by T. GormanPosted on Posted in SECActions

Mary Joe White became the thirty first Chairman of the Securities and Exchange Commission today. She was sworn in yesterday after being confirmed by the Senate. Ms. White, a prominent white collar lawyer and former U.S. Attorney for the Southern District of New York has promised to make SEC Enforcement unrelenting while moving swiftly through the unfinished rule making tasks before the agency.

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SEC Enforcement amended its complaint against Tai Nguyen, the founder and owner of Insight Research, to add his sister, Thanhha Bao as a defendant. Mr. Nguyen were tied to the expert network insider trading cases. Ms. Bao was formerly employed in the finance department of Abaxis, Inc. where she helped prepare quarterly earnings releases. She was charged with having repeatedly tipped her brother in advance of Abaxis earnings releases. Her brother then traded for his own account, reaping about $145,000 in profits over a period of several years. SEC v. Nguyen, Civil Action No. 12-CV-5009 (S.D.N.Y. Amended complaint filed April 8, 2013).

At the time the Commission brought the original case against Mr. Nguyen, the U.S. Attorney in Manhattan filed parallel criminal charges. U.S. v. Nguyen (S.D.N.Y. June 26, 2012). In the two cases Mr. Nguyen was charged with having traded in the securities of Abaxis on inside information on at least seven occasions between 2006 and 2009 in advance of earnings announcements. The complaint did not name the source of the inside information.

The complaint also alleged that Mr. Nguyen tipped two other funds. One was Sonar Capital, an investment adviser based in Boston that advised several hedge funds. That firm reaped profits and avoiding losses totaling over $5.4 million. Noah Freeman, a managing director of that firm pleaded guilty to criminal charges and settled with the SEC in a parallel civil case. U.S. v. Freeman, 11-cr-116 (S.D.N.Y.); SEC v. Longoria, Civil Action No. 11-cv-0753 (S.D.N.Y.).

The other was Bari Capital, the founder of which is Samir Barai, who pleaded guilty in the expert network cases and was named as a defendant in the parallel SEC enforcement action. Bari Capital had trading profits of over $1.7 million. Mr. Barai pleaded guilty to criminal charges and settled with the Commission in a parallel civil case. U.S. v. Barai, 11-cr-116 (S.D.N.Y.); SEC v. Longoria.

The SEC’s complaint against Mr. Nguyen, and the amended complaint his sister, Ms. Beo, allege violations of Securities Act Section 17(a) and Exchange Act Section 10(b). Ms. Beo agreed to settle with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. She also agreed to pay a civil penalty of $144,910 and to be barred from serving as an officer or director of a public company for five years.

Her brother previously pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud in connection with an insider trading scheme. As part of the plea he agreed to forfeit the proceeds of the offense. He was also named as a defendant in SEC v. Longoria.

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by T. GormanPosted on Posted in SECActions

The SEC filed its first Foreign Corrupt Practices Act case of the year, a settled administrative proceeding which named Philips Electronics as a Respondent. In the Matter of Koninklijke Philips Electronics N.V., Adm. Proc. File No. 3-15265 (April 5, 2013). The company settled FCPA books and records charges alleging violations of Exchange Act Sections 13(b)(2)(A) and (B), consenting to the entry of a cease and desist order based on the two sections and agreeing to pay disgorgement of $3,120,587 along with prejudgment interest. A penalty was not imposed based on the cooperation of the company.

The Order for Proceedings alleges that over an eight year period beginning in 1999 certain employees of Philips Poland made about 30 improper payments to healthcare officials in connection with public tenders to purchase equipment. Under the arrangements Philips employees submitted specifications for their equipment to local officials who then incorporated them into the tender. That significantly increased the chances that Philips would secure the contract.

Philips Poland employees also made payments to officials that ranged from 3% to 8% of the value of the contract. The Philips employees kept a portion of the payment as their “commission.” Frequently the payments, which were recorded incorrectly in the books and records of the company, were made through agents.

Philips first became aware of the issue in 2007 when a search was conducted at its facilities by local officials and its employees were arrested. Although an internal audit failed to discover the payments, several employees were either terminated or disciplined. The company also made certain changes to its internal controls.

In December 2009, 23 individuals were indicted in Poland. Three were former Philips Poland employees and 16 were healthcare officials. The indictment alleged violations of the laws regarding public tenders for healthcare equipment. Philips then conducted an internal investigation and discovered the improper payments. Early in 2010 the company self-reported and made the results of its investigation available.

In response to the internal investigation Philips terminated and disciplined several employees. New management was installed in Philips Poland. The company also retained three law firms and two audit firms to conduct the investigation and design remedial measures to address the issues. The changes adopted included: revisions to the internal controls, strict due diligence procedures relating to third parties, a centralized and enhanced contracting function and a broad based verification process for payments. The firm also made significant revisions to its Global Business Principles and established an enhanced anti-corruption training program that includes a certification process and a variety of training applications to ensure effectiveness.

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