Articles Posted in SEC whistleblower

CHS-300x200A Revived Lawsuit Against Community Health Systems Is Moving Forward

The court system is reviving an $891 million securities fraud lawsuit against Community Health Systems. According to Modern Healthcare, the shareholder’s allegations of securities fraud deserve another look. A federal appeals court agrees the company may have intentionally inflated its financial outlook.

The Lawsuit

 Fraud Investigators Follow the Money to Delaware

 SEC’s fraud investigators are in the midst of uncovering a possible billion-dollar investment scheme.  The trail is taking them to Delaware in search of more than 200 Delaware limited liability companies.  Delaware Online reports it’s the latest turn in a high-profile case that seems to take advantage of the secret nature of LLC’s in their state around the country.  Apparently, dirty money can flow easily through an LLC’s pipeline and fraud investigators want to close that loophole.

LLC Fraud Investigation

The Securities and Exchange Commission has leveled a $30 million sanction against Jaspen Capital Partners Ltd. And its Chief Exec Andriy Supranonok, from Kiev and the Ukraine. Both have agree to pay the fine to settle U.S. Securities and Exchange Commission civil insider trading charges over a scheme to hack into networks that distribute corporate news releases, the regulator said on Monday.

The two are also the first of 34 defendants to settle SEC charges over allegations of the theft of more than 150,000 press releases from Business Wire, Marketwired and PR Newswire before the news became public. The SEC said the operation resulted in more than $100 million of illegal profit over a roughly five-year period.

Traders gave hackers “shopping lists” of press releases they wanted to see in advance, and then make trades based on them. Nine of the defendants also face criminal charges.

The Securities and Exchange Commission (SEC) is looking to see whether  Diageo PLC, maker of Smirnoff Vodka,  and Johnny Walker has been shipping excess inventory to distributors to make the company bottom line look better than it really is. By doing so,the company is able to report increased sales and shipments, according to these people.

The North American region is the largest and most important to Diageo’s bottom line. It accounted for about a third of the company’s $15.9 billion in sales in 2014 and around 45% of operating profit. Volume in the region decreased 1% last year, but price increases helped sales rise 3% to about $5.34 billion.

In the U.S., Producers like Diageo ship to wholesalers,  then ship to retailers. Liquor companies can record shipments as sales when they ship them to the wholesaler. The Wall Street Journal broke this story.

The Securities and Exchange Commission is examining more than a dozen firms to determine whether mutual-fund managers are dipping more deeply than allowed into their investors’ money to pay the brokerages that distribute their products, reports The Wall Street Journal. OppenheimerFunds, Franklin Templeton and J.P. Morgan Chase JPM +0.09% are among the fund firms under review by the SEC, which has been conducting a broad sweep of how companies sell their products for the past two years. The SEC is concerned that the additional fees aren’t being properly disclosed to investors, and that brokers may be more likely to suggest funds that pay for such services. “It creates the notion of pay to play,” says Bing Waldert, a Cerulli Associates director.

Jeffrey Newman represents whistleblowers

The Securities and Exchange Commission (SEC) announced the first award under its whistleblower program to a former company officer. The officer will receive $575,000. The SEC maintains confidentiality of the whistleblower’s identity as required by law and provided few details about the underlying case, the matter still provides some further insight into the SEC’s evolving whistleblower program.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Securities Exchange Act of 1934 to create a new awards program for whistleblowers.  Under the whistleblower rules, the SEC is authorized to pay awards to whistleblowers that provide the SEC with “original information” about a securities law violation and that information leads to a successful SEC enforcement action resulting in monetary sanctions over $1 million. The size of the award can range from 10 to 30 percent of the amount recovered in the enforcement action, and the SEC has considerable authority to determine the amount of the whistleblower bounty within that range. The rules also broadly prohibit retaliation against whistleblowers, and require the SEC  to maintain the anonymity of the whistleblower’s identity.

Under the SEC rules, a whistleblower’s original information must be derived from the whistleblower’s own independent knowledge or independent analysis.

The Securities and Exchange Commission(S.E.C.) has filed charges against a number of Portugese companies operating as Winds Network for running a multi-level marketing company offering digital and mobile solutions to customers.However, Wings Network’s revenues actually came solely from selling memberships to investors, not from the sale of any products. The company relied upon the recruitment of new members, and commissions were paid to earlier investors with money received from later investors. The scheme raised at least $23.5 million from thousands of investors, including many in Brazilian and Dominican immigrant communities in Massachusetts.Several of the scheme’s promoters charged in the SEC’s complaint live in Marlborough, Mass.

According to the SEC’s complaint, the scheme was orchestrated by Wings Network officers Sergio Henrique Tanaka of São Paulo, Brazil and Davie, Fla., Carlos Luis da Silveira Barbosa of Lisbon, Portugal, and Claudio de Oliveira Pereira Campos of Lisbon, Portugal. After establishing a network of lead promoters, recruitment of new members surged through the use of social media such as Facebook and YouTube. The promoters used Facebook to publicize “business meetings” that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah. The promoters also set up storefronts or “training centers” to lure investors into attending Wings Network presentations. For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.

The SEC’s complaint alleges that the Portuguese entities and principals Tanaka, Barbosa and Campos violated antifraud provisions Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10-b-5 thereunder, and registration provisions Section 5(a) and 5(c) of the Securities Act, and that the promoter defendants violated Section 5(a) and 5(c) of the Securities Act.

The Vanguard Group one of the world’s largest investment funds with $3 trillion under management illegally evaded taxes through transfer pricing, says whistleblower David Danon, a tax attorney at Vanguard for nearly five years.  He became aware of a transfer pricing arrangement while at Vanguard and its affect on corporate taxes. He filed a whistleblower action in 2013 under the New York False Claims Act. He alleges that Vanguard charges its own funds at cost prices for management services, which is below market pricing. Vanguard says that the Securities and Exchange Commission issued an order approving :joint participation arrangement. Danon says that order allowed the transactions for securities purposes not taxes. Continue reading

The Securities and Exchange Commission today announced an award of more than $30 million to a whistleblower, living in a foreign nation, who provided key original information that led to a successful SEC enforcement action. The award is the largest made by the SEC’s whistleblower program to date and the fourth award to a whistleblower living in a foreign country, demonstrating the program’s international reach.

The anonymous whistleblower will receive more than double the previous record whistleblower award after providing information that led directly to an SEC enforcement.The U.S. Securities and Exchange Commission whistleblower program that went into effect three years ago. Continue reading

A court squabble $14.7-million whistleblower bounty has  identified the  recipient of a record  award from the Securities & Exchange Commission.A massive fraud perpetrated through the federal visa-for-sale program, known as EB-5, by a young Chicago promoter named Anshoo Sethi was halted by the whistleblower tips.

Sethi raised $147 million from rich Chinese investors for a massive project near O’Hare airport, which he marketed as the “World’s First Zero Carbon Platinum LEED-certified” hotel and convention center complex. He was charged in a February 2013 SEC fraud complaint, which was settled with fines and other sanctions this March, without any admission or denial of guilt. The matter also triggered a federal criminal investigation.

The recipient of the whistleblower award,  under whistleblower provisions of the 2010 Dodd-Frank law, is 62-year-old Michael Sears, a principal in a small Virginia-based firm called Global Capital Markets Advisors, which manages real estate investment funds. However, this has been challenged by John Tung, a principal in the firm and a veteran of the real-estate financing business, according to the firm’s website. The two men have worked together for more than a decade.