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The U.S. Securities and Exchange Commission (SEC) is the federal agency responsible for protecting investors, maintaining fair and efficient financial markets, and overseeing the securities industry. Established in 1934, the SEC enforces securities laws, regulates public companies, and ensures transparent financial disclosures to support informed investment decisions. It also facilitates capital formation and monitors market activity through rulemaking, examinations, and enforcement actions.

Tyson Foods charged with violations of the Foreign Corrupt Practices Act

 

The Securities and Exchange Commission (SEC) today charged Tyson Foods Inc. with violating the Foreign Corrupt Practices Act (FCPA) by making illicit payments to two Mexican government veterinarians responsible for certifying its Mexican subsidiary’s chicken products for export sales.

The SEC alleged that Tyson de Mexico concealed the improper payments by putting two veterinarians’ wives on its payroll but they performed no work for the company. The spouses were later removed from the payroll and their payments were processed with invoices issued for “services.” Tyson de Mexico paid the veterinarians, who were responsible for certifying Tyson’s chicken products for export and served as official Mexican government veterinarians at Tyson facilities, a total of $100,311. It was not until two years after Tyson Foods officials first learned about the subsidiary’s illicit payments that its counsel instructed Tyson de Mexico to cease making the payments.

The SEC further charged that in connection with these improper payments, Tyson Foods failed to keep accurate books and records and failed to implement a system of effective internal controls to prevent salary payments to phantom employees and the payment of illicit invoices. The improper payments were recorded as legitimate expenses in Tyson de Mexico’s books and records, and included in Tyson de Mexico’s reported financial results for fiscal years 2004, 2005 and 2006. Tyson de Mexico’s financial results were, in turn, a component of Tyson Foods’ consolidated financial statements filed with the SEC for those years.

Without admitting or denying the SEC’s allegations, Tyson Foods consented to the entry of a final judgment ordering disgorgement plus pre-judgment interest of more than $1.2 million and permanently enjoining it from violating the anti-bribery, books and records, and internal controls provisions of the FCPA. The proposed settlement is subject to court approval.

In a related criminal action announced today, the Department of Justice (DOJ) charged Tyson Foods with conspiring to violate the FCPA and violating the FCPA. The DOJ and Tyson Foods agreed to resolve the charges by entering into a deferred prosecution agreement. Tyson Foods also agreed to pay a $4 million criminal penalty.

February 12th, 2011|Categories: Commercial Transactions Due Diligence|Tags: , , , |

Green-energy scams put portfolios in the red

 

The emerging green-energy market has created a horde of fraudsters. So many, in fact, that late last year, the Financial Industry Regulatory Authority (FINRA) warned about schemes that promise large gains from investments in companies that pitch alternative, renewable or waste-to-energy products. And in May of this year, the Securities & Exchange Commission (SEC) followed with its own alert about potential scams that exploit the Gulf oil spill and related cleanup efforts.

The green-energy get-rich-quick schemes are showing up in blog posts, e-mail, infomercials, Internet message boards, text messages, and Twitter. As with most investment scams, all promise unrealistic returns, such a 200 percent stock gain by a solar panel company, a one-in-a-million deal to get a “51 times” return on current stock value from a China wind-power enterprise, and a 500 percent one week stock gain by a hydrogen-based energy outfit.

Of course, the regulators are on the lookout for the scammers. In one recently filed case, the SEC charged that promoters of eco-friendly investment opportunities lured 300 investors into a $30 million Ponzi scheme, encouraging the participants to finance “green” initiatives of Mantria Corporation, including a purported “carbon negative” housing community in rural Tennessee and a “bio-char” charcoal substitute made from organic waste. Investors were promised returns ranging from 17 percent to “hundreds of percent” annually. But, according to the SEC’s complaint, Mantria did not generate any income from which such extraordinary returns could be paid.

As cautioned by the SEC, the oil spill in the Gulf of Mexico brought additional scam opportunities for cons promising financial gains from investments in companies that claim to be involved in the cleanup operations. In May and June 2010, the SEC suspended the trading in shares of ACT Clean Technologies Inc. of Huntington Beach, CA, and Green Energy Resources, Inc. of New York, NY, because, among other issues, questions arose about the accuracy and adequacy of the publicly disseminated information by the companies.

To dodge green-energy investment scams (and other frauds) investigate before investing! And:

  • Never rely solely on information contained in an unsolicited communication.
  • Find out who sent the investment recommendations; many companies and individuals that tout stocks are paid by the company being promoted.
  • Examine the fine print for any statements indicating payments in cash or in stock for issuing the report or message.
  • Find out where the stock trades. Most unsolicited recommendations involve stocks that do not meet the listing requirements of the major stock exchanges; they are usually quoted on the OTC Bulletin Board or in the Pink Sheets, which do not impose minimum qualitative standards. Many of the OTC or Pink Sheets stocks trade infrequently which can make shares difficult to sell. When these stocks do trade, they may fluctuate in price very rapidly.
  • Read the company’s SEC filings to verify information.
  • Exercise skepticism and be wary of any pitch that suggests immediate pay-offs, especially if the investment involves a start-up company or a product or service that is still in development.
October 19th, 2010|Categories: Commercial Transactions Due Diligence|Tags: , , , |

SEC’s proposed rule requires issuers and underwriters of asset-backed securities to make due diligence findings available to the public

The Securities and Exchange Commission (SEC) issued on October 13, 2010 a proposal to enhance disclosure to investors in the asset-backed securities market. The proposed rule requires issuers of asset-backed securities (ABS) to perform a review of the assets underlying the securities, and publicly disclose information relating to the review. The proposal also requires an issuer or underwriter of ABS to make publicly available the findings and conclusions of any third-party due diligence report.

  • The SEC’s proposed rule would enhance ABS disclosure in three ways:
    Issuers of ABS that are registered with the SEC would be required to perform a review of the bundled assets that underlie the ABS.
  • Proposed amendments to Regulation AB would require an ABS issuer to disclose the nature, findings and conclusions of this review of assets.
  • Issuer or underwriter of both registered and unregistered ABS offerings would be required to disclose the findings and conclusions of any review performed by a third-party that was hired to conduct such a review.

In addition to this rule, the Commission last week proposed regulations that require issuers of ABS — and credit rating agencies that rate ABS — to provide investors with new disclosures about representations, warranties, and enforcement mechanisms. And, in April 2010, the Commission proposed rules that would revise the disclosure, reporting and offering process for ABS to better protect investors in the securitization market.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Commission to adopt rules regarding the review of assets, such as loans, underlying the securities no later than 180 days after enactment.

October 15th, 2010|Categories: Commercial Transactions Due Diligence|Tags: , , , |

FINRA will make more information about brokers and former brokers available to the public

On July 13, 2010, the Financial Industry Regulatory Authority (FINRA) announced that it will be implementing changes to its free online BrokerCheck service. With recent approval by the Securities & Exchange Commission, the amount of information available to the public about current and former securities brokers will expand significantly in the coming months, including the number of customer complaints reported publicly. The public disclosure period for the full record of a broker who leaves the industry will be extended from two years to 10 years, and certain information, such as criminal convictions and selected civil injunctive actions and arbitration awards, will be on record permanently. The changes will also formalize a process for current and former brokers to dispute or update the information disclosed through BrokerCheck.

“This additional information will benefit investors who are considering whether to conduct or continue to conduct business with a particular securities firm or broker,” said FINRA chairman and CEO Rick Ketchum. “Just as important, it will provide valuable information about persons who have left the securities industry, often not of their own accord, and who have established themselves in other segments of the financial services industry and can still cause great harm to the investing public.”

July 22nd, 2010|Categories: Commercial Transactions Due Diligence|Tags: , , |

More on fake Web sites

 

Bogus company Web sites mimicking government entities and promising easy money SECare sprouting in record numbers. In March, the SEC issued warnings to investors about a fraudulent Web site set up by a company named International SecurityInvestor Protection Corporation (ISIPC) which claimed that $1.3 billion in Madoff money has been found in Malaysia and urged Madoff victims to submit personal information to verify that they are on the restitution list. The site copied most of the content and design of the Securities Investor Protection Corporation Web site, and provided links to several legitimate government entities such as the United Nations, the International Monetary Fund, the World Bank and the IBA, falsely touting their sponsorship. (The SIPC is a non-profit organization created by Congress in 1970 toprotect customers in the event of a brokerage failure, acting as a trustee or working with independent court-appointed trustees to recover funds).

Two months after the ISIPC made its debut, the SEC posted an alert that a Web site for an entity calling itself the “US Securities and Equities Administration” was attempting to dupe investors by claiming that funds were being held by the U.S. government on their behalf, and asking for upfront fees to collect the funds.

One of the easiest ways to spot government-related online scams is to look at the Web site and e-mail addresses. No U.S. government agency has a Web site or e-mail address that ends in anything other than “.gov”, “.mil”, or “fed.us”.

July 15th, 2010|Categories: Commercial Transactions Due Diligence|Tags: , |
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