Entries in Securities and Exchange Commission (16)


Feds Seek Missing Money Manager

Lowndes County Sheriff's Office, Georgia(ATLANTA) -- Federal law enforcement authorities are investigating the disappearance of Georgia money manager Aubrey Lee Price, accused by the SEC of having orchestrated a $40 million investment fraud.

The missing financier told associates in a June letter that he planned to kill himself off the coast of Florida by jumping from a ferry boat, according to FBI special agent Michael Howard. The Atlanta Journal Constitution reported Sunday that Price last was seen in Key West, Fla., hopping a ferry to Ft. Myers.

“Despite a recent search by the Coast Guard, Price’s body has not been recovered,” agent Howard states in a June 28 affidavit seeking a warrant for Price’s arrest.

The SEC says Price raised money from more than 100 investors in Georgia and Florida by selling shares in an unregistered investment fund Price managed. Though Price purported to make investments in traditional securities, says the SEC, he also made “illiquid investments in South America real estate and a troubled South Georgia bank.”

He concealed “massive trading losses,” the SEC alleges, by creating bogus account statements with false balances.

On or around June 18, according to FBI and SEC documents, Price sent several persons a 22-page letter titled “Confidential Confession For Regulators,” in which he admitted he had falsified statements and created false returns to conceal $20 million to $23 million in investment losses.

On July 3, the SEC announced it had frozen Price’s accounts.

Agent Howard says Price is known to have traveled frequently to Venezuela and Guatemala; and further, that Price may own a boat large enough to travel from Florida to Venezuela.

The FBI asks anyone with information about Price’s whereabouts to contact its Atlanta office at (404) 679-9000.

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Copyright 2012 ABC News Radio


SEC Wants Wells Fargo Documents for Possible Fraud Investigation

Justin Sullivan/Getty Images(NEW YORK) -- Regulators say that Wells Fargo & Co. should be forced to cooperate with an investigation into its sale of nearly $60 billion in residential mortgage-back securities after it failed to hand over documents demanded in U.S. subpoenas, Bloomberg Businessweek reports.

The Securities and Exchange Commission asked a federal judge on Friday to require the bank to submit documents it agreed to produce under subpoenas dating from September. The SEC is looking into possible fraud of the San Francisco-based company and noted that until now, the company has escaped accusations that most of its competitors have suffered since increasing mortgage defaults prompted record government bailouts of the financial system.

If the agency's request is granted, Well Fargo would have 14 days to submit 1,365 emails and attachments it has withheld from the SEC. Wells Fargo responded by saying the subpoena enforcement action is "inappropriate and unwarranted," and further stated that "the SEC staff has inaccurately described its conduct with regard to residential mortgage-back securities."

Copyright 2012 ABC News Radio 


Insider Trading Case Involves Secrets Shared Among AA Members

Andrew Harrer/Bloomberg via Getty Images(PHILADELPHIA) -- In what a government attorney calls the first case of its kind, the Philadelphia office of the Securities and Exchange Commission (SEC) has charged five people with making more than $1.8 million illegally through insider trading of stocks.

The SEC is claiming that the violation of trust and confidentiality required to prove insider trading occurred between members of Alcoholics Anonymous (A.A.).

The SEC says Timothy McGee and Michael Zirinsky, both registered representatives of Ameriprise Financial Services, bought and sold stock in Philadelphia Consolidated Holding Corp. (PHLY), based on non-public information about an impending merger between PHLY and Tokio Marine Holdings.

McGee, the SEC claims, got that insider information from a PHLY executive who confided in him, based on the fact they both were members of A.A.

"What we're saying, here, is that the two shared a relationship of confidence and trust, beginning at the time they both started to attend A.A. in 2009," says Elaine Greenberg, associate director of the SEC's Philadelphia Regional office.

The two men's relationship extended beyond A.A.  For example, they occasionally trained together for triathlons, according to the SEC, and routinely shared confidences about their personal and professional lives.  But, says Greenberg, their relationship of trust was heightened by A.A.

That contention matters, because the government, to establish insider trading, must show that a relationship of trust and confidentiality existed above and beyond that of ordinary friendship.  The government has to prove, says Greenberg, that the person communicating the information and the one receiving it "have a history of sharing confidences, such that the recipient knows the giver expects him to maintain confidentiality."

Never before has the SEC tried to use as proof a shared membership in A.A.

Copyright 2012 ABC News Radio


SEC Pressured to Implement CEO to Worker Pay Disclosure

Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- Danny Stauffer of Milwaukee has been working as a baker at Walmart for almost five years.  His salary is $9.40 an hour, up from a starting wage of $7.11.

Stauffer, 26, said has tried to work full-time at the company, but hasn't had success.

"I actually like the work I do," he said.  "The people I work with, the work itself -- they're all great.  It just doesn't pay the bills."

A provision of the Dodd-Frank financial regulatory reform act proposes that public companies disclose the ratio of the CEO's pay to that of the median salary of company workers.  But two years after Dodd-Frank was passed, the Securities and Exchange Commission (SEC) has not yet implemented the rule or initiated the rule-making process.  Business groups have opposed the rule, while advocates for corporate reform have pressured the regulatory agency to work quickly.

Stauffer, who is a member of the Walmart employees group, OURWalmart, said he would support the Dodd-Frank provision to provide more disclosure to not only shareholders, but to the chief executive officers of companies across the U.S.

"Obviously there's only one of them and a lot of us, but it shows how hard we have to work, how much profit there is to go around, and how little we see," Stauffer said.  "It does not make me happy that the CEO gets to enjoy such a great life off of our labor."

Stauffer said he dropped out of college because he struggled to keep up with his tuition on his income.  He said he has tried to find a second job to support himself while living in a basement and receiving public assistance.

If Stauffer was working full-time for 40 hours a week, he would make about $18,800 a year.

The total compensation for Walmart's CEO Michael Duke was $18.7 million, a drop of 2.7 percent, for the last fiscal year which ended in January 2011, the company reported last April.  His salary increased 2.4 percent to $1.2 million.

Based on just Duke's salary and not his total compensation, the ratio would be 63.8 to one.  But based on Duke's total compensation, the ratio would be 994.7 to one.

In a statement to ABC News, Walmart said: "When you look at pay, benefits and opportunities for advancement, Walmart offers some of the best jobs in the retail industry. Last year, we promoted more than 161,000 associates and roughly three-fourths of our store management teams started out in hourly positions with the company."

"It's important to note that 'OURWalmart' is a union-backed, union-funded organization attempting to further its own political and financial agenda," the statement continued. "They do not represent our associates at any of our locations. We've seen other places where they have pitched associates to media for stories and, largely, the experiences they offer up typically don't reflect the norm within our base of 1.2 million associates in the U.S."

"You are correct in saying $12.14 is the average hourly wage for a full-time associate hourly associate in a Wisconsin Walmart store. The current average wage, nationally, for a full-time associate is $12.40," Walmart said.

The company said it hasn't taken a position on the pay disclosure rule.

Sen. Robert Menendez, D-N.J., the author of the provision Section 953(b), and other members of Congress, signed letters to the SEC chairwoman Mary Schapiro last week urging the agency to move forward with the rule-making process.

"It might embarrass some companies to reveal that they pay their CEO in the range of 400 times what they pay their typical worker, but that's important information for both investors and workers to know," he told ABC News.

Copyright 2012 ABC News Radio


Facebook IPO: $5 Billion Filing to Sell Stock in May

Justin Sullivan/Getty Images(WASHINGTON) -- Facebook, in one of the world's most widely anticipated IPOs, or initial public offerings of stock, filed papers Wednesday afternoon to raise at least $5 billion and begin to sell stock this spring.

The filing was made online with the Securities and Exchange Commission in Washington. If all goes as planned, it will likely take until May for Facebook stock to begin trading on a stock exchange.


"It is a major sign of maturation" for Facebook to go public, said Lawrence Summers, the former Secretary of the Treasury who was president of Harvard University when Mark Zuckerberg, now 27, started Facebook from his dorm there in 2004. "It means more cash flow, it means even more visibility, it means even more responsibility to shareholders, but also to the broader society.

"It is both a recognition of what has been accomplished, and it points to the fact that Mark Zuckerberg has done a remarkable thing in building a global institution in a very short time," said Summers.


Several major investment banks are involved in the IPO, with Morgan Stanley in the lead role. Goldman Sachs, Bank of America, Merrill Lynch, Barclays Capital and JP Morgan are also involved.

Facebook's filing has been widely dubbed the IPO event of the year. Analysts said that this offering will change the Internet sector, creating what will be one of the world's most valuable Internet companies.

Others warn that Facebook may not be a surefire winner for small investors looking to make some quick money. Certainly, Facebook has been profitable, but it has already made a great deal of money as a private company. It has more than 800 million active users -- up 45 percent in 2011 -- but growth in the United States and other Western countries has already begun to slow.

Why go public now anyway? Since Facebook already has more than 500 investors, it is required to make certain financial information public anyway under SEC regulations. The deadline to file this information expires in April.

Facebook CEO Mark Zuckerberg reportedly decided to go public once it became clear that the company had become too big to keep its finances private. By going public, Facebook loses some of its mystery and cool, having to declare profits and losses and answer to shareholders every quarter. But the company will have access to new cash and can use the value of its stock to acquire other companies and to reward its employees.

Many of Facebook's 3,000 employees could now become Silicon Valley millionaires. Zuckerberg himself is already said to be the world's youngest billionaire.

Copyright 2012 ABC News Radio


Citigroup's $285M Settlement with SEC Rejected

Nicholas Roberts/Bloomberg News(NEW YORK) -- A federal judge in New York has struck down a settlement agreement between one of the nation's biggest banks and government regulators.  

Under a deal reached with the Securities and Exchange Commission, Citigroup would pay $285 million to settle claims it misled customers about an investment tied to mortgages.

Judge Jed Rakoff was upset that the deal did not require Citigroup to admit that it did anything wrong. He said the settlement "is neither fair, nor reasonable, nor adequate, nor in the public interest." Rakoff said the deal may be good for Citigroup, but gives nothing to the government other than a quick headline and leaves defrauded investors "substantially short-changed."

Copyright 2011 ABC News Radio


SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio


Moody's Ex-Staffer Says Ratings Rife with Conflicts

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- The former Moody's analyst who filed blistering comments with U.S. regulators about conflicts of interest at his former employer says analysts must be shielded from retaliation if the bond ratings system is to be fixed.

William Harrington, a Moody's senior vice president in the Derivatives Group who was an employee from June 1999 until his resignation in July 2010, filed a 78-page letter with the Securities and Exchange Commission about proposed rules for the ratings agencies.

Harrington described systematic problems within the ratings agencies that can lead to conflicts of interest and flawed ratings reports. Harrington seems to confirm the familiar concern that Moody's is being paid by the companies whose securities it rates and therefore has their best interests at heart.

The major ratings agencies Moody's and Standard & Poor's have come under fire for their role in assigning top ratings to bundles of mortgage securities that went delinquent, leading to the financial meltdown that began in 2008.

Harrington said analysts were intimidated or harassed, and dissenting analysis was not properly weighed in final decisions. "Putting up a spirited effort before caving-in made analysts look good in the eyes of management. Opposing a banker or issuer brought only trouble from Moody's senior management," Harrington wrote.

He wrote that "bankers and issuers were willing to have as many calls a day as were necessary to wear a rating team down."

Formal feedback in annual reviews for an analyst, or "contributor," centered on "the recurring themes that the contributor should make life easier for bankers and issuers and that he should be more alert to the bottom line."

Over 55 comments have been submitted after the SEC announced the beginning of the public comment period in May.

An agency spokesman said the commission is beginning to sort through the comments and may not begin further steps until January to June next year.

In response to the Harrington's letter, Moody's issued a statement:

"We cannot emphasize strongly enough the importance Moody's places on the quality of our ratings and the integrity of our ratings process. For that very reason, we have robust protections in place to separate the commercial and analytical aspects of our business."

The goal of management, Harrington wrote, "is to mold analysts into pliable corporate citizens who cast their committee votes in line with the unchanging corporate credo of maximizing earnings of the largely captive franchise."

He wrote that the management and the board "are squarely responsible for the poor quality of previous Moody's opinions that ushered in the financial crisis and should not be given first shot at debasing future opinions as well. Seriously, dudes, not for nothing, but something is way wrong with this picture. The phrase 'bass ackwards' recurs. Please re-calibrate."

Harrington asks why analysts would want to work at Moody's given the possibly troubled internal reporting process within the company.

He answers that "analysts once came to Moody's solely to do work of which they would be proud, not to kowtow to their superiors and certainly not to prostrate themselves in front of whichever external entity happened to be footing the bill on a given day."

Copyright 2011 ABC News Radio


Spouse of former 'Playboy' CEO Charged with Insider Trading

Ron Galella/WireImage(NEW YORK) -- The spouse of former Playboy Inc. CEO Christie Hefner has been charged with illegal insider trading, the Securities and Exchange Commission announced Wednesday.

William Marovitz is alleged to have bought and sold Playboy stock based on confidential information he obtained from his wife ahead of it becoming public knowledge.

Officials say Marovitz, who is alleged to have participated in illegal trading between 2004 and 2009, gained profits and avoided losses of $100,952.

According to court documents, Hefner instructed her husband to not disclose information he acquired through private conversations. Among the more profitable trades Marovitz benefited from was the purchasing of Playboy stock ahead of the public announcement that Iconix was interested in becoming a potential merger. Playboy's stock increased by 42 percent once that announcement was made public.

Copyright 2011 ABC News Radio


Manhattan DA Issues Goldman Sachs a Subpoena

John Foxx | Thinkstock(NEW YORK) --– The Manhattan District Attorney's office issued Goldman Sachs Group Inc. (GS) a subpoena as a result of a report from the Senate Permanent Subcommittee on Investigations.

Goldman Sachs was investigated by Senate Subcommittee and the Securities and Exchange Commission for its role in the national mortgage crisis. In the 639-page report, released in April, Goldman Sachs is accused of making billions of dollars from misleading investors and clients.

Bloomberg News reported on the subpoena and stated that David Wells, a spokesman for the Wall Street firm, said the company does not comment on "specific regulatory or legal issues."

Shares fell by 2 percent after news of the subpoena on Thursday.

Copyright 2011 ABC News Radio

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