Business Crimes Hotline

OHIO

Four Executives Sentenced for Role in Fraud

Earlier this year, five former executives of National Century Financial Enterprises (NCFE) were found guilty by a federal jury of conspiracy, fraud, and money laundering from a scheme to deceive investors about the financial health of NCFE. Prosecutors charged that investors were misled to believe that NCFE kept abundant cash reserves and that NCFE only bought accounts receivable, not riskier, future accounts receivable, that these misrepresentations were also passed on to ratings agencies who gave NCFE a AAA bond rating, further compounding investors' losses, and that NCFE then moved losses back and forth between accounts to deceive investors. NCFE's fraud is estimated at $3 billion by the DOJ and is noteworthy, in part, because NCFE was a privately held company. Before NCFE filed for bankruptcy in 2002, it was one of the largest health care finance companies in the country, according to the DOJ.

Last month, four of those former executives were sentenced in the Southern District of Ohio to terms of imprisonment ranging from five-to-15 years in prison. The fifth individual, Rebecca S. Parrett, former NCFE chairman, secretary, treasurer, and director, has been a fugitive from justice since her conviction in March 2008. The defendants were also ordered to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay $2.3 billion in restitution.

SOUTH CAROLINA

Mayor of Beaufort, SC, Settles Insider Trading Charges with SEC

Beaufort, SC, Mayor William J. Rauch settled charges of insider trading with the SEC, without admitting or denying the allegations, stemming from the sale of Advanced Cell Technology, Inc.'s stock. Rauch allegedly traded on material non-public information that he obtained while working for the California biotechnology company in 2006. The SEC's Complaint states that Rauch purchased the company's stock immediately after one if its executives informed him about a breakthrough embryonic stem cell technique that the company was planning to disclose to the public. Rauch called a securities broker after receiving the news and opened accounts in his and his children's names to purchase more than $11,000 of the company's stock. After the company's public announcement of the breakthrough, the stock price increased 360 percent before later receding. When Rauch sold his shares, he had profited more than $20,000 from his initial investment. Rauch has agreed to an injunction barring him from future securities violations and has agreed to pay $20,708 in disgorgement plus interest and a $20,708 fine.

WASHINGTON, DC

Former Top Executive Pleads Guilty to Air Cargo Price-Fixing

Thomas Pfeil, once the highest-ranking cargo executives in the United States for SAS Cargo Group A/S (“SAS”), has agreed to plead guilty and serve a six-month jail sentence for conspiring to fix prices for air cargo rates. Pfeil was SAS's area director of sales and marketing for North America when he conspired with competitors to fix the rates charged to domestic and international customers for air cargo shipments. SAS pled guilty to price-fixing in July 2008 and was fined $52 million for violations of the Sherman Act. Pfeil's guilty plea is the latest in a string of guilty pleas for air cargo price-fixing. To date, the DOJ has charged nine companies and two executives in the an ongoing investigation of the air cargo industry, which has produced $1.2 billion in criminal fines. The largest of those fines fell on British Airways Plc and Korean Air Lines, which were sentenced to pay $300 million each.

SEC Launches New Anti-Money Laundering Resources

The SEC has created a new “one-stop online reference site” intended to assist mutual funds comply with anti-money laundering laws, in addition to a centralized phone line designed for securities firms to report the filing of Suspicious Activity Reports. Mutual funds will have access to an on-line tool developed for use by SEC examiners in the Office of Compliance Inspections and Examinations, which will provide links to key AML laws, rules and related guidance to help mutual funds maintain their AML compliance programs as required under law, the SEC said.

In the Courts and Business Crimes Hotline were written by Associate Editor Jason Hernandez, Kirkland & Ellis LLP, Washington, DC.

OHIO

Four Executives Sentenced for Role in Fraud

Earlier this year, five former executives of National Century Financial Enterprises (NCFE) were found guilty by a federal jury of conspiracy, fraud, and money laundering from a scheme to deceive investors about the financial health of NCFE. Prosecutors charged that investors were misled to believe that NCFE kept abundant cash reserves and that NCFE only bought accounts receivable, not riskier, future accounts receivable, that these misrepresentations were also passed on to ratings agencies who gave NCFE a AAA bond rating, further compounding investors' losses, and that NCFE then moved losses back and forth between accounts to deceive investors. NCFE's fraud is estimated at $3 billion by the DOJ and is noteworthy, in part, because NCFE was a privately held company. Before NCFE filed for bankruptcy in 2002, it was one of the largest health care finance companies in the country, according to the DOJ.

Last month, four of those former executives were sentenced in the Southern District of Ohio to terms of imprisonment ranging from five-to-15 years in prison. The fifth individual, Rebecca S. Parrett, former NCFE chairman, secretary, treasurer, and director, has been a fugitive from justice since her conviction in March 2008. The defendants were also ordered to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay $2.3 billion in restitution.

SOUTH CAROLINA

Mayor of Beaufort, SC, Settles Insider Trading Charges with SEC

Beaufort, SC, Mayor William J. Rauch settled charges of insider trading with the SEC, without admitting or denying the allegations, stemming from the sale of Advanced Cell Technology, Inc.'s stock. Rauch allegedly traded on material non-public information that he obtained while working for the California biotechnology company in 2006. The SEC's Complaint states that Rauch purchased the company's stock immediately after one if its executives informed him about a breakthrough embryonic stem cell technique that the company was planning to disclose to the public. Rauch called a securities broker after receiving the news and opened accounts in his and his children's names to purchase more than $11,000 of the company's stock. After the company's public announcement of the breakthrough, the stock price increased 360 percent before later receding. When Rauch sold his shares, he had profited more than $20,000 from his initial investment. Rauch has agreed to an injunction barring him from future securities violations and has agreed to pay $20,708 in disgorgement plus interest and a $20,708 fine.

WASHINGTON, DC

Former Top Executive Pleads Guilty to Air Cargo Price-Fixing

Thomas Pfeil, once the highest-ranking cargo executives in the United States for SAS Cargo Group A/S (“SAS”), has agreed to plead guilty and serve a six-month jail sentence for conspiring to fix prices for air cargo rates. Pfeil was SAS's area director of sales and marketing for North America when he conspired with competitors to fix the rates charged to domestic and international customers for air cargo shipments. SAS pled guilty to price-fixing in July 2008 and was fined $52 million for violations of the Sherman Act. Pfeil's guilty plea is the latest in a string of guilty pleas for air cargo price-fixing. To date, the DOJ has charged nine companies and two executives in the an ongoing investigation of the air cargo industry, which has produced $1.2 billion in criminal fines. The largest of those fines fell on British Airways Plc and Korean Air Lines, which were sentenced to pay $300 million each.

SEC Launches New Anti-Money Laundering Resources

The SEC has created a new “one-stop online reference site” intended to assist mutual funds comply with anti-money laundering laws, in addition to a centralized phone line designed for securities firms to report the filing of Suspicious Activity Reports. Mutual funds will have access to an on-line tool developed for use by SEC examiners in the Office of Compliance Inspections and Examinations, which will provide links to key AML laws, rules and related guidance to help mutual funds maintain their AML compliance programs as required under law, the SEC said.

In the Courts and Business Crimes Hotline were written by Associate Editor Jason Hernandez, Kirkland & Ellis LLP, Washington, DC.