Among recent enforcement actions by the SEC were charges against Goodyear for FCPA violations and against two Louisiana brothers-in-law for insider trading.
In addition, a New Jersey broker was convicted of defrauding his great-aunt and great-uncle, and the judgment against a pension plan fiduciary added to the $12 million already recovered.
NJ Broker Convicted of Bilking Elderly Relatives in Fake Hedge Fund
Attorney General Eric Schneiderman has announced the felony conviction of Khawaja Saud Masud, of Jersey City, New Jersey, for stealing over $1 million from his great-uncle and great-aunt by fraudulently soliciting them to invest in his purported hedge fund, RKS Capital, LP.
According to the indictment, Masud convinced his relatives, Dr. Kalim Irfani, a 75-year old retired pediatrician, and his wife, Rehana Irfani, of Westchester, to invest with him by claiming that his purported hedge fund RKS Capital, LP was a far safer investment than a mutual fund. He told them that he would preserve their $1 million investment and that not only would their investments be transparent, but they would also be monitored by an independent third-party administrator.
Instead, Masud was a speculator and aggressively traded stocks several times a day; his “strategy” netted massive losses—more than $900,000 in only three months. Of course he did this without his relatives’ knowledge or permission, knowing full well that what he was doing was risky; the trading “strategy” was intended to benefit Masud, not the Irfanis. And, naturally, there was no third-party administrator to oversee what he was doing. Masud canceled the fund administrator’s services.
Just two weeks after he was charged by the attorney general’s office, Masud pleaded guilty to grand larceny in the fourth degree and securities fraud under the Martin Act. Both are Class E felonies.
As part of his plea, Masud has agreed to pay a total of $500,000 in restitution. He has already repaid the Irfanis approximately $200,000, but must pay an additional $300,000 as a condition of his plea. His conviction means deportation to his native Pakistan; he is not a U.S. citizen.
Goodyear to Pay $16M on Bribery Charges
The SEC has charged Goodyear Tire & Rubber Co. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries paid bribes to get tire sales in Kenya and Angola.
According to the agency, Goodyear’s subsidiary in Kenya bribed employees of the Kenya Ports Authority, Armed Forces Canteen Organization, Nzoia Sugar Co., Kenyan Air Force, Ministry of Roads, Ministry of State for Defense, East African Portland Cement Co., and Telkom Kenya Ltd.
Goodyear’s subsidiary in Angola bribed employees of the Catoca diamond mine, which is owned by a consortium of mining interests including Angola’s national mining company Endiama E.P. and Russian mining company Alrosa. Others bribed in Angola worked at Unicargas, Engevia Construction and Public Works, Electric Company of Luanda, National Service of Alfadega, and Sonangol.
The bribes amounted to more than $3.2 million over a four-year period, and Goodyear failed to detect them thanks to inadequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa.
The bribes usually took the form of cash payments to employees of private companies or government-owned entities as well as other local authorities such as police or city council officials. The bribes were disguised as legitimate business expenses in the books and records of the subsidiaries, which were then consolidated into Goodyear’s books and records.
Goodyear neither admitted nor denied the SEC’s charges, but agreed to settle with the agency. The company must pay disgorgement of $14,122,525 — the total of the company’s illicit profits in Kenya and Angola — plus prejudgment interest of $2,105,540. Goodyear also must report its FCPA remediation efforts to the SEC for three years. The settlement reflects the company’s self-reporting, prompt remedial acts and significant cooperation with the SEC’s investigation. Louisiana Brothers-in-Law Charged by SEC With Insider Trading