Articles Posted in Securities and Exchange Commission

dominos pizza fraudWhile everyone enjoys a nice slice of the pie, Domino’s Pizza has had a corporate insider file a detailed whistleblower report with the SEC against top-level officers and various staff members. This case involves general misconduct and an alleged scheme involving misleading franchisors and fraudulent investments.

On February 19, 2019, the franchise community website Blue MauMau reported that “[a] corporate insider has filed a well-documented whistleblower report with the [SEC] against Domino’s Pizza, its top-level officers, and various staff members.” Domino’s allegedly forced an unapproved advertising increase to franchisees in order to pay a $1.85 billion Securitization Transaction to gain higher stock prices and dividends.

Details of this case came directly from a concerned insider at Domino’s Pizza who noticed the presence of possible misconduct and decided to blow the whistle on this major pizza chain.

oil-company-bribes-300x200In a U.S. Securities and Exchange Commission filing, the company, TechnipFMC plc, stated that they have set aside $280 million in possible settlement funds involving bribery-related offenses. The payment would be delivered to authorities in the United States as well as Brazil and France.

TechnipFMC plc is a company based in London that is often found engaging in projects involving oil and gas. They were formed through a merger in 2017, including the UK-based FMC Technologies Inc. and French oil-services giant Technip SA. In 2010, Technip SA paid $338 million to resolve its own issue involving FCPA offenses in Nigeria that involved using massive bribes to win contracts worth $6 billion. They then used these bribery-won contracts to build massive liquefied natural gas (LNG) facilities on Bonny Island in Nigeria.

Moving back to the present, this current reserve of settlement funds is related to an investigation involving a number of factors. TechnipFMC states in a summary of their financial statement for the fourth quarter in 2018 that, “We are cooperating with the U.S., Brazilian, and French authorities in their investigations of potential violations of anti-corruption laws relating to historical projects in Brazil, Equatorial Guinea, and Ghana, and Unaoil contracts. We have been informed that these authorities have been coordinating their investigations, which could result in a global resolution.”.

Lumber Liquidators lied to investors after a“60 Minutes” Episode and has agreed to pay a total penalty of $33 million. The payment is for filing a materially false and misleading statement to investors regarding the sale of its laminate flooring from China to its customers in the United States about the chemicals used in its wood products including formaldehyde. In 2013 and 2014, CARB informed Lumber Liquidators that flooring samples collected from its California stores failed deconstructive testing for formaldehyde emissions.  Lumber Liquidators’ own deconstructive tests of the same products yielded similar results.

A U.S. laminate supplier informed Lumber Liquidators that it tested a Chinese laminate sample purchased from one of Lumber Liquidators’ stores in the United States and that the sample emitted high levels of formaldehyde.  Lumber Liquidators took only limited steps to determine the validity of the suppliers’ concerns, and instead sought to generate support for its position that deconstructive testing was not a valid test method, the company admitted.

Lumber Liquidators, a public corporation headquartered in Toano, Virginia, and one of the largest retailers of flooring products in the United States, entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Eastern District of Virginia charging the company with securities fraud.  The case was primarily focused on the fact that Lumber Liquidators knowingly filed a false and misleading statement to investors broadly denying the allegations featured in a March 2015 episode of 60 Minutes, and affirming that the company complied with California Air Resources Board (CARB) regulations.

town financial fraudThe New York town of Oyster Bay has been granted a settlement by the Securities and Exchange Commission (SEC) that will allow for no fines relating to a 2017 SEC lawsuit involving alleged financial fraud. This agreement is contingent on the assurance that the town hire a municipal finance consultant to review bond disclosures for three years.

The town of Oyster Bay as well as their former town supervisor John Venditto, who was not involved in the settlement, have been accused of defrauding investors by keeping vital information from them, including side deals with local restaurants to indirectly guarantee private loans. Those investigating the case have stated that during the time of the 2017 suit Oyster Bay was not disclosing loan guarantees that totaled $20 million during 26 securities offerings in the years 2010 to 2015

Allegations such as these could have resulted in much harsher punishments for the town, as they have in the past with other fraud cases. However, Oyster Bay received a light settlement that allowed them to avoid fines and seek professional financial assistance for up to three years. Initially, though the SEC sought to impose a court-appointed consultant for a five-year period with the power to prevent borrowing, but this was changed throughout the settlement.

insider tradingAccording to the Securities and Exchange Commission’s 2018 Annual Report, 262 tips were received from whistleblowers regarding insider trading and resulted in a total of 56 charges throughout the year. As one of the SEC’s most successful years in combating insider trading, it is evident that the combination of whistleblower tips and modern technology are the key to securing the integrity of the securities market.

What is Insider Trading?

According to the SEC’s Investor.gov, “Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.”

SEC Pump-and-Dump Scheme The Securities and Exchange Commission has charged ten individuals, named as “microcap fraudsters” in the SEC press release, for numerous market manipulation schemes that lead to the group profiting over $27 million in unlawful stock sales. The classic “pump and dump” scheme went on for years and involved well-known figures in the cryptocurrency and biotech field.

The Microcap Fraudsters

Of the ten individuals charged in this complex and manipulative scheme, three names stand out from the group. At the forefront of the microcap fraud is Barry Honig, who once served as one of the largest shareholders of the cryptocurrency company, Riot Blockchain. According to the SEC, Honig was the primary leader of the market manipulation scheme, bringing together the group of those charged and strategizing their elaborate fraudulent activities.

SEC-Director-300x200The Division of Corporation Finance has named Valerie A. Szczepanki their Associate Director and Senior Advisor of the Digital Assets and Innovation Division. In her new role, Ms. Szczepanki will deal with security laws relating to digital technologies, including, but not limited to, cryptocurrencies and Initial Coin Offerings. Social media expressed a great attitude toward her appointments and her stated intentions toward working to make new currency tech trading, investing, and development easier to regulate.

Ms. Szczepanki will be looking at issues that concern securities laws that possibly affect the developments and advancements of certain lender technologies, such as blockchain and distributed ledger technologies, cryptocurrencies, Initial Coin Offerings, tokenized securities, and other digital methods of currency transfer and lending. While the SEC recognizes that cryptocurrencies are the wave of the future and need flexibility and freedom to develop in multiple ways, the organization also knows that this tech needs to be regulated and registered to some extent in order to protect those investing as well as those trading in these currencies.

With the developments of all of these new technologies in lending and electronic currency, Ms. Szczepanki has intentions to thoroughly examine the many ways that securities can affect their function and advancement in the markets. Ms. Szczepanki’s efforts are very welcomed by social media outlets and those who utilize social media platforms for business and for other types of electronic currency transactions that deal in the transfer of funds. These routes have noted that regulations are outdated and are affecting the advancement of these types of digital lender technologies and new currency developments as well.

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

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 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

Foreign Soil SEC Corruption Cases Are Now Up Against a Ticking Clock

SEC corruptionA Supreme Court ruling, this summer, has put the U.S. Securities and Exchange Commission against the clock to wrap up foreign corruption cases.  According to an article by the Wall Street Journal, the recent ruling may impact SEC corruption cases when it comes to international anti-bribery laws.

The Ruling