1. REGULATORY TRENDS:
FRAUD AND OTHER
ISSUES ON THE
HORIZON
The Practicing Law Institute
Basics of Accounting for Lawyers 2015:
What Every Practicing Lawyer Needs to Know
Lesley Hand CPA, CFE, CFF

2.  SEC Enforcement Actions in 2014
 SEC Announces 2015 Examination Priorities
 SEC FCPA Discussion & Actions
 Financial Institutions Settlements
 Revisit Concepts of Fraud
 Other Actions/Consequences
TODAY WE WILL COVER:

3. WHAT DID THE SEC LANDSCAPE LOOK
LIKE IN 2014

4. SEC ENFORCEMENT ACTIONS FOR 2014

5. SEC ENFORCEMENT ACTIONS FOR 2014
CONTINUED

6. 1. Protecting retail investors, especially those saving for
retirement
2. Assessing market wide risk
3. Using data analytics to identify signs of potential illegal
activity
Note: OCIE’s Director, Andrew J. Boysen, says “We share
our annual examination priorities to promote compliance”.
This is not an exhaustive list, it may be adjusted
OCIE: Office of Compliance Inspections and Examinations
OCIE can be referred to as the “eyes and ears” of SEC
SEC ANNOUNCES
2015 EXAMINATION PRIORITIES

7. Protecting Retail Investor’s Savings for Retirement:
 OCIE’s Planning on Examination of:
 Fee Selection & Churning:
 Professionals choosing to operate as investment advisors or as duly
registered investment advisors/broker dealers
 Broker dealer = commission
 Advisors = fee based on assets, hourly, performance, etc.
 Focus will be on account type, fees charged, services provided, disclosures
and if in best interest of clients
 Sales Practices:
 Focus on issue of whether or not improper or misleading practices
 In particular, whether charges pose greater risks with higher fees
 Suitability:
 Evaluate recommendations
 Evaluate whether due diligence, disclosures made, and if suitability is
consistent with legal requirements
SEC ANNOUNCES
2015 EXAMINATION PRIORITIES
CONTINUED

8. Protecting Retail Investor’s Savings for Retirement:
 OCIE’s Planning on Examination of:
 Branch Offices:
 Supervision of branch office registered and financial advisors
 Use data analytics to identify branches that may be deviating from
compliance procedures of the home office
 Other Areas Include:
 “Alternative” investments and exposure of mutual funds (with exposure to
interest rates) are disclosing risks and if their liquidity profiles are
consistent with disclosures
SEC ANNOUNCES
2015 EXAMINATION PRIORITIES
CONTINUED

9. Assessing OCIE Market Wide Risks:
 Large firm monitoring to assess risk
 Clearing agencies
 Cyber security
 Assess controls/compliance and effectiveness
 Potential equity order routing conflicts
 Are firms prioritizing trading venues?
SEC ANNOUNCES
2015 EXAMINATION PRIORITIES
CONTINUED

10. OCIE Data Analytics:
 Identify individuals with record of misconduct and examine
firms that hire them
 Microcaps fraud - aiding and abetting, pump and dump
schemes or market manipulation
 Excessive trading
 “AML” focus on firms that did not file “SARs” or had
incomplete “SARs”
SEC ANNOUNCES
2015 EXAMINATION PRIORITIES
CONTINUED

11. Fiduciary Rules for Brokers:
 Mary Jo White, Chairwoman of SEC, says new fiduciary rule
needed
 SEC commission appears divided
 White wants new rule – Fiduciary
 Brokers to put interest of clients ahead of their own…
 Brokers to act in best interest of clients
 Current stance is suitability of recommendations
Investments have to fit investor’s needs and tolerance for risk
SEC OTHER TRENDS FOR 2015

12. SEC OTHER TRENDS FOR 2015
CONTINUED
Fiduciary Rules for Brokers:
 Expectations for some is that the new rule is unlikely to
happen soon:
 Even if ready to begin, it takes a long time
 New President elected in 15 months
 New President may want to appoint new SEC Chair
 Not withstanding that Dodd Frank gave SEC authority to promulgate
such a rule

13. SEC Probes Companies Treatment of Whistleblowers:
 SEC has sent letters to companies asking for nondisclosure
agreements, employment contracts and other documents
 Concern is possible backlash against whistleblowers
 Examples include
 Forego any benefit from government probes
 Prohibiting employees from reporting wrongdoing without approval of
general counsel
 Tips submitted to SEC approximate
 2011 – 334
 2012 – 3,001
 2013 – 3,238
 2014 – 3,620
Tipsters can get between 10 – 30% of awards
SEC OTHER TRENDS FOR 2015
CONTINUED

14. Some Data Points of Whistleblower Tips:
 By allegation type, 2014:
 Corporate disclosure and financials 616
 Offering fraud 581
 Manipulation 563
 Insider trading 256
 Trading & Pricing 144
 FCPA 159
 Other 911
SEC OTHER TRENDS FOR 2015
CONTINUED

15.  New York Times “Whistleblower Awards Lure Wrongdoers
Looking to Score” 12/30/2014 by Steven Soloman
 Banner year Whistleblowers paid $435 million and an
additional $170 million to be shared by 3 people I/C/W BofA
 These claims net payments $435 million in 2014
 Dodd Frank created another program for SEC and federal
securities fraud. 9 awards in 2014 with largest being $30
million to anonymous foreign national
 Whistleblowing leads to bad people:
 BofA real estate appraiser committed fraud on 14 loans and then
filed whistleblower action – received $56 million
 Private banker at UBS who admitted to placing diamonds in
toothpaste to smuggle, ultimately spent 2 ½ years in prison for
helping U.S. people dodge taxes – received $100 million
OTHER SIDE OF WHISTLEBLOWERS
Does this create perverse incentives and reward wrongdoing ???

16. FOLLOW THE MONEY

17.  2014: 7 corporate actions and collected $327 million
 2013: 8 corporate actions and contributed $300 million
Does this suggest that DOJ and SEC are
allocating resources to fewer high-value cases?
SEC FCPA ACTIONS
2014 VS 2013

18.  3 FCPA actions were SEC only:
 Bruker
 Layne Christensen
 Smith & Wesson
 6 enforcement actions were before administrative law judge
(all but Aliva)
 $327 Million collected in 2014, break down as follows:
 $2.7 Million civil penalties (Bruker, Layne Christensen, and Smith &
Wesson)
 $324.3 Million disgorgement and prejudgment interest
FCPA 2014 ACTIONS

19.  Avon Products
 Paid $135 million to settle
 Charged:
 Controls did not detect and prevent payments to Chinese government officials
 By subsidiary
 Voluntary disclosure and came about as a result of lawsuit between Alba
& Alcoa
 Bruker Corporation
 Paid $2.4 million to settle
 Charged:
 Providing non-business related travel
 Improper payments to Chinese government officials
 Voluntary disclosure
A DISCUSSION OF FCPA CASES

20.  Hewlett-Packard
 Paid $108 million to settle
 Charged:
 3 subsidiaries in 3 countries
 Improper payments to government officials
 Done to obtain or secure lucrative public contracts
 Appears to be result of previous German and Russian law posts
 Alcoa
 Paid $384 million
 Charged:
 Paid bribes to government officials in Bahrain to maintain key source of
business
 Stephen Timms & Yasser Ramahi, of FLIR defense contractor
 Took Saudi Arabia government officials on “World Tour”
 Falsified records to hide their misconduct to secure business
 Agreed to settle the charges and pay penalties
A DISCUSSION OF FCPA CASES
CONTINUED

21.  Bio-Rad Laboratories
 Made improper payments to foreign officials in Russia, Vietnam, and
Thailand to win business
 Voluntary disclosure
 Layne Christensen Company
 Paid improper payments to foreign officials in several African
countries to:
 Obtain beneficial treatment
 Reduce its tax liability
 Voluntary disclosure
 Smith & Wesson
 Improper payments to foreign officials
 Action originated after an employee was criminally charged
A DISCUSSION OF FCPA CASES
CONTINUED

22.  Recent trend of enforcement actions suggest that DOJ and
SEC continued trend away from corporate monitors
 Government has moved towards adopting self reporting
requirements
 For example, DOJ’s settlement with HP required HP to:
 Evaluate it’s revised compliance program over a 3 year period
 Report it’s findings for each year
 Discounts from sentencing guidelines for corporations and
settlements
 HP received 25% discount
 Alcoa received 55% discount
 From bottom of sentencing guidelines fine range
RECENT TRENDS & PATTERNS
IN FCPA ACTIONS

23. Dodd Frank gave SEC ability to bring administrative proceedings
against any individuals or entities
Advantages:
1. Administrative law judge not subject to normal rules of evidence
and generally completed on fast track
Previously only available against investment advisors and broker dealers
2. Avoids scrutiny of district courts – Radoff overturned but concerns
3. Dodd Frank allowed SEC to impose civil penalties
 Previously had to bring civil action in district court to obtain civil monetary
penalties
RECENT TRENDS & PATTERS
IN FCPA ENFORCEMENT

24. According to published source, Boston Consulting Groups reported
that U.S. & European banks paid nearly $65 billion in penalties
and fines, about 40% higher than in 2013
 Credit Suisse AG – May 2014 – Plead guilty that it conspired to
aid tax evasion and agreed to pay $2.6 billion to settle with U.S.
Justice Department
 Bank of America – August 2014 – Agreed to settlement of
$16.65 billion to resolve federal and state claims against bank
and its subsidiaries
 Bank agreed it sold AMBs without disclosing key facts about quality
 Settlement does not release bank/subsidiaries from potential criminal
prosecution
 Bank of America – August 2014 – Paid $6.3 billion to Federal
Housing Agency for selling faulty mortgages
FINANCIAL INSTITUTION SETTLEMENTS
CONTINUE IN 2014

25.  Citigroup & JP Morgan (among 6 firms) to pay $4.3 billion to four
regulators ranging from U.S. to Switzerland I/C/W rigging key
foreign-exchange benchmarks
 BNP Paribus SA – June 2014– Agreed to pay $9.0 billion I/C/W
banks ability to conduct certain U.S. dollar transactions. DOJ
 Sophisticated and long running scheme to disguise financial transactions
in violation of American sanctions against Sudan, Iran and Cuba
 Bank went to elaborate lengths to conceal prohibited transactions
 Bank was also forced to terminate 13 employees including the Head of
Ethics and Compliance for North America, the COO and its senior advisors
to the bank’s executive committee
 Largest fine ever paid by bank for violations of U.S. economic sanctions
 Bank will plead guilty to single federal criminal charge of conspiring to
violate the International Emergency Economic Powers Act.
 Bank pled guilty in state court to criminal charges of conspiring and filing
false business records in New York state court and to a temporary ban on
the bank’s ability to transact in U.S. dollars
 SEC granted temporary relief so bank can continue to operate investment
advisory business in U.S. despite a guilty plea
FINANCIAL INSTITUTION SETTLEMENTS
CONTINUE IN 2014

26. REVISIT SOME CONCEPTS OF FRAUD

27. …It is not necessarily a duck!
IF IT QUACKS LIKE A DUCK…

28. FRAUDULENT FINANCIAL REPORTING IS
OFTEN ASSOCIATED
You could substitute FCPA improper payments to
increase sales and earnings

29.  Fabricated documents to disguise improper payments or
expenses
 Omissions of material facts
 Failure to act in investors best interest
 Improper payments to government officials to secure and
obtain business
 Improper payments to government officials to win concessions
FRAUDULENT FINANCIAL REPORTING

30.  False/Misleading statements
 Misrepresentation or
intentional omission
 Falsification of
accounting records including
contracts, agreements or expense documents
 Intentional misapplication of accounting
principles (amount, classification, presentation
and/or disclosure)
 Offsets between customer accounts via manual
journal entries
FRAUDULENT FINANCIAL REPORTING

31. FRAUD TRIANGLE

32. “I’m entitled”
FRAUD TRIANGLE: RATIONALIZATION

33. FRAUD TRIANGLE: OPPORTUNITY
“We fooled them again”
“Wow, I am glad I am no longer
an auditor or regulator”

34. FRAUD TRIANGLE: PRESSURE
“We have to do this for the good of everyone”
“Everybody is doing this and has for ever”
“Just do as you are told, you make good money”

35. OTHER ACTIONS
CONSEQUENCES!

36. Without admitting or denying, per SEC order:
 Asbell was a New Jersey attorney operating as an unregistered
investment advisor
 Managed $139 million
 Engaged in fraudulent transactions with apparent purpose of
shifting trading profits or losses from accounts of Asbell, family
and/or certain clients
 These activities were not solely incidental to his practice of law
 Used back dated transactions processed with inter account
journal entries to shift profits from one advisor client to another
advisory client and to his family
 Asbell used an account where he was sole trustee to purchase
shares of 4 different companies from Asbell, family and/or other
advisory clients via interaccount journal entries and failed to
notify trust as required under section 206(3) of the Advisors Act.
 Processed trades at higher than market values. Trust then sold
shares at loss
YALE I. ASBELL

37. Violations:
 Willfully violated Section 10(b) of Exchange Act and Rule 10b-
5 which prohibits fraudulent conduct I/C/W purchase or sale
of securities
 Willfully violated Sections 206(1),(2) and (3) of Advisors Act
which prohibits fraudulent conduct by an investment advisor
 Willfully aided and abetted and caused violations of Sections
203 of Advisors Act which specifies unlawful for any
investment advisor, unless registered
YALE I. ASBELL
CONTINUED

38. Findings:
 Cease and desist
 Barred from association with any broker, dealer, investment
advisor, municipal securities dealer, municipal advisor, transfer
agent or nationally recognized statistical rating agency
 Prohibited from serving or acting as an employee, officer,
director or member of advisory board, investment advisor or
depositor of/or principal underwriter for, a registered investment
company or affiliated person of such investment advisor,
depositor or principal underwriter
 Denied privilege of appearing or practicing before commission as
an attorney
 Pay $150,000 civil penalty
 Pay disgorgement of $60,263 plus prejudgment interest of
$5,773
YALE I. ASBELL
CONTINUED

39. Without admitting or denying…
 Edward Cummings, CFO, internal controls deficiencies and violating
Sarbanes-Oxley requirements
 The CEO, Marc Sherman, has a pending settlement referred to
2/4/2015 order
 The CFO per SEC orders:
 Aware of deficiencies in and the circumvention of internal controls relating to
inventory and accounts receivable plus falsification of books and records
 Participated in decision to improperly accelerate accounts received and
inventory to increase borrowing base under line of credit
 Withheld information from company’s external auditor
 Made affirmative misrepresentations and statements…and omission of
information included in management representation letters about design,
maintenance and operation of internal controls
 As part of 10k filed, he signed management report on internal control that
falsely represented that CEO had participated in accessing I.C.
 Also signed falsely representing that others and CFO had evaluated I.C. and
had disclosed all significant deficiencies to auditor
EDWARD CUMMINGS, CFO

40. Facts per SEC order:
 He was aware of deficiencies in and circumvention of inventory controls
 Inventory received/shipped out was not entered into the books
 Items were removed without being recorded
 These internal control problems resulted in falsification of books and records
 He participated in design and implementation of internal controls, and
he was aware of deficiencies
 He and other senior management communicated openly about failed
implementation, training and circumvention of controls
 Going concerns opinions were issued in 2007 and 2008 so the ability to
procure funds was critical
 2008 revolving credit facility – inventory and A/R factored into
borrowing base
 On occasions records show that borrowings exceeded borrowing base
and improper A/R in inventory was accelerated to meet borrowing needs
 CFO participated in, and was aware of, and signed the borrowing base
certificate
EDWARD CUMMINGS, CFO
CONTINUED

41. Facts per SEC order (continued):
 CFO mislead auditors
 He did not disclose or direct anyone else to disclose deficiencies in
internal controls or the circumvention of controls
 He made misrepresentations and statements that were misleading
 He signed management representation letters where he omitted to
mention existence of significant deficiencies in design or operation of
I.C.
 He orally represented that key controls were in place and no significant
deficiencies
 10k Section 404 and 302 (SOX) management’s report and
certifications of I.C. falsely represented
 Sections 302 of SOX certificates attached to 10k and 10Q were
false (i.e. no significant deficiencies)
EDWARD CUMMINGS, CFO
CONTINUED

42. Findings & Sanctions:
 Commission finds that
 CFO willfully violated 10(b) & 13(b)5 and various rules and violations
of Exchange Act etc.
 The commission ordered:
 Cease & desist from committing or causing any violations and any
future violations
 Denied privilege of appearing or practicing before commission as an
accountant
 After 5 years can request readmission subject to various conditions
 For period of 5 years can not serve as officer or director of any public
company
 Pay a civil penalty of $23,000
EDWARD CUMMINGS, CFO
CONTINUED

43. Recent article by Bloomsberg BNA and
The Harvard Law School have commented:
 SEC broadens corporate officer liability by adding teeth to internal
control
 SEC advances a novel theory of fraud in this case
 Case is unique in that it did not arise from restatement
 Case may sound end to days when corporate officers say “No harm no
fowl” approach to disclosure when companies identifies I/M accounting
issues
 Chairman White “…minor violations that are overlooked or ignored can
feed bigger ones… perhaps…can foster a culture…”
 Commissioner Aguilar said that “The Commission must be willing to
charge fraud and must not hesitate to suspend…this is true regardless of
whether the fraudulent misconduct involves scienter”
 The SEC has advanced fraud charged against CEO and CFO rather than a
theory of negligence under 10(b)5 plus 13(b)5 which prohibits knowingly
falsifying books and records plus 13(b)2 which requires companies to
create and make accurate books and records
The weight of the SEC evidence may yet be tested
DOES THIS MATTER
HAVE BIGGER IMPLICATIONS?

44.  Even in the civil securities fraud area, courts have held that false
certifications are insufficient on their own to enable a securities fraud
action to survive a motion to dismiss
 2014 Judge Forrest says “…failure [of corporate executives] to identify
problems with…internal controls and accounting practices does not
constitute reckless conduct sufficient for section 10(b) liability. ”
 SEC is signaling an intent to enforce 302 and 404 certifications even
absent misstatements in companies F/S
 In it’s press release the SEC took the opportunity to state that
corporate executives have “an obligation to take Sarbanes-Oxley
disclosures and certification requirements very seriously.”
DOES THIS MATTER
HAVE BIGGER IMPLICATIONS??
CONTINUED

45.  Brian T. Croteau, Deputy Chief Accountant Office of the Chief
Accountant 12/08/2014 in remarks before the 2014 AICPA
National Conference on Current & PCAOB Developments said:
 “I question whether material weaknesses were being properly
identified and disclosed…and noted it was surprisingly rare to see
management identify material weakness in the absence of a material
misstatement…these results could…from deficiencies not being
identified…or…deficiencies not being evaluated appropriately.”
 On enforcement front they charged CEO and CFO who mislead
auditors by withholding information about internal control
deficiencies
 Key take away is that SEC as it pertains to Internal Control over
Financial Reporting requirements are ongoing, coordinated and are
increasingly integrated into our routine consultation, disclosure
review and enforcement efforts.
INTERNAL CONTROL OVER FINANCIAL
REPORTING IMPLICATIONS

46.  Case filed December 2010 – alleged:
 Luna drafted legal opinions to transfer agent that falsely stated that
shares were exempt from registration under Rule 504 of Regulation D
 Luna further falsely represented that 4 companies were accredited
investors – sham straw companies
 Luna and accomplices received $6.8 million from sales of shares they
obtained
 Scheme:
 Axis Technologies, Inc. sought financing to expand business and were
referred to Luna
 Luna identified Riverside Entertainment as a non-operating company
which was quoted in pink sheets
 Luna orchestrated a reverse merger
 Riverside changed name to Axis Technology Group, Inc. and acquired Axis
Technologies, Inc.
MARCUS LUNA

47.  Scheme:
 Luna identified 4 purported accredited companies as investors
 St. Paul VF
 Minnesota VC
 Real Estate NM
 Matrix VC
 These 4 companies execute subscription agreements to purchase 15
million shares for $300,000 which was funded from Luna’s law firm
 Company relied upon Luna representation that above companies were
accredited
 These represented accredited companies were a sham created to acquire
and sale securities
 Equity owners of 3 of the companies were recruited by Luna (the 4th was
controlled by Luna) and were themselves not accredited
 Note: Corporations needs $5 million of assets and individuals need $1 million in
income in the previous 2 years in excess of $200,000
 Luna mailed opinion letter to Axis Groups transfer agent that 15 million
shares may be issued as “free trading” and without restrictive legend
Done to facilitate scheme
MARCUS LUNA
CONTINUED

48.  Scheme:
 Luna filed paperwork NASDQ to obtain ticker “AXTG” and submitted unaudited
financial statements so the stock could be quoted
 Stock promoters were issuing press releases, faxes and emails regarding group
sales and sales prospects
 Trading volume and price increases happened
 Luna and recruited representatives sold stock for net gain of $6.8 million
 Recruited representatives paid Luna $1.7 million
 February 26, 2014 court ruled:
 Granted summary judgment against all defendants, in part court held that Luna
had violated various sections of Exchange Act and 10b-5
 The court made no findings that the violations were not willful
 4 Entities set up by Luna were merely formed to act as conduits to allow him and
others to sell stock
 Luna authored and issued a false legal opinion letter to transfer agent that
stated that shares were not restricted and were freely tradable
 Court found that gains were recognized as follows:
 $2 million to Luna
 $6 million to the 4 companies
 Principals of the 4 companies paid Luna $1.7 million in kickbacks
MARCUS LUNA
CONTINUED

49.  On June 27, 2014 U.S. District Court issued an order:
 Prohibits Luna from providing legal services I/C/W offer or sale of
securities in connection with exemption under Regulation D
 Bars Luna Montgomery Daskivich & Murtha from participating in any
offering of any penny stock
 Imposes disgorgement and prejudgment interest of:
 Luna & St. Paul of $4.98 million
 Montgomery & Minnesota of $2.51 million
 Daskivich & Real Estate of $3.49 million
 Murtha & Matrix of $1.72 million
 Luna (jointly and severally) with other defendants of $2.39 million
 Imposes civil penalties of
 Luna & St. Paul $2.03 million
 Montgomery & Minnesota of $1.97 million
 Daskivich & Real Estate of $2.73 million
 Murtha & Matrix of $1.37 million
MARCUS LUNA
CONTINUED

50.  On June 27, 2014 U.S. District Court issued an order:
 Court denied SEC request for permanent injunctions holding that the
legal services and penny stock bars are sufficient
 Court previously granted the SEC’s motion finding no genuine issues
of the material fact remained that the defendants each violated
section 5 of Securities Act and that Luna violated sections 17(a)(1),
(2) and (3) of Securities Act, Section 10(b) of Exchange Act and Rule
10b-5
MARCUS LUNA
CONTINUED

51. Complaint – SEC v. Todd Duckson, et al.
 Involves offer and sale of interest in Capital Solutions Monthly Income,
LP (“Fund”)
 From 1/05 to 8/09 the fund raised $74 million from 450 investors
Note: $21.6 million of this was raised from 3/08 thru 8/09
 Fund’s sole business was to make real estate loans to a single
borrower (Hennessey)
 In late 2007, real estate Hennessey started to have severe financial
difficulties
 In 2008 Hennessey borrowers, which were affiliates, defaulted and
Hennessey foreclosed
 In May 2008 Hennessey defaulted on its obligations to Fund
 Fund foreclosed on Hennessey real estate interest
 Since defaults resulted in no meaningful income producing
investments, the Fund began mostly to pay debt service related to
senior lenders from proceeds of new investors
TODD A. DUCKSON

52. Complaint – SEC v. Todd Duckson, et al.
 In 2008 Duckson (as outside counsel) participated in drafting private
placement memorandum (“PPM”)
 PPM mislead investors by saying 21% return without disclosing that
investment strategy had failed, and its affiliated borrowers had
defaulted
 PPM did not make clear Hennessey issues and only made a vague
reference to “voluntarily surrendered collateral”
 In 2008 Duckson through his firm, Transaction Finance (“TFFM”)
became an investment advisor for Fund
 Disclosures made subsequently mislead investors stating that Fund
would use proceeds raised to make real estate loans and other
investments
 Fund’s foreclosure on Hennessey required to use most of the proceeds
from investors to pay senior lenders on properties
 Other allegations
TODD A. DUCKSON
CONTINUED

53.  Memorandum Opinion and Order of U.S. District Judge Donovan W.
Frank issued June 27, 2014
 This matter is before the Court on SEC motion for remedies against
Duckson, Fund and TFFM
 These were the only remaining defendants at time of trial
 On 10/22/2013 after 5 weeks of trial, the jury returned a verdict
finding on 2 time frames that Fund, TFFM & Duckson were found
guilty as follows:
 Period One: 3/08 – 10/08
 Direct violations of Section 10(b) and Rule 10b-5 by Fund
 Aiding and abetting the Funds violations 10(b) and 10b-5 by Duckson
 Direct violations of 17(a) of 33 Act by Duckson and Fund
 Period Two: 10/08 – 12/09
 Direct violation of 10(b) and Rule 10b-5 by Duckson, Fund and TFFM
 Direct violation of 17(a) of Securities Act by Duckson and Fund
 Additionally during period one and two, the jury found that Duckson and
Fund’s direct violations of Section 17(a) were made knowingly with
recklessness and negligently
 Plus the jury concluded that defendants violation of 10(b) and Rule 10b-5
were made knowingly or with reckless disregard
TODD A. DUCKSON
CONTINUED

54. Judge Donovan W. Frank:
 Imposed permanent injunctions against all 3 defendants
 Barred Duckson from serving as officer or director of public
company for 10 years
 Imposed financial sanctions as follows:
 $14.5 million against Fund
 $3.3 million against Duckson & TFFM, jointly and severally
 $1.8 million against Duckson individually
 Civil penalties of $50k and $15k against Duckson & TFFM,
respectively
Note: 12/18/14 Duckson request for retrial was denied by Court (Judge
Donovan W. Frank)
TODD A. DUCKSON
CONTINUED

55.  DOJ 3/26/2015
 A unit of Paris based Schlumberger Ltd. has agreed to plead guilty
and pay $232.7 million penalty for conspiracy to violate trade
sanctions with Iran & Sudan
 The plea agreement is contingent upon Court approval
 Additional terms agreed during 3 years probationary period:
 Cessation of all operations in Iran & Sudan
 Reporting on present companies compliance with sanctions
 Responding to request for information and materials related to parent
companies compliance
 Hiring an independent consultant to review parent company’s internal
sanctions policies and procedures and parent company’s internal audits
focused on sanctions compliance
OTHER NEWS - SCHLUMBERGER

56. Facts:
 Shlumburger Oilfield Holdings Ltd. Conducted business with
Iran & Sudan from U.S. and took steps to disguise:
 They willfully violated U.S. sanctions against regimes
 The International Economic Powers Act is what U.S. uses to address
threats through the regulation of commerce
 This case puts global corporations on notice they must respect U.S.
laws when on American soil
 One can violate sanctions even if they do not ship from the U.S., if
you facilitate trade with those countries from the U.S.
SCHLUMBERGER
CONTINUED

57. SCALES OF JUSTICE

58. COMMENTS AND QUESTIONS

59. Lesley Hand CPA, CFE, CFF
hand.lesley@gmail.com
(925) 933-6176
CONTACT INFORMATION