Among recent enforcement actions by the Securities and Exchange Commission were the suspension of an accountant for conducting a faulty audit that failed to uncover a fraud; an asset freeze against three unregistered brokers accused of stealing client money to go shopping; and a settlement with a South America-based airline for its violations of the Foreign Corrupt Practices Act.
SEC Freezes Assets After Investor Funds Used for Shopping Sprees
The SEC has frozen the assets of three men who aren’t registered to sell investments, but raised more than $5 million from investors they claimed would be used to develop a resort. Instead, the three went on lavish shopping sprees.
According to the agency, Matthew White, Rodney Zehner, and Daniel Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own, claiming that the money would be used to fund the resort project. But they never came close to raising the funds necessary to start the project, and in the meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada and Versace.
“We allege that these men stole millions of dollars from investors for personal use and orchestrated sham transactions to prop up the price of the worthless, expired bonds at the center of the fraud,” said William Hicks, associate director of the SEC’s Atlanta regional office.
The SEC seeks permanent injunctions, disgorgement and penalties against all of the defendants. The court order freezes defendants’ cash held in a brokerage account and freezes the bonds held in a separate brokerage account.
Ex-Brokers Took $5M From Clients, SEC Says
The SEC has frozen the assets of two former brokers with disciplinary histories who raised more than $5 million from clients and proceeded to use the money for their own purposes.
According to the agency, James Hugh Brennan III and Douglas Albert Dyer sold phony shares in eight similarly named companies to more than 240 investors since 2008 without ever registering the stock as they promised. Instead, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives.
The SEC also said that Brennan and Dyer continue to solicit investors while touting their securities industry experience and hiding the facts that Brennan was banned from the brokerage industry and Dyer suspended and fined for executing unauthorized transactions in customers’ accounts.
Neither Brennan nor Dyer has been registered to sell investments as a broker since the late 1990s — a fact that could have been found in an online search, as the SEC points out.
The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctions, as well as penny stock and officer-and-director bars against Brennan and Dyer. The court’s order freezes the assets of Brennan, Dyer and their company Broad Street Ventures. In addition, their spouses are named as relief defendants for the purposes of recovering ill-gotten gains deposited in their accounts.
Accountant Suspended by SEC for Faulty Audit