SEC, FINRA Enforcement: 2 Busted for Selling Fake ‘Charitable Gift’ Annuities

According to the agency, Voight recently raised $13.8 million that he said would be loaned to a startup named InterCore Inc. to fund its deployment of a "Driver Alertness Detection System," or DADS. Starting in October 2014, Voight wrote to prospective investors about a "tremendous" opportunity to help InterCore install the DADS technology into "several million trucks and buses," which he said was enough for the company to pay the 30% to 42% annual interest rates on the promissory notes "many, many times over."

But of course Voight knew that was a lie. He served on InterCore's board and knew perfectly well that the public company, based in Delray Beach, Florida, was underwater and couldn't pay back the loans.

Voight used the DADS investors' money to make Ponzi payments to earlier investors, or channeled the funds to InterCore through two of his other partnerships, Rhine Partners LP and Topside Partners LP. InterCore then sent the funds to its Montreal-based subsidiary, InterCore Research Canada Inc., where they vanished.

Routing the money through Rhine and Topside gave Voight the chance to collect  a number of financial benefits, including fees and InterCore stock warrants, that he never disclosed to the DADS investors.

Voight and Daystar agreed to settle without admitting or denying the charges, and consented to various measures along with asset freezes and other emergency relief. They also agreed to pay civil penalties and return ill-gotten gains, with interest, in amounts to be determined later by the court. Voight also agreed to being barred from serving as a public company officer or director and to be barred permanently from participating in the offer, purchase, or sale of any security except for his own personal account.

The SEC named F.A. Voight & Associates, Rhine, Topside, InterCore, and InterCore Research Canada as relief defendants for the purpose of recovering any ill-gotten gains. F.A. Voight & Associates, Rhine, and Topside have agreed to asset freezes and other emergency relief, and to return ill-gotten gains in amounts to be set by the court. The SEC will go to court against relief defendants InterCore and InterCore Research. FINRA Bars Former Caldwell Broker for Churning

Richard Adams, a former registered representative of Caldwell International Securities Corp., has been permanently barred by FINRA from the securities industry for churning customers' accounts and other securities rule violations. Adams also failed to report a dozen unsatisfied judgments and liens on his U4 Registration Form as required by FINRA rules.

According to the agency, from July 2013 to June 2014, Adams excessively traded and churned the accounts of two customers, generating more than $57,000 in commissions. At the same time, the excessive trading activity in these accounts resulted in over $37,000 in customer losses.

Adams neither admitted nor denied the charges but agreed to the sanctions.

Miller Energy Resources, COO, Former CFO Charged With Accounting Fraud

The SEC has charged Tennessee-based Miller Energy Resources Inc., its current COO and its former CFO with inflating values of oil and gas properties, resulting in fraudulent financial reports for the company. The audit team leader at the company's former independent auditor also was charged.

According to the agency, after acquiring oil and gas properties in Alaska in late 2009, Miller Energy overstated their value by more than $400 million, boosting the company's net income and total assets. That high valuation had a significant impact, turning a penny-stock company into one that eventually was listed on the New York Stock Exchange, where its stock reached a 2013 high of nearly $9 per share.

Miller Energy paid $2.25 million and assumed certain liabilities to buy the Alaska properties, but later reported them at a value of $480 million. While accounting standards required the company to record the properties at "fair value," then-CFO Paul Boyd relied on a reserve report that did not reflect fair value for the assets, and also double-counted $110 million of fixed assets already included in the reserve report.

The report by a petroleum engineering firm also contained expense numbers that were knowingly understated by David Hall, the CEO of Miller Energy's Alaska subsidiary and Miller Energy's chief operating officer since July 2013. Hall, of Anchorage, Alaska, also altered a second report to make it look as if it reflected an outside party's estimate of value.

In addition, the fiscal 2010 audit of Miller Energy's financial statements was deficient due to the failure of Carlton W. Vogt III, the partner in charge of the audit. Vogt, of Warwick, New York, was then at Sherb & Co LLP, a now-defunct firm that was suspended by the SEC in 2013 for conduct unrelated to its work for Miller Energy. Vogt issued an unqualified opinion of Miller Energy's 2010 annual report, falsely stating that the audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board and that Miller Energy's financial statements were presented fairly and conformed with U.S. generally accepted accounting principles.

The SEC is seeking cease-and-desist orders, civil monetary penalties and return of allegedly ill-gotten gains from the company, Boyd and Hall. It also seeks to bar Boyd and Hall from serving as public company officers or directors and to bar Boyd and Vogt from public company accounting. There will be a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division's allegations and determine what, if any, remedial actions are appropriate.

— Check out Live by the Code! The SEC's Ethics Code, That Is on ThinkAdvisor.