Legal News

Florida's "mini-Madoff" Nadel admits huge fraud

Arthur Nadel, a former Florida fund manager dubbed a "mini-Madoff" for running a decade-long investment fraud of nearly $400 million, pleaded guilty on Wednesday to criminal charges.

Nadel, 77, disappeared for two weeks before his arrest in January 2009. He had left a letter for his wife imploring her to use a trust fund for her benefit and "sell the Subaru if you need money," a reference to their motor vehicle.

The FBI arrested Sarasota, Florida-based Nadel in his home state, but the case was moved to New York because he traded through a brokerage in the city, Shoreline Trading, an affiliate of Goldman Sachs Group Inc.

Nadel, who looked frail in court and remained seated throughout the proceeding, pleaded guilty to an indictment of 15 charges, including securities fraud, mail fraud and wire fraud before Manhattan federal court Judge John Koeltl.

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SEC Approves Interpretive Guidance on Climate Change Disclosures

The SEC today voted to provide public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.  The interpretive release approved today provides guidance on certain existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business. The relevant rules cover a company's risk factors, business description, legal proceedings, and management discussion and analysis.

Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.

Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.

Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.

Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

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SEC and Galleon defendants tussle over wiretaps

The U.S. Securities and Exchange Commission is demanding that Galleon hedge fund founder Raj Rajaratnam and others accused of insider trading hand over recordings of wiretap evidence, but the defendants have refused to give them up.

In a flurry of letters made public on Monday in the high-profile Manhattan federal court case involving employees of some of America's best-known companies, Rajaratnam and his co-accused argue that the recorded conversations belong only in a parallel criminal investigation.

U.S. District Court Judge Jed Rakoff also heard oral arguments on the wiretap issue on Monday, but he reserved publishing any ruling until next week.

Separately, Rakoff ruled from the bench that the SEC may file an amended complaint to add new civil charges against Rajaratnam. The request stemmed from a guilty plea on criminal charges by former McKinsey & Co management consultants director Anil Kumar on January 7 in which he said Rajaratnam paid him $1.75 million (1.08 million pounds) in exchange for tips on McKinsey clients.

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SEC Gives Small Public Cos Extension On Securities Law

The Securities and Exchange Commission will give the smallest public companies extra time to comply with the final portion of Sarbanes-Oxley.

Such companies must now begin complying within nine months with a provision in the law, known as Section 404, requiring them to report on the effectiveness of their internal controls. Previously, the companies were to begin complying by Dec. 15. The extension will apply to companies with a public float below $75 million.

The reprieve comes after pressure from Capitol Hill to delay the new reporting requirements. The SEC said it decided on the extension after issuing a new study on the compliance costs of the change, which it indicated the smallest companies would need time to review.

“Now that the SEC has finally produced this report, it should use this information to implement the law in a way that doesn’t harm small companies that are already struggling to survive the worst economic contraction in decades,” Rep. Nydia M. Velazquez, D.-N.Y., the chairman of the House Small Business Committee, said in a statement.

SEC Chairman Mary L. Schapiro warned that this would be the last extension. “Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance,” she said in a statement.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com

California Investment Fraud Sentence

A California man was ordered to serve 19  years in prison for a Ponzi scheme that federal prosecutors say financially devastated dozens of victims.

Stefan Wilson plead  guilty earlier this year to wire fraud and tax evasion charges. Wilson was also ordered to pay restitution of more $12 million.

Federal prosecutors say Wilson bilked nearly 80 people out of millions of dollars by promising returns of 1824 percent in an investment fund. Some of the victims say they lost their homes or were forced to come out of retirement.

While he was wrecking peoples lives, I’m not sure this sentence is necessary. He’s not a dangerous man unless hes involved in securities, so just don’t make that an option for him and take more of his money rather than spend tax payer money having him locked up.

Source: California Investment Fraud

Former Kmart CEO Misled Investors, SEC Tells Jurors

Kmart Corp.’s former Chief Executive Officer Charles Conaway misled investors about the company’s cash crisis in the months before its bankruptcy in 2002, a U.S. lawyer said in closing arguments at Conaway’s civil fraud trial.

The Securities and Exchange Commission, which is trying to bar Conaway permanently from serving as an officer of a publicly traded company, sued him in 2005, alleging he misled investors in a third-quarter 2001 securities filing and during a Nov. 27, 2001, conference call.

Conaway “dodged inconvenient information,” Alan Lieberman, an SEC lawyer, said today in U.S. District Court in Ann Arbor, Michigan. “He knew when to deny and blame others and say ‘nobody ever told me.’”

Jurors began considering the case today after both sides completed their closing arguments. If the jury of five men and five women finds Conaway is liable, U.S. Magistrate Judge Steven Pepe will determine what penalty to impose.

Kmart filed for bankruptcy protection on Jan. 22, 2002, after fourth-quarter sales fell, the surety bond market evaporated and some suppliers halted shipments. Conaway was fired two months later. Kmart subsequently shed 599 stores and fired about 57,000 workers.

Cash Shortage Hidden

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SEC alleges billion-dollar fraud in high-yield 'CD' sales

The Securities and Exchange Commission today accused Houston money manager R. Allen Stanford of operating a "massive" fraud involving sales of allegedly bogus certificates of deposit.

With the stock market continuing to meltdown, the allegations are another serious blow to investor confidence: Many of Stanford’s clients must have figured they were playing it safe in what the SEC now labels "so-called" CDs.

"Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Chatman Thomsen, the SEC’s enforcement chief.

Allenstanford The SEC’s civil complaint alleges that Stanford, via his network of financial advisers at Stanford Group Co., has sold approximately $8 billion of so-called certificates of deposit to investors by "promising improbable and unsubstantiated high interest rates." The CDs were issued by Antigua-based Stanford International Bank.

The SEC says Stanford misrepresented to CD purchasers "that their deposits are safe, falsely claiming that the bank reinvests client funds primarily in ‘liquid’ financial instruments [the portfolio]; monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators."

What’s more, "Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, Stanford attempted to calm its own investors by falsely claiming the bank has no ‘direct or indirect’ exposure to the Madoff scheme," the SEC said.

From Bloomberg News:

    The SEC has asked former employees about the bank’s stated returns on investment, between 10.3% and 15.1% every year from 1995 until last year, according to documents and annual reports on the bank’s Web site. SIB says it has $7.2 billion in assets and 30,000 clients, according to the SEC.

    Investigators from the Financial Industry Regulatory Authority visited six Stanford Group offices in January, downloaded information from computer hard drives and looked through files, people familiar with the events said. The people declined to be identified because they didn’t want to put their current jobs at risk.

    "Regulatory officers have conveyed to us these visits are part of their routine examinations," Allen Stanford said in a Feb. 11 letter to clients and an e-mail message to the company’s employees obtained by Bloomberg.

    Stanford said in a Feb. 12 e-mail to his employees that he’d "fight with every breath to continue to uphold our good name" in the face of the investigations.
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He will need a good securities attorney.