Among recent enforcement actions by the Securities and Exchange Commission were the imposition of a $2.5 million fine on RBC Capital Markets LLC for proxy statement disclosure violations, charges against a supposed green technology company for defrauding investors and against an Alabama attorney and companies he controls for defrauding professional athletes out of millions.
Also, the Financial Industry Regulatory Authority went after two Morgan Stanley entities for failures regarding potentially suspicious transactions and for large options positions reporting errors.
SEC: Lawyer Defrauding Pro Athletes to Pay Alimony
The SEC has charged Alabama attorney Donald Watkins and companies he controls with defrauding professional athletes and other investors out of millions of dollars, much of which he spent on his girlfriend and to cover personal expenses like alimony, past-due taxes and credit card bills.
According to the agency, Watkins and his companies, Watkins Pencor LLC and Masada Resource Group LLC, claimed to investors that their money would be used to support waste-to-energy ventures.
Investors were further duped by being told that Waste Management Inc., a large international waste treatment company, was seriously considering acquiring Watkins Pencor, Masada, and its affiliated companies in a multibillion-dollar transaction. However, the SEC said that Waste Management's "interest" in Masada never went beyond a short initial meeting in August 2012, more than a year after the defendants began telling investors that negotiations were progressing and that the acquisition was imminent.
"We allege that Watkins duped investors into believing that there was a lucrative transaction on the horizon, when in fact there was none," Walter Jospin, regional director of the SEC's Atlanta regional office, said in a statement.
The agency seeks permanent injunctions, penalties and return of ill-gotten gains with prejudgment interest. It has also charged Watkins' law firm, Donald V. Watkins P.C., as a relief defendant for recovery of ill-gotten gains from investor monies the SEC says it received.
RBC to Pay $2.5 Million on Proxy Statement Disclosure Violations
RBC Capital Markets LLC has agreed to a $2.5 million settlement with the SEC for causing materially false and misleading disclosures about its valuation analysis in a proxy statement for Rural/Metro Corp.'s sale in 2011 to a private equity firm.
According to the agency, RBC was the lead financial advisor to Rural/Metro, a medical transportation services provider, and received a $500,000 fee for a fairness opinion presented to Rural/Metro's board as it considered the sale.
But an investigation by the SEC found that RBC's presentation contained materially false and misleading statements that made the bid look more attractive. RBC also got that information included in the proxy statement Rural/Metro filed in May 2011 to solicit shareholder approval for the sale.
RBC's presentation claimed that one of its valuations was based on Wall Street analysts' "consensus projections" of Rural/Metro's 2010 adjusted EBITDA, a pretax earnings figure. However, the valuation had nothing to do with analysts' research or a "consensus" view; instead, it was Rural/Metro's actual 2010 adjusted EBITDA of $69.8 million.
Rural/Metro's proxy statement included a summary of RBC's valuation analysis, including the false statement that RBC used "Wall Street research analyst consensus projections" for 2010 "consensus" adjusted EBITDA. Not only was the proxy statement false, it was also misleading, since it would lead shareholders to believe the analysis reflected the "consensus" calculation of $76.8 million.
The SEC also said RBC caused the proxy statement to include a misleading disclosure suggesting that RBC had relied on another valuation analysis in its fairness presentation to Rural/Metro's board when it did not use that analysis for valuation purposes.
Without admitting or denying the SEC's findings, RBC agreed to the SEC's order and to pay $500,000 in disgorgement, $77,759 in interest and a $2 million penalty.
SEC Charges 'Green Tech' Company with Fraud
A California company and two executives purporting to manufacture environmentally friendly building materials have been charged by the SEC with using baseless financial projections and other misleading statements to defraud investors.
