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Halliburton Paying $29.2 Million to Settle FCPA Violations: Enforcement

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The Securities and Exchange Commission charged Halliburton Co. with violating the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA) while selecting and making payments to a local company in Angola in the course of winning lucrative oilfield services contracts.

Halliburton, which profited by approximately $14 million from the deals, has agreed to pay more than $29.2 million to settle the SEC’s case. The company also agreed to obtain an independent compliance consultant to oversee its anti-corruption policies and procedures in Africa. Halliburton’s former vice president Jeannot Lorenz has agreed to pay a $75,000 penalty for causing the company’s violations, circumventing internal accounting controls, and falsifying books and records.

According to the SEC’s order, officials at Angola’s state oil company Sonangol advised Halliburton management in 2008 that it was required to partner with more local Angolan-owned businesses to satisfy local content regulations for foreign firms operating in Angola. Halliburton tasked Lorenz to spearhead these efforts. When a new round of oil company projects came up for bid, Lorenz began a lengthy effort to retain a local Angolan company owned by a former Halliburton employee who was a friend and neighbor of the Sonangol official who would ultimately approve the award of the contracts. It took three attempts but Halliburton ultimately outsourced more than $13 million worth of business to the local Angolan company.

“Halliburton committed to using a particular supplier that posed significant FCPA risks and a company vice president circumvented important internal accounting controls to get the deal done quickly,” said Antonia Chion, Associate Director in the SEC’s Enforcement Division. “Companies and their executives must comply with these internal accounting controls that help ensure the integrity of corporate transactions.”

Lorenz failed to conduct competitive bidding or substantiate the need for a single source of supply, and he avoided an internal accounting control that required contracts of more than $10,000 in countries like Angola with high corruption risks to be reviewed and approved by a special committee within Halliburton, the SEC says. The company eventually paid $3.705 million to the local Angolan firm, and Sonangol approved the award of seven lucrative subcontracts to Halliburton.

Without admitting or denying the findings, Halliburton and Lorenz consented to the order requiring them to cease and desist from committing or causing any violations or any future violations of the books and records and internal accounting controls provisions of the FCPA. Halliburton agreed to pay $14 million in disgorgement plus $1.2 million in prejudgment interest and a $14 million penalty. Halliburton must retain an independent compliance consultant for 18 months to review and evaluate its anti-corruption policies and procedures, particularly in regard to local content obligations for business operations in Africa. 

SEC Announces 2 Whistleblower Awards

The SEC announced a whistleblower award of more than $1.7 million to a company insider who provided the agency with critical information to help stop a fraud that would have otherwise been difficult to detect. Millions of dollars were returned to harmed investors as a result of the SEC’s ensuing investigation and enforcement action. 

“When whistleblowers tip the SEC, it not only can bring wrongdoers to justice but also relief to investors,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “This whistleblower’s valuable information enabled us to stop further investor harm and ultimately return money to victims.” 

The SEC also announced an award of nearly $2.5 million to an employee of a domestic government agency whose whistleblower tip helped launch an SEC investigation and whose continued assistance enabled the SEC to address a company’s misconduct.

“This whistleblower not only helped us open the case, but also provided timely ongoing assistance along with critical documents and testimony that accelerated the pace of our enforcement action,” Norberg said in a statement.

Approximately $158 million has now been awarded to 46 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action.

Energy Exec Fined for Taking Investor Funds to Enrich His Family, Pay Psychics

The SEC announced fraud charges against the founder of a collection of businesses known as Citadel Energy, which provided fluid management solutions to the oil and gas industry in North Dakota.

According to the SEC’s complaint, from approximately November 2012 through December 2014, Joey Stanton Dodson, of Porter Ranch, California, made numerous material misstatements and statements that were materially misleading as a result of omissions to investors.

According to the SEC, Dodson misled investors regarding, among other things, his compensation arrangements, the intended use of investor proceeds, the status of an important land lease agreement, the ownership of certain assets or income streams, and prior litigation against himself. The SEC alleges that, most significantly, Dodson commingled funds among three ventures funded by separate investor groups and then misappropriated at least $1.7 million from investors for his personal benefit, including for large cash payments to himself and his family members, Ponzi-like payments to prior investors in unrelated projects, casino vacations, lease payments for a BMW automobile, and psychic readings and spiritual products. As a result of Dodson’s alleged misconduct, approximately 50 investors suffered substantial, and in some cases total, losses.

Without admitting or denying the allegations in the SEC’s complaint, Dodson consented to entry of a final judgment enjoining him from violating the charged provisions of the federal securities laws and requiring him to pay disgorgement of $1,718,026, plus prejudgment interest of $189,389, and a civil penalty of $859,013. The settlement is subject to court approval.

Former Connecticut Resident Pleads Guilty to Bitcoin Mining Fraud

Homero Joshua Garza, a defendant in a pending SEC civil fraud action, pleaded guilty on July 20 in federal court in Connecticut to criminal charges in connection with his scheme to defraud investors in a digital bitcoin mining scheme in 2014 and 2015, according to an SEC litigation release. Garza is scheduled to be sentenced in October.

The criminal charge arises largely from the same conduct alleged in the SEC’s complaint filed on Dec. 1, 2015. The SEC alleged that GAW Miners and ZenMiner, along with their principal, Garza, purported to offer shares to investors in their bitcoin mining operation. Mining for bitcoin or other virtual currencies means applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer or collection of computers to solve an equation is awarded new units of that virtual currency. According to the SEC’s complaint, GAW Miners and ZenMiner did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed. Returns paid to some investors came not from successful mining activity but from proceeds generated from sales to other investors.

On June 2, the court entered a final judgment against GAW Miners and ZenMiner and ordered each entity to pay, jointly and severally, approximately $10 million in disgorgement and prejudgment interest, and a civil penalty of $1 million each. Both GAW Miners and ZenMiner have ceased their former business operations.

The SEC’s litigation continues against Garza.

Texas Company and Its President Settle Oil-and-Gas Offering Fraud

A Texas company and its president have agreed to pay nearly $300,000 to settle charges by the SEC related to an oil-and-gas offering fraud, according to a litigation release. The SEC also charged two senior salespeople as unregistered brokers in the transactions underlying the fraud.

According to the SEC’s complaint, Austin-based Petroforce Energy LLC and its founder and president, William Veasey, raised nearly $3.9 million from approximately 80 investors in four fraudulent oil-and-gas offerings. The SEC alleges that Petroforce and Veasey provided investors with offering documents and other materials that contained false and misleading statements about the investments.

The SEC also alleged that Ivan Turrentine and Javier Alvarado, two sales agents employed by Petroforce and Veasey to offer and sell joint-venture and limited partnership interests to investors, and Veasey acted as brokers in Petroforce’s securities transactions. The SEC alleges that Veasey, Turrentine, and Alvarado solicited prospective investors and earned money as a result of sales made to the investors.

All four defendants agreed to settle the SEC’s charges, which require Veasey and Alvarado to pay disgorgement and prejudgment interest in the amount of $58,204 and $10,800, respectively, and Petroforce and Veasey to pay civil penalties of $150,000 and $90,000, respectively. The settlements are subject to court approval.

SEC Files Charges in ‘Prime Bank’ Scam

The SEC announced fraud charges against two Las Vegas-based individuals and their company for operating a prime bank investment scheme that promised investors sky-high returns.

The SEC’s complaint alleges that, between October 2013 and July 2015, Anthony Joseph Marino and George Frank Polera, operating through United Business Alliance LLC, engaged in a fraudulent “prime bank” scheme. The defendants allegedly raised a total of $615,500 from 10 investors.

According to the complaint, Marino, Polera and United Business Alliance promised investors outsize rates of return, including 84% per year on a note and 90% every two weeks on for 40 weeks on another investment. Prime bank instruments are fictitious. The SEC’s complaint alleges that investor funds were used to make Ponzi-type payments to other investors and misappropriated by Marino, Polera and their affiliated entities. Of the $615,500 allegedly raised, approximately $253,500 was subsequently returned.

According to the SEC’s complaint, neither Marino nor Polera were registered to sell investments. The SEC seeks permanent injunctions, a conduct-based injunction against Marino, disgorgement of ill-gotten gains plus prejudgment interest thereon, and civil penalties.

SEC Charges San Diego Businessman in Offering Fraud

The SEC charged Interactive Media Solutions LLC and its sole principal, John Anthony Giunti, with perpetuating a securities offering fraud.

According to the SEC’s complaint, IMS claimed to have developed a mobile phone application that could send money from a cellphone. The complaint alleges that from July 2015 through November 2016, IMS and Giunti raised nearly half a million dollars from more than 20 investors and had plans to raise an additional $5 million with hopes of a possible IPO.

To lure investors, Giunti allegedly told them that investor funds would be spent for business purposes, IMS had positive cash flow, and IMS had a business partnership with Google and offices at its Los Angeles location. The SEC alleges that all of these statements were false.

In reality, Giunti used investor funds for Giunti’s retail purchases, large cash withdrawals, private-school tuition for his children, luxury vacations and political contributions. Moreover, IMS allegedly had no revenue from operations, nor did it have any connection with Google. Rather, as alleged in the complaint, IMS was based at Giunti’s home and a San Diego business center.

Without admitting or denying the allegations in the SEC’s complaint, IMS and Giunti consented to the entry of a final judgment that permanently enjoins them from violating the charged provisions of the federal securities laws, orders them to jointly and severally disgorge ill-gotten gains of $457,960 plus pre-judgment interest of $25,053, orders Giunti to pay a civil penalty of $457,960, and prohibits Giunti from serving as an officer or director of a public company or from raising money from investors in any securities offering. The proposed settlement is subject to approval by the court.


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