006, involving Securities and Exchange Commission v. Vector Medical Technologies, Inc., Michael H. Salit, James P. Farnell, Michael J. Farnell, David A. Zimmerman, and Stanley Wasser, Case No. 03-80858-CIV-HURLEY/LYNCH (S.D. Fla.).

The Securities and Exchange Commission announced that on February 1, 2006, the Honorable Daniel T.K. Hurley, United States District Court for the Southern District of Florida, adopted the Magistrate’s Report and Recommendation in full and entered Final Judgment of disgorgement and civil penalties against Vector Medical Technologies, Inc., Michael Salit, James Farnell and Michael Farnell.

On December 20, 2005, Magistrate Judge Frank J. Lynch, Jr., conducted an evidentiary hearing, and thereafter filed his Report and Recommendation. By adopting the Magistrate’s Report and Recommendation in full, the District Court entered a Final Judgment that ordered Vector Medical to pay $14,208,718 in disgorgement and prejudgment interest; Salit to pay a $486,000 civil penalty; James Farnell to pay $1,127,796 in disgorgement and prejudgment interest and a $100,000 civil penalty; and Michael Farnell to pay $715,320 in disgorgement and prejudgment interest, and a $100,000 civil penalty.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Yitzchak Zigdon Settles SEC Charges in CO2 Tech Pump-and-Dump Scheme

/in /by

Yitzchak Zigdon is one of several defendants named in a 2011 SEC complaint relating to a $7 million alleged fraud scheme to sell CO2 Tech stock at artificially inflated prices.

In the original complaint, the Commission alleged that CO2 Tech Ltd. was a sham company without significant assets or operations whose stock prices were quoted in the Pink Sheets. According to the complaint, among other things, Zigdon provided the paper work necessary to establish the account that was used to dump the shares of CO2 Tech on to the market.

The complaint also stated that Zigdon caused materially false and misleading information about CO2 Tech to be disseminated in press releases and on its website. In particular, the complaint alleged that CO2 Tech falsely touted business relationships that the company had not formed, including a relationship with the Boeing Company when, in fact, there had been no communications, correspondence or understandings between CO2 Tech and Boeing.

On January 23, 2013, the U.S. District Court for the Southern District of Florida entered a final judgment by consent against Yitzchak Zigdon in the SEC’s enforcement action against seven defendants concerning the common stock of CO2 Tech Ltd.

The final judgment enjoins Zigdon from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered Zigdon to pay disgorgement of $260,000, prejudgment interest of $74,516 and a civil penalty in the amount of $130,000 for a total of $464,516 in monetary sanctions.

In addition, the Court barred Zigdon from participating in an offering of penny stock. Zigdon consented to the entry of the final judgment without admitting or denying any of the allegations of the Commission’s Complaint.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Mary Jo White Nominated for SEC Chair

/in /by

President Obama nominated Mary Jo White, a former U.S. Attorney for the Southern District of New York, to serve as Chair of the U.S. Securities and Exchange Commission. White would replace Mary Schapiro, who left the agency in December.

Ms. White is currently Chair of the Litigation practice group at the New York law firm of Debevoise & Plimpton, where she concentrates her practice in white collar criminal defense and securities law. Her biography, as outlined below from the law firm’s website, summarizes her career highlights.

Ms. White served as the United States Attorney for the Southern District of New York from 1993 to 2002. She is the only woman to hold the top position in the more than 200-year history of that office, which has the responsibility of enforcing the federal criminal and civil laws of the nation.

Ms. White also served as the first Chairperson of Attorney General Janet Reno’s Advisory Committee of United States Attorneys from all over the country. Prior to becoming the United States Attorney in the Southern District of New York, Ms. White served as the First Assistant United States Attorney and Acting United States Attorney in the Eastern District of New York from 1990 to 1993.

In addition, Ms. White has served as a Director of The NASDAQ Stock Exchange, and on its Executive, Audit and Policy Committee. She is also a member of the Council on Foreign Relations.

Ms. White’s practice concentrates on internal investigations and defense of companies and individuals accused by the government of involvement in white collar corporate crime or Securities and Exchange Commission (SEC) and civil securities law violations, and on other major business litigation disputes and crises. For her criminal work, she leads a Debevoise team that includes eleven former Assistant U.S. Attorneys with extensive experience in major commercial investigations and prosecutions.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.