PatrickPretty.com

Day: August 4, 2011

  • URGENT >> BULLETIN >> MOVING: Former Major League Baseball All-Star Doug DeCinces Charged With Insider Trading; Attorney, Physical Therapist And Businessman Who Knew Longtime Third Baseman Charged In Same Case

    URGENT >> BULLETIN >> MOVING: Former Major League Baseball star Doug DeCinces, who threw out the honorary first pitch last night at a game between the Los Angeles Angels of Anaheim and the Minnesota Twins, today was charged with insider trading by the SEC.

    Also charged in the civil case were attorney Fred Scott Jackson, 65, of Newport Beach, Calif.; Joseph J. Donohue, 49, a physical therapist who resides in Trabuco Canyon, Calif.; and Roger A. Wittenbach, 69, a businessman in Lutherville- Timonium, Md.

    DeCinces, a third baseman who retired from the big leagues in 1987, spent 15 seasons in the majors, mostly for the Baltimore Orioles. He was an American League All-Star in 1983, and hit 237 career homers. He also played for the Angels and the St. Louis Cardinals, driving home nearly 900 runs during the course of his long and successful baseball career.

    But the SEC said today that DeCinces, 60, began to drive home illegal profits from insider trading when he came into possession of material, nonpublic information that Abbott Laboratories Inc. was acquiring Advanced Medical Optics Inc. through a tender offer in 2008.

    DeCinces shared the information with the other charged defendants, putting each of them in position to profit illegally, the SEC charged. DeCinces bought 83,700 shares of Advanced Medical ahead of the acquisition news, and allegedly “sold all of his shares for $1.2 million in profits.”

    “Time and again, we see reputable people engaging in insider trading and risking their good names in order to enrich themselves and those around them,” said Daniel M. Hawke, chief of the SEC Division of Enforcement’s Market Abuse Unit and director of the Philadelphia Regional Office. “People need to understand that we are watching for suspicious trading activity, and they will pay a heavy price when we catch them insider trading.”

    Donohue made $75,570 on the illegal tip, while Jackson made $140,259, the SEC charged. Meanwhile, Wittenbach made $201,692. After Wittenbach told his sister to buy the stock, she made $13,214, the SEC said. The sister was not charged.

    DeCinces agreed to settle the case for $2.5 million, without admitting or denying the allegations. The other defendants also settled without admitting or denying.

    Donohue agreed to pay disgorgement of $75,570 and a penalty of $37,785, while Jackson agreed to pay disgorgement of $140,259, prejudgment interest of $12,508 and a penalty of $140,259.

    At the same time, Wittenbach agreed to pay disgorgement of $201,692, prejudgment interest of $5,768, and a penalty of $214,906.

    Jackson bought 8,500 shares of Advanced Medical with a handheld device while having breakfast with DeCinces, the SEC said.

  • BULLETIN: Attorney Pleads Guilty In $47 Million ‘Bond’ Ponzi Scheme That Caused Arkansas Bank To Collapse; ‘Fraud, Whether Of This Magnitude Or Not, Cannot Be Tolerated,’ U.S. Attorney Christopher R. Thyer Says

    BULLETIN: An Arkansas attorney and businessman caused a bank to collapse with his $47 million Ponzi scheme involving the sale of fraudulent bonds, federal prosecutors said.

    Kevin Harold Lewis, 43, of Little Rock, pleaded guilty to a federal charge of bank fraud after waiving indictment, prosecutors said.

    First Southern Bank, an FDIC-insured institution, collapsed after learning it had purchased $23 million in fraudulent bonds from Lewis, prosecutors said. At least seven other banks provided loans to Lewis that were collateralized with Lewis’ bogus bonds: Centennial Bank, Citizens, Liberty Bank, First Community, Allied, Simmons and Regions Bank.

    Two banks continue to hold bogus bonds from the Lewis scheme: Centennial Bank and Bank of Augusta, prosecutors said.

    The Lewis scheme caused losses of $47 million, and Lewis borrowed $4.6 million from First State Bank in Lonoke to gain a controlling interest in First Southern, collateralizing the First State loan with stock from First Southern, the very bank he was defrauding, prosecutors said.

    “This case demonstrates that the actions of one individual can have far-reaching, detrimental effects, including the collapse of a financial institution,” said U.S. Attorney Christopher R. Thyer of the Eastern District of Arkansas. “The amount of fraud loss in this case is one of the highest in the history of our office. Fraud, whether of this magnitude or not, cannot be tolerated, and the Department of Justice will aggressively investigate and prosecute such schemes.”

    A veteran FBI agent described the Lewis scheme as a brazen one that put multiple institutions in the line of financially injurious fire laid down by a con man.

    “With each creation of a fraudulent bond, Mr. Lewis added to his house of cards that ultimately collapsed,” saidValerie Parlave, special agent in charge of the FBI’s Little Rock Field Office.

    As the scheme grew, Lewis increased his ownership stake in First Southern to 64.9 percent, but the stake was built virtually entirely on the instruments of deceit, according to prosecutors. To up his stake in the bank from 53 percent to nearly 65 percent, Lewis used proceeds from the sale of fraudulent bonds he sold to First Southern, effectively imperiling the bank further by opening a second fraud front that destabilized the institution.

    Based in Batesville, First Southern collapsed in December 2010. The cost to the FDIC insurance fund was estimated at $22.8 million.

    At its collapse, First Southern became the 156th bank to fail in the United States in 2010. Only three banks failed in 2007.

    Sixty one banks have failed this year in the United States, including three on July 29.

    Lewis faces a maximum sentence of 30 years in federal prison. prosecutors said he upped his stake in First Southern through an entity known as PA Alliance Trust.

     

  • DATA SHAPING? Bowdoin Email ‘Blasts’ To 77,000 Members Delayed In Favor Of Purported ‘Soft Launch’

    Andy Bowdoin

    Late Tuesday, a fundraising email attributed to accused Ponzi schemer Andy Bowdoin of AdSurfDaily acknowledged that an advertised email “Blast” to 77,000 ASD members that was supposed to have occurred on Monday — the third anniversary of the Aug. 1, 2008, ASD-related asset seizures — had not occurred.

    What actually occurred, according to the email, was a purported “Soft Launch” to fewer than 500 ASD members. Despite an earlier  claim that the “Blast” to 77,000 members would occur Monday, the email backed away from the claim, advising recipients that the “Blast” was “COMING REAL SOON.”

    Bowdoin’s fundraising venture itself missed two advertised launch dates, but finally launched on July 26, fours days after Bowdoin’s most recent appearance before a federal judge in the District of Columbia.

    Tuesday’s email made various claims about the success of the purported “Soft Launch” so far while at once planting the seed that Bowdoin remains hugely popular among the ASD membership base.

    Because the email did not identify the characteristics of the ASD members initially contacted, the purported results — including a result that 110 people among the group of fewer than 500 initially contacted had made donations totaling “Over $4,400”  — could be heavily skewed in Bowdoin’s favor. As things stand, the email effectively makes the claim that more than 22 percent of the people initially contacted chose to donate to Bowdoin while suggesting the number could hold across a cross-section of 77,000 ASD members.

    The “average” donation was pegged at $40. Averages in such a small sample, however, can be misleading. The email did not reveal the amount of the smallest donation or the largest one.

    At the same time, the email does not say whether the “Soft Launch” group consisted of Bowdoin friends, family members, close business associates or people who may be friendly with Bowdoin such as former cheerleaders on the pro-ASD Surf’s Up forum. Nor does it say whether the initial contributors perhaps were predisposed to make a donation out of fear or concern that they had legal exposure because of the size of their downlines, the dollar volume they generated through ASD, the amount of “profits” they have lost as a result of their participation in ASD or the amount of interference they ran for Bowdoin before and after the August 2008 seizures of about $65.8 million from Bowdoin’s personal bank accounts.

    Some ASD members have more legal and financial exposure than others and may be predisposed to help Bowdoin raise funds to mount his criminal defense as a means of delaying their own day of reckoning. The government, however, has two civil judgments against ASD-related assets in its favor, and announced nearly three years ago that it was implementing a remissions program through which ASD victims would receive compensation for their losses through seized funds.

    Certain purported results suggest that, in the early stages of Bowdoin’s fundraising venture, the initial goal was to let Bowdoin bask in a preordained light and to shape the data to intensify the light. Although much has been made of a purported open rate of 42 percent — meaning that more than four out of 10 members of the initial group contacted opened the fundraising email — such a purportedly glowing statistic could be meaningless. Friends and foes alike are interested in Bowdoin news, and the nature of the initial group’s relationship with Bowdoin has not been revealed.

    If Bowdoin and his fundraising helpers already had a “hot” list of sympathizers, early purported success would not be surprising — in the same way that a self-evident result culled from baseball fans asked to name their favorite team while already inside the park of their favorite team would not be surprising.