SEC Asks for Congressional Authority to Seek Civil Penalties for Investment Fraud
The Securities and Exchange Commission (SEC) is hoping Congress will increase its authority to seek civil penalties for investment fraud.
The Agency's Director of Enforcement, Robert Khuzami, testified before the Senate Banking Subcommittee on Securities and said the SEC would like to have increased authority to impose penalties on those who help defendants in violation of the Investment Advisers Act. Khuzami also told the Senate the agency needs the authority to subpoena people in civil cases across the country. This would save the agency travel expenses as well as staff resources, because duplicate depositions would be avoided. Khuzami also pointed out several areas in the enforcement division that need more resources. The agency would benefit, he said, from hiring more trial lawyers, as well as chief operating officers to manage the division. He also asked for more resources in the form of enhanced paralegal and administrative support, as well as better technological resources.
Khuzami spoke to the panel in response to a report by the Government Accountability Office, which made suggestions for enhancements in SEC operations. The report analyzed agency operations and found there was a delay in cases and lowered settlement amounts in investment fraud cases, because of outdated penalty policies. Under one of these policies agency enforcement staff was forced to obtain approval on a settlement before discussing penalties with public companies. That policy was revoked by SEC Chairman Mary Schapiro.
The agency has also suffered from a shortage of staffing and resources, resulting in a backlog of cases. Since the Bernard Madoff investment fraud was exposed last year, the SEC has come under increased pressure to enhance its operations. The appointment of Khuzami was one of the first moves Schapiro made to strengthen the division.
Attempts at SEC Improvement
Last month we discussed other moves that could strengthen the SEC and fine tune its ability to crack down on investment fraud much faster. These include the proposed formation of specialized teams to deal with specific frauds. The SEC is also proposing increased cooperation with criminal authorities and enhancing the management model currently in place at the agency.
It may be a while before these proposed measures actually move toward becoming implemented at the agency, but securities attorneys, who have been critical of the agency's failures to crack down on investment fraud, believe any enhancements are worth the wait.
According to Attorney General Jerry Brown, the three used investor money to bankroll their lavish lifestyle, including luxury residences, expensive cars, and a Lear jet. Most of the investors were retirees who Armitage and Guidi coaxed into investing their life savings.
He is being held at the Potter county jail on a $500,000 bond for each charge..jpg)
According to Sims, his office worked together with the 
Kiselak allegedly entrusted the funds to a California-based Venture capital firm, Gemstar Capital Group Inc. The firm and its president, Jeffrey Sykes, have also been named in the 
According to authorities, the investment fraud affected investors across the country. Next week, Hsu faces another trial for campaign finance fraud. According to prosecutors, his contributions to politicians allowed him access into influential political circles, and he used these connections to impress potential investors. At least one of his fraud victims is due to testify that Hsu played a voice mail message by a political candidate to impress her into investing with him. Hsu is facing charges that he had “straw donors“ contribute to federal candidates. These donors were then reimbursed..jpg)
Pardue, the pastor of an unidentified Birmingham area church, is being charged with seven counts of fraud in connection with the sale of a security, and one count for each sale of an unregistered security..jpg)
To placate investors, Hudgins sent them false account statements, reflecting profits. He reportedly paid older investors approximately $17 million from money solicited from newer investors in his scheme. According to court records, the remainder of the money was used for lavish personal expenses, including an antique sports car collection, jewelry, and an airplane.
According to investigators, Copeland began soliciting investors about 10 years after he began practicing as an attorney. He promised investors that their funds would be used as short term loans for real estate investment. He told them that when he was able to sell the properties, he would be able to pay them returns as high as 15 to 18 percent. Copeland operated a firm called Advance Asset Strategies, assuring investors in his brochure that ”your loan is secured by the actual property that the real estate investor purchases”. .jpg)
According to the SEC lawsuit, as much as $3.5 million was spent on lavish personal expenses, including a down payment on a $1.9 million home. She also threw a grand party to celebrate the company’s "success" at the Ritz Carlton in Marina Del Ray, which unsuspecting investors paid for. Of the $23 million, approximately $13 million was spent making interest payments to investors while more than $5 million was lost in speculative investments. There is no information yet on whether there is a criminal investigation into Flores' actions. The SEC lawsuit is seeking restitution and penalties..jpg)
In a classic investment fraud tactic, Merriman promised his investors returns of up to 20%, but lost approximately $400,000 from the initial funds. It was then that Merriman started another fund to pay investors in a Ponzi scheme operation. As the scale of the fraud grew, he added two more funds to pay withdrawals. He traded securities during the first year of his scam, but eventually stopped and focused completely on his scheme. The SEC asked that Merriman‘s assets be frozen and that he be ordered to pay his investors back with interest.
The SEC’s shortcomings were glaringly evident in the way Bernard Madoff managed to operate his 
Needless to say, the investments went neither into initial public offerings or trading firms. Instead, Regensberg invested in speculative investments, losing large portions of investor money in the process. Large sums of money also found their way into the hands of his relatives.
In March, the 38-year-old Schrenker was put through mental evaluation tests to determine whether he was competent to stand trial. Those evaluations came about as a result of Schrenker’s bizarre behavior prior to his arrest. On January 11th, Schrenker, aware that he was facing a black hole of investment fraud charges and lawsuits, got into his plane, put it on auto pilot, and parachuted out of it, leaving the aircraft to crash into an Alabama swamp. Once safely on the ground, Schrenker hopped onto a motorcycle he had earlier hidden in a storage unit and drove away. His ingenious, Bondesque escape plan was unsuccessful, however, and he was arrested two days later on Florida camping grounds.
For Greenwood and Walsh, the trouble began in February when their firms were subjected to an audit by the National Futures Association. They refused to cooperate and were suspended from the organization. Since then, the two have been the subject of several .jpg)
It's the first formal statement we’ve heard from the man at the center of the 
Drier's scheme involved the selling of at least 85 fake promissory notes that were said to pay an interest of 11.5 percent. He is charged with selling fake promissory notes to three separate investors and 13 hedge funds between 2004 and 2008. Most of the money went to fund Dreier's extravagant lifestyle, while some went to fund his law firm operations and pay returns to early investors, in a classic 
Instead, Haroutunian funneled most of his investors' money to himself and his co-conspirators. On Monday he pled guilty to mail fraud in Los Angeles and faces a maximum sentence of 20 years in prison. Earlier, he pled guilty to siphoning approximately $450,000 from Bank of America in 2003 when he worked there as a customer care officer. He has also pled guilty to tax fraud.
Investors who wish to see their frozen funds released
Friehling was not charged for knowledge of the 
Prosecutors also plan to seize assets in Ruth Madoff's name including: $17 million cash and $45 million in bonds. The Madoffs' lawyers insist Ruth is the sole owner of the cash, bonds and Manhattan apartment and that they are not related to her husbands $65 billion Ponzi scheme. In addition, loans given to the Madoffs' sons, Mark and Andrew, adding up to nearly $32 million are on the list of assets to be seized.
Earlier in the week Madoff refused to agree to a plea deal with prosecutors and admit to conspiracy, implicating others. Because of his refusal investigators will have no help in identifying others involved in the scheme. According to 
A few employees from the Houston headquarters will be kept on long enough to wrap things up at the office and close the company down. After, however, they will also be out of a job.
Most of these accounts are managed at Pershing LLC, the clearing firm for the majority of Stanford accounts. Janvey, however, has also considered releasing accounts held at JP Morgan Clearing Company..jpg)
According to Business Insurance, contrary what you might expect, most of these lawsuits were not filed in the latter half of 2008, when the extent of the credit crisis became clear. Rather, most of the cases were filed in the first half of the year, 
In January, Burden and the Gagosian Gallery purchased the gold, through Stanford Coins & Bullion, from Dillon Gage Group, a rare coins and metal dealer unrelated to Stanford or any of his businesses. The parties agreed that Burden and the Gagosian would wire the payment for 
Guiana Island is Antigua's largest island measuring 2.5 miles across and .5 miles wide. With extensive mangroves, coral reefs and wildlife it is one of Antigua's ecological treasures. It is home to Antigua's national animal, the European fallow deer, and the endangered West Indian whistling duck..jpg)
The next day, authorities found Nadel's vehicle in a local airport parking lot. He also left his wife a handwritten note explaining he left documentation enough for her to take over what is left, "even documentation for divorce" and felt "extreme guilt." He also advised her to withdraw money as soon as possible, knowing the assets would be frozen shortly.
According to the SEC, since 2004 the schemer swindled nearly $900 million from naive investors. Soon after 
In a different lawsuit, J. Mark Brewer sued to SEC in an attempt to get access to frozen retirement accounts. His funds are held by a clearing firm called Pershing, who handled Stanford transactions. Brewer argues that, although, Stanford may be guilty, his dealings with Pershing have nothing to do with his situation. Brewer is one of many investors unhappy with the freezing of their Pershing assets. Some of the others, however, have taken a different approach; they are on board with the SEC's civil lawsuit in Dallas.
Also, in 2001, Stanford, claimed he was a descendant of Stanford University's founder, Leland Stanford. Stanford University officials denied any relation and, in 2008, filed a trademark infringement lawsuit against the billionaire, claiming his actions were "injurious" to the university's name and caused "public confusion." This odd attempt at name dropping supports the idea that the egomaniacal Stanford is after power in every way. 
At least 300 investors with their 
In a classic case of the foxes guarding the hen house, Lena Stinson, who served as the 
Florida has been hit particularly hard in the recent series of investment fraud scandals that have come to light. The victims of 
In December of 2007, former Stanford Financial Group (SFG) financial advisers, Charles Rawl and Mark Tidwell quit their jobs for fear of being held criminally liable due to the 
According to insiders, nearly half of all 
Much like investors, senior employees at Stanford had limited access to the bank's investment methods themselves. At least one employee, Michael Zarich, told .jpg)
equaling the donation Stanford made to his election campaign to charity. Several lawmakers have also followed suit. According to sources, the Stanford Financial Group spent approximately $4.8 million in donations to American politicians over the past decade. Stanford worked hard to spread his influence in American politics. He, not only donated to the Obama, McCain and Clinton campaigns, but in 2002, donated heavily to Florida senator Bill Nelson who served as vice chairman of the Democratic Senatorial Campaign Committee during the time Congress was debating the introduction of harsher anti-investment fraud laws. .jpg)
Their reasons for suspicion are not hard to understand; it all boils down to common sense. Brokers have confirmed that they were suspicious of the incredibly high returns the Stanford financial scheme promised investors, coupled with the minimal risk company officials promised investors. Many former brokers who worked for Stanford left, unable to digest the unsavory practices at the firm. The suspicions about the flamboyant Stanford were confirmed over the past few days as his offices were seized and cases were filed against him. As the Stanford Financial fraud unfolds his ploy to gain investments becomes more clear..jpg)
In September of 2007 BCI and their CEO, Cooper, began taking advantage of naive investors by giving presentations and seminars at Deaf Community centers and events. The fraudster ultimately collected $4.4 million from 125 investors and, rather than investing the money, bought himself a new home, among other things.
It is one of the oldest investment fraud schemes, and its low risk, high yield mantra has helped it become one of the most successful forms of investment fraud. A Ponzi scheme works similarly to a pyramid scheme. Here, the fraudster collects funds from investors, and uses them to pay off previous investors. As long as the number of investors is limited and there is enough money to pay off previous investors, Ponzi scheme fraudsters have little risk of getting caught. However, when funds begin to dry up, older clients cannot be paid as quickly, which is when the scheme begins to crumble. The financial meltdown that went into full gear a few months ago resulted in a credit crunch, which meant that Ponzi scheme fraudsters like Bernie Madoff and Ralph Russell were unable to continue making payments to earlier investors and keep the fraud alive. That is why there have been a large number of Ponzi scams uncovered since the meltdown began. These fraudsters are able to survive well in times of a booming economy, but as soon as the economy falls, their schemes are busted.
The Antigua-based Stanford International Bank Limited assured clients that it’s certificates of deposit were as secure as “U.S. government insured accounts”. As SEC agents and U.S. marshals raided the company's Houston office, investors had already begun to reveal the attraction the 
scandal was a flash in the pan and that few other Ponzi schemes and 