SEC News Digest

COMMISSION ANNOUNCEMENTS

Additional Item added to Closed Meeting Scheduled for Friday, June 19, 2009 at 11:00 a.m.

The following item has been added to the Friday, June 19, 2009 Closed Meeting agenda: formal order of investigation.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.

ENFORCEMENT PROCEEDINGS

In the Matter of Bernard L. Madoff

On June 16, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Bernard L. Madoff (Madoff). The Order finds that on Feb. 9, 2009, a Partial Judgment on Consent Imposing Permanent Injunction and Continuing Other Relief was entered by consent against Madoff in the U.S. District Court for the Southern District of New York, permanently enjoining him from the antifraud violations of the federal securities laws. The Commission had alleged in the District Court that Madoff and his firm, Bernard L. Madoff Investment Securities LLC, had conducted a $50 billion fraudulent scheme through the firm's investment advisory business. The Commission's allegations had included that in December 2008, Madoff had told senior employees that his advisory business was a fraud, "just one big lie [and] basically, a giant Ponzi scheme" that had been paying returns to certain investors out of principal received form other investors.

Based on the above, the Order bars Bernard L. Madoff from association with any broker, dealer or investment adviser. Bernard L. Madoff consented to the issuance of the Order without admitting or denying any of the findings except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and that on Feb. 9, 2009, a Partial Judgment on Consent Imposing Permanent Injunction and Continuing Other Relief was entered by consent against Madoff, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, in the civil action entitled SEC v. Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, Civil Action Number 08-10791 (LLS), in the United States District Court for the Southern District of New York, which are admitted. (Rels. 34-60118; IA-2892; File No. 3-13520)

In the Matter of Mitchel S. Guttenberg

The Securities and Exchange Commission announced today that on June 2, 2009, the Honorable P. Kevin Castel, United States District Judge for the Southern District of New York, entered final judgments against Mitchel S. Guttenberg and DSJ International Resources Ltd. (d/b/a Chelsey Capital) in SEC v. Guttenberg, et al., C.A. No. 07 CV 1774 (S.D.N.Y.), an insider trading case the SEC filed on March 1, 2007. The SEC's complaint alleged that from 2001 through 2006, Guttenberg, an executive director in the equity research department of UBS Securities LLC (UBS), illegally tipped material, nonpublic information concerning upcoming UBS analyst upgrades and downgrades to two Wall Street traders, Erik R. Franklin and David M. Tavdy, in exchange for sharing in the illicit profits from their trading on that information. The SEC further alleged that both traders had downstream tippees, and that Franklin tipped, among others, Chelsey Capital, which also traded on the information. Without admitting or denying the allegations in the complaint, both Guttenberg and Chelsey Capital settled the SEC's insider trading charges.

Guttenberg consented to the entry of a final judgment which (i) permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 (Securities Act); and (ii) orders him to pay disgorgement of $15,810,000. On June 16, in a related administrative proceeding, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions against Guttenberg. The Order finds that Guttenberg was enjoined from violating Section 10(b) of the Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act and, in a parallel criminal case, pled guilty to charges of securities fraud and conspiracy to commit securities fraud. U.S. v. Mitchel Guttenberg and David Tavdy, No. 1:07-CR-141 (S.D.N.Y.). Guttenberg consented to the entry of a Commission order barring him from future association with any broker, dealer, or investment adviser without admitting or denying the findings in the order except as to entry of the injunction and his guilty plea.

Chelsey Capital consented to the entry of a final judgment which (i) permanently enjoins him from violating Section 10(b) of the Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act; and (ii) orders it to pay $8,901,440, which consists of disgorgement of $3,637,548, prejudgment interest thereon of $1,626,344, and a civil penalty of $3,637,548.

The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. (Rels. 34-60119; IA-2893; File No. 3-13521); [SEC v. Mitchel S. Guttenberg, Erik R. Franklin, David M. Tavdy, Mark E. Lenowitz, Robert D. Babcock, Andrew A. Srebnik, Ken Okada, David A. Glass, Marc R. Jurman, Randi E. Collotta, Christopher K. Collotta, Q Capital Investment Partners, LP, DSJ International Resources Ltd. (d/b/a Chelsey Capital), and Jasper Capital LLC, C.A. No. 07 CV 1774 (S.D.N.Y) (PKC)] (LR-21086)

In the Matter of Michael J. Kiselak

On June 16, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Michael J. Kiselak. The Order finds that Kiselak, a 42 year old resident of Westlake, Texas, is the manager of Kiselak Capital Group, LLC. Kiselak is a former NFL player, and played for the Dallas Cowboys from 1998 to 2000. He is not currently affiliated with a registered person. He currently holds a series 7 license that was termed in 2006, and has no known disciplinary history. On May 15, 2009, an agreed permanent injunction was entered against Kiselak, permanently enjoining him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action styled Securities and Exchange Commission v. Kiselak Capital Group, LLC, et al, Civ. Action No. 4:09-cv-256-A (United States District Court for the Northern District of Texas).

The Commission's complaint alleged that Kiselak solicited approximately $24 million from 14 investors on behalf of Kiselak Capital Group by promising inflated returns and misrepresenting how the investor funds would be invested, and failed to disclose to investors that Kiselak Capital Group took a 35% performance fee on all trading profits. Kiselak also told investors that Kiselak Capital Group made a 2.25% per month profit trading treasury bills; instead Kiselak invested over 95% of the investor funds in Gemstar.

Based on the above, the Order bars Michael J. Kiselak from association with any broker, dealer, or investment adviser. Michael J. Kiselak consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rels. 34-60120; IA-2894; File No. 3-13522)

In the Matter of Keystone Ventures, Inc.

On June 17, the Commission instituted an administrative proceedings pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act) against Keystone Ventures, Inc., to determine whether it is necessary and appropriate for the protection of investors to revoke or suspend for a period not to exceed twelve months the registration of each class of its securities.

In the Order Instituting Proceedings (Order), the Division of Enforcement alleges that Keystone failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.

In this proceeding, a hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the respondent an opportunity to dispute the allegations, and to determine whether it is necessary and appropriate for the protection of investors to suspend for a period not to exceed twelve months or revoke the registration of each class of the respondent's securities.

The Order requires the Administrative Law Judge to issue an initial decision no later than 120 days from the date of service of the Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice. (Rel. 34-60124; File No. 3-13523)

SEC Charges Former Quest Resource Executives with Fraudulently Concealing Millions of Dollars of Self-Dealing

On June 17, the Securities and Exchange Commission charged two Oklahoma City residents with securities fraud and other violations for a scheme in which they misappropriated to themselves millions of dollars from Quest Resource Corporation, Quest Energy Partners, L.P. and their affiliates while they were executives at the company. The SEC alleges that Quest's then-chief executive officer and board chairman Jerry D. Cash and then-chief financial officer David E. Grose caused Quest to make a series of transfers to a separate company that Cash controlled. Cash tried to conceal the transfers by, among other things, ostensibly transferring the funds back to Quest at the end of each quarter. The SEC alleges that the scheme, which began in June 2004, collapsed in August 2008 after other Quest executives discovered and began questioning the legitimacy of the transfers. By that time, Cash had misappropriated a total of $10 million from Quest.

According to the SEC's complaint, Grose also took advantage of Quest's lax internal controls to siphon more than $1.8 million from the company for his own benefit, through kickbacks from a Quest vendor and by misappropriating $1 million of Quest's money to fund his personal investment in a small Oklahoma start-up company.

The SEC's complaint states that none of these transactions were disclosed in the multiple quarterly and annual filings Quest made with the SEC during the periods in question that Cash and Grose signed and certified. The SEC also claims that Cash and Grose signed multiple representation letters to Quest's auditor attesting that all related party transactions had been disclosed and that there had been no fraud involving management.

The SEC's complaint charges, among other things, that Cash and Grose violated the anti-fraud provisions of the Securities Act of 1933 and the anti-fraud, internal controls, proxy statement, record-keeping and reporting provisions of the Securities Exchange Act of 1934. The SEC seeks injunctive relief, financial penalties, disgorgement of ill-gotten proceeds with prejudgment interest, and permanent bars from serving as officers or directors of public companies. [SEC v. Jerry D. Cash and David E. Grose, Civil Action No. 5:09-cv-639, USDC, WDOK] (LR-21087; AAE Rel. 2991)

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