3 COMPANIES AND INVESTMENT ADVISER REPRESENTATIVE CHARGED BY SEC WITH SECURITIES FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Atlanta-Based Investment Adviser Representative and Related Companies with Securities Fraud

On September 11, 2013, the Securities and Exchange Commission filed an emergency action seeking a temporary restraining order and other emergency relief in federal court in the Northern District of Georgia, charging Paul Marshall (Marshall), a state-registered investment adviser representative, and three Atlanta-based companies that he owned and controlled - Bridge Securities, LLC, Bridge Equity, Inc. (collectively, the Bridge Entities) and FOGFuels, Inc. (FOGFuels) - with violations of the federal securities laws for misappropriating client funds.

According to the Commission's complaint, since at least 2011, Marshall, an investment adviser representative of the Bridge Entities, misappropriated at least $2 million from advisory clients. In its complaint, the Commission alleges that Marshall instructed clients, some of whom were elderly, to transfer funds to bank accounts under his control for purported investment in various securities, including mutual funds. Instead, Marshall used those client funds to pay personal expenses, including luxury vacations and private school tuition for his children. The complaint further alleges that Marshall concealed his fraud by providing advisory clients with fabricated account statements.

Additionally, the Commission's complaint alleges that Marshall, currently the majority owner and Managing Director of purported alternative fuel company FOGFuels, misappropriated $100,000 from an advisory client who invested in that company.

The Commission's complaint alleges that, through their misconduct, Marshall, the Bridge Entities, and FOGFuels violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and that Marshall and FOGFuels violated Section 17(a) of the Securities Act of 1933. Finally, the complaint alleges that Marshall and the Bridge Entities violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

On September 11, 2013, the Honorable Timothy C. Batten, Sr., United States District Judge for the Northern District of Georgia, granted the Commission's request for emergency relief, issuing an order temporarily restraining Marshall, the Bridge Entities and FOGFuels from further securities laws violations, freezing their assets, preventing the destruction of documents, requiring an accounting, and expediting discovery. The Court also set a hearing date of September 20, 2013 for the Commission's request for a preliminary injunction. The Commission's complaint also seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. Those claims will be adjudicated at a later date.

HEDGE FUND MANAGER AGREES TO PAY $1.8 MILLION FOR ALLEGED ROLE IIN INSIDER TRADING CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION

California Hedge Fund Manager Agrees to $1.8 Million Settlement in Galleon-Related Insider Trading Case

The Securities and Exchange Commission announced today that the Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York has entered a final judgment approving a $1.8 million settlement between the SEC and hedge fund manager Douglas F. Whitman and his firm Whitman Capital in a case that arose from the SEC's investigation of widespread insider trading perpetrated by Raj Rajaratnam of Gallon Management and other hedge fund managers.

In its February 2012 action, SEC v. Douglas F. Whitman et al., 12-CV-1055 (SDNY) (JSR), the SEC alleged that Whitman and Whitman Capital illegally traded based on material nonpublic information obtained from Rajaratnam associate Roomy Khan, who was Whitman's friend and neighbor. Khan tipped Whitman with confidential details about Polycom Inc.'s fourth quarter 2005 earnings and Google Inc.'s second quarter 2007 earnings prior to the public announcements of those financial results by the companies. Khan had received the material non-public information that she conveyed to Whitman from a high-ranking executive at Polycom and from an employee of an investor relations firm retained by Google. According to the SEC complaint, hedge funds managed by Whitman Capital reaped over $900,000 in ill-gotten gains by trading on Khan's illegal tips.

On August 21, 2012, in the parallel criminal case arising out of the same facts, Whitman was convicted of two counts of conspiracy to commit securities fraud and two counts of securities fraud. On January 29, 2012, Whitman was sentenced to two years in prison, followed by one year of supervised release, and ordered to pay forfeiture of $935,306, and a $250,000 criminal fine.

The final judgment in the SEC action permanently enjoins Whitman and Whitman Capital from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. It also requires Whitman and Whitman Capital to jointly and severally disgorge $935,306, and orders Whitman to pay a civil penalty in the amount of $935,306. Pursuant to the final judgment, Whitman's civil disgorgement liability will be offset by his obligation to make criminal forfeiture of the same amount. The imposition of the civil penalty is in addition to the criminal fine that has been assessed. Separately, Whitman has also agreed to be barred from the securities industry.

FORMER COUNSEL SETTLES SUIT ALLEGING STOCK OPTIONS BACKDATING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Susan Skaer, former General Counsel of Mercury Interactive Corporation, to be Permanently Enjoined and to Pay Civil Penalties and Disgorgement, and to be Barred from Practicing or Appearing as an Attorney Before the Commission

The Securities and Exchange Commission today settled civil fraud charges against Susan Skaer, the former General Counsel and Secretary of Mercury Interactive Corporation (Mercury), arising from an alleged scheme to backdate stock option grants and from other alleged misconduct.

On May 31, 2007, the Commission charged three other former senior Mercury officers and Skaer with perpetrating a scheme from 1997 to 2005 to award Mercury executives and other employees undisclosed, secret compensation by backdating stock option grants and failing to record hundreds of millions of dollars of compensation expense. The Commission's Complaint also alleged other misconduct by Skaer related to the award of stock options to Mercury executives and employees.

Without admitting or denying the allegations in the Commission's complaint, Skaer consented to the entry of a final judgment permanently enjoining her from violating and/or aiding and abetting violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as well as the financial reporting, record-keeping, internal controls, false statements to auditors, and proxy provisions of the federal securities laws. Skaer will pay $628,037 in disgorgement and prejudgment interest, representing the "in-the-money" benefit from her exercise of backdated option grants, and a $225,000 civil penalty. The settlement is subject to the approval of the United States District Court for the Northern District of California.

As part of the settlement, and following the entry of the proposed final judgment, Skaer, without admitting or denying the Commission's findings, has consented to the entry of a Commission order, pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending her from appearing or practicing before the Commission as an attorney.

The settlement with Skaer, if approved, will conclude the litigation. The Commission previously filed settled charges against Mercury and three former outside directors of Mercury. On May 31, 2007, the Commission filed civil fraud charges against Mercury based on the stock option backdating scheme and other fraudulent conduct noted above. Mercury, which was acquired by Hewlett-Packard Company on November 8, 2006, after the alleged misconduct, settled the matter by agreeing to pay a $28 million penalty and to be permanently enjoined.  in a separate action, the Commission filed settled charges against three former outside directors of Mercury alleging that they recklessly approved backdated stock option grants and reviewed and signed public filings that contained materially false and misleading disclosures about the company's stock option grants and company expenses. The outside directors settled the matter by consenting to permanent injunctions and the payment by each director of a $100,000 penalty. The Commission also previously settled with three of the four senior officers in its contested action. On March 20, 2009, the Commission settled with former Mercury CFO Sharlene Abrams by which she agreed to entry of a permanent injunction against the antifraud and certain other securities law provisions, to pay $2,287,914 in disgorgement which was deemed partially satisfied by payment to Mercury, to pay a $425,000 civil penalty, to be permanently barred from serving as an officer and director of any public company, and to a Commission order barring her from appearing or practicing before the Commission as an accountant. On February 21, 2013, the Commission settled with former Mercury CEO Amnon Landan and former Mercury CFO Douglas Smith. Landan agreed to entry of a permanent injunction against the antifraud and certain other securities law provisions, to pay $1,252,822 in disgorgement and prejudgment interest, to pay a $1,000,000 civil penalty, to be barred from serving as an officer and director of any public company for five years, and to reimburse Mercury, pursuant to Section 304 of the Sarbanes-Oxley Act, $5,064,678 for cash bonuses and profits from the sale of Mercury stock. Smith agreed to a permanent injunction against future violations of certain of the antifraud provisions, to pay $451,200 in disgorgement satisfied by a prior repayment to Mercury, to pay a $100,000 civil penalty, and to reimburse Mercury, pursuant to Section 304 of the Sarbanes-Oxley Act, $2,814,687 for profits received from the sale of Mercury stock, all but $250,000 of which was deemed satisfied by prior cash repayments and foregoing of rights to exercise vested options to the benefit of Mercury.  Landan, Abrams and Smith each settled without admitting or denying the allegations in the Commission's complaint

FORMER OFFICER OF MASSACHUSETTS-BASED CORPORATION SENTENCED TO 60 MONTHS’ IMPRISONMENT FOR SECURITIES FRAUD

FROM: SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission announced today that, on February 26, 2013, the Honorable Douglas P. Woodlock of the United States District Court for the District of Massachusetts sentenced James C. Fields of Brookline, Massachusetts, to 60 months imprisonment, to be followed by three years of supervised release, and the payment of restitution to be determined at a later hearing. Fields is the former chief financial officer and former chief executive officer of LocatePlus Holdings Corporation, a Massachusetts-based information technology company that sold on-line access to public record databases for investigative searches. Fields was found guilty after a jury trial and was sentenced on 28 criminal charges including securities fraud, false statements to company auditors, false statements and false certifications in SEC filings.

On November 10, 2010, the United States Attorney’s Office for the District of Massachusetts charged Fields and former LocatePlus chief executive officer Jon Latorella with conspiracy to commit securities fraud for their role in a scheme to fraudulently inflate revenue at LocatePlus as well as a scheme to manipulate the stock of another company. On the same date, the Commission amended a previously-filed civil injunctive action against LocatePlus arising out of the same conduct, to add both Fields and Latorella as defendants. The Commission’s civil injunctive action, which is still pending, has been stayed until the conclusion of the criminal cases against Fields and Latorella.

FATHER AND SON HEDGE FUNDERS CHARGED WITH FRAUD BY SEC

FROM:  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., April 20, 2012 – The Securities and Exchange Commission today charged a Boston-based father-son duo of hedge fund managers and their firms with securities fraud for misleading investors about their investment strategy and past performance.

The SEC’s investigation found that Gabriel and Marco Bitran raised millions of dollars for their hedge funds through GMB Capital Management LLC and GMB Capital Partners LLC by falsely telling investors they had a lengthy track record of success based on actual trades using real money. In truth, the Bitrans knew the track record was based on back-tested hypothetical simulations. The Bitrans also misled investors in certain hedge funds to believe they used quantitative optimal pricing models devised by Gabriel Bitran to invest in exchange-traded funds (ETFs) and other liquid securities. Instead, they merely invested the money almost entirely in other hedge funds. GMB Capital Management later provided false documents to SEC staff examining the firm’s claims in marketing materials of a successful track record.

The Bitrans agreed to be barred from the securities industry and pay a total of $4.8 million to settle the SEC’s charges.

“The Bitrans solicited investors by touting an impressive track record and a unique investment strategy, and they lied about both,” said David P. Bergers, Director of the SEC’s Boston Regional Office.

According to the SEC’s order instituting settled administrative proceedings, Gabriel Bitran founded GMB Capital Management in 2005 for the stated purpose of managing hedge funds using quantitative models he developed based on his academic optimal pricing research to trade primarily ETFs. He and his son Marco Bitran solicited potential investors with three primary selling points:
Very successful performance track records based on actual trades using real money from 1998 to the inception of the hedge funds.

The firm’s use of Gabriel Bitran’s proprietary optimal pricing model to trade ETFs.
Gabriel Bitran’s involvement as founder and portfolio manager of the funds.
The SEC’s order states that over a period of three years, the Bitrans raised more than $500 million for eight hedge funds and various managed accounts while making these misrepresentations to investors. In order to market the hedge funds, GMB Management and the Bitrans created performance track records beginning in January 1998 showing double-digit annualized return without any down years. They distributed these track records to potential investors in marketing materials, and told investors that they were based on actual trading with real money using Gabriel Bitran’s optimal pricing models. In reality, the Bitrans knew their representations were false and the track records were based on hypothetical historical investments. For two of their hedge funds, they created track records showing annualized returns of 16.2 percent and 11.7 percent with no down years, and told investors the returns were based on actual trading when in fact they were based on hypothetical historical allocations to hedge fund managers.

According to the SEC’s order, investors were misled to believe their money was being invested according to Gabriel Bitran’s unique quant strategy when in reality certain GMB hedge funds were merely investing predominantly in other hedge funds without his involvement. For example, investors in two GMB hedge funds were told that Gabriel Bitran spent 80 percent of his time managing the funds and was involved in reviewing trades in the funds on a daily basis. However, he actually had no role in the management of either fund. Both funds experienced a series of losses at the end of 2008, and GMB eventually dissolved them. When a possible financial fraud at the Petters Group Worldwide was reported in late September 2008, the two hedge funds’ investments in a fund that was entirely invested in the Petters Group became illiquid. However, GMB did not disclose to investors that it had been impacted by the Petters fraud, instead sending investors a letter stating that “a swap instrument that the Fund entered into seeking to realize a higher return on a portion of its uninvested cash” had become illiquid because “one of the parties underlying the swap instrument is currently experiencing a credit and liquidity crisis, in conjunction with other alleged factors.” Furthermore, the two GMB funds suffered significant losses in hedge funds that had invested with Bernard Madoff. These investments in funds that ultimately invested with the Petters Group and Madoff were made contrary to what GMB investors were told.

According to the SEC’s order, during an SEC examination of GMB Capital Management, the firm produced a document that the Bitrans claimed was a real-time record of Gabriel Bitran’s trades since 1998. In fact, the document was false and created solely for the purpose of responding to the SEC staff’s request for the books and records that supported GMB’s performance claims.

The GMB entities and the Bitrans neither admitted nor denied the SEC’s findings in settling the charges. They agreed to pay disgorgement of $4.3 million. Gabriel and Marco Bitran also agreed to pay $250,000 each in penalties and be barred from the securities industry, and the GMB entities will be censured. The SEC’s order requires the Bitrans and the GMB entities to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2) and 206(4) of the Advisers Act and Rules 204-2(a)(16) and 206(4)-8 thereunder.

The SEC’s investigation was conducted by Kerry Dakin, Kevin Kelcourse, and Kathleen Shields of the Boston Regional Office. Paul Prata, Elizabeth Ward, and Milton Pepin of the Boston Regional Office worked on the SEC’s examination. Stuart Jackson of the SEC’s Division of Risk, Strategy, and Financial Innovation assisted in the investigation.