Blog Posts Tagged With Corporate and Other Issues

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SEC Files Motion for Order to Show Cause in Case Against Elon Musk (S.D.N.Y. Feb. 27, 2019)

The SEC sought an order to show cause why Elon Musk, the CEO of Tesla, should not be held in contempt for a violation of an October 2018 final judgment by the District Court for the Southern District of New York.  The judgment required Musk to obtain pre-approval of any written communications that “contained, or reasonably could contain, information material to Tesla or its shareholders.”  The SEC filed this motion after Musk tweeted about the
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SEC v. Jack D. Massimino and Robert C. Owen (C.D. Cal. Feb. 25, 2019, Settled)

Action against Defendants, two former executives of a now defunct public company that operated for-profit schools, for their roles in the company’s alleged failure to disclose material regulatory risks in public filings.  According to the SEC, the company improperly inflated its long-term debt in financial submissions to the Department of Education.  The SEC alleges that Defendants failed disclose in public filings that the inflation could affect the company’s access to education funds.  Defendants have agreed
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In re Gladius Network LLC (A.P. Feb. 20, 2019, Settled)

Action against Respondent, a cybersecurity company, for alleged unregistered initial coin offering.  According to the SEC, Respondent conducted an initial coin offering without registering or qualifying for an exemption.  Respondent agreed to return funds to participating investors.  The SEC did not impose a penalty due to Respondent’s self-reporting and cooperation.

SEC Complaint

SEC Press Release
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SEC v. Kevin R. Kuhnash and Jason P. Jimerson (S.D. Ind. Feb. 12, 2019, Contested)

Action against Defendants, former executives of a plastics manufacturer, for alleged fraud in connection with the company’s sale to a public company.  According to the SEC, the company routinely made material misrepresentations about product specifications and test data.  The SEC alleges that Defendants concealed these practices while negotiating the company’s acquisition.  Defendants have been charged in a parallel criminal action in the Southern District of Indiana.

SEC Complaint

SEC Litigation Release
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In re Digital Turbine, Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a technology company, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting.  According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to its financial statements and reporting over a period of seven years but did not adequately address those weaknesses, which included inadequate accounting staffing and inadequate financial information technology.  Respondent has agreed to pay a civil penalty of $100,000.

SEC Order

SEC Press Release
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In re Lifeway Foods, Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a dairy foods producer, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting (“ICFR”).  According to the SEC, Respondent’s Forms 10-K disclosed recurring material weaknesses related to its financial statements and reporting over a period of nine years but did not sufficiently address those weaknesses.  The SEC also alleges that Respondent failed to perform an ICFR evaluation and assessment for two consecutive years and that Respondent had restated its
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In re CytoDyn Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a biotechnology company, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting.   According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to financial statements and reporting over a period of nine years, including inadequate segregation of financial duties, but provided insufficient information about the specific weaknesses.  Respondent has agreed to pay a civil penalty of $35,000.

SEC Order

SEC Press Release
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In re Grupo Simec S.A.B. DE C.V. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a manufacturer of iron and steel products, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting (“ICFR”).  According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to its financial statements and reporting over a period of 10 years but did not adequately address those weaknesses, which included inadequate segregation of financial duties, inadequate transaction controls, and inadequate financial oversight.  Respondent has agreed to pay a civil penalty
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In re Hertz Global Holdings, Inc., and The Hertz Corporation (A.P. Dec. 31, 2018, Settled)

Action against Respondents, a rental car company and its holding company, for alleged financial misstatements.  According to the SEC, Respondents misstated pretax income, failed to disclose material facts to investors, issued earnings guidance that was inaccurate based on internal analyses, and failed to maintain adequate accounting controls.  Respondents have agreed to pay a civil penalty of $16 million.

SEC Order
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In re Polycom, Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a communication product company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, Respondent’s subsidiary provided discounts to distributors and resellers with the understanding that the discounts would be used to make cash payments to government officials who had influence over purchasing decisions.  The SEC further alleges that Respondent failed to maintain adequate accounting controls and lacked an effective anti-corruption compliance program with
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In re Centrais Elétricas Brasileiras S.A. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a partially state-owned Brazilian energy company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, officers of Respondent’s subsidiary engaged in a scheme to rig construction bids, inflate contract prices, and pay bribes to government officials.  The SEC further alleges that Respondent’s accounting controls were inadequate.  Respondent has agreed to pay a civil penalty of $2.5 million.

SEC Order

SEC Administrative Summary
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In re Nutriband, Inc., et al. (A.P. Dec. 26, 2018, Settled)

Action against Respondents, a nutritional patch manufacturer and two of its directors, for alleged filing of misleading statements.  According to the SEC, Respondents misrepresented the FDA’s jurisdiction over the company’s products and failed to disclose that the products required FDA approval.  Respondent directors have agreed to pay civil penalties of $25,000 each.

SEC Order
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In re ADT Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a home security firm, for failure to comply with disclosure requirements with respect to non-GAAP financial measures.  According to the SEC, Respondent used non-GAAP metrics in its financial statements and failed to give equal or greater prominence to comparable GAAP metrics.  Respondent has agreed to pay a civil penalty of $100,000.

SEC Order
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In re Paul A. Margis (A.P. Dec. 18, 2018, Settled)

Action against Respondent, a former senior executive of an electronics company, for alleged books and records and internal accounting control violations.  According to the SEC, Respondent falsely recorded payments to several consultants, including a government official, and misled an auditor about the company’s internal accounting controls and books and records.  Respondent has agreed to pay a civil penalty of $75,000.

SEC Order 

SEC Press Release

Related Action
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In re Takeshi “Tyrone” Uonaga (A.P. Dec. 18, 2018, Settled)

Action against Respondent, a former senior executive of an electronics company, for alleged books and records and internal accounting control violations.  According to the SEC, Respondent backdated a contract, which caused the company to improperly recognize revenue, and misled an auditor about financial statements, internal accounting controls, and books and records.  Respondent has agreed to pay a civil penalty of $50,000.

SEC Order 

SEC Press Release 

Related Action
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In re Santander Consumer USA Holdings Inc. (A.P. Dec. 17, 2018, Settled)

Action against Respondent, an automotive financing company, for alleged books and records and internal accounting controls violations.  According to the SEC, Respondent failed to properly calculate and report certain measures in accordance with GAAP.  Respondent has agreed to pay a civil penalty of $1.5 million.

SEC Order 

SEC Administrative Summary
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In re Lotus Bio-Technology Development Corporation (A.P. Dec. 11, 2018, Settled)

Action against Respondent, a biotechnology development company, for alleged violation of interim financial review requirements of Regulation S-X.  According to the SEC, Respondent filed a Form 10-Q with financial statements that had not been reviewed by an independent public accounting firm.  Respondent has agreed to a cease-and-desist order.  The SEC did not impose a civil penalty based on Respondent’s demonstrated inability to pay.  SEC Order
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In re The Hain Celestial Group, Inc. (A.P. Dec. 11, 2018, Settled)

Action against Respondent, an organic food and personal care product company, for alleged books and records and accounting controls violations.  According to the SEC, Respondent insufficiently documented sales incentives offered to distributors and failed to implement adequate policies and procedures related to documentation.  Respondent agreed to a cease-and-desist order.  The SEC did not impose a civil penalty due to Respondent’s self-reporting, remediation efforts, and cooperation.

SEC Order 

SEC Press Release
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In re Auscrete Corporation (A.P. Dec. 11, 2018, Settled)

Action against Respondent, a construction product manufacturer, for alleged violation of interim financial statement review requirements of Regulation S-X.  According to the SEC, Respondent filed three Forms 10-Q that included financial statements that had not been reviewed by an independent public accounting firm.  Respondent has agreed to a cease-and-desist order.  The SEC did not impose a civil penalty based on Respondent’s demonstrated inability to pay.

SEC Order
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In re Frontier Oilfield Services, Inc. (A.P. Dec. 11, 2018, Settled)

Action against Respondent, an oilfield fluid disposal corporation, for alleged violation of interim financial review requirements of Regulation S-X.  According to the SEC, Respondent filed a Form 10-Q with financial statements that had not been reviewed by an independent public accounting firm.  Respondent has agreed to pay a civil penalty of $25,000.

SEC Order
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In re Eastgate Biotech Corporation (A.P. Dec. 11, 2018, Settled)

Action against Respondent, a pharmaceutical company, for alleged violation of interim financial review requirements of Regulation S-X.  According to the SEC, Respondent filed three Forms 10-Q that included financial statements that had not been reviewed by an independent public accounting firm.  Respondent has agreed to a cease-and-desist order.  The SEC did not impose a civil penalty based on Respondent’s demonstrated inability to pay.

SEC Order
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In re Agria Corporation (A.P. Dec. 10, 2018, Settled)

Action against Respondent, an agricultural company, for alleged fraudulent accounting related to a 2010 divestiture.  According to the SEC, Respondent materially overstated the value of consideration received from the divestiture, thereby underreporting the loss it incurred on the transaction.  Respondent has agreed to pay a civil penalty of $3 million.

SEC Order 

SEC Press Release
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In re Lai Guanglin (Alan) (A.P. Dec. 10, 2018, Settled)

Action against Respondent, an executive chairman of an agricultural company, for alleged scheme to manipulate the market price of the company’s American Depositary Shares (“ADSs”).  According to the SEC, Respondent used brokerage accounts to engage in trading to inflate the company’s ADS price and made materially misleading statements about the company’s compliance with a New York Stock Exchange listing standard.  Respondent has agreed to a five-year officer-and-director bar and to pay a civil penalty of
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In re Vantage Drilling International (A.P. Nov. 19, 2018, Settled)

Action against Respondent, a drilling company, for alleged violations of the FCPA’s internal accounting control provisions by its predecessor, Vantage Drilling Company (“VDC”). The SEC alleges that VDC failed to implement an adequate system of internal controls and, as a result, made payments to a former outside director that the former director may have used to bribe foreign officials. Defendant has agreed to pay disgorgement of $5 million.

SEC Order

SEC Administrative Summary
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