MASSACHUSETTS-BASED CORPORATION FORMER OFFICER OF SENTENCED TO 60 MONTHS’ IMPRISONMENT FOR SECURITIES FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission announced today that, on February 26, 2013, the Honorable Douglas P. Woodlock of the United States District Court for the District of Massachusetts sentenced James C. Fields of Brookline, Massachusetts, to 60 months imprisonment, to be followed by three years of supervised release, and the payment of restitution to be determined at a later hearing. Fields is the former chief financial officer and former chief executive officer of LocatePlus Holdings Corporation, a Massachusetts-based information technology company that sold on-line access to public record databases for investigative searches. Fields was found guilty after a jury trial and was sentenced on 28 criminal charges including securities fraud, false statements to company auditors, false statements and false certifications in SEC filings.

On November 10, 2010, the United States Attorney’s Office for the District of Massachusetts charged Fields and former LocatePlus chief executive officer Jon Latorella with conspiracy to commit securities fraud for their role in a scheme to fraudulently inflate revenue at LocatePlus as well as a scheme to manipulate the stock of another company. On the same date, the Commission amended a previously-filed civil injunctive action against LocatePlus arising out of the same conduct, to add both Fields and Latorella as defendants. The Commission’s civil injunctive action, which is still pending, has been stayed until the conclusion of the criminal cases against Fields and Latorella.

A CASE OF MISAPPROPRIATION OF MONEY

FROM: SECURITIES AND EXCHANGE COMMISSION

Defendant in SEC Enforcement Action Sentenced and Ordered to Pay Restitution

The Securities and Exchange Commission announced today that, on December 5, 2012, the United States District Court for the District of Connecticut sentenced Stephen B. Blankenship, a resident of New Fairfield, Connecticut to forty-one months imprisonment plus three years of supervised release and ordered him to pay a fine of $7,500.00, and restitution in the amount of $607,516.81 based upon his guilty plea to one count of Mail Fraud and one count of Securities Fraud. On September 12, 2012, Blankenship pleaded guilty to all charges brought by the United States Attorney’s Office in Connecticut in connection with a scheme he operated through Deer Hill Financial Group, LLC in Danbury, Connecticut. From 2002 to 2012, Blankenship falsely represented to numerous investors that he had investment opportunities that were safe and would pay a consistent return to investors. Instead, there were no actual investments and Blankenship used some of the victim’s funds to pay personal and business expenses and other investors in furtherance of his fraud.

On September 13, 2012, the Commission filed a civil complaint in the United States District Court for the District of Connecticut alleging that Blankenship misappropriated at least $600,000 from at least 12 investors by falsely representing that he would invest their funds. The Commission’s complaint seeks the entry of a permanent injunction against future violations, disgorgement of ill-gotten gains plus pre-judgment interest and civil monetary penalties. The Commission litigation is still pending.

On October 11, 2012, the Commission barred Blankenship from the securities industry based his guilty plea. The Connecticut Department of Banking’s Securities Division has also obtained, by consent, a revocation of Blankenship’s state license and barred Blankenship and Deer Hill from operating in Connecticut.

SEC ACCUSES MASSACHUSETTS RESIDENT WITH SELLING FICTITIOUS FACEBOOK IPO INVESTMENTS

FROM:  SECURITIES AND EXCHANGE COMMISSION
June 20, 2012
The Securities and Exchange Commission announced today that it has charged Gary J. Martel, a resident of Chelsea, Massachusetts, with defrauding investors. The Commission’s complaint, filed in federal district court on June 19, 2012, alleges that, from at least 2006 to the present, Martel, who conducted business under multiple names including Martel Financial Group and MFG Funding, defrauded at least 12 investors in Massachusetts, Vermont and Florida of at least $1.6 million, and likely obtained significantly more from other investors. Today, with Martel’s consent, a federal judge entered an order freezing Martel’s assets and prohibiting him from continuing to violate the antifraud provisions of the federal securities laws.

According to the complaint, Martel told investors, many of whom were retirees looking for a safe investment earning reliable income, that he would place their money in “pass-through bonds” or other purported fixed income or pooled investment products, which he assured investors were safe. The complaint alleges that Martel gave investors purported account statements showing interest earned and sometimes made small distributions of supposed interest, which encouraged investors to give Martel more money to invest. Martel also allegedly offered other fraudulent investments. In March 2012, according to the complaint, Martel solicited investments in a Facebook investment pool, claiming it would allow small investors to “own a piece” of the Facebook IPO. In fact, however, the complaint alleges that the investments Martel offered were fictitious and/or no longer exist, and that he transferred funds out of the bank account where investor funds were deposited to bank accounts he maintained for his businesses.

The Commission’s complaint alleges that Martel violated Section 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In its action, the Commission seeks the entry of a permanent injunction against Martel, disgorgement of ill-gotten gains plus pre-judgment interest thereon, and the imposition of civil monetary penalties. In addition to freezing Martel’s assets and prohibiting him from violations of antifraud provisions of the federal securities laws, the order entered by the court today further prohibits Martel from soliciting, accepting, or depositing any money from investors and from altering or destroying any relevant documents and also requires him to provide an accounting of their assets and uses of investor funds.

The Commission appreciates the assistance of Secretary of the Commonwealth of Massachusetts William F. Galvin and the Massachusetts Securities Division, which notified the Commission of Martel’s conduct and investor losses and last week filed an action against Martel based on the same conduct.

MAN ACCUSED BY SEC OF $60 MILLION PONZI-LIKE SCHEME

FROM:  SEC
Washington, D.C., May 24, 2012 – The Securities and Exchange Commission today charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund, used false and misleading marketing materials to lure investors into believing that the fund was earning double-digit annual returns by investing 75 percent of its assets in investments tied to major stock indices. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25 percent annual returns in every year of the fund’s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.

The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, the fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute barring people from claiming that the SEC has passed on the merits of a particular investment. The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.

The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

SEC ALLEGES PRIME BANK SCHEME INVOLVING NEARLY $2 MILLION IN INVESTMENTS

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 8, 2012
SEC Charges Arizona Resident with Securities Fraud
The Securities and Exchange Commission (“Commission”) filed a civil injunctive action in Atlanta, Georgia on May 8, 2102, alleging that Gerald D. Kegley (“Kegley”) and the company he operates, Prism Financial Services, LLC (“Prism”), participated in a fraudulent “Prime Bank” scheme that violated the antifraud and securities and broker dealer registration provisions of the federal securities laws.

The Commission’s complaint alleges that from at least April 8, 2010 through at least August 20, 2010, the defendants were directly responsible for introducing six individuals, who invested $1.95 million, to the fraudulent scheme. The complaint alleges that in furtherance of the scheme, the defendants forwarded misrepresentations made by others to investors. These misrepresentations included: 1) that investors could draw upon bank issued guarantees worth millions of dollars without having to repay the withdrawn funds; and 2) that investor funds would be held in escrow until the bank guarantees were issued. The complaint alleges that defendants knew or were reckless in not knowing that both of these representations were false because no such bank guarantees existed and investor funds were misappropriated immediately upon receipt.

Defendants also misrepresented that they would be paid commissions only once the investor received the bank guarantee. In fact, defendants were paid commissions relatively soon after the investors transferred the money. Defendants further told investors that they had previously worked on a successful bank guarantee program. Defendants, however, had actually reported this purportedly successful bank guarantee program to the Federal Bureau of Investigation because they believed it was a fraud.

In its Complaint, the Commission alleges that the defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission also alleges that defendants aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

SEC CHARGES FORMER DETROIT OFFICIALS AND INVESTMENT ADVISER TO CITY PENSION FUNDS IN INFLUENCE PEDDLING SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 9, 2012
The Securities and Exchange Commission (“Commission”) today charged former Detroit mayor Kwame M. Kilpatrick, former city treasurer Jeffrey W. Beasley, and the investment adviser to the city’s public pension funds involved in a secret exchange of lavish gifts to peddle influence over the funds’ investment process.

The Commission’s complaint alleges that Kilpatrick and Beasley, who were trustees to the pension funds, solicited and received $125,000 worth of private jet travel and other perks paid for by MayfieldGentry Realty Advisors LLC, an investment adviser whose CEO Chauncey Mayfield was recommending to the trustees that the pension funds invest approximately $117 million in a real estate investment trust (REIT) controlled by the firm. Despite their fiduciary duties, neither Kilpatrick and Beasley nor Mayfield and his firm informed the boards of trustees about these trips and the conflicts of interest they presented. The funds ultimately voted to approve the REIT investment, and MayfieldGentry received millions of dollars in management fees.

According to the Commission’s complaint filed in U.S. District Court for the Eastern District of Michigan, members of Kilpatrick’s administration began to exert pressure on Mayfield in early 2006 after he supported Kilpatrick’s opponent in his 2005 re-election and hired that candidate’s daughter at MayfieldGentry. The complaint alleges that Beasley met with Mayfield in February 2006 and told him he was “in the dog house” with Kilpatrick and offered to help him “clear the air.” Throughout 2007, Mayfield appeared before the boards of trustees for Detroit’s public pension funds recommending the REIT investment.

Meanwhile, the complaint alleges, MayfieldGentry began footing the bills for trips taken by Kilpatrick, Beasley and others that extended beyond business. In January 2007, Beasley demanded and Mayfield agreed to pay more than $3,000 for hotel rooms in Charlotte, N.C. for Beasley, Kilpatrick, and others. According to the complaint, Beasley told Mayfield that the reason for the trip was to inspect a building recently acquired by one of the pension funds, but in fact Beasley and Kilpatrick never inspected the building. Mayfield knew that Beasley and Kilpatrick never inspected the building, but did not ask any further questions about the matter.

According to the Commission’s complaint, the non-business travel continued:
In April 2007, MayfieldGentry paid for Kilpatrick, Beasley, and their associates to travel by private jet to Las Vegas, where they enjoyed luxury hotel accommodations, two concerts, three rounds of golf, meals, and massages. The Las Vegas trip cost more than $60,000.

In July 2007, MayfieldGentry paid more than $24,000 for a private jet to take Kilpatrick, Beasley’s son and others to Tallahassee, Fla., where Kilpatrick had a second home.

In October 2007, MayfieldGentry paid more than $34,000 for a private jet to fly Kilpatrick and his wife to and from Bermuda, and Kilpatrick’s father and his girlfriend back from Bermuda.

The Commission alleges that neither Kilpatrick nor Beasley nor Mayfield nor MayfieldGentry told anyone associated with the pension funds about any of the travel. The boards of trustees for the funds thus voted to invest approximately $117 million with Mayfield and his firm without the knowledge that they had supplied Kilpatrick, Beasley, and their associates with the extravagant travel and perks during the preceding 10 months.
The Commission’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a), 10b-5(b) and 10b-5(c) thereunder.  The Commission also alleges that MayfieldGentry and Chauncey Mayfield violated Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933. In addition, the Commission charges that MayfieldGentry and Chauncey Mayfield violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Kilpatrick and Beasley aided and abetted those violations. The Commission seeks disgorgement of ill-gotten gains, penalties, and permanent injunctions, including an injunction against Kilpatrick and Beasley to prohibit them from participating in any decisions involving investments in securities by public pensions.

The Commission’s investigation, which is continuing, has been conducted jointly by the Chicago Regional Office led by Merri Jo Gillette and Timothy L. Warren, the Enforcement Division’s Asset Management Unit led by Bruce Karpati and Robert Kaplan, and the Municipal Securities and Public Pensions Unit led by Elaine C. Greenberg and Mark R. Zehner. The investigative attorneys are Brian D. Fagel, Rebecca R. Goldman and Eric A. Celauro, led by Assistant Directors Peter K.M. Chan and John J. Sikora, Jr. The Commission’s litigation will be led by Timothy S. Leiman and John E. Birkenheier.

ALLEGED LIES TO THE SEC HAS RESULTED IN A CRIMINAL INDICTMENT

The following excerpt is from the SEC web site:

The Commission announced that on August 24, 2011, the United States Attorney’s Office for the Southern District of Florida unsealed an Indictment charging Steven Steiner a/k/a Steven Steinger, a defendant in a now settled SEC action, with obstructing justice by lying to the SEC. The 54 count Indictment charges Steiner, along with Henry Fecker, III, with money laundering and other violations. According to the Indictment, Steiner and Fecker, among other things, concealed assets and lied in financial statements that they submitted to the SEC. Steiner and Fecker submitted the financial statements during settlement negotiations to resolve the SEC’s case against Steiner for his antifraud and other violations in a billion dollar offering fraud conducted by Mutual Benefits Corporation (MBC). Fecker was the sole officer and director of Camden Consulting, Inc., a relief defendant in that case.

The Commission first halted the on-going fraud at MBC in May 2004 when it filed a contested emergency civil enforcement action against MBC and its principals, including Steiner’s brothers, Joel and Leslie Steinger. In its complaint, the SEC alleged that the defendants had raised over $1 billion from more than 29,000 investors through a fraudulent, unregistered offering of securities in the form of fractionalized interests in viatical and life settlements. The SEC obtained a restraining order to halt the alleged fraud at MBC, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida (the “MBC Receiver”), to identify and trace the assets of MBC.

In June 2005, the SEC filed an amended complaint adding Steiner as a defendant and naming SKS Consulting, Inc. (SKS) a company he controlled, and Camden, as relief defendants. In the amended complaint, the SEC alleged that Steiner was the "public face" of MBC, who participated in all or most initial sales training sessions for new in-house and outside sales agents, met with prospective and existing MBC investors, and made misrepresentations to investors about the safety of investing with MBC and the manner in which it obtained life expectancies for the insurance policies that formed the basis of an investment in MBC. The SEC also alleged that Fecker – Steiner’s life partner – was Camden’s sole officer and director and shared signatory authority with Steiner on the company’s bank accounts. In January 2006, the SEC filed a second amended complaint and further alleged relief defendant Camden acted as a conduit for MBC to make undisclosed payments to Steiner.

On April 10, 2007, the Court entered a settled Final Judgment of Permanent Injunction and Other Relief against Steiner and Relief Defendants SKS and Camden. The Final Judgment enjoins Steiner from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Final Judgment also holds Steiner, SKS, and Camden jointly and severally liable for disgorgement and prejudgment interest in the amount of $5,000,000, but orders them to pay $3,925,000 based on their financial statements and other information submitted to the Commission and waives the remainder of the amount and did not impose a penalty based on the financial information.

According to the Indictment, in the years after 2004 when MBC was shut down, Steiner and Fecker engaged in a series of transactions to hide assets from the SEC and the MBC Receiver by placing funds attributable to Steiner with third parties or in Fecker’s name alone, and later by causing third parties to make payments of monies due to Steiner, instead to Fecker. Fecker used the funds to support a lavish lifestyle for Fecker and Steiner. To obtain a favorable settlement of the SEC’s case against Steiner, SKS, and Camden, the Indictment alleges that in 2006 and early 2007, Steiner and Fecker submitted a series of false and misleading documents to conceal their true financial condition.
The Indictment further alleges that in late 2009, to further conceal assets from the SEC and the MBC receiver, Steiner sold a luxury New York apartment for $1.3 million, but caused false documents to state that the sales price was $1.1 million, and submitted these documents to the SEC and the MBC Receiver. The Indictment alleges that Steiner caused the purchaser to make an additional $200,000 in undisclosed side payments to Fecker, and that these undisclosed and concealed funds were thereafter used to support the lavish lifestyle of Steiner and Fecker. To further thwart the SEC’s efforts to recover assets attributable to MBC, the Indictment alleges that Steiner provided false and misleading testimony under oath to the MBC Receiver concerning his assets and financial condition.

The SEC’s actions regarding Mutual Benefits resulted in injunctions and other relief against eight defendants and eight relief defendants, and orders to pay disgorgement and civil penalties totaling $30 million. In addition, before the August 24 Indictment, the United States Attorney’s Office for the Southern District of Florida had charged 10 defendants in criminal actions for their roles in the fraud.

The SEC acknowledges the work of the United States Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation, Miami Field Office, and the Internal Revenue Service, Criminal Investigation Division in this matter.”