The SEC recently charged a coal company and its founder for false disclosures, the operators of a global pyramid scheme that preyed on Asian and Latino communities, and two in separate cases who engaged in insider trading on information they received from their wives.
Also, the agency charged Transamerica advisors with overcharging clients.
SEC Charges Inside Traders Using Wives’ Info in Two Separate Cases
Two men were charged by the SEC in separate cases for insider trading on information they had gotten from their wives.
Tyrone Hawk of Los Gatos, Calif., overheard work calls made by his wife, a finance manager at Oracle Corp., regarding Oracle’s plan to acquire Acme Packet Inc. Hawk’s wife also told him that there was a blackout window for trading Oracle securities because it was in the process of acquiring another company.
However, according to the SEC, Hawk went ahead and bought Acme Packet shares before the acquisition was announced in February 2013, and reaped approximately $150,000 by selling after the stock price rose 23% on the news. Without admitting or denying the allegations, Hawk agreed to pay more than $300,000 to settle the SEC’s charges.
In an unrelated case, the SEC charged Ching Hwa Chen of San Jose, Calif., after he acted on confidential information in mid-2012 that his wife’s employer, Informatica Corp., would miss its quarterly earnings target for the first time in 31 consecutive quarters.
During a drive to vacation in Reno, Nev., Chen overheard business calls by his wife, who previously advised Chen not to trade in Informatica securities under any circumstances. But the temptation proved too much for Chen, who, once they returned from the trip, set up positions in the stock that would make money if the stock price fell.
Informatica’s shares dropped more than 27% after the news of the earnings miss hit. Chen profited by nearly $140,000. Without admitting or denying the allegations, Chen agreed to pay approximately $280,000 to settle the SEC’s charges.
Coal Company, Founder Charged on False Disclosures
Dickson Lee, the founder of L&L Energy Inc., was charged, along with his company, for making false disclosures about who was running the company.
Lee went to great pains to make it appear as if L&L had a professional management team at the helm, when in fact he was in sole control of the company and its actions. L&L, headquartered in Seattle but with all its operations in China and Taiwan, was purportedly being run by Lee’s brother as CEO, with a woman as CFO, according to the company’s annual report in 2008. However, Lee himself was the only one in charge and the woman had turned down his offer to be CFO the month before. In the next three quarterly reports in 2009, Lee continued to misrepresent the CFO position as being occupied by the woman who had declined the job, even going so far as to provide an electronic signature supposed to be hers. However, she never signed any public filings during this time, nor did she authorize her signature to be used.
She confronted Lee in mid-2009, but he went ahead and kept up the deception, to the company’s board of directors and in the company’s 2009 annual report. He even certified falsely that all fraud involving management had been disclosed to the company’s auditors and audit committee.
Lee even managed to get the company listed on the NASDAQ by falsely stating that all required Sarbanes-Oxley certifications had been accurately made.
The SEC has also issued a settled cease-and-desist order against Shirley Kiang, L&L Energy’s former audit committee chairwoman, finding that she played a role in the company’s reporting violations by signing an annual report that she knew or should have known contained a false Sarbanes-Oxley certification by Lee. Kiang has neither admitted nor denied the charges.
The SEC is seeking disgorgement and financial penalties against L&L Energy and Lee as well as an officer-and-director bar against Lee, as well as preventing him from practicing as a CPA before the agency. Its investigation is continuing.