Florida Securities Fraud Lawyer Blog

The SEC charged two residents of Madrid, Spain with insider trading and obtained an emergency injunction freezing their assets. The action resulted from the traders making $1.1 million in illegal profits by trading in advance of last week's public announcement of a multi-billion dollar cash tender offer by BHP Billiton Plc to acquire Potash Corp. of Saskatchewan Inc.

According to the SEC's complaint filed Friday in U.S. District Court for the Northern District of Illinois and unsealed by the court today, BHP made an unsolicited $38.6 billion offer to purchase all of the stock of Potash for $130 per share in cash. The acquisition share price represented a 16 percent premium above Potash's closing price of $112.15 on August 16. Potash, based in Saskatoon, Canada, is the world's largest producer of fertilizer minerals.

The SEC alleges that the two traders - Juan Jose Fernandez Garcia and Luis Martin Caro Sanchez - violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder.

Jeweler Luis Felipe Perez was recently charged with perpetrating a $40 million Ponzi scheme and $12 million bank fraud. Perez operated the scheme by convincing investors to invest in his jewelry store, along with his pawn shops in New York, and the investors would be rewarded with high rates of return. Perez promised a return of approximately 120% -- a telltale sign of a fraudulent investment.

The bank fraud scheme alleged Perez was recruiting borrowers to invest in his businesses, then a former loan officer with Wachovia created the fraudulent loan applications (believed to be in excess of 25). A third member of the scheme, an accountant, provided the information which needed to be faked in order to get the loans applications through. In exchange for the loan officer's help, she received a commission.

The local Hialeah community were supporters of Mr. His jewelry store was popular according to South Florida magazines. Like other Ponzi schemers, Perez increased his standing with local political leaders by donating frequently to their political campaigns.

The SEC, FINRA, and North American Securities Administrators Association (NASAA) today have issued a 2010 Addendum to their report of best practices for financial services firms to improve their policies and procedures for serving senior-citizen investors. The 2010 Addendum focuses on the following categories of practices:

• Communication with seniors;

• Training brokers on senior-related issues;

• Creating a process for escalating issues and taking action;

• Securing accurate information at account opening;

• Making sure investments are suitable; and

• Supervision and compliance reviews.

Securities regulators are publicizing this updated report to ensure that broker-dealers will serve senior investors in an ethical, respectful and informed manner.

The SEC has charged Citigroup Inc. with misleading investors about the company's exposure in subprime mortgages. Citigroup repeatedly made misleading statements in conference calls relating to earnings and public filings. Citigroup represented that subprime exposure in its investment banking unit was $13 billion or less, when in fact it was more than $50 billion.

Citigroup and the two executives settled the SEC's charges. Citigroup will pay a $75 million penalty. Former chief financial officer Gary Crittenden will pay $100,000, and former head of investor relations Arthur Tildesley, Jr. will pay $80,000.

The SEC's complaint states Citigroup's management began to gather information on the investment bank's subprime exposure as of April 2007. On four occasions in 2007, however, Citigroup stated that its investment bank's subprime exposure was reduced to $13 billion from $24 billion at the end of 2006 -- without disclosing the more than $40 billion in additional subprime exposure relating to the super senior CDO tranches and liquidity puts. Crittenden and Tildesley were repeatedly on notice of the information about the full extent of Citigroup's subprime exposure. The SEC's order finds that Crittenden and Tildesley caused Citigroup's filing to be misleading to investors.