The Securities and Exchange Commission today charged a former senior lawyer at SeaWorld Entertainment Inc. with insider trading based on nonpublic information that the company’s revenue would be better than anticipated for the second quarter of 2018.

The SEC alleges that Paul B. Powers had early access to key revenue information as the company’s associate general counsel and assistant secretary, and he purchased 18,000 shares of SeaWorld stock the day after he received a confidential draft of the 2018 second quarter earnings release that detailed a strong financial performance by the company after a lengthy period of decline.  According to the SEC’s complaint, Powers immediately sold his SeaWorld shares for approximately $65,000 in illicit profits after the company announced its positive earnings and the company’s stock price increased by 17 percent.

“As alleged in our complaint, Powers blatantly exploited his access to nonpublic information by misusing SeaWorld’s confidential revenue data to enrich himself,” said Kurt Gottschall, Director of the SEC’s Denver Regional Office.  “Investors should feel confident in the integrity of corporate officers, particularly attorneys.  The SEC is committed to swiftly pursuing insiders who breach their duties to investors.” 

The SEC’s complaint, filed in federal district court in Orlando, Florida, charges Powers with fraud.  Powers has consented to a permanent injunction with the amounts of disgorgement and penalties, if any, to be decided by the court.  The settlement is subject to court approval.

In a parallel action, the U.S. Department of Justice today announced criminal charges against Powers arising out of the same conduct.

The SEC’s investigation was conducted by L. James Lyman and supervised by Ian Karpel and Mr. Gottschall of the Denver office.  The litigation will be handled by Stephen McKenna.  The SEC appreciates the assistance of the U.S. Department of Justice and the U.S. Department of Homeland Security.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

The Securities and Exchange Commission today announced that Fresenius Medical Care AG & Co KGaA (FMC) has agreed to pay more than $231 million to resolve parallel SEC and U.S. Department of Justice investigations related to its violations of the Foreign Corrupt Practices Act (FCPA) across multiple countries for nearly a decade.

The SEC’s order finds that FMC, a German-based worldwide provider of products and services for individuals with chronic kidney failure engaged in misconduct in Saudi Arabia, Morocco, Angola, Turkey, Spain, China, Serbia, Bosnia, Mexico, and eight countries in the West African region against a backdrop where the company failed to have sufficient internal accounting controls.  FMC made improper payments through a variety of schemes, including using sham consulting contracts, falsifying documents, and funneling bribes through a system of third party intermediaries.  Despite known red flags of corruption since the early 2000s, FMC devoted insufficient resources to compliance.  In some jurisdictions, Fresenius failed to take basic steps such as providing anti-corruption training or performing due diligence on its agents.  In many instances, senior management actively engaged in corruption schemes and directed employees to destroy records of the misconduct.  All told FMC paid nearly $30 million in bribes to government officials and others to procure business.

“Failure to address the corruption risks in its growing business allowed complicit managers to engage in bribery schemes that went undetected for more than a decade,” said Charles Cain, Chief of the FCPA Unit.  “As companies expand their business, their internal accounting controls and compliance programs must keep up.”

“By engaging in widespread bribery schemes across multiple countries, the company prioritized profits over compliance in its dealings with foreign government officials,” said Tracy Price, Deputy Chief of the SEC Enforcement Division’s FCPA Unit.

FMC agreed to pay $147 million in disgorgement and interest to the SEC as well as a criminal fine of $84.7 million as part of a non-prosecution agreement announced today by the Justice Department.  FMC must retain an independent compliance monitor for two years and self-report its FCPA compliance efforts for the year after the monitor expires.

The SEC’s investigation was conducted by Irene Gutierrez, M. Shahriar Masud, and Michelle L. Ramos.  The case was supervised by Tracy L. Price.  The SEC appreciates the assistance of the U.S. Department of Justice Criminal Division’s Fraud Section, the U.S. Attorney’s Office for the District of Massachusetts, and the Federal Bureau of Investigation.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

The Securities and Exchange Commission and the United Kingdom (UK) Financial Conduct Authority (FCA) have today reaffirmed their commitment to continue close cooperation and information sharing in the event of the UK’s withdrawal from the European Union (EU).

As evidence of their long-standing partnership, SEC Chairman Jay Clayton met with FCA CEO Andrew Bailey and signed two updated Memoranda of Understanding (MOUs) to ensure the continued ability to cooperate and consult with each other regarding the effective and efficient oversight of regulated entities across national borders.  At the meeting in London, Chairman Clayton and Andrew Bailey also discussed risks posed by jurisdictional share trading obligations, which could increase market fragmentation and impose unnecessary costs on investors. 

SEC Chairman Jay Clayton said, “The SEC and the FCA have a long history of effective cooperation on supervisory and other matters.  The amended MOUs we entered into today reaffirm this commitment and collaboration with respect to the oversight of our respective registrants for the benefit of each of our markets and investors.”

FCA CEO Andrew Bailey said, “As part of our preparations for Brexit we have been working with our partners in the EU and globally to ensure there is minimal disruption. These MOUs will ensure the UK can continue to be a key market for funds and fund managers.  Today’s amendments will ensure continuity and stability for consumers and investors in the UK and US.”

The first MOU, originally signed in 2006, is a comprehensive supervisory arrangement covering regulated entities that operate across the national borders.  The MOU was updated to, among other things, expand the scope of covered firms under the MOU to include firms that conduct derivatives, credit rating and derivatives trade repository businesses to reflect (i) post-financial crisis reforms related to derivatives and (ii) the FCA’s assumption of responsibility from the European Securities and Markets Authority for overseeing credit rating agencies and trade repositories in the event of the UK’s withdrawal from the EU.

The second MOU, which is required under the UK Alternative Investment Fund Managers Regulations, was originally signed in 2013.  The MOU provides a framework for supervisory cooperation and exchange of information relating to the supervision of covered entities in the alternative investment fund industry. The updated MOU ensures that investment advisers, fund managers, private funds and other covered entities in the alternative investment fund industry that are regulated by the SEC and the FCA will be able to continue to operate on a cross-border basis without interruption, regardless of the outcome of the UK’s withdrawal from the EU.

These MOUs will come into force on the date EU legislation ceases to have direct effect in the United Kingdom.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com

The Securities and Exchange Commission today filed charges against the former chief operating officer (COO) of a Commission-registered investment adviser for aiding and abetting the advisory firm’s actions to overbill its clients as part of a fraudulent scheme to improperly inflate his own pay.

According to the SEC’s complaint, between 2011 and December 2018, former COO Richard T. Diver, a resident of Spring Lake, New Jersey, engaged in an illicit scheme to steal approximately $6 million from his employer. Diver, whose duties included managing the advisory firm’s payroll and client billing functions, allegedly inflated his salary by hundreds of thousands of dollars per year. As part of this scheme, Diver defrauded investors by causing the investment adviser to overbill more than 300 investment advisory client accounts by approximately $750,000, for the purpose of generating additional revenue. As alleged in the complaint, Diver used this revenue to finance his inflated salary and when confronted by the investment adviser’s CEO in December 2018, Diver confessed to having carried out the scheme.

“As alleged, Diver lined his own pockets by stealing from hundreds of advisory clients, until his scheme was exposed by an investor who asked the right questions about charged fees,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “When the scheme came to light, we took swift action to ensure that there was no further investor harm.”

The SEC’s complaint, filed in federal district court in Manhattan, charges Diver with aiding and abetting the investment adviser’s violations of the antifraud provisions in Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking a judgment ordering permanent injunctive relief, disgorgement plus prejudgment interest, and civil monetary penalties against Diver.

After conducting a swift investigation, the Commission staff referred Diver’s misconduct to the U.S. Attorney’s Office for the Southern District of New York, which separately announced criminal charges against Diver today.  

The SEC’s investigation has been conducted by Gerald Gross, James Hanson, and Paul Gizzi of the New York Regional Office, and the litigation will be handled by Messrs. Gizzi and Hanson. The case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the U.S. Postal Inspection Service.

SEC Press Release

— If you believe need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

from SECLaw.com