The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
April 16, 2020
SEC Obtains Final Judgments Against New York Penny Stock Promoter and Associated Companies in Scalping and Market Manipulation Case (SEC Release)Court-Orders Final Forfeiture of Over $54 Million in Connection with Billion Dollar Ponzi Scheme (DOJ Release)
'I can't even get anyone to take my application': Some small businesses are locked out of loan program (CNBC by Annie Nova)
https://www.cnbc.com/2020/04/15/when-you-cant-find-a-bank-to-give-you-one-of-the-small-business-loans.html
Read the plight of pie-shop owner Johanna Mann, who is strangling amid an ever-tightening cord of red tape. Her story is one of banks that can't be bothered with the small fry or aren't interested in putting in the effort to file the paperwork. I don't know about you but I would love to order some fresh-baked pies while I'm sitting at home and self distancing. I'm sure that there are folks near Mann's bakery who would be happy to don their masks and gloves and pick up a pie. Ultimately, we have become a nation that ponders everything and solves nothing. It's easier for our elected officials to just appear on television and talk about trillions of dollars and the tired platitudes about government for the people. When it comes to implementing laws and creating the mechanics by which they will work, well, our politicians don't want to roll up their sleeves and get their hands dirty. As Bloomberg's Annie Nova reports:
The Paycheck Protection Program was supposed to help business owners with that exact concern. Starting on April 3, banks began accepting applications for the forgivable loans that are supposed to cover up to eight weeks of a businesses' payroll expenses. Mann, for her part, hopes to secure a loan for around $133,000.However, she learned that not all banks are participating. On the Small Business Administration's website, she filled out the initial loan application and sent it to her bank, Buckeye Community.Soon after, she received an email from someone at Buckeye, explaining that it isn't giving out loans under the Paycheck Protection Program. Someone at Buckeye said she should apply for the loan through Fountainhead Commercial Capital, a bank in Lake Mary, Florida."They told me they're not equipped to handle all of the paperwork," Mann said. "I called them and said, 'What the hell?' "
https://www.theindychannel.com/news/coronavirus/indiana-firefighter-surprised-when-stimulus-payment-shows-8-2-million-in-his-bank-account
In contrast to Johanna Mann's frustration with getting loans from her local banks, consider this story in which a local bank did, indeed, put the "Stimulus" in those government stimulus payments:
Charles Calvin said he was supposed to receive $1,700 from the government for his stimulus payment.
"I went to the ATM at the Family Express and once I withdraw $200 out of my account I looked at the available balance that was still left in my account," Calvin said. "Apparently, my account had $8.2 million in it. I'm like what in the world is going on here?"
Coronavirus cases tied to giant South Dakota pork-processing plant surpass 500 / The Smithfield plant employs about 3,700 people (Fox Business News by Evie Fordham)
https://www.foxbusiness.com/money/smithfield-foods-covid-19-outbreak-closed-governor
As Fox Business News' Fordham reports in part:
There have been 518 employees at a Smithfield Foods processing plant in South Dakota and 126 of their close contacts who have contracted coronavirus, state health officials said at a press conference on Wednesday.
Fordham's article also notes that South Dakota's Governor Kristi Noem:
has not issued a statewide stay-at-home order like many other governors have, but she pointed out that the Smithfield plant is an essential business that would have stayed open despite such an order."Let's be perfectly clear: a shelter-in-place order would NOT have prevented Smithfield from happening," Noem wrote on Twitter on Wednesday. "They are a critical infrastructure business. They are part of the nation's food supply chain and contribute to South Dakota's role feeding the country and the world."
Bill Singer's Comment: Y'all remember South Dakota Governor Noem's "I'm on Meth" campaign?
In an effort to reprise the idiocy of her Meth campaign, Govern Noem refused to issue statewide MANDATORY social distancing rules; instead, Noem minced words and issued what amounted to so-called "baseline" "guidance." As the Governor saw it, her role wasn't to govern from the top down but to punt the critical issue of social distancing onto local communities. Noem's press conference is all about what folks "should" do but nary a word about what they "must " do per a Gubernatorial Order.
If Noem does her math, she will conclude that with 518 sick employees out of a workforce of 3,700, some 14% of Smithfield's workers have COVID19. How's that local-community-based punt working for ya? Having miserably failed to govern, now Noem plays semantics and pretends that her failure "would NOT have prevented Smithfield from happening." Yeah, sure, all those employees got COVID19 from ham sandwiches.
[In]Securities Guest Blog: Small Worlds by Aegis Frumento Esq (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5172/aegis-frumento-insecurities-weeds/
Apparently chafing at his prolonged self distancing a la home quarantine, Guest Blogger Aegis Frumento grouses that pandemics put societal imbalances in high relief, spurring people to demand social restructuring. Frumento asserts that our principal social imbalance is inequality; and that we have bred a new class of downtrodden, living paycheck-to-paycheck, overburdened with credit card and student debt, unable to get and keep a decent job, unlikely ever to do as well as their parents, chronically insecure in the heath and livelihood. As Frumento laments, these felt inequities spawn such pathologies as nativism, fundamentalism, hypernationalism, isolationism, racism, anti-intellectualism -- in short, Trumpism.
SEC Obtains Final Judgments Against New York Penny Stock Promoter and Associated Companies in Scalping and Market Manipulation Case (SEC Release)
https://www.sec.gov/litigation/litreleases/2020/lr24795.htm
In a Complaint filed in the United States District Court for the Southern District of New York
https://www.sec.gov/litigation/complaints/2020/comp24795.pdf, the SEC alleged that between March 2013 and March 2014, Joseph Fiore manipulated the market for, and scalped, the stock of microcap issuer Plandai Biotechnology, Inc; and, further, that Fiore financed and directed a promotional campaign aimed at public investors that included recommendations to buy Plandai stock without disclosing that he beneficially the stock, and that he intended to sell and was selling into the public market millions of shares. Further, the Complaint alleged that Fiore engaged in manipulative trading of Plandai stock through Berkshire Capital Management Company, Inc. and Eat at Joe's Ltd n/k/a SPYR,Inc. (companies that he controlled), and that he made false and misleading statements to brokerage firms through which he traded Plandai stock, and failed to disclose his beneficial ownership of more than 5% of the outstanding shares of Plandai stock. Finally, the Complaint alleged that SPYR failed to register with the SEC as an investment company.
https://www.sec.gov/litigation/complaints/2020/comp24795.pdf, the SEC alleged that between March 2013 and March 2014, Joseph Fiore manipulated the market for, and scalped, the stock of microcap issuer Plandai Biotechnology, Inc; and, further, that Fiore financed and directed a promotional campaign aimed at public investors that included recommendations to buy Plandai stock without disclosing that he beneficially the stock, and that he intended to sell and was selling into the public market millions of shares. Further, the Complaint alleged that Fiore engaged in manipulative trading of Plandai stock through Berkshire Capital Management Company, Inc. and Eat at Joe's Ltd n/k/a SPYR,Inc. (companies that he controlled), and that he made false and misleading statements to brokerage firms through which he traded Plandai stock, and failed to disclose his beneficial ownership of more than 5% of the outstanding shares of Plandai stock. Finally, the Complaint alleged that SPYR failed to register with the SEC as an investment company.
Without admitting or denying the allegations in the Complaint, Fiore, Berkshire, and SPYR consented to the entry of final judgments that require them to jointly and severally pay $2 million of disgorgement and prejudgment interest, with each Defendant separately paying a $500,000 civil penalty. Additionally, Fiore, Berkshire, and SPYR agreed to be permanently enjoined from violating the antifraud, market manipulation, beneficial ownership reporting, and other provisions of the federal securities laws charged in the complaint. Further, Fiore and Berkshire agreed to be barred for five years from participating in any penny stock offering, and Fiore consented to a five-year bar from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934.
Court-Orders Final Forfeiture of Over $54 Million in Connection with Billion Dollar Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-edca/pr/court-orders-final-forfeiture-over-54-million-connection-billion-dollar-ponzi-scheme
Jeff Carpoff pled guilty in the United States District Court for the Eastern District of California to conspiracy to commit wire fraud and money laundering; and his wife, Paulette Carpoff, pled guilty to conspiracy to commit an offense against the United States and money laundering. Additionally, Defendants Joseph W. Bayliss and Ronald J. Roach, Robert A. Karmann, and Ryan Guidry pled guilty to charges related to the underlying fraud. The Court ordered a final forfeiture of $3.9 million in private jet shares bringing the total court-ordered forfeiture this year to more than $54 million related to the DC Solar Ponzi scheme. The forfeitures included the seizure and auction of 148 of the Carpoffs' luxury and collector vehicles that resulted in recouping over $8.2 million for victims. As alleged in the DOJ Release, the Carpoffs used money from the scheme to pay for a minor-league professional baseball team and a NASCAR racecar sponsorship; to purchase luxury real estate; a subscription private jet service; a suite at a professional football stadium; and jewelry. As alleged in part in the DOJ Release:
[B]etween 2011 and 2018, DC Solar manufactured mobile solar generator units (MSG), solar generators that were mounted on trailers and promoted as providing emergency power to cellphone towers and lighting at sporting events. A significant incentive for investors were generous federal tax credits due to the solar nature of the mobile units.The conspirators pulled off their scheme by selling solar generators that did not exist to investors, making it appear that solar generators existed in locations that they did not, creating false financial statements, and obtaining false lease contracts, among other efforts to conceal the fraud. In reality, at least half of the approximately 17,000 solar generators claimed to have been manufactured by DC Solar did not exist.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Robert Renteria submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The 2020 AWC alleges that Robert Renteria entered the industry in 2013 with FINRA member firm PFS Investments, Inc. The 2020 AWC alleges under "Relevant Disciplinary History":
On December 4, 2019, in Matter No. 2019063663401 (the "Prior Matter"), FINRA issued a Letter of Acceptance, Waiver and Consent containing its finding that Respondent violated FINRA Rules 3240 and 2010 by borrowing approximately $7,500 from two Firm customers without the Firm's prior knowledge or approval.
In accordance with the terms of the 2020 AWC, FINRA found that Renteria had violated FINRA Rules 8210 and 2010; and the self regulator imposed upon him a Bar from association with any FINRA member in any capacity. As set forth in part in the AWC:
On August 30, 2019, in connection with the Prior Matter, FINRA staff issued a request to Respondent, pursuant to FINRA Rule 8210, seeking information and documents relating to allegations that he had borrowed money from Firm customers without the Firm's approval. In response, Respondent provided a signed statement to FINRA on October 4, 2019 stating that he borrowed $1,600 from a Firm customer and had repaid her in full, even though he knew that these statements were false. Respondent had actually borrowed $20,000 from the customer and had not fully repaid her. During February 2020, the customer informed FINRA that, while she previously stated that Respondent had only borrowed about $1,600 and had fully repaid her, her previous statements were not accurate. Instead, Respondent had borrowed $20,000 and had only repaid $2,200.
Bill Singer's Comment:
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Robert Renteria submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Robert Renteria, Respondent (FINRA AWC 2019063663401 / December 4, 2019) (the "2019 AWC")
https://www.finra.org/sites/default/files/fda_documents/2019063663401
%20Robert%20Renteria%20CRD%205773053%20AWC%20jlg%20%282020-1578529173918%29.pdf
In accordance with the terms of the 2019 AWC, FINRA found that Renteria had violated FINRA Rules 3240 and 2010; and the self regulator imposed upon him a $5,000 fine; a three-month suspension from association with any FINRA member in any capacity, and ordered that he pay $6,000 in restitution to a customer. As alleged in part in the 2019 AWC:
In February 2018, Respondent borrowed approximately $1,500 from Firm Customer 1. The Firm's written procedures throughout the Relevant Period from entering into borrowing or lending arrangements with ci not notify the Firm that he had borrowed money from Firm approval to do so. In addition, on December 7, 2018 and May 18, 2019, Respondent falsely certified on the Firm's annual compliance questionnaire that he had not borrowed money from any Firm customerDuring March 2019, the Firm detected that Respondent was using funds from his own bank account to purchase securities for Firm Customer 1, and commenced an investigation. In response to Firm inquiries, Renteria then informed the Firm on May 24, 2019 that he had borrowed money from Firm Customer 1 and that he was purchasing securities for her to repay the loan.Subsequently, in July 2019, Respondent borrowed approximately $6,000 from Firm Customer 2. Respondent did not notify the Firm that he had borrowed money from Firm Customer 2 or obtain approval to do so.Respondent repaid the loan from Firm Customer 1 in full. To date, Respondent has not repaid any portion of the loan from Firm Customer 2.
After nearly four decades on Wall Street, nothing surprises me anymore. If you really think about Renteria's dealings with FINRA, you have to wonder what, if anything, was going through his mind. After all, in December of last year -- only about five months ago -- he enters into a settlement with FINRA whereby he had a chance to clear the decks of all aspects of his customer loans. Instead, he sort of, almost, pretty much but not totally, fessed up to FINRA and negotiated a settlement whereby he was fined $5,000, suspended for three months, and ordered to make restitution. Okay, sure, maybe if he admitted to FINRA during its investigation that he had not fully repaid Customer 1, the fine would have been larger, the suspension longer, and the restitution larger -- but what the hell was the point of lying about repaying Customer 1 in full? It doesn't take a genius to figure out that FINRA would likely go berserk, which it did, when it found out that a rep entered into an AWC based upon a whopping lie.
Having excoriated Renteria, now let me turn my sights on FINRA. What the hell was FINRA thinking when it published the 2020 AWC and failed to disclose the sanctions imposed in its 2019 AWC? I mean, seriously? Why did FINRA bother to reference the 2019 AWC but not the imposed fine, suspension, and restitution? More to the point, how does that further customer protection?