Latest Accounting and Finance Industry News from Brilliant Financial Staffing

Date: May 31, 2012
Time: 1 PM EST

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FOR IMMEDIATE RELEASE
2012-98

Washington, D.C., May 18, 2012 — The Securities and Exchange Commission today announced that James P. McNamara has been named to the newly-created position of Managing Executive of the SEC’s Division of Trading and Markets.

Mr. McNamara is currently an Assistant Director in the SEC’s Office of Financial Management. In his new position, Mr. McNamara will be responsible for the administrative and operational aspects of the Division of Trading and Markets, including human resources, budget, information technology, and strategic planning.

“The breadth of Jamey’s management experience, including his expertise with respect to managing and improving business processes in the financial, human resources, and IT areas, will be invaluable to the Division,” said Robert Cook, Director of the SEC’s Division of Trading and Markets.

Mr. McNamara previously worked in the Division of Trading and Markets from 2003 to 2005, when he served as a Branch Chief for Administration. He then moved to the Office of Financial Management and became a Branch Chief for Budget Formulation and Performance Management until 2006, when he left to work in the private sector. Mr. McNamara returned to the SEC’s Office of Financial Management in 2010, serving as the agency’s Budget Officer for a year before becoming an Assistant Director.

“I am honored to have been selected for this position. I look forward to returning to the Division and working with Robert and the talented staff in Trading and Markets,” Mr. McNamara said.

Mr. McNamara began his federal service at the U.S. Department of Justice, where he worked for 10 years in positions of increasing responsibility in human resources management and budget formulation in the agency’s largest litigating division.

Mr. McNamara received his bachelor’s degree in history from Brown University.

FOR IMMEDIATE RELEASE
2012-97

Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today announced that Erica Williams will become the agency’s Deputy Chief of Staff.

Ms. Williams has been a member of Chairman Schapiro’s staff since February 2011, primarily focusing on enforcement and regulatory issues. Prior to that, Ms. Williams served as assistant chief litigation counsel in the Enforcement Division’s trial unit for seven years, leading trial teams in a host of successful prosecutions.

“Erica is well-steeped in the securities laws and has a true grasp of the intricacies of the agency,” said Chairman Schapiro. “She also fully embraces the agency’s mission and I am thrilled that she is willing to take on this new responsibility.”

Ms. Williams said, “This is an incredible opportunity that allows me to continue protecting investors and ensuring our markets operate fairly and efficiently.”

Ms. Williams replaces James R. Burns, who will become the Deputy Director of the Division of Trading and Markets.

In 2009, Ms. Williams was selected by U.S. Senator Ted Kaufman as Federal Employee of the Week. Before coming to the SEC, Ms. Williams was a commercial litigator in private practice.

Ms. Williams received her law degree from the University of Virginia School of Law. She holds a bachelor’s degree from the University of Virginia.

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FOR IMMEDIATE RELEASE
2012-96

Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today announced that James R. Burns will become a Deputy Director in the Division of Trading and Markets.

Mr. Burns will oversee several of the Division’s core regulatory functions, including market oversight and operations, derivatives policy and trading practices, and chief counsel and enforcement liaison functions. He also will contribute to the Division’s ongoing implementation of key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, Mr. Burns will assist with the overall management of the Division, working closely with the Division’s Director Robert Cook and other Deputy Director John Ramsay.

Mr. Burns has been a member of Chairman Mary Schapiro’s staff since March 2010, most recently serving as the agency’s Deputy Chief of Staff. Mr. Burns advised the Chairman on the development and execution of the agency’s rulemaking and policy agenda as well as other key agency initiatives. He also served as counsel to Chairman Schapiro on issues involving the Division of Trading and Markets, including the agency’s analysis and response to the Flash Crash on May 6, 2010, and numerous other market structure and Dodd-Frank related rulemakings, studies, and programs.

“Jim has played an instrumental role in the implementation of the financial reform legislation and navigating through complex market structure issues,” said Chairman Schapiro. “In his new position, he will continue to help put in place the new regulatory regime governing complex derivatives as well as critical market structure improvements.”

Mr. Cook said, “At a time when the Division is taking on unprecedented challenges and new responsibilities, I am delighted that we will have the benefit of Jim’s leadership, initiative, and experience. Investors will be well-served by Jim’s dedication to the Commission’s mission and his wide-ranging knowledge of the diverse markets and intermediaries we regulate.”

Mr. Burns said, “I am honored to take on this new role. I have deep respect for Robert and the Division’s staff, who are carrying out tremendous responsibilities on behalf of our markets and investors, and I look forward to working with them to help advance the agency’s mission.”

Mr. Burns is expected to begin his new role in the Division in late May. He fills the Deputy Director position that was vacated by James Brigagliano when he left the agency for the private sector.

Prior to joining the Chairman’s staff, Mr. Burns was a counsel to Commissioner Kathleen Casey, advising her chiefly on investment management and enforcement matters. Before joining the SEC in 2008, Mr. Burns was a securities lawyer in private practice who focused on investment management and broker-dealer regulatory and enforcement matters. He previously served as a law clerk to now-chief Judge William B. Traxler on the U.S. Court of Appeals for the Fourth Circuit, and also worked at Oriel College, Oxford University.

Mr. Burns received his JD, cum laude, from Georgetown University Law Center. He holds masters and doctoral degrees from Oxford University, and graduated with an AB, magna cum laude, from Harvard College.

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FOR IMMEDIATE RELEASE
2012-95

Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today charged a Seattle-based investment adviser and his firm with defrauding clients by secretly investing their money in two risky start-up companies he co-founded.

The SEC alleges that Mark Spangler, a former chairman of the National Association of Personal Financial Advisors, funneled approximately $47.7 million of client money into these private ventures despite representing that he would invest primarily in publicly-traded securities. Spangler served as chairman and CEO of one of the companies, which is now bankrupt. Such risky investments were inconsistent with the investment strategies that Spangler promised his clients and contrary to their investment objectives.

The U.S. Attorney’s Office for the Western District of Washington today announced parallel criminal charges against Spangler.

“Spangler assured his clients he was investing them in publicly-traded equities and bonds, not risky start-ups in which he had a personal interest,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “For an investment adviser to put his self-interest above the best interests of his clients is a disturbing abuse of trust.”

According to the SEC’s complaint filed in federal court in Seattle, Spangler raised more than $56 million from his clients since 1998 for several private investment funds he managed. Beginning around 2003, without notifying investors in the funds, Spangler and his advisory firm The Spangler Group (TSG) began diverting the majority of client money into two private technology companies he created. One of the companies received nearly $42 million from the funds before shutting down operations. It had long been a cash-poor company with a history of net losses, generating less than $100,000 in revenue during its 11-year history. Yet Spangler continued to treat the funds as the company’s piggy bank.

The SEC alleges that Spangler also did not tell investors that TSG collected fees for “financial and operational support” from these companies, which were essentially paying these fees with the client money they had received from the funds. Therefore, Spangler and his firm secretly reaped $830,000 from the companies in addition to any management fees that TSG received from clients.

According to the SEC’s complaint, Spangler concealed his diversion of client funds for years. He disclosed it only after he placed TSG and the funds he managed into state court receivership in 2011.

The SEC’s complaint charges Spangler and TSG with violating, among other things, the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The complaint seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by Karen Kreuzkamp and Robert S. Leach of the San Francisco Regional Office with assistance from Michael Tomars, Peter Bloom, and Christine Pelham of the investment adviser/investment company examination program. Robert L. Tashjian will lead the SEC’s litigation.

The SEC thanks the U.S. Attorney’s Office for the Western District of Washington, Federal Bureau of Investigation, and Internal Revenue Service for their assistance in this matter.

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FOR IMMEDIATE RELEASE
2012-94

Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today charged a New Jersey man with operating a Ponzi-like scheme involving a series of investment vehicles formed for the purported purpose of purchasing and managing rental apartment buildings in New Jersey and Pennsylvania.

The SEC alleges that David M. Connolly induced investors to buy shares in real estate investment vehicles he created through his firm Connolly Properties Inc. He promised investors monthly dividends based on cash-flow profits from rental income at the apartment buildings as well as the growth of their principal from the appreciation of the property. However, the real estate investments did not produce the projected dividends, and Connolly instead made Ponzi-like dividend payments to earlier investors using money from new investors. Connolly, who lives in Watchung, N.J., also siphoned off at least $2 million in investor funds for his personal use.

“David Connolly presented himself to investors as a successful real estate investment manager with a track record of paying consistent, high returns,” said George S. Canellos, Director of the SEC’s New York Regional Office. “In truth, Connolly’s operation was essentially a shell game intended to raise additional funds from new or existing investors in order to perpetuate his fraudulent scheme.”

The U.S. Attorney’s Office for the District of New Jersey, which conducted a parallel investigation of the matter, today announced that Connolly was indicted on one count of securities fraud among other criminal charges.

According to the SEC’s complaint filed in federal court in New Jersey, none of Connolly’s securities offerings in the investment vehicles were registered with the SEC as required under the federal securities laws. He began offering the investments in 1996 and ultimately raised in excess of $50 million from more than 200 investors in more than 25 investment vehicles. However, beginning in at least 2006, Connolly misrepresented to investors that their funds would be used exclusively for the property related to the particular vehicle in which they invested. Connolly instead commingled the funds in bank accounts that he alone controlled and used for a variety of purposes that weren’t disclosed to investors, including $2 million in payments he made to himself that vastly exceeded any dividends to which he would be entitled through his ownership stake. Between 2007 and 2010, Connolly also wrote checks to “cash” in excess of $2.5 million. Even after Connolly stopped making dividend payments to investors in April 2009, he still continued to pay himself dividends as well as a $250,000 “salary” out of investor funds.

The SEC alleges that Connolly lacked sufficient revenues from rental income at the apartment buildings, so he continued to raise millions of dollars for new investment vehicles. He used the funds to pay purported monthly cash-flow dividends in excess of 10 percent to investors in older investment vehicles. Connolly refinanced properties and improperly used the cash proceeds to continue the scheme, which ultimately collapsed in 2009 when new investor funds dried up and rental income was insufficient to support payments on the mortgages. The properties owned by the investment vehicles were forced into foreclosure, wiping out the equity of the investors.

The SEC’s complaint charges Connolly with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by Justin Smith and William Edwards in the New York Regional Office. Jack Kaufman will lead the litigation.

The SEC thanks the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, and the Internal Revenue Service for their assistance in this matter.

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