SATELLITE VIEW OF LOW PRESSURE SYSTEM OFF SOUTHEAST COAST OF AUSTRALIA

FROM:  NASA

In late July 2013, a low pressure system off Australia’s southeast coast and moist onshore winds combined to create unsettled weather across central Australia – and a striking image of a broad cloud band across the stark winter landscape. The Moderate Resolution Imaging Spectroradiometer (MODIS) aboard NASA’s Terra satellite captured this true-color image on July 22 at 01:05 UTC (10:35 a.m. Australian Central Standard Time). To the west of the low pressure trough the skies are clear and dry. To the east, the broad band of bright white clouds obscures the landscape. The system brought wind, precipitation and cooler temperatures to the region. Image Credit: NASA/Jeff Schmaltz, MODIS Land Rapid Response Team, NASA GSFC

LABOR DEPARTMENT OBTAINS INJUNCTION AGAINST PENSION PLAN FIDUCIARIES

FROM:  U.S. DEPARTMENT OF LABOR 
US Labor Department obtains preliminary injunction against Kentucky-based plan fiduciaries, alleging improper use of retirement funds

LEXINGTON, Ky. — The U.S. District Court for the Eastern District of Kentucky on July 26 granted in part the U.S. Department of Labor's motion for a preliminary injunction against George S. Hofmeister and Bernard Tew, former fiduciaries of four Lexington-based pension plans: the Hillsdale Salaried, Hillsdale Hourly, Revstone Casting Fairfield GMP Local 359, and Fourslides Inc.

The department previously filed lawsuits in the same court that named Hofmeister and Tew, among others. Hofmeister was the trustee of the four pension plans, and Tew was managing director of their investment service provider, Bluegrass Investment Management LLC. The court's order removes Hofmeister as a fiduciary of the plans and prohibits him from taking any actions with respect to the pensions plans or their assets. Tew resigned as fiduciary of the plans a few days before a hearing regarding the department's motion.

The lawsuits alleged that the defendants engaged in a series of prohibited transactions resulting in the misuse of approximately $12.1 million from the Hillsdale Salaried pension plan, approximately $22.5 million from the Hillsdale Hourly pension plan, approximately $4.4 million from the Revstone Casting Fairfield GMP Local 359 pension plan, and approximately $500,000 from the Fourslides Inc. pension plan. The four plan sponsors are closely affiliated with Lexington-based Revstone Industries LLC and Spara LLC.

"Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money for their retirement," said Phyllis C. Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration. "Our aim is to make this right for those workers."
The suits follow an EBSA investigation that found violations of the Employee Retirement Income Security Act, including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to services providers, and payment of fees on behalf of the companies.

According to the brief filed on behalf of the department by the Cleveland Regional Solicitor's Office, Hofmeister, Tew and Bluegrass have repeatedly violated ERISA, using nearly $40 million in pension plan assets to benefit themselves or related parties.

The department's investigation of these pension plans revealed a pattern of prohibited transactions involving the use of these plans' assets by Hofmeister, Tew and investment adviser firms. Alleged improper use of the plans' assets began within days or months of Hofmeister assuming control of the pension plans. The department contends that Hofmeister has placed millions of dollars in pension plan assets at risk and has consistently failed to act to protect these assets when required.

The court has appointed Fiduciary Counselors Inc. to administer the four pension plans. Fiduciary Counselors is an investment adviser firm in Washington, D.C., that has extensive experience acting as an independent fiduciary for employee benefit plans.

FLORIDA RESIDENT CHARGED WITH UNREGISTERED SALES OF SECURITIES

FROM:   SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Florida Resident with Unregistered Sales of Securities

On July 23, 2013, the Securities and Exchange Commission filed settled charges against Florida resident Jorge Bravo, Jr., for unlawful sales of millions of shares of a microcap company to the public without complying with the registration requirements of the Securities Act of 1933.

According to the SEC's complaint filed in the U.S. District Court for the Southern District of New York, from April 2009 until May 2010, Bravo unlawfully sold approximately 93 million shares of stock of AVVAA World Health Care Products, Inc. in unregistered transactions for proceeds of approximately $523,000. The complaint alleges that Bravo obtained the shares through three "wrap around agreements." The wrap around agreements involved debts that AVVAA supposedly owed to its officers, affiliates, or other persons closely associated with the company ("Affiliates") for unpaid compensation for services rendered. Under the wrap around agreements, the Affiliates assigned to Bravo the debts that AVVAA purportedly owed to them, and AVVAA consented to the assignment and agreed to modify the terms of the original debt obligation so that the debts now owed to Bravo were immediately convertible into shares of AVVAA common stock. According to the complaint, within weeks of entering into the first two agreements, and approximately four months after the execution of the third, Bravo began selling the shares he obtained under the agreements to the public. He then used some of the proceeds of the stock sales to pay the amounts owed to the Affiliates under the wrap around agreements. The complaint further alleges that Bravo had previously been involved in wrap around agreements, in his capacity as of president and chief executive of Cross Atlantic Commodities, Inc., a public company located in Weston, Florida, and that those wrap around agreements were subjects of a prior Commission enforcement action, SEC v. K&L International Enterprises, Inc., 6:09-cv-1638-GAP-KRS (M.D. Fla. Sept. 24, 2009). Bravo was not charged in that matter.

Without admitting or denying the SEC's allegations, Bravo agreed to settle the case against him by consenting to the entry of a final judgment permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act; permanently enjoining him from participating in any offering of penny stock; and requiring him to pay disgorgement of $ 392,000, the amount of his ill-gotten gains, plus prejudgment interest of $ 53,866 and a civil penalty in the amount of $150,000. The settlement must be approved by the court.

The SEC's investigation was conducted by New York Regional Office Enforcement staff Karen Lee, Christopher Ferrante, and Leslie Kazon. The Commission acknowledges the assistance of FINRA, the British Columbia Securities Commission, and the Ontario Securities Commission in this matter.

SECRETARY OF STATE KERRY'S STATEMENT ON THE ELECTION IN ZIMBABWE

FROM:  U.S. STATE DEPARTMENT 
Zimbabwe's Presidential Election
Press Statement
John Kerry
Secretary of State
Washington, DC
August 3, 2013

Zimbabweans voted in their country’s first national elections this week since the violent and disputed polls in 2008. These elections were an opportunity for Zimbabwe to move forward on a democratic path and provide a foundation for growth and prosperity.

The people of Zimbabwe should be commended for rejecting violence and showing their commitment to the democratic process. But make no mistake: in light of substantial electoral irregularities reported by domestic and regional observers, the United States does not believe that the results announced today represent a credible expression of the will of the Zimbabwean people.

Though the United States was restricted from monitoring these elections, the balance of evidence indicates that today’s announcement was the culmination of a deeply flawed process. There were irregularities in the provision and composition of the voters roll. The parties had unequal access to state media. The security sector did not safeguard the electoral process on an even-handed basis. And the government failed to implement the political reforms mandated by Zimbabwe’s new constitution, the Global Political Agreement, and the region.

We urge the Southern African Development Community and the African Union to address their concerns with the electoral process, as well as those raised by domestic monitoring groups. The Government of Zimbabwe needs to chart a way forward that will give the people of Zimbabwe the opportunity to express their most fundamental democratic right in a free and fair environment. We further call on all parties to refrain from violence during this period.

The United States shares the same fundamental interests as the Zimbabwean people: a peaceful, democratic, prosperous Zimbabwe that reflects the will of its people and provides opportunities for them to flourish. For that to happen, the Government of Zimbabwe should heed the voices of its citizens and implement the democratic reforms mandated by the country’s new constitution.

Only then will Zimbabwe truly embark on a path towards democracy that reflects the aspirations of its people.

DOD RECRUITING AND RETENTION NUMBERS FOR FISCAL 2013

FROM:  U.S. DEPARTMENT OF DEFENSE 
DOD Announces Recruiting and Retention Numbers for Fiscal 2013, Through June 2013

           The Department of Defense announced today recruiting and retention statistics for the active and reserve components for fiscal 2013, through June.

            Active Component.

            Recruiting.  All four active services met or exceeded their numerical accession goals for fiscal 2013, through June.

     • Army – 49,273 accessions, with a goal of 48,690; 101 percent
     • Navy – 28,482 accessions, with a goal of 28,482; 100 percent
     • Marine Corps – 21,001 accessions, with a goal of 20,960; 100 percent
     • Air Force – 20,154 accessions, with a goal of 20,154; 100 percent
           Retention. The Army, Air Force, and Marine Corps exhibited strong retention numbers for the ninth month of fiscal 2013. The Navy exhibited strong retention numbers in the mid-career and career categories. However, the Navy's achievement of 89 percent in the initial category relates to reduced accessions from four to six years ago.

           Reserve Component.

           Recruiting. Five of the six reserve components met or exceeded their fiscal-year-to-date 2013 numerical accession goals. The Army Reserve finished June 2,572 accessions short of its goal.

     • Army National Guard – 38,002 accessions, with a goal of 37,669; 101 percent
     • Army Reserve – 19,779 accessions, with a goal of 22,351; 88 percent
     • Navy Reserve – 4,138 accessions, with a goal of 4,138; 100 percent
     • Marine Corps Reserve – 6,891 accessions, with a goal of 6,804; 101 percent
     • Air National Guard – 7,788 accessions, with a goal of 7,788; 100 percent
     • Air Force Reserve – 5,515 accessions, with a goal of 4,835; 114 percent
            Attrition – All Reserve Components have met their attrition goals. Current trends are expected to continue. (This indicator lags by one month due to data availability.)

U.S. Department of Defense Armed with Science Update

U.S. Department of Defense Armed with Science Update

TELEMARKETER BANNED FROM SELLING DEBT RELIEF SERVICES

FROM:  FEDERAL TRADING COMMISSION 
FTC Settlement Bans Marketer from Selling Debt Relief Services, Telemarketing, and Robocalling

Under a settlement with the Federal Trade Commission, a telemarketer who allegedly defrauded consumers with false promises of debt relief and charged them without their consent is banned from selling debt relief services, telemarketing, and making robocalls.
The settlement resolves a complaint the FTC filed last year against Jeremy R. Nelson and four companies he controlled. The agency alleged that they violated federal law by making false claims, causing unauthorized debits from consumers’ bank accounts, and illegally charging advance fees.

The FTC also alleged that the defendants called phone numbers on the National Do Not Call Registry, called consumers who had told them not to call, failed to transmit caller identification to consumers’ caller ID service, delivered pre-recorded messages without prior written consent, repeatedly called consumers to annoy them, and delivered pre-recorded messages that failed to identify the seller, the call’s purpose, and the product or service.

In addition to the ban on debt relief sales, telemarketing, and robocalls, the proposed settlement order permanently prohibits the defendants from misrepresenting material facts about any products and services, making unsubstantiated claims, charging consumers’ accounts without their express informed consent, collecting money from customers who agreed to purchase debt relief products or services from the defendants, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The order imposes a judgment of more than $4.6 million against the defendants. The judgment against Nelson will be suspended, based on his inability to pay, after he surrenders to the FTC bank accounts and investment assets frozen by the court. The full judgment will become due immediately if he is found to have misrepresented his financial condition.

For information on dealing with debt, read the FTC’s Knee Deep In Debt.

The Commission vote authorizing the staff to file the proposed consent order was 4-0. The consent order was filed in the U.S. District Court for the Central District of California.

NOTE: Consent orders have the force of law when approved and signed by the District Court judge.

WYETH PHARMACEUTICALS AGREES TO PAY $490.9 MILLION FOR MARKETING DRUG FOR UNAPPROVED USES

FROM:  U.S. DEPARTMENT OF JUSTICE 

Tuesday, July 30, 2013
Wyeth Pharmaceuticals Agrees to Pay $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses

Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer, Inc. in 2009, has agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drug Rapamune for uses not approved as safe and effective by the U.S. Food and Drug Administration (FDA), the Justice Department announced today.  Rapamune is an “immunosuppressive” drug that prevents the body’s immune system from rejecting a transplanted organ.

 “FDA’s drug approval process ensures companies market their products for uses proven safe and effective,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “We will hold accountable those who put patients’ health at risk in pursuit of financial gain.”

 The Federal Food, Drug and Cosmetic Act (FDCA) requires a company such as Wyeth to specify the intended uses of a product in its new drug application to the FDA.  Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses.  In 1999, Wyeth received approval from the FDA for Rapamune use in renal (kidney) transplant patients.  However, the information alleges, Wyeth trained its national Rapamune sales force to promote the use of the drug in non-renal transplant patients.  Wyeth provided the sales force with training materials regarding non-renal transplant use and trained them on how to use these materials in presentations to transplant physicians.  Then, Wyeth encouraged sales force members, through financial incentives, to target all transplant patient populations to increase Rapamune sales.

“The FDA approves drugs for certain uses after lengthy clinical trials,” said Sanford Coats, U.S. Attorney for the Western District of Oklahoma.  “Compliance with these approved uses is important to protect patient safety, and drug companies must only market and promote their drugs for FDA-approved uses.  The FDA approved Rapamune for limited use in renal transplants and required the label to include a warning against certain uses.  Yet, Wyeth trained its sales force to promote Rapamune for off-label uses not approved by the FDA, including ex-renal uses, and even paid bonuses to incentivize those sales.  This was a systemic, corporate effort to seek profit over safety.  Companies that ignore compliance with FDA regulations will face criminal prosecution and stiff penalties.”

Wyeth has pleaded guilty to a criminal information charging it with a misbranding violation under the FDCA.  The resolution includes a criminal fine and forfeiture totaling $233.5 million.  Under a plea agreement, which has been accepted by the U.S. District Court in Oklahoma City, Wyeth has agreed to pay a criminal fine of $157.58 million and forfeit assets of $76 million.

The resolution also includes civil settlements with the federal government and the states totaling $257.4 million.  Wyeth has agreed to settle its potential civil liability in connection with its off-label marketing of Rapamune.  The government alleged that Wyeth violated the False Claims Act, from 1998 through 2009, by promoting Rapamune for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by Medicare, Medicaid and other federal health care programs.  These unapproved uses included non-renal transplants, conversion use (switching a patient from another immunosuppressant to Rapamune) and using Rapamune in combination with other immunosuppressive agents not listed on the label.  The government alleged that this conduct resulted in the submission of false claims to government health care programs.  Of the amounts to resolve the civil claims, Wyeth will pay $230,112,596 to the federal government and $27,287,404 to the states.  

“Wyeth’s conduct put profits ahead of the health and safety of a highly vulnerable patient population dependent on life-sustaining therapy,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations.  “FDA OCI is committed to working with the Department of Justice and our law enforcement counterparts to protect public health.”

Pfizer is currently subject to a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services’ Office of Inspector General that it entered in connection with another matter in 2009, shortly before acquiring Wyeth.  The CIA covers former Wyeth employees who now perform sales and marketing functions at Pfizer.  Under the CIA, Pfizer is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA, and the company is subject to monetary penalties for less significant breaches.

“We are committed to enforcing the laws protecting public health, taxpayers and government health programs, and to promoting effective compliance programs,” said Daniel R. Levinson, Inspector General, Department of Health and Human Services.  “Our integrity agreement with Pfizer, which acquired Wyeth, includes required risk assessments, a confidential disclosure program, and auditing and monitoring to help prospectively identify improper marketing.”

 The civil settlement resolves two lawsuits pending in federal court in the Western District of Oklahoma under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and share in any recovery.  The first action was filed by a former Rapamune sales representative, Marlene Sandler, and a pharmacist, Scott Paris.  The second action was filed by a former Rapamune sales representative, Mark Campbell.  The whistleblowers’ share of the civil settlement has not been resolved.

 "The success obtained in this case is an excellent example of how we address the threats to our nation’s health care system; the importance of the public reporting of fraud, waste, or abuse; and the significant results that can be obtained through multiple agencies cooperating in investigations,” said James E. Finch, Special Agent in Charge of the Oklahoma City Division of the FBI.

 The criminal case was handled by the U.S. Attorney’s Office for the Western District of Oklahoma (USAO) and the Justice Department’s Civil Division, Consumer Protection Branch.  The civil settlement was handled by USAO and the Justice Department’s Civil Division, Commercial Litigation Branch.  The Department of Health and Human Services’ (HHS) Office of Counsel to the Inspector General; the HHS Office of General Counsel, Center for Medicare and Medicaid Services; the FDA’s Office of Chief Counsel; and the National Association of Medicaid Fraud Control Units.  These matters were investigated by the FBI; the FDA’s Office of Criminal Investigation; HHS’ Office of Inspector General, Office of Investigations and Office of Audit Services; the Defense Criminal Investigative Service; the Office of Personnel Management’s Office of Inspector General and Office of Audit Services; the Department of Veterans’ Affairs’ Office of Inspector General; and TRICARE Program Integrity.

 Except for conduct admitted in connection with the criminal plea, the claims settled by the civil agreement are allegations only, and there has been no determination of civil liability.  The civil lawsuits are captioned United States ex rel. Sandler et al v. Wyeth Pharmaceuticals, Inc., Case No. 05-6609 (E.D. Pa.) and United States ex rel. Campbell v. Wyeth, Inc., Case No. 07-00051 (W.D. Okla.).

SEC ANNOUNCES INSIDER TRADING CHARGES AGAINST SYSTEMS ADMINISTRATOR AT GREEN MOUNTAIN COFFEE ROASTERS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him.

In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis of Morrisville, Vermont purchased Green Mountain securities - typically out-of-the-money options - shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach of Hamden, Connecticut, who illegally traded in his own account and his mother's trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain's stock price to 12 of the past 13 quarterly earnings announcements since 2010.

The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain's computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees' e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain earnings announcements before they became public.

The SEC's complaint was filed under seal on July 24, when the court granted the Commission's motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7.

The SEC's complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach's mother Bella Pugach is named as a relief defendant in the SEC's complaint for the purpose of recovering ill-gotten gains in her trading account.

The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency.

THREE SENTENCED IN PUERTO RICO IN OPERATION GUARD SHACK DRUG SECURITY PROSECUTION

FROM:  U.S. DEPARTMENT OF JUSTICE 
Wednesday, July 31, 2013

Three Men Sentenced in Puerto Rico in Operation Guard Shack Prosecution
131 Defendants Have Pleaded Guilty or Been Convicted After Trial 

Two former officers with the Police of Puerto Rico and another individual were sentenced to prison late yesterday for their roles in providing security for drug transactions.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI’s San Juan Field Office made the announcement after sentencing by U.S. District Judge Carmen Consuelo Cerezo in the District of Puerto Rico.

Former Police of Puerto Rico officers Daviel Salinas-Acevedo, 29, of Bayamon, Puerto Rico, and Miguel Santiago-Cordero, 30, of Lares, Puerto Rico, were each sentenced on July 30, 2013, to serve 181 months in prison. In addition, Wendell Rivera-Ruperto, 38, of Las Marias, Puerto Rico, was also sentenced yesterday to 420 months in prison.

On Jan. 10, 2013, Salinas-Acevedo and Santiago-Cordero were each convicted at trial of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine and one count of possessing a firearm in furtherance of a drug transaction.  Rivera-Ruperto was convicted of one count of conspiring to possess with intent to distribute more than five kilograms of cocaine, attempting to possess with the intent to distribute more than five kilograms of cocaine and possessing a firearm in furtherance of a drug transaction.  Rivera-Ruperto had been convicted previously of 15 other counts arising from his participation in other, related drug transactions.

The case against the three defendants arose from the FBI’s undercover operation known as “Operation Guard Shack.”  To date, 131 defendants have pleaded guilty or been convicted at trial, and 123 defendants have been sentenced as a result of the operation.

According to the evidence presented in court, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each provided security for what they believed were illegal cocaine deals that occurred on March 24, April 9 and July 8, 2010, respectively.  In fact, each purported drug transaction was one of dozens of simulated transactions conducted as part of the undercover FBI operation.  The three men performed armed security for the multi-kilogram cocaine deals by frisking the buyer, standing guard as the kilos were counted and inspecting and escorting the buyer in and out of the transaction.

In return for the security they provided, Salinas-Acevedo, Santiago-Cordero and Rivera-Ruperto each received a cash payment of $2,000.  The money was never returned by any of the defendants, and none of the defendants ever reported the transactions.

The case was investigated by the FBI.  The Puerto Rico Department of Justice also provided assistance in this case.

The case was prosecuted by Trial Attorneys Anthony J. Phillips and Edward J. Loya Jr. of the Criminal Division’s Public Integrity Section. The U.S. Attorney’s Office for the District of Puerto Rico participated in the investigation and prosecution of this case.

STOCK PROMOTER TO PAY OVER $1.6 MILLION FOR INFORMATION ISSUED IN PENNY STOCK PUBLICATIONS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Massachusetts-Based Penny Stock Promoter Ordered to Pay Over $1.6 Million in Penny Stock Fraud Case

The Securities and Exchange Commission announced today that on July 24, 2013, a final judgment was entered by default against Massachusetts-based National Financial Communications, Inc. ("NFC"). NFC is a defendant in an action filed by the Commission in the U.S. District Court for the District of Massachusetts on December 12, 2011, alleging that Massachusetts resident Geoffrey J. Eiten and NFC made material misrepresentations and omissions in penny stock publications they issued.

The judgment enjoins NFC from further violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder) and from certain specified activities related to penny stocks, including the promotion of a penny stock or deriving compensation from the promotion of a penny stock. The judgment also imposed a penny stock bar against NFC which permanently bars it from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purpose of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. The judgment orders NFC to pay disgorgement of $605,262, representing NFC's ill-gotten gains, plus prejudgment interest of $38,819 and a civil penalty of $1 million.

The Commission's complaint alleged that Eiten and NFC issued a penny stock promotional publication called the "OTC Special Situations Reports." According to the complaint, the defendants promoted penny stocks in this publication on behalf of clients in order to increase the price per share and/or volume of trading in the market for the securities of penny stock companies. The complaint alleged that Eiten and NFC made misrepresentations in these reports about the penny stock companies they promoted. For example, the Commission's complaint alleged that during 2010, Eiten and NFC issued reports promoting four penny stock companies: (1) Clean Power Concepts, Inc., based in Regina, Saskatchewan, Canada, a purported manufacturer and distributor of various fuel additives and lubrication products made from crushed seed oil; (2) Endeavor Power Corp., based in Robesonia, Pennsylvania, a purported recycler of value metals from electronic waste; (3) Gold Standard Mining, based in Agoura Hills, California, a purported owner of Russia gold mining operations; and (4) Nexaira Wireless Corp., based in Vancouver, British Columbia, Canada, a purported developer and seller of wireless routers. The Commission's complaint alleged that in these four reports, Eiten and NFC made material misrepresentations and omissions, concerning, among other things, the companies' financial condition, future revenue projections, intellectual property rights, and Eiten's interaction with company management as a basis for his statements.

According to the complaint, Eiten and NFC were hired to issue the above reports and used false information provided by their clients, without checking the accuracy of the information with the companies in question or otherwise ensuring that the statements they were making in the OTC Special Situations Report were true.

Weekly Address: Securing a Better Bargain for the Middle Class | The White House

Weekly Address: Securing a Better Bargain for the Middle Class | The White House

FTC ANNOUNCES COURT ORDER HALTING DEBT COLLECTORS ILLEGAL PRACTICES

FROM:  FEDERAL TRADE COMMISSION
At FTC's Request, Court Orders Halt to Debt Collector's Illegal Practices, Freezes Assets

Defendants Allegedly Broke the Law by Posing as Process Servers, Threatening Lawsuits, and Contacting Consumers’ Employers and Family Members in Violation of Their Privacy.

At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly extorted payments from consumers by using false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers.  The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.

The lawsuit, part of the FTC’s continuing crackdown on scams that target consumers in financial distress, charged four individuals and seven companies.  The FTC alleged that the defendants were part of an elaborate debt collection scheme operating from locations in Orange and Riverside counties in California, and that they used various business names including Western Performance Group, as well as fictitious names, which they changed frequently to avoid law enforcement scrutiny.

The FTC alleged that the defendants called consumers and their employers, colleagues, and family members posing as process servers or law office employees, and claimed they were seeking to deliver legal papers that purportedly related to a lawsuit.  In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls.  But the debt collectors were not process servers or law office employees, and the defendants did not file lawsuits against the consumers.  The FTC charged that the defendants’ false and misleading claims violated the FTC Act and the Fair Debt Collection Practices Act.  In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:

improperly contacting third parties about consumers’ debts; failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and failing to notify consumers of their right to dispute and obtain verification of their debts.

The complaint names as defendantsThai Han; Jim Tran Phelps; Keith Hua; James Novella; One FC, LLC, also doing business as Western Performance Group and WPG; Credit MP, LLC, also doing business as AFGA, CMP, AFG & Associates, AF Group, Allied Financial Group, and Allied Guarantee Financial; Western Capital Group, Inc., also doing business as ERA, LMR, WCG, and WC Group; SJ Capitol LLC, also doing business as SCG; Green Fidelity Allegiance, Inc., also doing business as WRA; Asset and Capital Management Group; and Crown Funding Company, LLC.

The Commission vote authorizing the staff to file the complaint was 4-0.  The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California.  On July 24, 2013, the court granted the FTC’s request for a temporary restraining order.  The Federal Trade Commission would like to thank the U.S. Postal Inspection Service for its assistance in bringing this case.

SECRETARY OF LABOR PEREZ LAUDS SENATE WORKFORCE INVESTMENT BILL

FROM:  U.S. DEPARTMENT OF LABOR
Perez: Senate workforce investment bill will create opportunity, strengthen middle class

WASHINGTON — Secretary of Labor Tom Perez today issued the following statement regarding Senate committee markup of the Workforce Investment Act of 2013:

"To create opportunity for the American people and ensure a better bargain for the middle class, we need strong partnerships to build a world-class workforce.
"By collaborating with business leaders, labor, workforce boards, community colleges, nonprofits and others, we can build a workforce system that ensures workers have the skills they need to succeed and employers have the workforce they need to compete in the 21st century.

"We applaud the U.S. Senate for taking a major step in that direction with the bipartisan approval by the Committee on Health, Education, Labor and Pensions of S. 1356, the Workforce Investment Act of 2013. I particularly want to thank Chairman Harkin, Ranking Member Alexander, Senator Murray and Senator Isakson for their efforts. This step to modernize the Act is long overdue — it was 15 years ago this summer that the Workforce Investment Act first became law.
"We need a demand-driven approach to workforce development, one that responds to the needs of employers and prepares people for the jobs that are actually available. We need to align the workforce system with regional economies and establish a more integrated network of American Job Centers. We need to promote innovation and strengthen performance evaluation in the system, so consumers can get information about programs and services that work and taxpayers know we are spending their dollars wisely.

"S. 1356 meets these tests, building on the strength of the current law at the same time that it updates and streamlines the system. It is a significant improvement over the partisan legislation passed by the House in March. The House bill froze funding and failed to provide many of the services needed by workers with the greatest barriers to employment, including veterans, disadvantaged youth and people with disabilities.

"We hope that S. 1356 will move quickly to the Senate floor, with Congress sending a sound, bipartisan bill to the White House for the president's signature. Reauthorizing the Workforce Investment Act will grow our economy, help restore middle-class security and empower more people to live the American Dream."

FLORIDA-BASED AMERIFIRST MANAGEMENT LLC AND OWNERS CHARGED IN FRAUDULENT PRECIOUS METALS SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges Florida-Based AmeriFirst Management LLC and Its Owners, John P. D’Onofrio, George E. Sarafianos, and Scott D. Piccininni, in Multi-Million Dollar Fraudulent Precious Metals Scheme

CFTC alleges that the Defendants engaged in illegal, off-exchange commodity transactions and deceived retail customers regarding financed precious metals transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against AmeriFirst Management LLC (AML) of Fort Lauderdale, Florida, and its owners, John P. D’Onofrio of Fort Lauderdale, George E. Sarafianos of Lighthouse Point, Florida, and Scott D. Piccininni of Fort Lauderdale.  The CFTC Complaint charges the Defendants with operating a precious metals scheme where the Defendants marketed illegal, off-exchange financed commodity transactions and fraudulently misrepresented the nature of those transactions.

According to the Complaint, filed on July 29, 2013, AML held itself out as a precious metals wholesaler and clearing firm, operating through a network of more than 30 precious metals dealers. As alleged, these dealers solicited retail customers to invest in financed precious metals transactions, where a customer gave a percentage deposit of the total value of the metal, typically 20%, and the dealer supposedly made a loan to the customer for the remaining 80%, supposedly sold the customer the total metal amount, and supposedly allocated the total metal amount at a depository to be held for the customer.

The Complaint alleges that AML created customer documents that represented that the dealer had in fact made such a loan and sold and allocated the total metal amount to the customer. However, these documents were false because the dealer never made a loan to the customer, nor did the dealer sell or allocate any metal to the customer, according to the Complaint. Further, the Complaint alleges that although there was no loan and no metal was allocated to the customer, AML charged the customer finance and storage fees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 expanded the CFTC’s jurisdiction over transactions like these and requires that such transactions be executed on or subject to the rules of a board of trade, exchange, or commodity market, according to the Complaint. This new requirement took effect on July 16, 2011. The Complaint alleges that all of the Defendants’ financed commodity transactions took place after this date and were illegal. The Complaint also alleges that the Defendants defrauded customers in these financed commodity transactions.

In its continuing litigation, the CFTC seeks a permanent injunction from future violations of federal commodities laws, permanent registration and trading bans, restitution to defrauded customers, disgorgement of ill-gotten gains, and civil monetary penalties.

The CFTC Division of Enforcement staff responsible for this action are David Chu, Mary Beth Spear, Eugene Smith, Patricia Gomersall, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

Remarks at the Iftar Roundtable

Remarks at the Iftar Roundtable

TREASURY TARGETS SUPPORTERS, BUSINESSES LINKED TO LEADER OF SINALOA CARTEL

FROM:  U.S. DEPARTMENT OF TREASURY 
Action Targets Supporters and Businesses Linked to Sinaloa Boss Ismael Zambada Garcia

 WASHINGTON – The U.S. Department of the Treasury today designated three individuals and three entities linked to Ismael Zambada Garcia, one of the principal leaders of the Sinaloa Cartel.  Those designated include Jose Antonio Nunez Bedoya, a Mexican attorney and notary public who helps to create front companies in order to conceal and launder assets on behalf of Zambada Garcia, members of Zambada Garcia’s family, and other members of the Sinaloa Cartel.  Nunez Bedoya incorporated Estancia Infantil Nino Feliz and Establo Puerto Rico on behalf of Zambada Garcia, and he notarized real estate purchases on behalf of Santa Monica Dairy, all of which were previously designated by the Treasury Department’s Office of Foreign Assets Control (OFAC) in May 2007.  Additionally, Nunez Bedoya notarized real estate purchases on behalf of Sinaloa Cartel leader Joaquin Guzman Loera and his wife, Griselda Lopez Perez, whom OFAC designated in September 2012.

“Treasury will continue to target and disrupt financial operations linked to the Sinaloa Cartel by taking action against any facilitators, legal or financial professionals, or businesses that are laundering their narcotics proceeds,” said OFAC Director Adam J. Szubin.

The cash-intensive businesses designated by OFAC today were Parque Acuatico Los Cascabeles, a Sinaloa-based water park, Centro Comercial y Habitacional Lomas, a shopping mall in Culiacan, and Rancho Agricola Ganadero Los Mezquites, a cattle ranch in Sinaloa.  Nunez Bedoya incorporated and notarized all three businesses on behalf of Zambada Garcia.

Also designated today were Tomasa Garcia Rios and Monica Janeth Verdugo Garcia, wife and daughter of deceased narcotics trafficker Jose Lamberto Verdugo Calderon.  Verdugo Calderon, who was killed by the Mexican military in January 2009, was widely identified by U.S. and Mexican authorities as a major financial operative and lieutenant for Zambada Garcia.  Tomasa Garcia Rios and Monica Janeth Verdugo Garcia own Rancho Agricola Ganadero Los Mezquites and Parque Acuatico Los Cascabeles.

Today’s action would not have been possible without critical support from the Drug Enforcement Administration.

“The Sinaloa Cartel cannot hide behind front companies like a water park or agricultural business,” said DEA Special Agent in Charge Doug Coleman.  “We are working with OFAC to expose these traffickers’ front companies for what they really are – illegal enterprises that fuel the drug trade, its violence and corruption.  As we continue to follow the money trail, we starve these traffickers of their assets and eventually put their global criminal networks out of business.”

Today’s action, pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), generally prohibits U.S. persons from conducting financial or commercial transactions with these designees and also freezes any assets they may have under U.S. jurisdiction.  The President named Ismael Zambada Garcia and the Sinaloa Cartel as significant foreign narcotics traffickers pursuant to the Kingpin Act in May 2002 and April 2009, respectively.

Internationally, OFAC has designated more than 1,300 businesses and individuals linked to 103 drug kingpins since June 2000.  Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties.  Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million. Criminal fines for corporations may reach $10 million.  Other individuals could face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.

COURT AUTHORIZES JOHN DOE SUMMONSES IN NORWAY SEEKING IDENTITIES OF PAYMENT CARD USERS

FROM:  U.S. DEPARTMENT OF JUSTICE 
Monday, July 29, 2013
Federal Courts Authorize Service of John Doe Summonses Seeking Identities of Persons Using Payment Cards in Norway

Ten Lawsuits Initiated Pursuant to Tax Treaty Between United States and Norway; Seven Petitions Granted, Three Petitions Remain Pending
The Justice Department announced that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California have entered orders over the past week authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway.  The summonses are referred to as “John Doe” summonses because the IRS does not know the identity of the person being investigated.  While orders have been entered in seven of these cases, the United States’ petitions in three additional cases remain pending.

The lawsuits, filed on July 19 and 22, 2013, in nine federal districts, were initiated at the request of the Norwegian government under a treaty between Norway and the United States.  The treaty allows the two countries to cooperate in exchanging information that is helpful in enforcing each country’s tax laws.  The United States is seeking the identities of persons who have used specific debit or credit cards issued by certain U.S. financial institutions so that Norway can determine if those persons have complied with Norwegian tax laws. A total of 18 U.S. financial institutions are identified in the government’s court filings. The filings do not allege that these financial institutions have violated any U.S. laws with respect to these accounts.

As alleged in court papers filed by the Justice Department, Norwegian authorities have reason to believe, based upon the use of payment cards in Norway that were issued by U.S. banks, that unidentified card holders may have failed to report financial account information or income on their Norwegian tax returns.  Court papers cite examples where individuals using non-Norwegian payment cards have claimed to be tax residents of other countries but were found to have resided in Norway for sufficient time to subject them to taxes in Norway.  

 “The Department of Justice and the IRS are committed to working with our treaty partners to fight tax evasion wherever it occurs,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. “All taxpayers should know that our efforts in this area are global, coordinated and will continue.”

  “These summonses reflect our continuing efforts to work with our international partners on offshore tax evasion,” said Douglas O’Donnell, IRS Assistant Deputy Commissioner, Large Business & International (LB&I). “By using effectively our existing network of bilateral agreements, countries can help one another put an end to the global practice of evading taxation by hiding assets abroad.”

The lawsuits are a part of ongoing international efforts to stop persons from using foreign financial accounts as a way to evade taxes.  Courts have previously approved John Doe summonses allowing the IRS to identify individuals using offshore accounts to evade their U. S tax obligations.  In the present suits, the Justice Department is seeking the identities of persons who may be attempting to hide their Norwegian taxable income in U.S. financial accounts.

ATTORNEY GETS 3 YEAR SUSPENSION FOR ROLE IN INSIDER TRADING CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION 

New York State Suspends Attorney Mitchell S. Drucker from Practicing Law for Three Years Based On Insider Trading Violation

The Commission announces that on July 17, 2013, the Appellate Division, Second Department, of the New York State Supreme Court (the "Appellate Division"), issued a decision suspending attorney Mitchell S. Drucker from the practicing law for three years, commencing August 16, 2013. The decision provides that Drucker cannot apply for reinstatement earlier than February 16, 2016. The Court imposed this sanction based on the judgment the Commission obtained in its insider trading case against Drucker. SEC v. Mitchell S. Drucker, et al, 06 Civ. 1644 (S.D.N.Y.) In December 2007, a jury in the United States District Court for the Southern District of New York found that Drucker, who was in the legal department of public company NBTY, Inc., violated the antifraud provisions of the securities laws by insider trading the common stock of NBTY, tipping his father, who traded, and trading his friend's NBTY shares. In its decision, the Appellate Division upheld the determination of a Special Referee that Drucker had (1) "engaged in conduct involving dishonesty, deceit, fraud, or misrepresentation, in violation of former Code of Professional Responsibility DR1-102(a)(4) (22 NYCRR 1200.3[a][4])," and (2) "engaged in conduct adversely reflecting on his fitness as an attorney, in violation of former Code of Professional Responsibility DR 1-102(a)(7) (22 NYCRR 1200.3[a][7])." In imposing its sanction, the Appellate Division found:

. . . [W]e note the absence of cooperation by the respondent with the SEC, as well as the absence of any admission by the respondent that he engaged in insider trading. As the District Court noted, the respondent "failed to cooperate … until … he could no longer conceal his transgression, thereby misleading his employer," and he failed to take responsibility for what he did. We find the absence of remorse to be an aggravating factor, consistent with the District Court's finding that the respondent was entitled to "no mercy" as a result of the "brazenness" of his conduct and his "cocky refusal to own up to it." Moreover, we note the District Court's description of the respondent as having "demonstrated utter indifference to the law and to his client," and of his conduct as "egregious."

Previously, on December 26, 2007, Judge Colleen McMahon, whose decision and findings were cited by the Appellate Division, enjoined Drucker from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and barred him from serving as an officer and director of any public company. The judgment also ordered defendant Drucker to pay disgorgement and prejudgment interest totaling $201,146, to pay, and be jointly and severally liable with his father, defendant Ronald Drucker for, disgorgement and prejudgment interest totaling $74,411, and to pay, and be jointly and severally liable with his friend, relief defendant William Minerva for, disgorgement and prejudgment interest totaling $11,577. Finally, the judgment ordered Mitchell Drucker to pay a civil penalty of $394,486, representing two times the combined ill-gotten gains obtained by defendants Mitchell Drucker and Ronald Drucker, and relief defendant Minerva. Drucker subsequently completed those payments to the U.S. Treasury.

In February 2008, the Commission issued an Order temporarily and then permanently suspending Drucker from practicing before the Commission based on his insider trading judgment.

West Wing Week: 08/02/13 or "Let Us Be Awed By Their Shining Deeds" | The White House

West Wing Week: 08/02/13 or "Let Us Be Awed By Their Shining Deeds" | The White House