The SEC and the Case of the Missing CFO

A trend toward increased telecommuting has been developing for years. Many firms have adopted the practice, permitting some employees to perform all, or at least part of their duties at home. The practice can have significant benefits for employees and firms in an era of rising real estate prices. The practice depends, however, on the employee actually rendering services. That does not seem to be the case in the SEC’s most recent enforcement action where the CFO is apparently missing. The person listed as the CFO for a Texas oil firm with offices in New York City apparently lived in Shanghai, China and there was little evidence that she ever visited the company. SEC v. Simeo, Civil Action No. 1:19-cv-08621 (S.D.N.Y. Filed September 17, 2019).

Defendant Tom Simeo is the CEO, Treasurer, Director and Chairman of the Board of Viking Energy Group, Inc. whose shares are listed on the OTC Markets Group’s OTCQB. The firm is engaged in the acquisition, exploration, development and production of oil and natural gas properties.

Mr. Simeo’s former wife introduced him to Guangfang “Cecile” Yang in Shanghai, China in 2013 when he was operating Viking as an incubator for Chinese companies. He retained Ms. Yang as the CFO shortly after the introduction.

In February 2013 Ms. Yang was announced as the CFO and a member of the board of directors of Viking in a Form 8-k filed with the Commission. Subsequent filings represented that Ms. Yang had worked at an audit firm from 1998 to 2006 and furnished services for certain companies that conducted initial public offerings. She received a business degree from an international business school, according to Viking. The information apparently was taken from her resume, furnished to the General Counsel of Viking by Mr. Simeo.

Over a two-year period, beginning in 2014, that Ms. Yang was held out in a number of firm filings as its CFO. The CFO represented in SOX certifications filed during the period that she was in fact the CFO. Nevertheless, there is no evidence that she performed any work over the two-year period. Few company documents reference her. Those that do suggest she had no role at the company. No written communications with Ms. Yang were produced to the staff. One document did state that someone named “Cecile” would forward Mr. Simeo her written signature to affix to a management representation letter for Viking’s auditor. In fact, here electronic signature appears on each of the eight annual and quarterly reports that Viking filed over the period.

In a Form 8-k, filed in July 2016, Viking stated that Ms. Yang had resigned. Prior to that date the firm raised about $2 million from investors in an offering. Throughout the offering Ms. Yang was represented to be the CFO of the company. The complaint alleges violations of Securities Act Section 17(a)(1) and (3) and Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 24599 (Sept. 17, 2019).