Recently in Securities Fraud Category

Tennessee Woman Pleads Guilty to Possession of Counterfeit Securities and Money Laundering

November 17, 2011, by The McKellar Law Firm, PLLC

An Eastern Tennessee woman has pled guilty to one count of possession of counterfeit securities and one count of money laundering in the U.S. District Court of Eastern Tennessee.

748507_the_almighty_dollar_2.jpg

Joan Black of Maynardville, Tennessee admitted before a judge that in 2007 she began soliciting investors to purchase annuities through her company, Benefit Capital, Inc. Part of her solicitation consisted of promising the investors that an insurance company in Galveston, Texas guaranteed to pay an annual interest rate of 10% on the annuities. In reality, Ms. Black created fake portfolios by printing the name and logo of the Galveston insurance company at a print shop in Knoxville. The insurance company had no knowledge that their name and logo were being fraudulently used.

Within one year, she was paid over $673,500 by at least five different investors. Instead of investing those funds, Joan deposited that money into her bank account for her own personal use. Her activity was discovered after an investigation was conducted by both the U.S. Postal Inspection Service and the IRS Criminal Investigation. Her sentencing has been set for January 2012.

Pursuant to 18 U.S.C. ยง 513(a), a person who "makes, utters or possess a counterfeited security of a state or a political subdivision thereof or of an organization, or whoever makes, utters, or possesses a forged security of a state or political subdivision thereof or of an organization, with intent to deceive another person, organization, or government" can be found guilty of possession of counterfeit securities. If a person is found to be guilty of such a crime, they can either be fined, imprisoned up to 10 years, or both.

Under subsection (b) of the same United States Code, a person can also be fined and/or imprisoned up to 10 years if they have either made, received, possessed, sold, or "otherwise transfer[red] an implement designed for or particularly suited for making a counterfeit or forged security with the intent that it be so used."

Georgia Man Charged with Securities Fraud and Insider Trading

September 15, 2011, by The McKellar Law Firm, PLLC

Two "old friends" were arrested last week for alleged securities fraud and insider trading. The Wall Street Journal reports that Scott Allen of Atlanta, Georgia, was a financial consultant who received inside information about acquisitions by pharmaceutical companies. Allen then released that information to his friend, John Bennett of Norwalk, Connecticut, an independent film producer and former investment professional. Bennett profited over $2.6 million in pharmaceutical stocks while giving Allen $100,000 in kickbacks.

748506_the_almighty_dollar_1.jpg

An "insider" is typically someone who is either a company's officers, directors, or someone who has control of at least 10% of a company's equity securities. A company is required to report trading by corporate officers, directors, or other company members with significant access to privileged information to the Exchange Commission or to have it be publicly disclosed.

Insider trading is when an individual has inside access to confidential or non-public information and takes advantage of such information. Insider trading violates a fiduciary duty that a company has given an insider. Insider trading can also increase the cost of capital for securities traders and therefore have a negative effect on economic growth.

As was the case with Allen and Bennett, when an insider "tips" off a friend about non-public information, the friend then has the same fiduciary duty as the insider, i.e., they now cannot make a trade based upon the inside information. But in order for a friend to be convicted, it must be proven that they knew or should have known that the information was company property.

Both Allen and Bennett were released on $500,000 bond and could face up to 45 years in prison and more than $10 million in fines.