SEC ANNOUNCES PARTIAL SUMMARY JUDGEMENT AGAINST FORMER HEART TRONICS, INC., ATTORNEY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23205 / February 23, 2015

Securities and Exchange Commission v. Heart Tronics, Inc., et al., Civil Action No. SACV 11- 1962-JVS (ANX)

SEC Wins Summary Judgment Against Mitchell J. Stein for Heart Tronics, Inc. Fraud Scheme.

The Securities and Exchange Commission today announced that on February 18, 2015, the U.S. District Court for the Central District of California awarded partial summary judgment in the Commission's favor against Mitchell J. Stein for his role in a wide-ranging fraud scheme while he was attorney for Heart Tronics, Inc. (formerly known as Signalife, Inc.). In December 2014, Stein was sentenced to a 17-year term of imprisonment based on his conviction in a parallel criminal prosecution for 14 counts of conspiracy to commit mail fraud and wire fraud, mail fraud, wire fraud, securities fraud, money laundering and conspiracy to obstruct justice.

Based on Stein's criminal conviction, the Court awarded summary judgment in the Commission's favor on the Commission's claims that Stein violated Section 17(a) of the Securities Act of 1933, violated and aided and abetted the violation of Sections 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, violated Sections 13(b)(5) and Rule 13b2-1 of the Exchange Act, and aided and abetted the violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 13a-1, 13a-11, 13a-13 and 12b-20. The Court imposed permanent injunctions, officer and director bars, a penny stock bar, a civil penalty of $5,378,581.61, and disgorgement and prejudgment interest of $6,076,415.52 against Stein.

The Commission's litigation against former Heart Tronics co-CEO for Operations, President and Chief Operating Officer, Willie Gault, continues, with trial to begin on March 3, 2015.

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.

BOARD CHAIRMAN ALLEN STANFORD CONVICTED IN $7 BILLION FRAUD

The following excerpt is from the Department of Justice website:

Tuesday, March 6, 2012
"Allen Stanford Convicted in Houston for Orchestrating $7 Billion Investment Fraud Scheme
WASHINGTON – A Houston federal jury today convicted Robert Allen Stanford, the former Board of Directors Chairman of Stanford International Bank (SIB), for orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion from SIB to finance his personal businesses.

The guilty verdict was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; Special Agent in Charge Lucy Cruz of the Internal Revenue Service-Criminal Investigations (IRS-CI).

Following a six-week trial before U.S. District Judge David Hittner, and approximately three days of deliberation, the jury found Stanford guilty on 13 of 14 counts in the indictment.

Stanford, 61, was convicted of one count of conspiracy to commit wire and mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct a U.S. Securities and Exchange Commission (SEC) investigation, one count of obstruction of an SEC investigation and one count of conspiracy to commit money laundering.  The jury found Stanford not guilty on one count of wire fraud.

At sentencing, Stanford faces a maximum prison sentence of 20 years for the count of conspiracy to commit wire and mail fraud, each count of wire and mail fraud, and the count of conspiracy to commit money laundering, and five years for the count of conspiracy to obstruct an SEC investigation and the count of obstruction of an SEC investigation.

The investigation was conducted by the FBI’s Houston Field Office, the U.S. Postal Inspection Service, the IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration.  The case was prosecuted by Deputy Chief William Stellmach of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Gregg Costa of the Southern District of Texas and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section.”

JUDGE FINDS U.K. COMPANY ILLEGALLY TRADED U.S. MUTUAL FUNDS AFTER THE MARKET CLOSE

The following excerpt is from the SEC website:

“On Tuesday, February 14, 2012, United States District Judge Robert W. Sweet of the Southern District of New York issued an Opinion in favor of the U.S. Securities and Exchange Commission finding that United Kingdom-based hedge fund adviser Pentagon Capital Management PLC (PCM) and Lewis Chester, PCM’s Chief Executive Officer, engaged in securities fraud in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934. Specifically, Judge Sweet found that Defendants PCM and Chester orchestrated a scheme to defraud mutual funds in the United States through late trading from February 2001 through September 2003. Late trading refers to the practice of placing orders to buy, redeem, or exchange U.S. mutual fund shares after the time as of which the funds calculate their net asset value (usually as of the close of trading at 4:00 p.m. ET), but receiving the price based on the net asset value already determined as of 4:00 p.m. ET. Judge Sweet found that the Defendants “intentionally, and egregiously violated the federal securities laws through a scheme of late trading” through broker-dealer Trautman Wasserman & Company, Inc. (TW&Co.), and found that the scheme was “broad ranging over the course of several years and in no sense isolated.”

As a result of Defendants’ conduct, the Court found that PCM and Chester violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and granted the Commission’s request to enjoin PCM and Chester from future violations of those provisions. Judge Sweet further found PCM and Chester, together with Relief Defendant Pentagon Special Purpose Fund, Ltd., PCM’s advisory client, jointly and severally liable for disgorgement of $38,416,500 of profits from the U.S. mutual fund trades executed through TW&Co. plus prejudgment interest. Finally, Judge Sweet imposed civil penalties against Defendants in the amount of $38,416,500, equal to Defendants’ pecuniary gain for late trades through TW&Co.

The Court found in Defendants’ favor regarding charges of deceptive market timing of U.S. mutual funds.

Chester, age 43, is a resident of London, England. PCM is an investment adviser and investment manager based in London, England, and it is registered with the United Kingdom Financial Services Authority. Pentagon Special Purpose Fund, Ltd. is an international business company incorporated in the British Virgin Islands.”