Securities Archive
10 Biggest SEC Securities Settlements So Far This Year
September 20th, 2012. By AbiK
If you’ve been wondering what the largest SEC securities settlements have been for the first half of the year, the National Economic Research Associates, Inc., (NERA) recently released it’s mid-year update. NERA has a proprietary database of SEC settlements and judgments going back to July 21, 2002, and they track SEC settlement trends each year.
According to the NERA report for the first half of 2012, there are some interesting trends to keep an eye on:
• The SEC is on pace to settle with more defendants in FY12 than it has in any year since FY05.
• This increase is being driven by heightened settlement activity with individuals, particularly for allegations related to insider trading and Ponzi schemes; the SEC is on pace for a record number of insider trading settlements in FY12.
• The median settlement value with individuals continued to follow the upward path observed since FY10, while the median value of settlements with companies declined after reaching a record value in FY11.
• The largest settlements in 1H12 are the highly publicized settlements with Citigroup Global Markets, Inc. ($285 million), still under appeal after being rejected by Judge Jed Rakoff, and Raj Rajaratnam ($92.8 million).
The 10 largest SEC securities settlements for the first six months of the year were:
| Settling Defendant | Announcement Date | Settlement Amount | Allegation | ||
| 1. Citigroup Global Markets Inc. | 10/19/11 | $285M | Financial Services Misrepresentation to Customers | ||
| 2. Raj Rajaratnam, Galleon Management, LP | 11/8/11 | $92.81M | Insider Trading | ||
| 3. Magyar Telekom | 12/29/11 | $90.80M | FCPA | ||
| 4. George David Gordon, Attorney | 2/16/12 | $50.51M | Market Manipulation | ||
| 5. Wachovia Bank N.A. | 12/8/11 | $46.08M | Trading Violations | ||
| 6. Pentagon Capital Management | 3/30/12 | $42.05M | Market Timing/Late Trading | ||
| 7. GE Funding Capital Market Services | 12/23/11 | $24.90M | Market Manipulation | ||
| 8. MAAA Trust1 | 12/22/11 | $24.75M | Insider Trading | ||
| 9. Aon Corporation | 12/20/11 | $14.55M | FCPA | ||
| 10. Joseph F. Skowron III, Portfolio Manager, FrontPoint Partners, LLC | 11/17/11 | $13.37M | Insider Trading | ||
| 1Settlements that included a jointly liable individual. | |||||
| Read the full NERA Report here. | |||||
InSecurities: Securities Fraud Roundup 7.5.11
July 5th, 2011. By LucyC
Top Securities Fraud Stories
By now you know the script. InSecurities takes a look at some of the latest securities fraud happenings—where folks who thought they’d made some secure investments have found those investments, well, a bit insecure due to fraudulent—or alleged fraudulent—activity. So be prepared for those omnipresent words and phrases—like “materially false and misleading statements”. They tend to pop up here with some regularity, as you’ll see…
New Securities Lawsuits Filed
Our first Madoff Meter contender is Deutsche Bank AG. And DB brings us another of those omnipresent securities fraud phrases: “mortgage-backed securities” (you’ve heard that one before, right?)…
Company: Deutsche Bank AG
Ticker: DB
Class Period: Jan-3-07 to Jan-16-09
Date Filed: Jun-21-11
Lead Plaintiff Deadline: Aug-20-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
Not to be left out of the fray, Deutsche Bank (DB) is facing a securities class action brought on behalf of an institutional investor. Details above, and we’re talking big bucks, allegedly lost on ordinary shares during the period between January 3, 2007 and January 16, 2009 (the “Class Period”).
The complaint alleges that during the Class Period, DB issued materially false and misleading Read the rest of this entry »
InSecurities: Securities Fraud Roundup 6.7.11
June 7th, 2011. By LucyC
Top Securities Fraud Stories
So here we go…another roundup of all the securities fraud lawsuits that’ve recently cropped up and have hit our Madoff meter. So without further ado, let’s get straight to them…
New Securities Lawsuits Filed
What was that Eurythmics Song?—Here Comes That Sinking Feeling Again…ok, so maybe Annie was singing about rain and whatever it represents and not about quicksand. But you can bet your bottom dollar that the folks who invested in WMS Industries during the class period here were probably feeling a bit under the weather with this one: WMS Industries Inc. Securities Fraud…
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Company: |
WMS Industries Inc |
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Ticker: |
WMS |
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Class Period: |
Nov-1-10 to Apr-11-11 |
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Date Filed: |
May-25-11 |
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Lead Plaintiff Deadline: |
Jul-24-11 |
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Court: |
Northern District of Illinois |
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Madoff Meter: |
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The Allegations:
WMS Industries, which designs, manufactures and distributes both video and mechanical slot machines and video lottery terminals, got hit with a securities class action in the latter half of May alleging materially false and misleading statements. Yes, that old chestnut.
The allegations state that WMS has not been successful in living up to claims that it would continue to post sales revenue and margin gains “without the benefit or need for the recovery of overall demand or the casino gaming replacement cycle.”
For those of us not following the ups and downs of the electronic gaming industry—it’s in a down Read the rest of this entry »
InSecurities: Securities Fraud Roundup 4.28.11
April 28th, 2011. By LucyC
Top Securities Fraud Stories
The securities fraud story that’s got the attention of most folks right now is the Erica P. John Fund v. Halliburton case—which the Supreme Court has been hearing oral arguments on this week. Not because any of us held any Halliburton stock—and not even because it’s related to Halliburton’s liability to asbestos-related lawsuits, though asbestos is a hot topic here at LawyersandSettlements.com. No, this one’s a biggie because it has to do with whether a plaintiff can only obtain class action certification by establishing a preponderance of the evidence that shows that a corporation’s correction of its false statements made its stock price tank thereby screwing its investors.
The Halliburton case is actually from way back in 2002. The plaintiff, Erica P. John Fund, claimed that at the time, Halliburton understated its liability exposure to asbestos-related lawsuits and overstated its revenues—then, came out later correcting those statements at which point Halliburton’s stock price declined. The question at the heart of the matter pertains to loss causation—i.e., the plaintiffs’ ability to link their losses to a particular statement made by the company. After the Halliburton case had initially been thrown out by a Texas federal court—meaning that the court found the plaintiffs did not show causation of loss—an appeals court upheld the decision. And here we are awaiting the Supreme Court’s decision which is sure to have a major impact either way on how securities cases are handled in the future.
So, be that as it may, the theme for this month’s InSecurities column is entitled “In violation of federal securities laws” and you’ll find the specific allegations—chapter and verse—below. So let’s get started with our first securities suit: Rosetta Stone…
Company: Rosetta Stone, Inc
Ticker: RST
Class Period: Feb-25-10 to Mar-1-11
Date Filed: Mar-31-11
Lead Plaintiff Deadline: May-30-11
Court: Eastern District of Virginia
Madoff Meter:
The Allegations:
Nothing like learning first hand, as Rosetta Stone is finding out. They got hit with a securities lawsuit at the end of March, alleging—everyone sing along—you know the words—”certain of its officers and directors violated federal securities laws.” Very nice. Nothing like a good harmony.
The class period is practically 12 months—from February 25, 2010 to March 1, 2011, inclusive (the “Class Period”). The specific allegations—from the top—are (i) that Rosetta Stone was facing intense competition for its products, including free competitive product offerings; (ii) that the free and lower priced competitive product offerings, not a temporary reduction in advertising, was having a material adverse effect on the Company’s Class Period revenues, particularly U.S. consumer revenues; (iii) that the favorable sales booking numbers Rosetta Stone reported during the Class Period was the result of key retail partners maintaining inventory of the Company’s products well above historic levels; and (iv) that Rosetta Stone’s reported sales bookings and revenues during the Class Period were the product of manipulation.
But of course, the truth comes home to roost eventually, and on February 28, Rosetta Stone announced fourth quarter revenue of $74.3 million, a 5% decrease from the prior year, net income on a GAAP basis of $5.0 million, a decrease of 60% from the 2009 fourth quarter. On this news, shares of Rosetta Stone fell $1.77 to $13.19 per share. Ker plunk. I think this gets a 3 Bernie rating on our trusty Madoff meter.
Next up: 1st Centennial Bancorp…
Company: 1st Centennial Bancorp
Ticker: FECN
Class Period: Apr-13-06 to Jan-23-09
Date Filed: Apr-19-11
Lead Plaintiff Deadline: Jun-18-11
Court: —
Madoff Meter:
The Allegations:
Weary investors in 1st Centennial Bancorp filed a securities class action on April 19, in hopes that they may get some of their hard earned dollars back from a less than stellar investment. As the class period runs from April 13, 2006 to January 23, 2009, there could be quite a line-up for payouts.
Here’s the nitty-gritty—during the Class Period, 1st Centennial was a bank holding company for the 1st Centennial Bank (the “Bank”). During that period, the bank misled investors and Read the rest of this entry »
Insecurities: Securities Fraud Roundup 3.30.11
March 30th, 2011. By LucyC
Top Securities Fraud Stories…
This week’s catch phrase—”False and Misleading Statements”…In our last edition of Insecurities, the recurring theme was ‘failure to disclose’—which led us to the Madoff Meter. Well, seems the idea of Bernie kind of stuck. So he’s back…
Though he never did really leave did he? Case in point, his yacht (or the ability to sell it in order to drum up some quid to help those who’d invested with him) was in today’s news—as well as the fact that three former Madoff employees lost their bid to have criminal charges dropped against them. The grounds for their request? That the charges should be dropped because the government had frozen their assets—assets they need to pay their lawyers. It didn’t fly with U.S. District Judge Laura Taylor Swain, who rejected the bid.
Enough about Bernie (or, more about him later)—starting off this edition of Insecurities is Elan Corporation…
Company: Elan Corporation
Ticker: ELN
Class Period: Jul-2-09 to Aug-5-09
Date Filed: Mar-1-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
What’s that crashing sound I hear? Elan got hit with a securities class action lawsuit earlier this month over allegations that it and certain of its officers and directors made false and misleading statements regarding the July 2, 2009 sale of the Company’s rights to its Alzheimer Immunotherapy Program (“AIP”) to Johnson & Johnson (“JNJ”).
The allegations stem from Elan’s failure to disclose that a provision in their definitive agreement with JNJ would violate the terms of an existing agreement between the Company and Biogen Idec Inc. (“Biogen”) related to their joint development and sale of multiple sclerosis drug Tysabri. Hey—maybe they just forgot about their deal with Biogen.
As a result of the violation, Elan was forced to renegotiate the terms of its sale of AIP, whereby JNJ paid $115 million less to Elan than previously agreed. Ouch.
Predictably, once Elan issued its press release disclosing the breach of their agreement with Biogen to the public, share prices of Elan common stock fell about 11%, according to the lawsuit, on abnormally high trading volume. That would make a difference to retirement funds, no doubt.
Next up: China Integrated Energy…
Company: China Integrated Energy, Inc.
Ticker: CBEH
Class Period: Mar-30-10 to Mar-16-11
Date Filed: Mar-26-11
Lead Plaintiff Deadline: May-25-11
Court: Central District of California
The Allegations:
Determining fact from fiction. This one involves China Integrated Energy—and allegations that it also issued materially false and misleading statements to investors, because it concealed related-party transactions.
The alleged facts—that the transactions between the Company and its officers and directors had the effect of funneling cash to these officers and directors. The alleged fiction—that the company’s Chinese SAIC filings misrepresented its financial performance, business prospects, and financial condition to investors.
So, the only people making the kind of money advertised were CBEH’s officers and directors. Not the investors. The alleged violations were uncovered in a report by Sinclair Upton, most of which CBEH denied. However, they did ‘fess up to having engaged in an undisclosed related party transaction with the CEO’s 22 year old son? Where’s Bernie? This could be a 3 or 4 on the Madoff meter…
On to Finisar Corporation…
Company: Finisar Corporation
Ticker: FNSR
Class Period: Dec-2-10 to Mar-8-11
Date Filed: Mar-15-11
Lead Plaintiff Deadline: May-14-11
Court: Northern District of California
Madoff Meter:
The Allegations:
Was Finisar doing a little too much networking maybe? It’s also accused of issuing false and misleading statements resulting in investor losses.
Finisar provides optical subsystems and components that connect short-distance local area networks, storage area networks, longer distance metropolitan area networks, fiber-to-the-home networks, cable television networks and wide area networks. A growth industry one would figure—especially in emerging markets.
The complaint alleges that the company failed to disclose that its recent revenue growth was due to an oversupply of inventory in the market and that the Company would be unable to sustain its strong growth due to increased pricing pressures and a slowdown in business from China. As a result of defendants’ false statements, Finisar’s stock traded at artificially inflated prices during the Class Period, reaching a high of $43.23 per share on February 14, 2011.
Then, on March 8, 2011, after the market closed, Finisar issued a press release announcing its third quarter fiscal year 2011 results—reporting earnings of $18.8 million, or $0.22 diluted earnings per share, and revenue of $263.0 million. The Company further reported its fourth quarter 2011 revenues would be in the range of $235 to $250 million, lower than analysts’ estimates. On this news, Finisar’s stock fell $15.43 per share to close at $24.61 per share on March 9, 2011, a one-day decline of nearly 39%—it went straight through the floor and kept on going…
Top Securities Settlements…
Countrywide Financial
Madoff Meter:
A couple of settlements registering on our Madoff meter this month. I’d give this first one a 5. It Read the rest of this entry »
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