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operations and found there was a delay in cases and lowered settlement amounts in investment fraud cases, because of outdated penalty policies.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 That policy was revoked by SEC Chairman Mary Schapiro.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 