The Securities and Exchange Commission today charged a Florida-based investment manager and his firm for failing to provide SEC examiners with records of a mutual fund advisory business that invested in NASCAR-related stocks.

The SEC examiners sought records from David W. Dube and Peak Wealth Opportunities LLC while examining a mutual fund they advised called the Stock Car Stock Index Fund. Despite repeated requests, Dube and Peak Wealth failed to furnish certain records to the SEC.

“After promising multiple times to provide the requested records, Dube failed to live up to his regulatory obligations and turn over the records,” said Bruce Karpati, Chief of the Enforcement Division’s Asset Management Unit. “When financial professionals fail to cooperate with SEC exams, they force the agency to expend greater resources to pursue investigations.”

According to an SEC order initiating administrative proceedings, Peak Wealth was the adviser to the Stock Car Stock Index fund from 2008 to June 2010. SEC examination staff requested records from Peak Wealth and Dube in 2010 while examining Peak Wealth’s advisory business and the operations of the fund.

The SEC further alleges that Dube and Peak Wealth:

• Failed to make and keep certain required financial records.
• Failed to withdraw Peak Wealth’s registration with the SEC and make other required filings.
• Failed to provide the fund’s board of directors with information reasonably necessary to assess Peak Wealth’s advisory fees.

Simultaneously with the SEC’s examination in 2010, the fund’s board requested information from Peak Wealth and Dube as part of the fund’s required annual evaluation of its advisory agreements. The annual evaluations are required under Section 15(c) of the Investment Company Act of 1940, which also requires advisers to provide their boards with information reasonably necessary to conduct those evaluations. Despite requesting additional time to respond to the board, Peak Wealth and Dube failed to provide any of the requested documents. The board subsequently terminated Peak Wealth’s advisory agreement and liquidated the fund by returning the money to investors.

“A fully-informed board is crucial to the advisory fee setting process, yet Dube failed to provide the board with the most basic of information,” said Chad Alan Earnst, an Assistant Regional Director in the Enforcement Division’s Asset Management Unit.

Under the relevant rules, the SEC could seek to permanently bar Dube from association with an SEC registered investment adviser or broker dealer. The SEC alleges that Peak Wealth willfully violated Sections 203A and 204 of the Advisers Act of 1940 and Rules 203A-1(b)(2), 204-1(a)(1), 204-2(a)(1), (2), (4), (5), and (6) thereunder, and Section 15(c) of the Investment Company Act. The SEC charged Dube with willfully aiding and abetting and causing Peak Wealth’s violations.

The Securities and Exchange Commission today charged Pfizer Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries bribed doctors and other health care professionals employed by foreign governments in order to win business.

The SEC alleges that employees and agents of Pfizer’s subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products. They tried to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising.

The SEC separately charged another pharmaceutical company that Pfizer acquired a few years ago – Wyeth LLC – with its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay more than $45 million combined to settle their respective charges. In a parallel action, the Department of Justice announced that Pfizer H.C.P. Corporation agreed to pay a $15 million penalty to resolve its investigation of FCPA violations.

“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations.”

According to the SEC’s complaint against Pfizer filed in U.S. District Court for the District of Columbia, the misconduct dates back as far as 2001. Employees of Pfizer’s subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products. In China, for example, Pfizer employees invited “high-prescribing doctors” in the Chinese government to club-like meetings that included extensive recreational and entertainment activities to reward doctors’ past product sales or prescriptions. Pfizer China also created various “point programs” under which government doctors could accumulate points based on the number of Pfizer prescriptions they wrote. The points were redeemed for various gifts ranging from medical books to cell phones, tea sets, and reading glasses. In Croatia, Pfizer employees created a “bonus program” for Croatian doctors who were employed in senior positions in Croatian government health care institutions. Once a doctor agreed to use Pfizer products, a percentage of the value purchased by a doctor’s institution would be funneled back to the doctor in the form of cash, international travel, or free products.

According to the SEC’s complaint, Pfizer made an initial voluntary disclosure of misconduct by its subsidiaries to the SEC and Department of Justice in October 2004, and fully cooperated with SEC investigators. Pfizer took such extensive remedial actions as undertaking a comprehensive worldwide review of its compliance program.

The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations primarily before but also after the company’s acquisition by Pfizer in late 2009. Starting at least in 2005, subsidiaries marketing Wyeth nutritional products in China, Indonesia, and Pakistan bribed government doctors to recommend their products to patients by making cash payments or in some cases providing BlackBerrys and cell phones or travel incentives. They often used fictitious invoices to conceal the true nature of the payments. In Saudi Arabia, Wyeth’s subsidiary made an improper cash payment to a customs official to secure the release of a shipment of promotional items used for marketing purposes. The promotional items were held in port because Wyeth Saudi Arabia had failed to secure a required Saudi Arabian Standards Organization Certificate of Conformity.

Following Pfizer’s acquisition of Wyeth, Pfizer undertook a risk-based FCPA due diligence review of Wyeth’s global operations and voluntarily reported the findings to the SEC staff. Pfizer diligently and promptly integrated Wyeth’s legacy operations into its compliance program and cooperated fully with SEC investigators.

In settling the SEC’s charges, Wyeth neither admitted nor denied the allegations. Pfizer consented to the entry of a final judgment ordering it to pay disgorgement of $16,032,676 in net profits and prejudgment interest of $10,307,268 for a total of $26,339,944. Wyeth also is required to report to the SEC on the status of its remediation and implementation of compliance measures over a two-year period, and is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Wyeth consented to the entry of a final judgment ordering it to pay disgorgement of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth’s remediation and implementation of compliance measures will be subsumed in Pfizer’s two-year self-reporting period. Wyeth also is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The settlements are subject to court approval.

The U.S. Securities and Exchange Commission today announced that, on July 20, 2012, the United States District Court for the Northern District of California entered a settled final judgment against Kenneth E. Lonchar, the former Chief Financial Officer of Veritas Software Corporation, in SEC v. Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully, and Douglas S. Newton, Civil Action No. 07 CV 3444 (CW) (N.D. Cal. filed July 2, 2007).

The final judgment resolves the Commission’s case against Lonchar, the last remaining defendant in the Commission’s action against certain former Veritas Software Corporation executives. The Commission’s amended complaint alleges that Lonchar and other executives inflated Veritas’ reported revenues by approximately $20 million in connection with a software sale to America Online, Inc. The complaint further alleges that from at least 2000 until his resignation in 2002, Lonchar and others applied three improper accounting practices to “smooth” artificially Veritas’ financial results.

Without admitting or denying the allegations in the complaint, Lonchar consented to entry of a final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and ordering him to pay disgorgement and prejudgment interest of $300,000 and a civil penalty of $100,000.

On August 2, 2012, the Commission issued an Order in a related, settled administrative proceeding suspending Lonchar from appearing or practicing before the Commission as an accountant with the right to request reinstatement after five (5) years from the date of the Order, pursuant to Rule 102(e) of the Commission’s Rules of Practice. The suspension is based on the entry of the final judgment in SEC v. Leslie, et al., enjoining Lonchar from future violations of the antifraud provisions of the Exchange Act. Without admitting to the findings in the Commission’s Order, except as to jurisdiction and the entry of the final judgment, Lonchar consented to the issuance of the Order.

The Securities and Exchange Commission today charged New York-based investment manager Peter Siris and two of his firms with a host of securities law violations mostly related to his activities with a Chinese reverse merger company, China Yingxia International Inc.

The SEC alleges that Siris, an active investor in Chinese companies and former newspaper money columnist, misled investors in his two hedge funds through which he invested $1.5 million in China Yingxia. Siris understated his involvement with the company particularly after it went out of business, and used his insider status to make illegal trades based on nonpublic information as he received it. In an attempt to circumvent the registration provisions of the securities laws, Siris also received shares from the China Yingxia CEO’s father and improperly sold them without any registration statement in effect. Siris further engaged in insider trading ahead of 10 confidentially solicited offerings for other Chinese issuers.

Siris and his firms agreed to pay more than $1.1 million to settle the SEC’s charges. The SEC also separately charged five individuals and one firm for securities law violations related to China Yingxia.

“Siris operated by his own set of rules in his dealings with China Yingxia and other Chinese issuers,” said Andrew M. Calamari, Acting Director of the SEC’s New York Regional Office. “He was the go-to person when Chinese reverse merger companies wanted to raise capital or needed advice about operations, but he used his prominence and reputation in this area to illegally game the system to his advantage.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Siris and his firms Guerrilla Capital Management LLC and Hua Mei 21st Century LLC became involved with China Yingxia in 2007 and their misconduct continued until 2010. Along with being one of three “consultants” that improperly raised money for China Yingxia, Siris and Hua Mei acted as advisers to the purported nutritional foods company.

Insider Trading and Illegal Short Selling

The SEC alleges that in February and March 2009, Siris sold China Yingxia stock while in possession of material, nonpublic information about problems at China Yingxia that he learned directly from the CEO. This confidential information included that she had engaged in illegal fundraising activities in China and that a company factory had shut down. Siris immediately began selling hundreds of thousands of shares of China Yingxia stock prior to any public disclosure by China Yingxia about these issues. Siris learned additional material, nonpublic information during the late afternoon of March 3, 2009, when he received a draft press release and notice that China Yingxia planned to publicly disclose the problems. Siris increased his orders to sell over the next couple of days before China Yingxia issued its press release publicly on March 6. Siris, through his funds, sold 1,143,660 China Yingxia shares in a matter of weeks for ill-gotten gains of approximately $172,000.

According to the SEC’s complaint, Siris and Guerrilla Capital Management also engaged in illegal insider trading ahead of 10 offering announcements for other Chinese issuers and made approximately $162,000 in ill-gotten gains. After expressly agreeing to go “over-the-wall,” which included a prohibition on trading, Siris traded ahead of the offering announcements in breach of his duty not to trade on such information.

The SEC further alleges that Siris sold short the securities of two Chinese companies prior to participating in firm-commitment offerings.

Fraudulent Representations in a Securities Purchase Agreement

The SEC alleges that in order to induce at least one issuer to sell securities to his funds, Siris falsely represented in a securities purchase agreement that his funds had not engaged in any trading after being contacted in confidence about a particular deal, when in fact his funds had effected sales in that issuer’s securities. Siris directed short sales of a Chinese issuer on Dec. 9, 2009, despite going “over-the-wall” in original solicitation discussions, and nevertheless Siris signed a securities purchase agreement later that afternoon that misrepresented he had not traded in those securities. The following morning, Siris directed additional sales of the company’s shares before the public announcement of the offering. Siris realized illegal insider trading gains.

Materially Misleading Disclosures to Fund Investors

The SEC alleges that Siris generally disclosed that he and his consulting firm Hua Mei, may provide services to Chinese issuers, but he did not disclose the depth of his involvement in China Yingxia. Investors were not informed that Siris and his firm provided drafting assistance for press releases and SEC filings, translation services, management preparation in advance of conference calls, and officer recommendations. By omitting key facts and making misrepresentations about his role with the company, Siris deprived his investors of material information that could have impacted their continued investment decisions with his funds. Furthermore, when China Yingxia later collapsed, Siris wrote to his investors and placed blame on others he claimed were responsible for the SEC filings and key hiring decisions while omitting his significant role in these very same tasks.

Acting as an Unregistered Securities Broker

The SEC alleges that Siris, who was not registered as a broker or dealer nor associated with a registered broker-dealer, acted as an unregistered broker during China Yingxia’s second securities offering, as he raised more than $2 million worth of investments. In a backdated consulting agreement, Siris through Hua Mei in fact received transaction-based fees for leading fundraising efforts for China Yingxia and not for providing consulting services. No disclosures were made to potential or actual investors concerning payments to three so-called consultants including Siris, who sold China Yingxia securities.

Improper Unregistered Sale of Securities

The SEC alleges that Siris and Hua Mei improperly sold securities that Hua Mei received from China Yingxia in a sham agreement intended to hide the fact that they were shares from a person controlled by the company. China Yingxia agreed to pay Siris for due diligence he conducted in connection with his lead investment in the company’s July 2007 PIPE offering. The company transferred shares to Siris with the appearance that they came from a shareholder to reimburse him for services performed for that shareholder. In fact, the sham agreement was simply a means for China Yingxia to provide Hua Mei with shares believed to be immediately eligible for sale, because had the company issued the shares directly to Hua Mei, they would have been restricted stock subject to holding period and other requirements for resale. The shareholder and source of the shares was later revealed to be the father of China Yingxia’s CEO – someone who was in fact a person directly or indirectly controlled by the issuer.

The SEC’s complaint against Siris and his entities alleges violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, Rule 105 of Regulation M, and Section 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-8 thereunder. Without admitting or denying the allegations, Siris and his firms agreed to pay $592,942.39 in disgorgement and $70,488.83 prejudgment interest. Siris agreed to pay a penalty of $464,011.93. They also consented to the entry of a judgment enjoining them from violations of the respective provisions of the Securities Act, Exchange Act, and Advisers Act. The settlement is subject to court approval.

Also charged for securities law violations related to China Yingxia:

• Ren Hu – the former CFO of China Yingxia made fraudulent representations in Sarbanes-Oxley (SOX) certifications, lied to auditors, failed to implement internal accounting controls, and aided and abetted China Yingxia’s failure to implement internal controls.
• Peter Dong Zhou – engaged in insider trading and unregistered sales of securities and aided and abetted unregistered broker-dealer activity while assisting China Yingxia with its reverse merger and virtually all of its public company tasks. Without admitting or denying the charges, Zhou agreed to pay $20,900 in disgorgement, $2,463.39 in prejudgment interest, and a penalty $50,000. He agreed to a three-year collateral bar, penny stock bar, and investment company bar.
• Alan Sheinwald and his investor relations firm Alliance Advisors LLC – were retained as “consultants” to China Yingxia and acted as unregistered securities brokers while raising money for China Yingxia and at least one other issuer.
• Steve Mazur – acted as an unregistered securities broker while selling away from his firm the securities of China Yingxia and one other issuer. Without admitting or denying the charges, Mazur agreed to pay $126,800 in disgorgement, $25,550.01 in prejudgment interest, and a penalty of $25,000. He agreed to a two-year collateral bar, penny stock bar, and investment company bar.
• James Fuld, Jr. – involved in the unregistered sales of securities. Without admitting or denying the charges, he agreed to pay $178,594.85 in disgorgement and $38,096.70 in prejudgment interest.

Mr. Calamari said, “With these charges, the SEC continues to make good on its commitment to hold accountable those who enable some Chinese reverse merger firms to take unfair advantage of investors in the U.S. capital markets.”

The Securities and Exchange Commission has charged the close friend of a CEO with insider trading in the stock of a Houston-based employment services company by exploiting confidential information he learned while they were spending time together.

The SEC alleges that Ladislav “Larry” Schvacho, who lived in Georgia at the time of his illegal trading, made approximately $511,000 in illicit profits by using inside information to trade around the acquisition of Comsys IT Partners Inc. by another staffing company. Schvacho gleaned nonpublic information while the Comsys CEO called other Comsys executives to discuss the acquisition and through confidential, merger-related documents to which Schvacho had access.

“As a result of Schvacho’s time with the CEO, he learned nonpublic details and stockpiled Comsys shares until it became by far the largest stock investment that he’d ever made into a single company,” said William P. Hicks, Associate Regional Director of the SEC’s Atlanta Regional Office. “The Comsys CEO confided in Schvacho, who exploited that trust and stole information for a half-million-dollar payday.”

According to the SEC’s complaint filed late yesterday in U.S. District Court for the Northern District of Georgia, Schvacho first met Larry L. Enterline when they worked for the same company in the 1970s. Enterline went on to become the Comsys CEO in 2006. The two maintained their close friendship even after Enterline moved to Houston to run Comsys, speaking frequently on the phone and maintaining a longstanding tradition of Friday evening dinner and drinks when Enterline visited Atlanta, where he still had a home. The two often shared confidential information with one another.

The SEC alleges that Schvacho purchased approximately 72,000 shares of Comsys stock in the weeks leading up to a public announcement on Feb. 2, 2010, that Comsys was to be acquired by Manpower Inc. Given their close relationship and long history of sharing confidences, Enterline made no significant effort to shield information about the impending acquisition from Schvacho. Rather, Enterline reasonably expected that Schvacho would refrain from disclosing or otherwise misusing the confidential information. For example, during one of their Friday evening dinners at a restaurant in Atlanta on Nov. 6, 2009, Enterline discussed the potential acquisition in Schvacho’s presence during phone conversations with one or more Comsys senior executives. On the very next business day (November 9), Schvacho began purchasing Comsys stock relying on the material, nonpublic information he learned.

The SEC further alleges that Schvacho learned nonpublic information between December 11 and December 14 while he and Enterline vacationed together in Florida. Enterline again discussed the possible acquisition in Schvacho’s presence during a phone conversation with another Comsys senior executive. During that vacation, Schvacho also had access to Enterline’s merger-related documents. Just days later, Schvacho bought additional Comsys stock. On December 19, Enterline again discussed the impending acquisition in Schvacho’s presence during a phone conversation after Schvacho picked him up from the airport. On the next business day, Schvacho purchased additional Comsys shares.

According to the SEC’s complaint, on or about January 20, Schvacho converted his 401(k) account to create a self-directed account so that he could buy even more Comsys shares based on material, nonpublic information about the deal. In order to purchase his large position in Comsys stock, Schvacho undertook other various unusual steps including using all available cash in his brokerage accounts to purchase Comsys shares. The Comsys stock price increased approximately 31 percent following the public announcement on February 2. Schvacho immediately sold half of his Comsys shares after the announcement was made.

The Securities and Exchange Commission today charged a Chicago-based consulting firm and two of its former executives with accounting violations that overstated the company’s income for multiple years.

The SEC found that Huron Consulting Group Inc., a provider of financial and operational consulting services to clients in various industries, failed to properly record redistributions of sales proceeds by the selling shareholders of four firms acquired by Huron. The selling shareholders redistributed the money to employees at those firms who stayed on to work at Huron as well as other Huron employees and themselves. Because the redistributions were contingent on the employees’ continued employment with Huron, based on the achievement of personal performance measures, or not clearly for a purpose other than compensation, Huron should have recorded the redistributions as compensation expense in its financial statements. By failing to do so, Huron overstated its pre-tax income to the public. Former chief financial officer Gary Burge and former controller and chief accounting officer Wayne Lipski oversaw these accounting decisions at Huron.

Huron agreed to settle the SEC’s charges by paying a $1 million penalty, and Burge and Lipski agreed to pay a total of nearly $300,000 in disgorgement and penalties to settle the charges against them.

“Huron’s income overstatements obscured the fact that a substantial portion of the money it paid to acquire other consulting firms was being used to retain professional talent at the firm,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “Huron, Burge, and Lipski should have known that their flawed accounting gave investors a misleading impression of the profitability of Huron’s acquisitions.”

According to the SEC’s order instituting settled cease-and-desist proceedings, Huron’s financial statements for 2006, 2007, 2008, and the first quarter of 2009 were materially misstated as a result of these accounting failures. In August 2009, Huron restated those financial statements, thus reducing its net income by approximately $56 million.

The SEC’s order finds that in January 2008, Huron, Burge and Lipski considered an SEC Staff Accounting Bulletin, which referenced accounting principles applicable to the redistributions, but that they subsequently did not determine the full impact of the accounting principles on the company’s financial statements. As a result, Huron publicly overstated its pre-tax income by 3.7 percent for 2005, 6.09 percent for 2006, 30.45 percent for 2007, 68.59 percent for 2008, and 25.29 percent for the first quarter of 2009.

The SEC’s order finds that Huron violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13a-13 thereunder. The order finds that Burge and Lipski caused Huron’s violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13, and that they violated Rule 13b2-1.

In agreeing to settle the charges without admitting or denying the SEC’s findings, Huron consented to the SEC’s order imposing a $1 million penalty and requiring the company to cease and desist from committing or causing any violations or any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Burge and Lipski, without admitting or denying the SEC’s findings, also consented to the order, which requires Burge to pay disgorgement of $147,763.12, prejudgment interest of $30,338.46, and a penalty of $50,000, and requires Lipski to pay disgorgement of $12,750, prejudgment interest of $3,584.94, and a penalty of $50,000. The order also requires Burge and Lipski to cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 13b2-1.

Cited from the Wall Street Journal:

“A hedge-fund manager who allegedly invested with convicted Ponzi scheme operators Samuel Israel III and Arthur Nadel has been himself been charged with fraud, according to court documents made public Tuesday.

Chetan Kapur, the sole managing principal of ThinkStrategy Capital Management LLC, was arrested by Federal Bureau of Investigation agents at John F. Kennedy International Airport about 9:30 p.m. EST Tuesday, said Peter Donald, a FBI spokesman in New York.

Mr. Kapur has been charged with securities fraud, investment-adviser fraud and four counts of wire fraud, according to a grand jury indictment unsealed Tuesday.

A lawyer for Mr. Kapur didn’t immediately return a phone call seeking comment. A call to a spokesman for ThinkStrategy wasn’t immediately returned.

Mr. Kapur was ordered detained at a hearing in Manhattan federal court.

In a separate civil complaint last year, the Securities and Exchange Commission alleged that Mr. Kapur allegedly invested ThinkStrategy funds with Mr. Israel III and Mr. Nadel without conducting thorough due diligence.

Mr. Nadel, dubbed by some as the “mini Madoff,” died at the age of 80 in April in a North Carolina federal prison. He was arrested in 2009, shortly after convicted Ponzi schemer Bernard Madoff‘s fraud came to light, and admitted to criminal charges in February 2010.

Mr. Israel, 52 years old, is serving a 20-year sentence after pleading guilty in 2005 to defrauding clients out of more than $400 million.

Mr. Kapur and his firm also allegedly made misrepresentations to investors about the performance, longevity and assets of the funds they managed, as well as the credentials and experience of ThinkStrategy’s management team, the SEC said in its lawsuit.

At its peak in 2008, ThinkStrategy managed about $520 million in assets, the SEC said in its lawsuit. The company was formed by Mr. Kapur in November 2002.

ThinkStrategy and Mr. Kapur, an Indian citizen and New York resident, agreed to settle with the SEC last year.

Mr. Kapur, who didn’t admit or deny wrongdoing in the SEC case, agreed to pay disgorgement and penalties and was barred from the securities industry.”

The Securities and Exchange Commission today charged Texas-based medical device company Orthofix International N.V. with violating the Foreign Corrupt Practices Act (FCPA) when a subsidiary paid routine bribes referred to as “chocolates” to Mexican officials in order to obtain lucrative sales contracts with government hospitals.

The SEC alleges that Orthofix’s Mexican subsidiary Promeca S.A. de C.V. bribed officials at Mexico’s government-owned health care and social services institution Instituto Mexicano del Seguro Social (IMSS). The “chocolates” came in the form of cash, laptop computers, televisions, and appliances that were provided directly to Mexican government officials or indirectly through front companies that the officials owned. The bribery scheme lasted for several years and yielded nearly $5 million in illegal profits for the Orthofix subsidiary.

Orthofix agreed to pay $5.2 million to settle the SEC’s charges.

“Once bribery has been likened to a box of chocolates, you know a corruptive culture has permeated your business,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “Orthofix’s lax oversight allowed its subsidiary to illicitly spend more than $300,000 to sweeten the deals with Mexican officials.”

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, the bribes began in 2003 and continued until 2010. Initially, Promeca falsely recorded the bribes as cash advances and falsified its invoices to support the expenditures. Later, when the bribes got much larger, Promeca falsely recorded them as promotional and training costs. Because of the bribery scheme, Promeca’s training and promotional expenses were significantly over budget. Orthofix did launch an inquiry into these expenses, but did very little to investigate or diminish the excessive spending. Later, upon discovery of the bribe payments through a Promeca executive, Orthofix immediately self-reported the matter to the SEC and implemented significant remedial measures. The company terminated the Promeca executives who orchestrated the bribery scheme.

The SEC’s proposed settlement is subject to court approval. Orthofix consented to a final judgment ordering it to pay $4,983,644 in disgorgement and more than $242,000 in prejudgment interest. The final judgment would permanently enjoined the company from violating the books and records and internal controls provisions of the FCPA. Orthofix also agreed to certain undertakings, including monitoring its FCPA compliance program and reporting back to the SEC for a two-year period.

Orthofix also disclosed today in an 8-K filing that it has reached an agreement with the U.S. Department of Justice to pay a $2.22 million penalty in a related action.

The Securities and Exchange Commission today obtained a court order to freeze the assets of a Georgia-based investment adviser who has apparently gone into hiding after orchestrating a $40 million investment fraud.

The SEC alleges that Aubrey Lee Price raised money from more than 100 investors living primarily in Georgia and Florida by selling shares in an unregistered investment fund (PFG) that he managed. Price purported to invest fund assets in traditional marketable securities, but he also made illiquid investments in South America real estate and a troubled South Georgia bank. In order to conceal mounting losses of investor funds, Price created bogus account statements with false account balances and returns that were provided to investors and bank regulators.

“Price raised nearly $40 million from investors and made woeful financial transactions that he hid from them,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office. “Now both the money and Price are missing.”

According to the SEC’s complaint filed in U.S. District Court for the Northern District of Georgia, Price is believed to be a resident of Lowndes County in Georgia after moving from Manatee County, Fla.

The SEC alleges that Price began his scheme in 2008. According to PFG’s private placement memorandum, the investment objective was to achieve “positive total returns with low volatility” by investing in a variety of opportunities, including equity securities traded on the U.S. markets. A significant portion of PFG investor funds – approximately $36.9 million – was placed in a securities trading account at a broker-dealer. The trading account suffered massive trading losses and money was frequently wire-transferred to PFG’s operating bank account. Throughout the time during which PFG suffered trading losses, client account statements prepared by Price were made available to investors indicating fictitious amounts of assets and investment returns.

According to the SEC’s complaint, Price has sent a letter to some individuals dated June 2012 and titled “Confidential Confession For Regulators – PFG, LLC and PFGBI, LLC Summary.” In the 22-page letter, Price admits that he “falsified statements with false returns” in order to conceal between $20 million and $23 million in investor losses.

The Securities and Exchange Commission today charged Peter Madoff, the brother of Bernie Madoff, with committing fraud, making false statements to regulators, and falsifying books and records in order to create the false appearance of a functioning compliance program over Madoff’s fraudulent investment advisory operations.

The SEC alleges that Peter Madoff, who served as Chief Compliance Officer and Senior Managing Director at Bernard L. Madoff Investment Securities LLC (BMIS) from 1969 to December 2008, created stacks of compliance documents setting out supposedly robust policies and procedures over BMIS’s investment advisory operations. However, Peter Madoff created these compliance manuals, written supervisory procedures, reports of annual compliance reviews, and compliance certifications to merely paper the file. No policies and procedures were ever implemented, and none of the reviews were actually performed even though Peter Madoff represented that he personally completed the reviews.

The U.S. Attorney’s Office for the Southern District of New York today announced parallel criminal charges against Peter Madoff.

“Peter Madoff helped Bernie Madoff create the image of a functioning compliance program purportedly overseen by sophisticated financial professionals,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Tragically, the image was merely an illusion supported by Peter’s sham paperwork and false filings for which he was rewarded with tens of millions of dollars in stolen investor funds.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Bernie Madoff realized in late 2008 that his decades-long scheme was on the verge of collapse. He told Peter Madoff that he could not pay billions of dollars of investor redemption requests and wanted to distribute remaining investor money to family, friends, and favored employees before the scheme collapsed. Peter Madoff then helped choose which family, friends and employees to pay, and rushed to withdraw $200,000 from BMIS’s bank account for himself before the fraud’s final downfall.

The SEC alleges that in addition to creating false compliance materials, Peter Madoff created false broker-dealer and investment advisor registration applications filed by BMIS. He also failed to implement and review required policies and procedures, and falsified the firm’s books and records. Peter Madoff was richly rewarded for his misconduct, pocketing tens of millions of dollars through salary and bonuses, fake trades, sham loans, and direct, undocumented transfers of investor funds to himself from the bank account that BMIS used to perpetrate the Ponzi scheme.

The SEC’s complaint against Peter Madoff alleges that by engaging in this conduct, he violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 207 of the Investment Advisers Act of 1940; and aided and abetted violations of Sections 15(b)(1), 15(c) and 17(a) of the Exchange Act and Rules 10b-3, 15b3-1 and 17a-3 thereunder, and Sections 204, 206(1), 206(2), 206(4) and 207 of the Advisers Act and Rules 204-2 and 206(4)-7 thereunder. Among other things, the SEC’s complaint seeks financial penalties and a court order requiring Peter Madoff to disgorge his ill-gotten gains.