Among recent enforcement actions, the SEC hit a ski resort embroiled in fraudulent EB-5 offerings; the Las Vegas Sands for violations of the Foreign Corrupt Practices Act (FCPA); a technology company for misleading investors; and a research analyst for insider trading.
In addition, Britain's Financial Conduct Authority (FCA) banned a former LIBOR submitter for manipulating his LIBOR submissions.
SEC Freezes Ski Resort's Assets on Fraudulent EB-5 Offerings
The SEC froze the assets of a Vermont-based ski resort and related businesses it said were misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.
According to the agency, Ariel Quiros of Miami, William Stenger of Newport, Vermont, and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.
Investors were told they were investing in one of several projects connected to Jay Peak Inc., a ski resort operated by Quiros and Stenger, and their money would only be used to finance that specific project.
But in Ponzi-like fashion, Quiros tapped money from investors in later projects to fund deficits in earlier projects. Quiros also used investor money for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.
More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros's personal expenses and in other ways never disclosed to investors.
Quiros, Stenger, Jay Peak, and a company owned by Quiros called Q Resorts Inc., as well as seven limited partnerships and their general partner companies, were charged by the SEC. Four other companies are named as relief defendants, for the purpose of recovering investor funds transferred into their accounts.
In addition to financial penalties and disgorgement of ill-gotten gains plus interest, the SEC seeks conduct-based injunctive relief against Quiros and Stenger along with an officer-and-director bar against Quiros.
Las Vegas Sands Settles With SEC on FCPA Violations
The Las Vegas Sands has agreed to settle SEC charges that it violated the Foreign Corrupt Practices Act (FCPA) by failing to properly authorize or document millions of dollars in payments to a consultant facilitating business activities in China and Macao.
According to the agency, LVS kept inaccurate books and records and frequently lacked supporting documentation or proper approvals for more than $62 million in payments to a consultant in Asia.
The consultant acted as an intermediary to obscure the company's role in certain business transactions such as the purchases of a basketball team and a building in China, where casino gambling isn't permitted.
LVS transferred $6 million to the consultant, who was internally referred to as a "beard," to buy a team to play in the Chinese Basketball Association, which did not permit gaming companies to own a team. The company transferred an additional $8 million to the consultant to cover the costs of operating the team without any documentation of those costs.
In addition, LVS used the same consultant as a beard to purchase a building in Beijing from a Chinese state-owned-entity, ostensibly to develop a business center for U.S. companies seeking to do business in China. Despite concerns by some employees that the real estate purchase was solely for political purposes, approximately $43 million in payments were made to the consultant without research, analysis, or proper approval by any LVS employee authorized to approve the amounts paid.
Approximately $900,000 paid to an entity controlled by the consultant was recorded in company books and records as "property management fees" when no property management services were actually performed. Approximately $1.4 million was recorded as "arts and crafts" when the entity never actually obtained any artwork for the building.
There were other violations, too, involving purchases, reimbursements to outside counsel, and comps to customers. In one case, an employee obtained a cash advance of $28,000 and a cash reimbursement of $86,000 without proper authorization. In another, an outside counsel requested reimbursement of $25,000 for expenses incurred on a business trip but provided no documentation, and later admitted that he actually requested the funds for a friend. And in a third, in its casinos in Macao, LVS employees didn't track which customers received comps to be sure they weren't providing improper gifts to government officials.
In additional to paying a $9 million penalty, LVS has agreed to retain an independent consultant for two years to review its FCPA-related internal controls, recordkeeping, and financial reporting policies and procedures and its ethics and compliance functions. The company neither admitted nor denied the SEC's charges.
SEC Charges Tech Company With Fraud
A Texas-based technology company and its founder have been charged with fraud by the SEC after it said they boosted stock sales with phony claims about a supposedly revolutionary computer server and big-name customers purportedly placing orders to buy it.
