This Week In Securities Litigation

by Dorsey & Whitney LLP
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The Commission filed a series of civil injunctive actions and administrative proceedings over the course of the week as the end of the government fiscal year draws near. A number of actions were brought against firms making false statements regarding their products. For example, a biopharmaceutical company repeatedly made claims about the effectiveness of a drug that were false; a silicon breast seller closed an offering without disclosing that its sole source manufacturer had a key license suspended; and a firm claimed to have a “design to build” contract for which it recorded revenue despite the fact that the agreement had not been approved.

Other cases involved investment advisers and broker-dealers. Those included false statements by the operator of a dark pool claiming that high frequency traders were not permitted; the use of improper advertising involving testimonials; the making of a prohibited cross-trade; and the failure to disclose conflicts regarding the 12b-1 fees.

SEC

Remarks: Commissioner Robert Jackson delivered remarks titled Unfair Exchange: The State of America’s Stock Markets at George Mason University, Arlington, Va. (Sept. 19, 2018). His remarks were called for additional supervision of the markets which “tax” investors (here).

Remarks: Stephanie Avaklan, Co-Director, Division of Enforcement, delivered remarks tilted Measuring the Impact of the SEC’s Enforcement Program, Dallas Tx. (Sept. 20, 2018). In her remarks the co-director rejected the notion that numbers were key and cited a series of cases as examples; she also discussed ICOs and challenges for the future (here).

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the SEC filed 11 civil injunctive cases and 13 administrative proceedings, excluding 12j and tag-along proceedings.

Financial fraud: In the Matter of Barrett Business Services, Inc., Adm. Proc. File No. 3-18806 (Sept. 20, 2018) names as Respondents the firm, a professional employer services and staffing organization, and Mark Cannon, who joined the firm in 2013 as Controller. The action centers on a financial fraud that took place from 2012 to 2014 conduced by the former CFO, James Miller. The purpose was to mask negative trends in the firm’s workers’ compensation exposure. The fraud involved misclassifying expenses to understate the recorded workers’ compensation expense and to overstate the recorded payroll tax, improperly recognizing certain federal and sate unemployment tax expenses over multiple periods rather than recognizing them in the proper period and intentionally underreporting workers’ compensation liability by about $80 million. In May 2016 the firm filed restated financial statements for 2011 through 2014 and the first three quarters of 2015. The Order alleges violations of Securities Act section 17(a) and Exchange Act sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). To resolve the proceedings the firm consented to the entry of a cease and desist order based on each of the sections cited in the Order and agreed to pay a penalty of $1.5 million. Mr. Cannon consented to the entry of a cease and desist order based on Exchange Act sections 13(a), 13(b)(2)(A) and 13(b)(2)(B). He will pay a penalty of $20,000. He is also denied the privilege of appearing and practicing before the Commission as an accountant with the right to apply for reinstatement after one year. See also SEC v. Miller, Civil Action No. 3:16-cv-05761 (W.D. WA Filed Sept. 20, 2018)(Action against former CFO James Miller based on the same facts; alleging violations of each subsection of Securities Act section 17(a) and Exchange Act sections 10(b), 13(a), 13(b)(5), 13(b)(2)(A) and 13(b)(2)(B) and asserting a claim under SOX section 304a; the action is pending).

Cherry picking: SEC v World Tree Financial, LLC, Civil Action No. 18-cv-1229 (W.D. LA. Filed Sept. 18, 2018) is an action which names as Defendants: the firm, previously a Commission registered investment adviser until 2012 and thereafter a state registered adviser; Welsey Perkins, a co-founder of the firm; and Priscilla Perkins, Welsey’s wife and also a co-founder of the firm. Over a four year period, beginning in early 2011, Mr. Perkins engaged in a cherry picking scheme in which he misused the firm’s omnibus account. Specifically, he held trades in the account until he could determine the direction of the market and then divided the trades by taking those that were profitable and giving those that were not to client accounts. Defendants also made false representations, claiming that they were not trading in the same securities as firm clients. The complaint alleges violations of Securities Act sections 17(a)(1) and (2) and Advisers Act sections 206(1) and 206(2). The case is pending. See Lit. Rel. No. 24278 (Sept. 20, 2018).

Muni registration: In the Matter of Eric Hall & Associates, LLC, Adm. Proc. File No. 3-18803 (Sept. 20, 2018) names as Respondents the firm, which provides consulting services to school districts, and Eric Hall, its CEO and president. In April 2011 the firm registered with the Commission under a then temporary rule as a municipal adviser. The firm never registered under the final rule. Here in 2015 and 2016 the firm and Mr. Hall represented to a California school district that it was in fact a municipal adviser. Even after being contacted by the staff about the failure to register the firm did not. The Order alleges violations of Exchange Act sections 15B(a)(1)(B), 15B(c)(1) and MSRB Rule G-17. To resolve the proceedings each Respondent consented to the entry of a cease and desist order based on the sections and rule cited in the Order. The firm was censured. Mr. Hall is barred from the securities business. Respondents will, on a joint and several basis, pay disgorgement of $35, 520, prejudgment interest of $4,241 and a penalty of $15,000.

Offering fraud: In the Matter of Phillip R. Grogan, Esq., Adm. Proc. File No. 3-18788 (Sept. 19, 2018) names as a Respondent Mr. Grogan, an attorney admitted to practice in Kentucky. Over a three year period beginning in 2013 Mr. Grogan participated in a fraudulent scheme conducted by Leroy Young and his firm, Young Capital Management, LLC. Specifically, Mr. Young raised about $362,000 from 32 investors based on claims that the funds would be used to pay fees associated with the offering of bonds or alternatively a hedge fund. Mr. Young reassured investors that their funds would be held safely until used by being placed in escrow with Mr. Grogan. Although Mr. Grogan told Mr. Young to delete his name from the escrow documents, he took the investor money in and then immediately transferred out to Mr. Young who misappropriated it. The Order alleges violations of Securities Act section 17(a) and Exchange Act section 10(b). To resolve the proceedings Respondent consented to the entry of a cease and desist order based on the sections cited in the Order. He also agreed to pay disgorgement of $3,050, prejudgment interest of $248 and a penalty equal to the amount of the disgorgement. See also In the Matter of Michael L. Lapenna, Adm. Proc. File No. 3-18787 (Sept. 19, 2018)(action against Mr. Lapenna, a Canadian citizen, who operates New World Brokerage LLC, a credit repair and loan brokerage firm in Niagara Falls, N.Y. who aided Mr. Young with his fraudulent investment program; settled with the entry of a cease and desist order based on Securities Act section 17(a) and Exchange Act section 10(b) and the payment of disgorgement of $22,500, prejudgment interest of $583.55 and a penalty equal to the amount of the disgorgement); SEC v. Young, Civil Action No. 18 CV 2170 (S.D. CA Filed Sept. 19, 2018)(action against Leroy Young and his firm, Young Capital Management LLC based on the facts detailed above alleging violations of Securities Act sections 5(a), 5(c) and 17(a) and Exchange Act section 10(b); Defendants each settled, admitting the allegations in the complaint and consented to the entry of permanent injunctions based on the sections cited in the complaint; Mr. Young will pay disgorgement of $336, 450, prejudgment interest of $18,923 and a penalty equal to the amount of the disgorgement). See Lit. Rel. No. 24279 (Sept. 20, 2018).

Concealed information: In the Matter of Sientra, Inc., Adm. Proc. File No. 3-18795 (Sept. 19, 2018) names as a Respondent the manufacturer of silicon breast implants. Those implants were made for the firm by Silimed Industria de Implantes Ltda of Brazil. Shortly before the firm closed a $60 million follow-on offering in September 2015, the its president, Hani Zeini, learned from the head of Silimed that the firm’s CE certification, a sign of regulatory compliance required to sell products in the EU, had been suspended. Rather than disclose the fact Mr. Zeini concealed it from the underwriters and the firm’s General Counsel. The offering closed. Later when the facts were disclosed the share price dropped 52.6% from $20.58 to $9.70. The Order alleges violations of Securities Act section 17(a) and Exchange Act section 10(b). The company agreed to an undertaking requiring it to cooperate with any related Commission proceedings. In view of the fact that the company self-reported and fully cooperated with the staff investigation the Commission accepted its offer of settlement. To resolve the proceedings the firm consented to the entry of a cease and desist order based on the sections cited in the Order. See also SEC v. Zeini, Civil Action No. 2:18-cv-08103 (C.D. Cal. Filed Sept. 19, 2018)(action against former president of firm alleging violations of each subsection of Securities Act section 17(a) and Exchange Act section 10(b); the case is pending). See Lit. Rel. No. 24275 (Sept. 19, 2018).

False statements: SEC v. Covis Oncology, Inc., Civil Action No. 1:18-cv-02381 (D. CO. Filed Sept. 18, 2018) is an action which names as defendants the firm, a biopharmaceutical company, Patrick Mahaffy, its CEO and Erle Mast, the CFO. A key product of the firm during the period July 8, 2015 to November 16, 2015 was rociletinib or Roci, a lung cancer drug. When introduced, a key competitor drug had an objective response rate of about 63% — the percentage of patients who saw their cancer reduced while using the drug. Roci was initially touted as having a 60% rate at the end of May 2015. By the middle of the next month, however, internal data showed that the rate was significantly lower. Nevertheless, the firm and its two executives continued to tout the drug by citing the 60% figure. This continued in July 2015 when the company conducted a $298 million offering. Subsequently, the firm, which had submitted the drug with the internal numbers to the FDA, was told by the agency that in fact the rate was in the 20s. Yet on November 10, 2015 the firm participated in an investor conference and cited the 60% figure. The next day Clovis disclosed the true percentage. Its stock price fell 70%. The complaint alleges violations of Securities Act section 17(a)(2) and Exchange Act section 13(a). Defendants settled the action. The firm agreed to pay a $20 million penalty while Messrs. Mahaffy and Mast will pay, respectively, $250,000 and $100,000. Mr. Mast will also pay disgorgement and prejudgment interest totaling $454,145 tied to his sale of stock while the price was inflated. See Lit. Rel. No. 24273 (Sept. 18, 2018).

False statements – impact of events: SEC v. SeaWorld Entertainment, Inc., Civil Action No. 1:18-cv-08480 (S.D.N.Y. Filed Sept. 18, 2018) names as defendants the theme park and James Atchison, its CEO. From mid-December 2013, following the release of the film Blackfish, to August 13, 2014, defendants made false statements regarding the impact of the film. Specifically, Blackfish detailed the firm’s abuse of its Orcas or killer whales. Over the period the film had a significant impact on the company. Nevertheless, the firm continued to deny the impact in filings made with the Commission, including a Form S-1 registration statement. During the period Mr. Atchison sold shares of the company through a 10(b_-1 plan at inflated prices. The complaint alleges violations of Securities Act sections 17(a)(2) and (2) and Exchange Act sections 13(a) and 20(a). To resolve the action the firm agreed to pay a penalty of $4 million while Mr. Atchison will pay $850,183 in disgorgement and prejudgment interest and a civil penalty of $150,000. See also SEC v. Jacobs, Civil Action No. 1:18-cv-08482 (S.D.N.Y. Filed Sept. 18, 2018)(action against Frederick Jacobs, the former v.p. of communications of the firm, alleging violations of Securities Act section 17(a)(2); settled with the payment of $99,155 in disgorgement and prejudgment interest but no penalty in view of Defendant’s substantial assistance in the staff investigation). See Lit. Rel. No. 24272 (Sept. 18, 2018).

Misrepresentations: SEC v. Romer, Civil Action No. 18-cv-12927 (E.D. MI Filed Sept. 18, 2018) names as a defendant Ernest Romer, III, a registered representative at CoreCap Investments, Inc. Over a two year period, beginning in 2014, Mr. Romer persuaded about 30 customers of his firm to transfer their funds totaling about $2.7 million to either P&R Capital LLC or CoreCap Solutions, LLC. Investors were lead to believe that their funds would be invested and that they would obtain a better return. In fact the two entities were not affiliated with the broker-dealer. Rather, they were controlled by Mr. Romer who proceeded to misappropriate their funds. The complaint alleges violations of each subsection of Securities Act section 17(a) and Exchange Act section 10(b). The case is pending. See Lit. Rel. No. 24274 (Sept. 18, 2018).

Testimonials: In the Matter of Creative Planning, Inc., Adm. Proc. File No. 3-18779 (Sept. 18, 2018) is a proceeding which names as Respondents the registered investment adviser and its president and majority owner, Peter Mallouk. Beginning in August 2015 the firm engaged a local radio station to air live and pre-recorded advertisements through two radio hosts in the Kansas City area. In January 2016 one of the hosts became a client. Shortly thereafter that host began giving personal testimonials on the air. That continued until October 2017. Earlier in 2017 the radio station recorded and aired advertisements that contained testimonials. They aired until October 2017. Although the firm’s policies and procedures required the firm to pre-approve and maintain copies of all advertisements, the firm did not monitor the live or pre-recorded advertisements and did not maintain a copy of the live statements. From July 2013 through November 2015 Mr. Mallouk also failed to report securities holdings and transactions from three personal securities accounts over which he exercised control in contravention of the firm’s Code of Ethics. The Order alleges violations 204, 204A and 206(4). To resolve the proceedings the firm consented to the entry of a cease and desist order based on each section cited in the Order and to a censure. Mr. Mallouk consented to the entry of a similar order based on section 204A. The firm will pay a civil penalty of $200,000 while Mr. Mallouk will pay $50,000.

Offering fraud: SEC v. Caufield, Civil Action No. 3:18-cv-02468 (N.D. Tx. Filed Sept. 17, 2018) is an action which names as a defendant, Thomas Caufield. Defendant is a former registered representative and during the period operated DAT Capital, a state registered investment adviser, and a franchise operation. Over a four year period, beginning in 2013, Mr. Caufield raised over $6 million marketing high yield promissory notes to his advisory clients as well as others. The notes allegedly paid between 10% and 18%. Investors were not told that the franchise operation could not meet its current obligations, that the notes were not secured and that investor funds would be used to pay Defendant’s obligations on past due notes. The notes also were not registered with the Commission. The complaint alleges violations of Securities Act sections 5(a), 5(c) and 17(a), Exchange Act section 10(b) and Advisers Act sections 206(1) and 206(2). Mr. Caufield settled, consenting to the entry of a permanent injunction based on the sections cited in the complaint. He also agreed to pay disgorgement of $614,815.14, prejudgment interest of $126,032.11 and a civil penalty of $160,000. The disgorgement and prejudgment interest obligations will be satisfied by the proceeds paid to investors from the sale of the franchise. See Lit. Rel. No. 24270 (Sept. 17, 2018).

False financial filings: In the Matter of Lane J. Castleton, Adm. Proc. File No. 3-18772 (Sept. 17, 2018) is a proceeding which names as a Respondent Mr. Castleton, the vice president, CFO, secretary and treasurer of Abtech Holdings, Inc., a firm which provides services that included storm water management and oil and gas water treatment. In the firm’s third quarter 2014 filing and annual report for that fiscal year, it claimed to have a “design-build” contract with Nassau County New York. Respondent drafted, reviewed and signed the filings. The claim was false since the New York Legislature had not approved such an agreement and without that approval the county could not enter into such an agreement. Without that approval over 80% of the revenue recognized under the installment method in its financials could not be recognized. The Order alleges violations of Securities Act section 17(a)(2) and Exchange Act section 13(a). To resolve the proceedings Respondent consented to the entry of a cease and desist order based on the sections cited in the Order. He will also pay a penalty of $35,000. See also In the Matter of Abtech Holdings, Inc., Adm. Proc. File No. 3-18770 (Sept. 17, 2018)(action against the firm based on the same facts, resolved with the entry of a cease and desist order based on the same sections and the payment of a $100,000 penalty); In the Matter of Glenn R. Rink, Adm. Proc. File No. 3-18771 (Sept. 17, 2018)(proceeding against the founder of the firm who reviewed, edited and signed the filings; settled with the entry of a cease and desist order based on the same sections and the payment of a $60,000 penalty).

Dark pools – HTF: In the Matter of Citigroup Global Markets, Inc., Adm. Proc. File No. 3-18766 (Sept. 14, 2018). Respondent Citigroup Global Markets is an indirect, wholly owned subsidiary of Citigroup, Inc., and is a registered broker-dealer. Citi Order Routing and Execution, LLC, also named as a Respondent and known as CORE, is an indirect subsidiary of Citigroup and a registered broker-dealer. CORE was acquired by a Citigroup subsidiary in 2007. At the time the firm was engaged in the equity market making business. It then launched a new trading product called I-Match which catered to institutional users. The product allowed users to place resting orders to trade against retail order flow purchased by the CORE market maker before the market maker had an opportunity to trade against the orders. Later in 2007 CORE rebranded the new product as Citi Match. Marketing for Citi Match stated that it was a dark pool for institutional investors that was separate from CORE’s market maker operations. Citi Match was also depicted as a “premium” and “exclusive” dark pool. The quality of the order flow in Citi Match was emphasized. Premium fees were charged. During the period Citi Match was marketed as not permitting high-frequency trading firms or HFT to enter orders in the dark pool. Nevertheless, from at least July 2011 through September 2012 at least two HFT firms traded in the venue. During that period about 17% of all executions based on dollar volume were with one of those firms. Those executions represented about $8.4 billion in notional value. During the same period traders were also not adequately informed that in fact Citi Match routed orders to more than twenty different external venues. In 2013, for example, 37% of Citi Match executions took place in external venues. In 2014 about 54% of the executions were in external venues. Finally, CORE acted as an unregistered exchange in its provision of Citi Match despite the dictates of section 5 of the Exchange Ac. The aforementioned conduct constituted violations of Securities Act section 17(a)(2) and Exchange Act section 5. To resolve the proceedings Citi Group Markets consented to the entry of a cease and desist order based on the Securities Act section cited in the order and to a censure. The firm will also pay disgorgement of $4,718,784.59, prejudgment interest of $718,690.47 and a penalty of $6.5 million. CORE consented to the entry of a cease and desist order based on the Exchange Act section cited in the Order and to a censure. The firm will also pay a civil penalty of $1 million.

Prohibited cross-trade: In the Matter of Cushing Asset Management, L.P., Adm. Proc. File No. 3-18767 (Sept. 14, 218) which names as a Respondent the firm, a registered investment adviser since June 2004. In late December 2012 the adviser decided to sell 1,565,786 units of a master limited partnership (the “Securities”) on behalf of a hedge fund client on December 20, 2012. On that date the units, which were thinly traded, would become unrestricted. The adviser also determined that on the sale date it would purchase the same number of unrestricted units for closed and open ended funds it advised (collectively “Registered Funds”). To avoid the prospect of a prohibited cross-trade the adviser consulted legal counsel. Counsel, in privileged advise, advised Respondent. Instructions were then given to the traders orally. The traders did not seek clarification of the instructions. They also failed to follow the instructions in material respects. Those failures resulted in the sale of the securities by the adviser being crossed with the purchase by the Registered Funds. As a result the adviser caused the hedge fund to sell securities to the Registered Funds in violation of section 17(a)(1) of the Investment Company Act. That section prohibits an affiliated person of a registered investment company from selling any security to such a registered firm unless an exemption has been granted by the Commission. To resolve the proceedings, Respondent consented to the entry of a cease and desist order based on the section cited in the Order. Respondent will also pay a penalty of $100,000.

Undisclosed conflicts: In the Matter of Capital Analysts, LLC, Adm. Proc. File No. 3-18765 (Sept. 14, 2018). The firm has been a registered investment adviser since 2012. It has approximately $4.75 billion in assets under management in a wholly-owned subsidiary of Lincoln Investment Capital Holdings, LLC. The adviser breached its obligations in two key respects during the period: First, from April 2013 through March 2016, the adviser purchased mutual fund shares with 12b-1 fees rather than the lower cost shares available. At the time its affiliated broker dealer received the fees based on the transactions. The adviser failed to adequately disclose the conflict of interest in its Form ADV and to obtain best execution. Second, from April 2013 through March 2017 the firm failed to disclose that it obtained compensation from a third-party broker and the related conflicts. The broker shared with the adviser fees it was paid on the transactions related to clearing. Those fees totaled $691,125. Finally, the firm failed to adopt and implement written compliance polices and procedures reasonably designed to prevent violations of the Advisers Act. The Order alleges violations of Advisers Act sections 206(2), 206(4) and 207. In determining to accept the offer of Respondent the Commission considered the adviser’s remedial acts. To resolve the proceedings, Respondent consented to the entry of a cease and desist order based on the sections cited in the Order and to a censure. Respondent will pay disgorgement of $936,181 and prejudgment interest of $113,692. This is tied to the 12b-1 fees. This amount shall be deposited into a distribution fund. In addition, Respondent shall pay disgorgement of $691,125 along with prejudgment interest of $79,351 and a penalty of $300,000.

Concealed control: In the Matter of Cecil Gregory Earls, Adm. Proc. File No. 3-18768 (Sept. 14, 2018) names as Respondents: Mr. Earls, who has previously been convicted of criminal violations of the securities laws and sentenced to serve about ten years in prison and has also been found liable for violating the securities laws and barred from serving as an officer or director of a public company; and Thomas Caggiano, Mr. Earls’ friend, who held the title of Managing Member of Kandax Capital Management LLC, an unregistered hedge fund adviser and Fincastle GP, LLC, the general partner of Kandax’s affiliated hedge fund, Fincastle Fund. Just prior to his release from prison Respondent Earls formed an advisory entity and investment fund. He began soliciting investors. Over a three year period beginning in 2015 he made false statements to potential investors claiming that Respondent Caggiano and others were the management team when in fact they had nominal roles since he was in control. Mr. Caggiano also opened brokerage accounts for the firm since Mr. Earls could not, falsely claiming that he alone controlled the account. The Order alleges violations of Exchange Act section 10(b) and Advisers Act section 206(4). To resolve the proceedings each Respondent consented to the entry of a cease and desist order based on the sections cited in the Order. Each also agreed to be barred from the securities business. A penalty was not imposed as to Mr. Earls based on an affidavit demonstrating an inability to pay. Mr. Caggiano will pay a penalty of $25,000.

Offering fraud: SEC v. Steele, Civil Action No. 1:18-cv-02838 (S.D. Ind. Filed Sept. 14, 2018) names as defendants Tamara Steele and Steele Financial, Inc. Ms. Steele is the CEO of Steele Financial, an unregistered investment adviser. Over a three year period beginning in December 2016 Defendants sold over $13 million in the extremely risky securities of Behavioral Recognition Systems, Inc., a private company that is the subject of a Commission enforcement action. In making the sales Defendants did not disclose to purchasers the fact that they were being paid commissions that ranged from 8% to as high as 18% by the firm. As part of the scheme Defendants concealed from many of their own clients, as well as from the broker-dealer where Ms. Steele was employed, the transactions. The complaint alleges violations of Securities Act section 17(a), Exchange Act sections 10(b) and 15(a) and Advisers Act sections 206(1), 206(2) and 206(3). The case is pending.

Offering fraud-Ponzi scheme: SEC v. Merrill, Civil Action No. 1:18-cv-02844 (D. Md. Filed Sept. 13, 2018) names as defendants Kevin Merrill, Jay Ledford, Cameron Jezierski and five controlled entities. Over a five year period beginning in 2013 Defendants, using their controlled entities, and about 30 others, raised over $345 million from 230 investors. Investors were told that their funds would be put into portfolios of consumer debt that would yield substantial returns. In fact the offering was a Ponzi scheme. Much of the money raised was misappropriated by the individual defendants. Other portions were used to repay early investors. The complaint alleges violations of Securities Act section 17(a) and Exchange Act section 10(b). The court granted a temporary freeze order when the complaint was unsealed. The U.S. Attorney’s Office for the District of Maryland filed parallel criminal changes against the individual defendants. The case is pending.

Insider trading: SEC v. Chen, Civil Action No. 2:18-cv-07840 (C.D. Cal. Filed Sept. 10, 2018) is an action which names as a defendant Rong Chen. The case centers on two transaction. The first involved the acquisition of RDM Microelectronics, Inc. by Tsinghau Unigroup Ltd., announced on November 11, 2013. At the time of the transaction Mr. Chen was the Vice President of Investments for Tsinghau and worked on the deal. Prior to the deal announcement he opened a brokerage account in his wife’s name and purchased RDA securities. Following the deal announcement he had profits of over $79,500. The second centered on the purchase of securities in 58.com Inc., a Chinese firm that engaged Mr. Chen as an investment consultant. The firm purchased a large stake in a rival company. Prior to the April 2015 purchase Mr. Chen bought out-of-the money call options on a U.S. exchange. Following the deal announcement he had trading profits of $94,400. The complaint alleges violations of Exchange Act section 10(b). The case is pending. See Lit. Rel. No. 24269 (Sept. 14, 2018).

Criminal cases

Offering fraud: U.S. v. Connerton, No. 3:17-cr-00047 (D. Conn.) is an action against Thomas Connerton in which a jury found him guilty on 12 counts of wire fraud, one count of mail fraud, 16 counts of securities fraud, four counts of money laundering and one count of tax evasion. The charges center on a scheme involving the sale of interests in Safety Technologies, LLC, founder in 2006. Defendant claimed the firm would commercialize a highly durable puncture and cut resistant material that would be used in surgical gloves and marketed for other uses. Beginning in 2009 Mr. Connerton induced investors to purchase interests in the firm based on claims that the funds would be used for the development of the product and that no investor would lose money. Several of the victims were women who Mr. Connerton lured to the scheme through a popular dating site. In fact much of the investor money was diverted to his personal use. The date for sentencing has not been set. See also SEC v. Connerton, Civil Action No. 3:16-cv-00882 (D. Conn.).

Anti-corruption/FCPA cases

U.S. v. Castilo, (S.D.Tx.) is an action in which Juan Carlos Castillo Rincon, pleaded guilty to one count of conspiracy to violated the FCPA. The guilty plea is based on a corrupt scheme that took place over a two year period beginning in 2011. In connection with that scheme Mr. Castillo, the manager of a Huston based logistics and freight forwarding firm, conspired with others to bribe a Petroleos de Venezuela S.A. or PDVSA official to obtain business. He is scheduled to be sentenced on February 21, 2019. Charges have been brought against 18 individuals tied to this scheme with 14 having pleaded guilty to date.

Hong Kong

The Securities and Futures Commission banned Ngo Win Chun, a former relationship manager of Hongkong and Shanghai Banking Corporation from the securities business. On his last day of employment at the firm in November 2015 Mr. Ngo emailed the personal data of 995 customers of HSBC to two personal email accounts. The customer data was detected by the firm’s email monitoring system before Mr. Ngo joined another bank the next day. His conduct breached the firm’s internal policies and the Personal Data (Privacy) Ordinance and the SFC’s Code of Conduct.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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