Category Archives: Financial Industry Regulatory Authority

Three Louisiana Residents Indicted for Insider Trading in Connection with Shaw Group Acquisition

Posted on by

Wednesday, July 12, 2017

BATON ROUGE, LA – Acting United States Attorney Corey Amundson announced today that three more individuals have been charged with insider trading in connection with the acquisition of the Shaw Group. A federal grand jury sitting in the Middle District of Louisiana has indicted KELLY LIU, age 31, SALVADOR RUSSO, III, age 34, both of Baton Rouge, Louisiana, and VICTORY HO, age 38, of Morgan City, Louisiana, with conspiracy to commit securities fraud (insider trading), in violation of Title 18, United States Code, Section 371, and securities fraud (insider trading), in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Sections 240.10b-5 and 240.10b5-1. If convicted, each face significant incarceration, fines, restitution, and supervised release following imprisonment.

The Indictment alleges that from on or before July 18, 2012, and continuing to at least July 30, 2012, LIU and her boyfriend RUSSO, along with associate HO, engaged in a scheme to profit from inside information about the upcoming merger between The Shaw Group (“Shaw”) and Chicago Bridge and Iron Company (“CB&I”).

According to the allegations contained in the Indictment, which was returned by the grand jury earlier today, in mid-2012, Shaw was considering a potential merger opportunity. At the time, LIU was a Shaw employee working in the Financial Planning and Analysis Department. In late July 2012, Shaw and CB&I came to an agreement whereby CB&I acquired all outstanding shares of Shaw stock. The merger between the two companies was publicly announced on July 30, 2012 (“the public announcement”). As a result of the public announcement, Shaw’s stock price rose substantially.

The Indictment alleges that, prior to the public announcement and through her job at Shaw, LIU obtained inside information that Shaw was being acquired by another company and passed the inside information to HO, through another individual, and to RUSSO, for their use in trading Shaw securities. Thereafter, HO and RUSSO allegedly purchased Shaw securities before the public announcement. HO sold his Shaw securities after the public announcement had caused Shaw’s stock price to rise, while RUSSO held his Shaw securities, all at the expense of Shaw shareholders and potential Shaw shareholders who were not privy to the inside information. The Indictment also alleges that HO made over $294,000, and RUSSO over $2,500 in unrealized profits, from their illegal insider trading activities.

Prior to the Indictment announced today, three other individuals have been charged in the Middle and Western Districts of Louisiana with securities fraud offenses related to the Shaw merger. One defendant has pled guilty, and the remaining two are scheduled for trial.

Acting U.S. Attorney Amundson stated: “Insider trading undermines investor confidence in the fairness and integrity of the securities markets, and cheats those honest investors who play by the rules. My office will continue to work aggressively with our excellent partners with the FBI, IRS-Criminal Investigations, the U.S. Secret Service, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and others to pursue such important matters whenever merited.”

This matter is being handled by the U.S. Attorney’s Office for the Middle District of Louisiana and the Baton Rouge offices of the FBI, Secret Service, and IRS-Criminal Investigation. It is being prosecuted by Assistant United States Attorneys Chris Dippel, Patricia Jones, and Adam Ptashkin.

NOTE: An indictment is an accusation by the Grand Jury. A defendant is presumed innocent until and unless adjudicated guilty at trial or through a guilty plea.

SEC Announces Charges in Massive Telemarketing Boiler Room Scheme Targeting Seniors

Posted on by

Washington D.C., July 12, 2017—

The Securities and Exchange Commission today brought fraud charges against 13 individuals allegedly involved in two Long Island-based cold calling scams that bilked more than one hundred victims out of more than $10 million through high-pressure sales tactics and lies about penny stocks.

The SEC alleges that the orchestrators of the scheme used boiler room-style call centers to make hundreds of thousands of cold calls that included the use of threatening and deceitful sales techniques to pressure victims – many of whom were senior citizens – into purchasing penny stocks.  For example, as part of one such scam, a boiler room salesman allegedly claimed that the Walt Disney Company was buying into a purported media and internet company and that would cause the penny stock’s price to increase substantially.

During these calls, victims were allegedly harassed and threatened by sales personnel.  When one victim complained about his losses, a sales representative allegedly said, “I am tired of hearing from you.  Do you have any rope at home?  If so tie a knot and hang yourself or get a gun and blow your head off.”  According to the SEC’s complaint, in a typical phone call, telemarketers would direct victims to place trades and tell them how many shares to purchase and at what price.  With this information about the victims’ trades, the orchestrators and the boiler room sales personnel allegedly placed opposing sell orders to dump their own shares, realizing more than $14 million in illegal proceeds while the victims lost millions of dollars, including retirement savings.

SEC investigators learned of the alleged scheme from investor complaints and used technological tools and innovative investigative approaches to build evidence – within a matter of months from receiving the complaints – against the defendants who went to great lengths to evade detection.

“These kinds of scams cause devastating harm to investors,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.  “Investors must beware of the sort of conduct alleged in our complaint – things like unsolicited calls, high-pressure sales tactics, and promises that a no-name stock is going to skyrocket.”

Scott W. Friestad, Associate Director of the SEC’s Enforcement Division, added, “The defendants allegedly used boiler rooms and high-pressure sales tactics to swindle seniors into investing their life savings in microcap securities they were secretly manipulating for their own profit.  But, through a combination of technology and innovative investigative approaches, we were able to unravel the alleged scheme and prevent further investor harm.”

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges.

The SEC’s complaint, filed in federal district court in Brooklyn, N.Y., charges all defendants with fraud and nine with market manipulation.  The SEC is seeking permanent injunctions, disgorgement with interest, civil penalties, penny stock bars, and an officer-and-director bar from one of the orchestrators of the scheme.  The complaint also names 27 individuals and entities that received proceeds from the fraud, as relief defendants.

The SEC’s complaint also charges certain defendants with acting as unregistered brokers.  The SEC encourages investors to check the backgrounds of people selling them investments by using the SEC’s investor.gov website to quickly identify whether they are registered professionals.

The SEC’s investigation, which is continuing, has been conducted by Andrew Elliott and Cecilia Connor and assisted by Leigh Barrett.  The investigation was supervised by Scott Friestad and Amy Friedman.  The SEC’s litigation will be handled by Matthew Scarlato and James Smith and supervised by Jan Folena.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority, Federal Bureau of Investigation, U.S. Attorney’s Office for the Eastern District of New York, British Columbia Securities Commission, Ontario Securities Commission, and Oregon Division of Financial Regulation.

The SEC encourages victims of the alleged fraud to contact [email protected] .  The SEC’s Office of Investor Education and Advocacy previously issued an alert warning investors that aggressive stock promotion is a red flag of fraud.

“Investors should be skeptical anytime they receive an unsolicited communication promoting a stock – it could be a part of a boiler room scheme,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “If you receive a phone call from a high-pressure salesperson who uses harassment and threats to get your business, hang up.”