CIVIL ACTION FILED AGAINST THREE CONSOLE ENERGY, INC., EMPLOYEES FOR INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
June 1, 2012
The Securities and Exchange Commission announced today that on June 1, 2012, it filed a civil action against three former employees of CONSOL Energy, Inc. (“CONSOL”) for illegal insider trading in CONSOL securities in advance of the company’s public announcement, on March 15, 2010, that it entered into an agreement to acquire the Appalachian Exploration and Production business of Dominion Resources, Inc. (“Dominion”). The Commission alleges that on March 9, 2010, both Charles E. Mazur Jr., CONSOL’s former Director of Corporate Strategy, and Joseph A. Cerenzia, CONSOL’s former Director of Public Relations, received a confidential email stating that the acquisition of Dominion was going to be announced prior to the opening of the market on March 15, 2010. Both individuals traded CONSOL securities after learning of the pending acquisition announcement. James S. Poland, CONSOL’s former General Manager of Engineering, conducted an environmental survey in connection with the of the Dominion acquisition. Poland also traded CONSOL stock after receiving nonpublic information about the acquisition and when it would be announced.

The Commission’s complaint alleges that Mazur violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a) and (c) thereunder, and alleges that Poland and Cerenzia violated of Sections 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder, and seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties.

The defendants agreed to settle the Commission’s charges, without admitting or denying the allegations in the Commission’s complaint. Under the settlements, the defendants consented to Final Judgments that will permanently enjoin Mazur from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and permanently enjoin Poland and Cerenzia from violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Mazur agreed to pay approximately $97,171 in disgorgement, prejudgment interest, and civil penalties. Poland agreed to pay approximately $19,600 in disgorgement, prejudgment interest, and civil penalties. Cerenzia agreed to pay approximately $15,453 in disgorgement, prejudgment interest, and civil penalties. The settlements are subject to court approval.

MAN CHARGED WITH INSIDER TRADING CONCERNING A TENDER OFFER

Photo Credit:  Wikimedia.
FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 24, 2012
Stephen H. Guth Settles SEC Insider Trading Charge Concerning Omrix Tender Offer
The U.S. Securities and Exchange Commission today filed a settled civil injunctive action in the U.S. District Court for the District of Columbia alleging that Stephen H. Guth violated Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 promulgated thereunder, by buying Omrix Biopharmaceuticals, Inc. common stock ahead of a November 2008 public announcement that Johnson & Johnson, Inc. was making a tender offer for the outstanding shares of Omrix stock. Guth, a U.S. citizen residing in the United Kingdom, is a self-employed consultant and had been the Chief Financial Officer of Omrix from 1996 to 2000.

The Commission’s complaint alleges the following: On October 3, 2008, after Johnson & Johnson had taken substantial steps to commence the tender offer, Guth received an unsolicited communication from the Chief Executive Officer of Omrix requesting assistance with due diligence questions pertaining to transactions that occurred while Guth worked for the company. In October and November 2008, the Chief Executive Officer of Omrix had additional communications with Guth related to due diligence questions. As a result of his communications with the Omrix CEO, Guth learned that an acquisition of Omrix was likely, and he purchased 7,000 shares of Omrix common stock. Guth purchased Omrix securities while in possession of material information relating to the tender offer, which he knew or had reason to know was nonpublic and had been acquired from an officer of the issuer whose securities were to be sought. On November 23, 2008, Omrix and Johnson & Johnson jointly announced the tender offer. Thereafter, defendant Guth tendered his shares of Omrix stock, realizing profits exceeding $60,000.

Without admitting or denying the allegations in the Commission’s complaint, Guth has consented to entry of a proposed Final Judgment that would enjoin him from future violations of Section 14(e) of the Exchange Act and Rule 14e-3 thereunder, order him to disgorge $63,517, with prejudgment interest of $7,695.49; and impose a civil penalty of $31,758. The proposed settlement is subject to the approval of the district court.

MAN ACCUSED OF RUNNING A $60 MILLION INVESTMENT FUND LIKE A PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

May 24, 2012
On May 24, 2012, the Securities and Exchange Commission 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 had incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund (Fund), used false and misleading marketing materials to lure investors into believing that the Fund was earning double-digit annual returns by investing 75% of its assets in investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. 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.

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 major stock indices. 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 Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also alleges the defendants violated or aided and abetted violations of Section 26 of the Exchange Act, which bars persons from claiming the SEC has passed on the merits of a particular investment. The SEC’s complaint names the Fund as a relief defendant. The complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and other relief. Geringer, the Fund, and two of the GLR 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.