SEC Litigation Releases: Week in Review - August 10th, 2012
(Aug 2012)
SEC Charges Participants in $5 Million Boiler Room Scheme
August 10, 2012, (Litigation Release No. 22444)
The SEC charged Edward M. Laborio, Jonathan Fraiman, Matthew K. Lazar, and seven entities controlled by Laborio for their alleged roles in a boiler scheme that ran from December 2006 to August 2009. The seven entities include Envit Capital Group, Inc., Envit Capital, LLC, Envit Capital Holdings, Inc., Envit Capital Private Wealth Management, LLC, Envit Capital Multi Strategy Mixed...
SEC Litigation Releases: Week in Review - August 3rd, 2012
(Aug 2012)
SEC Settles Litigation with Former Veritas Software Corporation Chief Financial Officer
August 2, 2012, (Litigation Release No. 22432)
On July 20, 2012, a final judgment was entered against Kenneth E. Lonchar in the case SEC v. Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully, and Douglas S. Newton. Lonchar, the former Chief Financial Officer of Veritas Software Corporation, had been charged with inflating Veritas' reported revenues "by approximately $20 million in...
Hedge Fund "Side Pockets" Explained
(Jul 2012)
Hedge funds can be extremely complicated investments, and one of the features that contributes to their lack of transparency is their so called 'side pocket' accounts. Side pockets have drawn scrutiny from the SEC and have been the subject of high profile investigations (see also) due to their potential for abuse from hedge fund managers eager to hide losses from investors.
Side pockets are essentially separate accounts that a hedge fund may use to separate illiquid or thinly traded assets...
SEC Litigation Releases: Week in Review - May 25th, 2012
(May 2012)
SEC Charges Northern California Fund Manager in $60 Million Scheme
May 24, 2012, (Litigation Release No. 22375)
The SEC charged John A. Geringer with running a $60 million Ponzi scheme. In Geringer's management of the GLR Growth Fund, he allegedly misrepresented the fund's historical returns -- double-digit annually -- in the marketing materials and then used new investor funds to finance the returns current investors purportedly realized. Geringer went so far as to produce account statements...
SEC Litigation Releases: Week in Review - April 27th, 2012
(Apr 2012)
SEC Charges Former Morgan Stanley Executive with FCPA Violations and Investment Adviser Fraud
April 25, 2012, (Litigation Release No. 22346)
Earlier this week, the SEC charged Garth R. Peterson (former managing director in Morgan Stanley's real estate investment and fund advisory business) with violating the Foreign Corrupt Practices Act (FCPA). The SEC alleges that "Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder's...
SEC Litigation Releases: Week in Review (Part II) - March 16th, 2012
(Mar 2012)
Due to the high volume of litigation releases from the Securities and Exchange Commission over the past week, we're spreading this week's review over two posts. This is the second of the two posts.
SEC Charges Five with Insider Trading on Confidential Merger Negotiations Between Philadelphia Company and Japanese Firm
March 14, 2012 (Litigation Release No. 22288)
The SEC charged Timothy J. McGee, Michael W. Zirinsky, Robert Zirinsky, and Hong Kong residents Paulo Lam and Marianna sze wan Ho with...
Greg Smith Leaves Wall Street
(Mar 2012)
The New York Times published an op-ed by Greg Smith, a Goldman Sachs' Executive Director who is resigning from his job after almost 12 years with the firm because, as he puts it, the firm's culture has veered far from what it was when he first joined the firm. He says in spite of the firm's recent scandals "the interests of the client continue to be sidelined in the way the firm operates and thinks about making money." At SLCG, we have come across many examples of the issues raised by Mr....
WSJ: Private-Equity Fund in Valuation Inquiry
(Feb 2012)
There is an article in the Wall Street Journal today concerning the alleged exaggeration of an asset's value in a private-equity fund. From the article:
The potential exaggeration in the [Oppenheimer Global Resource Private Equity Fund LP] grew to more than $4 million, according to documents shared with Oppenheimer investors. The bulk of this markup came as the fund was reaching out to potential investors in the fall of 2009, and helped push the fund's reported internal rate of return to 38%,...
Déjà Vu: Non-Traded Business Development Companies
(Feb 2012)
Last week we posted an introduction to non-traded REITs that highlighted the many risks inherent to those investments. As it happens, another non-traded investment has been growing in popularity, but has an almost identical set of risk factors and has recently caught the attention of regulators: non-traded business development companies (BDCs).
The resemblance between non-traded REITs and non-traded BDCs is uncanny. Both are special business classes created by Congress in the mid 20th...
An Introduction to Non-Traded REITs
(Feb 2012)
Both FINRA and the SEC have started warning investors about non-traded real estate investment trusts (REITs), which are growing in popularity but expose investors to very serious risks. We at SLCG have had a variety of cases involving non-traded REITs and would like to describe our experience analyzing these investments and what they mean for regulators and retail investors.
In the most general sense, REITs are simply companies that hold almost entirely real estate assets. These companies can...
