PHILADELPHIA – Acting United States Attorney Laurie Magid and Special Agent-in-Charge of the FBI Janice K. Fedarcyk today announced that a federal grand jury has returned an indictment1 charging George Georgiou with conspiracy, securities fraud, and wire fraud for his role in an international stock fraud conspiracy that resulted in more than $26 million in actual losses and hundreds of millions of dollars in intended losses. The indictment charges that Georgiou and his co-conspirators sought to manipulate the markets for four stocks publicly traded on the Pink OTC Markets Inc. (commonly known as the "Pink Sheets"), and the OTC bulletin board ("OTCBB"): Neutron Inc., Avicena Group, Inc., Hydrogen Hybrid Technologies Inc., and Northern Ethanol, Inc. Georgiou was a registered investment professional in Canada until 1995 when he was banned from acting as broker.

According to the indictment, Georgiou conspired with others in the United States, Canada, Turks and Caicos, and the Bahamas to manipulate the demand for, and prices of, the four companies' stocks. Georgiou and his conspirators intended to profit from the scheme by (1) selling the stocks when they reached an artificially inflated price; and (2) using the artificially inflated values of the stock as collateral to obtain loans in brokerage accounts often referred to as "margin."

"This fraud attacks the credibility of our financial markets at a time when individual investors have already suffered great losses and when legitimate small companies can ill afford yet another blow to their efforts to raise capital through stock offerings," Magid said. "The crimes charged reached across America and into Canada and the Caribbean. This prosecution shows that we will not be deterred by international borders in our efforts to protect Americans, and the markets upon which they rely, from fraud."

Georgiou and his co-conspirators owned significant amounts of the four companies' stocks. They opened brokerage accounts in various locations including Canada, the Bahamas, and Turks and Caicos in various names which they then used to engage in manipulative trading in the stocks. By trading the stocks among and between the various accounts they controlled, they artificially inflated the prices of the stocks and falsely made it appear that there was an active market for the stocks. Georgiou and his co-conspirators sold their shares at inflated prices for a profit and also used the artificially inflated stocks as collateral to fraudulently obtain margin and other cash loans of at least $26 million from two Bahamian brokerage firms. When Georgiou caused trading losses in these accounts, the Bahamian brokerage firms were left with virtually worthless stocks as collateral. As a result, one of the firms was forced to liquidate its business.

"The defendant in this case engaged in an organized and on-going international scheme to manipulate and artificially inflate stock prices of publicly traded companies," said Fedarcyk, "and in so doing defrauded all of the legitimate market investors who owned shares in these companies. The investment market, and the entire economy, suffers when individuals use deceitful means to unscrupulously cheat the system."

Georgiou was arrested after allegedly agreeing to pay an undercover FBI agent a kickback to bribe brokers to purchase $10 million worth of Northern Ethanol stock in their clients' accounts. The FBI agent was posing as a person who had access to a network of corrupt brokers whom the agent could bribe to buy stock as part of the scheme.

Georgiou is currently on house arrest in the United States pending trial.
INFORMATION REGARDING THE DEFENDANT
NAME ADDRESS AGE
George Georgiou Camp Bell Ville, Ontario, Canada 39

If convicted of all charges, Georgiou faces a statutory maximum of 165 years imprisonment and a $21.25 million fine. He also faces approximately 262-327 months under the advisory federal sentencing guidelines.

The case was investigated by the Federal Bureau of Investigation and the United States Securities and Exchange Commission. It is being prosecuted by Assistant United States Attorneys Derek A. Cohen and Louis D. Lappen.

UNITED STATES ATTORNEY'S OFFICE Contact: PATTY HARTMAN
EASTERN DISTRICT, PENNSYLVANIA Media Contact
Suite 1250, 615 Chestnut Street 215-861-8525
Philadelphia, PA 19106

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20875 / January 30, 2009

SECURITIES AND EXCHANGE COMMISSION V. JAMES N. STANARD, ET AL., Case No. 06 Civ. 7736 (GEL) S.D.N.Y.

JAMES N. STANARD, FORMER CEO OF RENAISSANCERE HOLDINGS LTD., HELD LIABLE FOR ACCOUNTING FRAUD

The Securities and Exchange Commission announced that on January 27, 2009, after a six-day bench trial, the Hon. Gerard E. Lynch of the U.S. District Court for the Southern District of New York issued an opinion and order that, among other things, held defendant James N. Stanard liable for securities fraud in the Commission's civil enforcement action against him. Stanard is the former chief executive officer of reinsurer RenaissanceRe Holdings Ltd. ("RenRe"). The court also held Stanard liable for making false or misleading statements to auditors, providing false officer certifications, and violating and aiding and abetting violations of reporting, books-and-records, and internal controls provisions of the securities laws.

The Commission charged Stanard and the other defendants with fraud in connection with a sham transaction whose purpose and effect was to fraudulently defer more than $26 million of RenRe's earnings from 2001 to later periods. With Stanard's knowledge, RenRe fraudulently accounted for the sham transaction as "reinsurance," when in fact, as Stanard knew, the transaction transferred no risk and could not properly be accounted for as reinsurance. As a result of RenRe's fraudulent accounting treatment, RenRe materially understated income in 2001 and materially overstated income in 2002.

In the court's January 27, 2009 opinion and order, Judge Lynch ruled in favor of the Commission on all of its claims, finding that Stanard "wanted to engage in a transaction that would have a particular balance sheet effect, without economic reality;" that "he knew the transaction was being structured in a way … that would obscure its significance from the auditors;" that he "knew the facts, and he knew the [applicable accounting] rule, and he knew that the facts did not square with the rule;" and that "[a]ccordingly, he acted with knowledge that RenRe's earnings would be falsely stated." The court further found that "Stanard damaged his credibility by claiming repeatedly at trial that this was intended as a reinsurance transaction, when in fact it was intended only to have an accounting effect, and not to constitute true insurance against risk."

The court found that Stanard violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 and that Stanard aided and abetted violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13. The court permanently enjoined Stanard from violating or aiding and abetting violations of all these provisions of the securities laws and imposed a civil penalty of $100,000 but denied the Commission's request for an officer and director bar. The court directed the Commission to submit an appropriate final judgment on or before February 17, 2009.

The Commission previously settled its claims against defendants Michael W. Cash and Martin J. Merritt and, in a related action, against RenRe.

For further information, see Litigation Release Nos. 19847 (Sept. 27, 2006), 19989 (Feb. 6, 2007), and 20360 (Nov. 8, 2007), and Administrative Proceeding No. 34-54661 (Oct. 27, 2006).

http://www.sec.gov/litigation/litreleases/2009/lr20875.htm

Washington, D.C., Jan. 8, 2009 — The Securities and Exchange Commission has charged a Philadelphia-area investment fund manager and his firm for conducting a multi-million dollar Ponzi scheme, and has obtained an emergency court order freezing their assets.

Additional Materials

• Litigation Release No. 20847
• SEC Complaint

According to the SEC’s complaint, Joseph S. Forte of Broomall, Pa., fraudulently obtained an estimated $50 million from as many as 80 investors through the sale of securities in the form of limited partnership interests in his firm, Joseph Forte, L.P. The SEC alleges that Forte told investors that he would invest the funds in an account that would trade in securities futures contracts, including S&P 500 stock index futures. According to the complaint, despite the impressive and consistent returns he reported to investors, Forte consistently lost money in the limited trading that he did, withdrew millions of dollars in so-called fees for his personal use based on the falsely inflated value of Forte LP, and used investor funds to repay other investors.

“As alleged in our complaint, Forte engaged in lies, deception and rapacious behavior at the expense of innocent investors, many of whom considered themselves his friends and close acquaintances,” said Daniel M. Hawke, Director of the SEC’s Philadelphia Regional Office. “Using other people’s money, Forte promised and reported outrageous returns over more than a 10-year period, and because of his relationships with investors was able to lull them into trusting him with their funds.”

Judge Paul S. Diamond, U.S. District Judge for the Eastern District of Pennsylvania, issued an order on January 7 granting a preliminary injunction, freezing assets, compelling an accounting, and imposing other emergency relief. Without admitting or denying the allegations in the Commission’s complaint, Forte and Forte LP consented to the entry of the order.

The SEC�s complaint alleges that Forte has been conducting a Ponzi scheme since at least 1995. Forte, who has never been registered with the SEC in any capacity, has admitted that he misrepresented and falsified Forte LP’s trading performance from the very first quarter. From 1995 through Sept. 30, 2008, Forte and Forte LP reported to investors annual returns ranging from 18.52 percent to as high as 37.96 percent. However, from January 1998 through October 2008, the Forte LP trading account had net trading losses of approximately $3.3 million.

The SEC’s complaint further alleges that in addition to misrepresenting to investors that the trading was highly successful and making huge profits, Forte and Forte LP misrepresented the use of investor funds. Although Forte claimed that he raised approximately $50 million from investors for the purpose of participating in the trading program, Forte deposited only $25.8 million in the trading account between January 1998 and October 2008, and during that same time period withdrew $23.1 million. Forte claims that he took at least $10 to $12 million in so-called fees for his personal use based on the falsely inflated value of Forte LP. But Forte LP statements provided to investors reflect fees charged of $28.7 million between March 1995 and September 2008. He also claims he used approximately $15 to $20 million of investor funds to repay other investors — the hallmark of a Ponzi scheme. The SEC’s complaint alleges that Forte and Forte LP also lied to investors about the value of the partnership portfolio. For example, in September 2008, they reported to investors that the Forte LP portfolio had a value of more than $150 million. In fact, Forte LP’s trading account at that time had a balance of only $146,814.

The SEC’s complaint alleges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief, the Commission’s complaint seeks disgorgement of the defendants’ ill-gotten gains plus pre-judgment interest, financial penalties, and permanent injunctions barring future violations of the antifraud provisions of the federal securities laws.

The SEC’s investigation is continuing.

The SEC acknowledges the assistance of the Commodity Futures Trading Commission. The CFTC has filed a related action against Forte.

# # #

For more information, contact:

Daniel M. Hawke, Regional Director
Elaine C. Greenberg, Associate Regional Director
David S. Horowitz, Assistant Regional Director
SEC’s Philadelphia Regional Office
215-597-3100

http://www.sec.gov/news/press/2008/2009-5.htm

Securities and Exchange Commission v. Braintree Energy, Inc. and Howard Graham, Civil Action No. 1:07-CV-10307, United States District Court for the District of Massachusetts

COURT ENTERS FINAL JUDGMENTS AGAINST MASSACHUSETTS COMPANY AND ITS PRINCIPAL IN SECURITIES FRAUD CASE

The Securities and Exchange Commission ("Commission") announced today that on December 23, 2008, the United States District Court for the District of Massachusetts entered a final judgment by consent against Howard Graham, principal of Braintree Energy, Inc., and a default judgment against the company itself, a now defunct Massachusetts corporation formerly located in Cheshire, Massachusetts. The Commission's action, filed on February 20, 2007, alleged that Braintree and Graham fraudulently offered and sold unregistered securities in the form of investment contracts and/or fractional interests in oil and gas leases and that Graham diverted almost $3 million for his own personal use. The final judgment enjoins Graham from violating of the antifraud, securities registration and broker-dealer registration provisions of the securities laws. In addition, Graham was ordered to pay over $3 million in disgorgement plus prejudgment interest, and a penalty of $120,000. The Commission obtained a default judgment against Braintree Energy, Inc., permanently enjoining it from violating the federal securities laws.

According to the Commission's complaint, from at least 2000 through 2006, Graham and Braintree made numerous oral and written misrepresentations to more than 200 investors nationwide and in foreign countries regarding the expected rate of return, level of profits and risks associated with the investment. The Commission alleged that Graham and Braintree told potential investors that they could expect the return of their principal within months to a year and that Graham failed to disclose that he intended to and did take approximately 30% of investors' funds for himself. The Commission alleged that Graham and Braintree, through their fraud, obtained at least $9 million of investor funds and diverted approximately $3 million for Graham's personal use. The Commission also alleged that Graham and others at his direction led investors to believe that investing in their offerings was not risky, falsely assuring some investors that Braintree had never offered interests in oil or gas wells that did not produce, and that investors' monies were safer than if they had invested in certificates of deposit. The complaint alleged that, in fact, most investors have received no profits and most have not even recovered their initial investments.

Without admitting or denying the substantive allegations in the Commission's complaint, Graham consented to the entry of a final judgment ordering him to pay $3,269,903.60. In addition, the final judgments against Graham and Braintree impose permanent injunctions prohibiting Graham and Braintree from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.

The Commission acknowledges the assistance of the Ontario Securities Commission, the Massachusetts Securities Division and the Pennsylvania Securities Commission.
For further information, please see: Litigation Release No. 20011 (February 21, 2007).

http://www.sec.gov/litigation/litreleases/2009/lr20841.htm

Fraud Cost Investors More Than $2 Billion

Press release from the U.S. Department of Justice:

WASHINGTON —A federal jury today convicted Lance K. Poulsen, former president, owner and chief executive officer of National Century Financial Enterprises (NCFE) of conspiracy, fraud, and money laundering, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and U.S. Attorney Gregory G. Lockhart for the Southern District of Ohio announced. The charges stemmed from a scheme to deceive investors about the financial health of NCFE that cost investors more than $2 billion. The company, which was based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.

The Columbus, Ohio, jury convicted Poulsen, 65, after a four-week trial on all 12 charged counts contained in a July 2007 superseding indictment, including one count of conspiracy, six counts of securities fraud, one count of wire fraud, one count of money laundering conspiracy, and three counts of concealment money laundering.

At trial, witnesses testified that Poulsen engaged in a scheme from 1995 until the collapse of the company to deceive investors and rating agencies about the financial health of NCFE and how investors’ money would be used. NCFE bought accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors, including pension funds, insurance companies and churches.

Evidence at trial showed that NCFE misused investors’ money and made unsecured loans to health care providers, including those owned in whole or in part by Poulsen and other owners. Former employees testified that Poulsen and other NCFE executives covered up the fraud by lying to investors and ratings agencies. The government presented evidence that Poulsen and others created investor reports containing fabricated data, and moved money back and forth between programs, in order to make it appear that NCFE was in compliance with its own governing documents. Evidence showed that Poulsen knew the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls.

“Today’s conviction closes another chapter in the long effort to bring former NCFE executives to justice for deceiving investors,” said Acting Assistant Attorney General Matthew Friedrich of the Criminal Division. “The Department will continue to hold accountable those corporate executives who misrepresent a company’s financial health and then leave the public to pick up the pieces.”

“Poulsen and others made millions of dollars in unsecured loans to companies they owned,” U.S. Attorney Lockhart said. “Their actions were designed to hide a financial house of cards from investors, eventually costing investors $2 billion.”

“The IRS, along with our law enforcement partners, will vigorously pursue corporate officers who victimize their investors and violate the public trust,” said Internal Revenue Service (IRS) Criminal Investigation Special Agent in Charge Jose A. Gonzalez. “Today's verdict demonstrates the government's determination to restore and ensure that trust.”

FBI Cincinnati Special Agent in Charge Keith L. Bennett stated, “The FBI notes that today's convictions are the culmination of a six year investigation which included the review of millions of pages of financial documents by federal investigators. The resolve of this cooperative effort demonstrates that the FBI and other law enforcement will not permit a few corporate executives to hijack our financial system for personal gain.”

The maximum penalty for each count of concealment money laundering, money laundering conspiracy and wire fraud is 20 years in prison and a $500,000 fine. The securities fraud and conspiracy charges are each punishable by up to five years in prison and a $250,000 fine. A sentencing date has not been set.

Poulsen, the sixth NCFE executive convicted in connection with the fraud, has been in custody since he was arrested on Oct. 17, 2007, on charges of witness tampering. A jury convicted him of conspiracy, witness tampering and obstruction on March 26, 2008, and Poulsen was sentenced to ten years in prison on those charges.

On March 13, 2008, five former NCFE executives were found guilty for their roles in the scheme to defraud investors. Donald H. Ayers, of Fort Myers, Fla., an NCFE vice chairman, chief operating officer, director, and an owner of the company, was found guilty on charges of conspiracy, securities fraud, and money laundering. Rebecca S. Parrett, of Carefree, Ariz., an NCFE vice chairman, secretary, treasurer, director, and an owner of the company, was found guilty on charges of conspiracy, securities fraud, wire fraud, and money laundering. Randolph H. Speer, of Peachtree City, Ga., NCFE’s chief financial officer, was found guilty on charges of conspiracy, securities fraud, wire fraud, and money laundering. Roger S. Faulkenberry, of Dublin, Ohio, a senior executive responsible for raising money from investors, was found guilty on charges of conspiracy, securities fraud, wire fraud, and money laundering. James E. Dierker, of Powell, Ohio, associate director of marketing and vice president of client development, was found guilty on charges of conspiracy and money laundering.

The case was prosecuted by Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Senior Litigation Counsel Kathleen McGovern and Trial Attorneys Leo Wise and N. Nathan Dimock of the Criminal Division’s Fraud Section, with assistance from Fraud Section Paralegal Specialist Sarah Marberg, FBI Agents Matt Daly, Ingrid Schmidt and Tad Morris, IRS Special Agents Greg Ruwe and Mark Bailey, U.S. Postal Inspector Dave Mooney and Immigration and Customs Enforcement Agent Celeste Koszut.

FOR IMMEDIATE RELEASE
2008-254

Washington, D.C., Oct. 22, 2008 — The Securities and Exchange Commission today announced that the second-highest number of enforcement actions in agency history took place in fiscal year 2008. For the second year in a row, the SEC also returned more than $1 billion to harmed investors through Fair Fund distributions.

“The SEC’s role in policing the markets and protecting investors has never been more critical,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “The dedicated enforcement staff has been working around the clock to investigate and punish wrongdoing. The staff’s commitment is unwavering year-in and year-out. We look forward to continuing our vital mission of investor protection in the coming year.”

The SEC brought 671 enforcement actions during the just-completed fiscal year, with the number of insider trading and market manipulation cases up more than 25 percent and 45 percent respectively over the previous year. In addition, the SEC has more than 50 ongoing investigations relating to the subprime market.

The Division of Enforcement also reached preliminary settlements in principle with six of the largest firms in the auction rate securities market. Although not included in these FY 2008 enforcement statistics, these settlements, which are subject to final approval by the Commission, would be the largest in the history of the SEC and would return more than $50 billion to investors.

The SEC took a record number of enforcement actions against market manipulation in FY 2008, including charges against a Wall Street short seller for spreading false rumors, and charging 10 insiders or promoters of publicly traded companies who made stock sales in exchange for illegal kickbacks.

Among the major fraud cases brought by the SEC in FY 2008, the SEC sued two Bear Stearns hedge fund managers for fraudulently misleading investors about the financial state of the firm’s two largest hedge funds. The agency also charged five former employees of the City of San Diego for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy.

The SEC brought the highest number ever of insider trading cases in FY 2008, including charging former Dow Jones Board Member David Li and three other Hong Kong residents in a $24 million insider trading enforcement action, and charging the former chairman and CEO of a division of Enron Corp. with illegally selling hundreds of thousands of shares of Enron stock based on nonpublic information.

Combating accounting fraud, including illegal stock option backdating, also was a priority for fiscal year 2008. During the year, the SEC charged eight public companies and 27 executives with providing false information to investors based on improper accounting for backdated stock option grants.

Another growth area is cases against U.S. public companies that use corporate funds to bribe foreign officials, an activity precluded by the Foreign Corrupt Practices Act (FCPA). In fiscal year 2008, the SEC filed 15 FCPA cases. Since January 2006, the SEC has brought 38 FCPA enforcement actions — more than were brought in all prior years combined since FCPA became law in 1977.

Additional data on the SEC’s FY 2008 enforcement results will be available as part of the agency’s Performance and Accountability Report, which is scheduled to be published in mid-November.

# # #

http://www.sec.gov/news/press/2008/2008-254.htm