Securities Law Blog

The Securities and Exchange Commission filed fraud charges on July 23, 2008 and obtained an emergency court order to stop a Hillsborough, Calif., investment adviser who is alleged to have misappropriated more than $20 million from investors who were falsely promised that their money would be invested in the stock market. According to the Commission's complaint, Robert C. Brown, Jr. promised more than 200 investors that he would invest their money risk-free in stock or options. Instead, Brown allegedly misappropriated millions of dollars to pay for lavish personal expenses such as a Ferrari, limousine services and shopping trips. The also alleges that, in a classic Ponzi scheme tactic, Brown often transferred money from new investors to favored clients to create the illusion of profitable trading. The SEC's complaint charges Brown with violating the antifraud and investment advisory provisions of the federal securities laws, and seeks preliminary and permanent injunctions, disgorgement, and civil penalties. The Commission further seeks disgorgement of all investor funds disbursed to relief defendants, Duane Eddings, CDC Global, Inc. and Wise Investors Simply Excel, LLC. Pursuant to the court's order, a hearing will be held on August 5, 2008 to determine whether the defendants' activities will continue to be restricted during the remainder of the litigation.

The SEC Press Release is available at http://www.sec.gov/news/press/2008/2008-148.htm.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.

The Securities and Exchange Commission charged Sycamore Networks, Inc. and three of its former executives earlier this week in connection with the backdating of stock options spanning several years at the Chelmsford, Mass.-based optical networking company. According to the SEC's complaint, filed in federal court in Boston, Sycamore's former Chief Financial Officer Frances M. Jewels and former Director of Financial Operations Cheryl E. Kalinen fraudulently backdated options grants to obtain more favorable options prices for employees. They misled the company's investors and auditors about the practice and did not disclose its consequent expenses in Sycamore's financial statements. They also personally benefited from grants of below-market options. The SEC also charged Sycamore's former Director of Human Resources Robin A. Friedman with helping to mislead Sycamore's auditors. The company and the former executives agreed to settle the SEC's charges, with the former executives paying more than $650,000 combined. Jewels also agreed to be barred from serving as an officer or director of a public company for five years. According to the SEC's complaint, Sycamore's unreported options-related expenses totaled nearly $250 million between 2000 and 2005. The SEC alleges that Jewels and Kalinen repeatedly backdated options grants between October 1999 and July 2002 to prices at or near monthly or quarterly low points for the company's stock, providing employees with options with prices at which they could purchase shares that were lower than the market price at the time the options actually were granted. The SEC alleges that Jewels and Kalinen falsified, or caused others to falsify, various company documents concerning these below-market options grants.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.