The Securities and Exchange Commission announced that it obtained a final judgment against Louis Martin Blazer III, a Pittsburgh, Pennsylvania-based financial advisor accused of bilking pro athletes to fund movie projects.
According to the SEC, Blazer took money to invest in movie projects and make Ponzi-like payments. The SEC says he then lied to SEC examiners who uncovered the unauthorized withdrawals.
In 2010, according to the SEC, Blazer agreed to raise money for two film projects, “Mafia the Movie” and “Sibling.” Between 2010 and 2012, Blazer repeatedly took money from his clients without authorization to invest in the films.
In one instance, Blazer actually pitched the movie project to a client – a former professional athlete – as an investment opportunity, but that client expressly refused to make the investment. Despite that, Blazer allegedly took $550,000 from the client’s account and invested the money in the film projects.
The final judgment permanently orders Blazer to pay approximately $1.8 million in disgorgement and prejudgment interest and a civil money penalty of $150,000.
On May 18, 2016, the court entered a partial judgment by consent and Blazer agreed to the entry of an SEC order, based on the partial judgment, imposing a permanent industry bar.
The court’s entry of the final judgment resolves this litigation in its entirety.
FINRA Bars 3 Brokers
A FINRA hearing panel barred three brokers from Craig Scott Capital, according to a hearing panel decision on July 31.
The Financial Industry Regulatory Authority has barred Edward Beyn for excessively trading and churning in nine accounts of six customers. Beyn also made qualitatively unsuitable recommendations to a customer.
The panel concluded that the number of trades recommended by Beyn combined with the high costs to the customers — costs that were not adequately disclosed — demonstrated that the trading was undertaken primarily for the benefit of Beyn and CSC, rather than the customers.
FINRA also barred Brent Morgan Porges and Craig Scott Taddonio for failing to exercise reasonable supervision in light of “glaring” red flags indicating that Beyn and other registered representatives were, or might be, excessively trading customer accounts.
According to FINRA, the red flags included trading in numerous customer accounts that resulted in turnover rates and cost-to-equity ratios far exceeding levels that the SEC and FINRA have identified as indicative of excessive trading; active account exception reports generated by CSC’s clearing firm documenting high levels of trading activity, large commission charges, significant losses, high turnover rates and high commission-to-equity ratios in the same customer accounts month after month; and customer complaints and arbitration claims.
Taddonio and Porges also each gave false testimony to FINRA in an on-the-record interview.
SEC Settles Trading Scheme Involving Government Info
The SEC announced a settlement with a former analyst at a hedge fund advisory firm in an insider trading case involving tips of material, nonpublic information about government plans to cut Medicare reimbursement rates.
Jordan Fogel, who agreed to cooperate with the SEC in its ongoing litigation against the remaining defendants for their roles in the insider trading scheme, consented to the entry of a judgment. The judgment provides that the court will decide whether it is appropriate to order disgorgement of ill-gotten gains, prejudgment interest thereon, and/or civil penalties upon the SEC’s motion.
SEC Charges Former Corporate Officer With Fraud
The SEC announced fraud charges against a former corporate officer and assistant treasurer of an Ohio-based restaurant chain.
The SEC’s complaint alleges that Michael Hudson, while employed as the assistant treasurer of Frisch’s Restaurants Inc., diverted payroll funds to accounts he controlled and falsified Frisch’s accounting records to conceal his defalcation from 2008 to 2014.
Hudson then submitted the falsified records to Frisch’s internal accounting personnel and its auditors in connection with the preparation and filing of the company’s financial statements. Hudson also falsely certified to Frisch’s chief financial officer that the company’s internal control over financial reporting for which he was responsible was effective. In total, Hudson allegedly misappropriated over $3.9 million from Frisch’s.
On Sept. 22, 2016, Hudson pleaded guilty in federal district court in Ohio to charges of wire fraud and filing a false tax return and was sentenced to five years in prison, three years of supervised release and ordered, among other things, to pay restitution to Frisch’s in the amount of approximately $3.1 million.
To settle the SEC’s charges, Hudson agreed to the entry of a judgment imposing permanent injunctions, an officer-and-director bar, and ordering him liable for disgorgement of approximately $3.9 million, payment of which is deemed satisfied by the restitution ordered in the parallel federal criminal case. The settlement is subject to court approval.
— Related on ThinkAdvisor: