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SEC Charges Former Officers of Gateway
The SEC has filed fraud charges against the former CEO, CFO, and controller of San Diego-based Gateway, Inc. for engaging in a fraudulent earnings manipulation scheme to meet Wall Street analysts' expectations, and for making false statements and concealing material information about the success of Gateway's personal computer business, in the second and third quarters of 2000. The suit seeks antifraud injunctions, civil money penalties, disgorgement of improper gains, and orders permanently barring the defendants from serving as officers or directors of public companies.
The SEC's complaint alleges that defendants misrepresented or failed to disclose significant trends in Gateway's business, such as that a material portion of Gateway's sales were generated through high-risk loan financing; that PC sales growth was declining; that, by the end of the third quarter, only a small percentage of net income was associated with PC sales; and that revenue and earnings included various one-time transactions. Through these actions, it is alleged, the defendants gave the false and misleading impression that Gateway, unlike many of its competitors, was outpacing an industry trend of decreasing sales of personal computers.
Motion to Dismiss Controversial Fraud Claim by SEC
Oral arguments on a motion to dismiss a controversial SEC fraud claim against Agora Inc., a publisher of investor newsletters, were heard in the U.S. District Court for the District of Maryland on November 18th.
The SEC claims Agora committed securities fraud by sending an e-mail last spring, promising customers they could enjoy a big return with the help of a 'super insider tip.' The four-page report cost $1000 and recommended when to buy and sell stocks in a Maryland company. The report, ultimately, was based on false information and speculation. The SEC's fraud claim is unique because it is based on comments about a company the defendant did not receive compensation from or in which it had no stock ownership. The complaint alleges that Agora 'engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters. The defendants offered to sell the inside information to newsletter subscribers. ' The purported inside information was false and, as a result, the subscribers did not realize the profits the defendants promised.'
The Supreme Court ruled in favor of the publisher in a similar case in 1985, holding that the defendant's newsletter was not an 'investment adviser' under the Investment Adviser Act of 1940, and thus had no duty to the SEC. The 1940 act provides exclusions for what it describes as 'general and regular circulation' publications and 'disinterested publishers,' which includes those who don't have a financial interest in a security that is the subject of a news report or editorial column. Here, the SEC avoided this problem by filing suit under a different provision of federal securities law with no exemptions for disinterested publishers. Agora, argues, however, that the First Amendment takes precedence, stating in its motion that '[t]he financial press and investment newsletter industry enjoy the full privileges of the First Amendment. In charging into the realm of protected speech, the SEC is operating outside of the boundaries of its statutory, constitutional, and jurisprudential framework.'
Martha Stewart Charges Upheld
The District Court for the Southern District of New York has refused to dismiss a securities fraud charge brought against Martha Stewart for allegedly lying publicly about her role in the ImClone insider trading scandal. The court acknowledged the count was an unquestionably novel application of the securities laws, but nevertheless properly alleged that Stewart made material misrepresentations in public statements about her sale of ImClone Systems Inc. shares in an effort to boost the share price of her own company, Martha Stewart Living Omnimedia (MSLO). United States v. Martha Stewart 03cr717 (MGC) (Nov. 18).
SEC Charges Former Officers of Gateway
The SEC has filed fraud charges against the former CEO, CFO, and controller of San Diego-based
The SEC's complaint alleges that defendants misrepresented or failed to disclose significant trends in Gateway's business, such as that a material portion of Gateway's sales were generated through high-risk loan financing; that PC sales growth was declining; that, by the end of the third quarter, only a small percentage of net income was associated with PC sales; and that revenue and earnings included various one-time transactions. Through these actions, it is alleged, the defendants gave the false and misleading impression that Gateway, unlike many of its competitors, was outpacing an industry trend of decreasing sales of personal computers.
Motion to Dismiss Controversial Fraud Claim by SEC
Oral arguments on a motion to dismiss a controversial SEC fraud claim against Agora Inc., a publisher of investor newsletters, were heard in the U.S. District Court for the District of Maryland on November 18th.
The SEC claims Agora committed securities fraud by sending an e-mail last spring, promising customers they could enjoy a big return with the help of a 'super insider tip.' The four-page report cost $1000 and recommended when to buy and sell stocks in a Maryland company. The report, ultimately, was based on false information and speculation. The SEC's fraud claim is unique because it is based on comments about a company the defendant did not receive compensation from or in which it had no stock ownership. The complaint alleges that Agora 'engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters. The defendants offered to sell the inside information to newsletter subscribers. ' The purported inside information was false and, as a result, the subscribers did not realize the profits the defendants promised.'
The Supreme Court ruled in favor of the publisher in a similar case in 1985, holding that the defendant's newsletter was not an 'investment adviser' under the Investment Adviser Act of 1940, and thus had no duty to the SEC. The 1940 act provides exclusions for what it describes as 'general and regular circulation' publications and 'disinterested publishers,' which includes those who don't have a financial interest in a security that is the subject of a news report or editorial column. Here, the SEC avoided this problem by filing suit under a different provision of federal securities law with no exemptions for disinterested publishers. Agora, argues, however, that the First Amendment takes precedence, stating in its motion that '[t]he financial press and investment newsletter industry enjoy the full privileges of the First Amendment. In charging into the realm of protected speech, the SEC is operating outside of the boundaries of its statutory, constitutional, and jurisprudential framework.'
Martha Stewart Charges Upheld
The District Court for the Southern District of
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?