SEC orders asset manager to pay $97m over ‘faulty’ models

The Securities and Exchange Commission (SEC) has ordered Transamerica Asset Management (TAM) and three affiliated entities to pay $97.6 million to investors over errors in asset allocation models used in a number of funds offered by the firm from 2011 to 2015.

Transamerica’s errors affected 15 products across its mutual fund, SMA, variable annuity and variable life insurance investment portfolios, the SEC said in an order, including the Transamerica Dynamic Allocation fund and the Transamerica Tactical Income fund.

The errors related to models used by the subadvisor of the products, Aegon USA Investment Management (AUIM), from July 2011 to June 2015.

The SEC said that the quantitative models used in the funds did not work as promised and that despite AUIM discovering some errors in the summer of 2013, the firm only stopped using at least one of the models in September that year and failed to disclose the errors or inform investors.

AUIM was subsequently dropped as subadvisor on the mutual funds in April 30 2015 and the remaining portfolios on June 30 2015. read more »

Legg Mason to pay $34 million to resolve charges relating to bribery scheme: SEC

The U.S. Securities and Exchange Commission said on Monday that Legg Mason will pay more than $34 million to resolve a charge it violated the Foreign Corrupt Practices Act in bribing Libyan officials to secure investments.

The SEC said that between 2004 and 2010, a former Legg Mason asset management subsidiary, Permal Group Inc, partnered with a French financial services company in paying bribes to solicit investment business from Libyan state-owned financial institutions.

The SEC fine is the second half of a settlement announced by the Department of Justice in June. read more »

CEO and CFO of Utah Biodiesel Company Charged $500 Million Fuel Tax Credit Scheme

A federal grand jury sitting in the District of Utah has returned an indictment, which was unsealed today, charging the CEO and CFO of Washakie Renewable Energy (WRE), a Utah-based biodiesel company, and a California businessman with laundering proceeds of a mail fraud scheme, which obtained over $511 million in renewable fuel tax credits from the Internal Revenue Service (IRS), announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney John W. Huber for the District of Utah, Don Fort, Chief of IRS Criminal Investigation and Jessica Taylor, Director of Environmental Protection Agency Criminal Investigation Division.

According to the indictment, Jacob Kingston was Chief Executive Officer and Isaiah Kingston was Chief Financial Officer of WRE and each held a 50% ownership interest in the company. WRE has described itself as the “largest producer of biodiesel and chemicals in the intermountain west.”

Jacob Kingston, Isaiah Kingston, and Lev Aslan Dermen (aka Levon Termendzhyan), owner of California-based fuel company NOIL Energy Group, allegedly schemed to file false claims for renewable fuel tax credits, which caused the IRS to issue over $511 million to WRE.  Jacob Kingston is separately charged with filing nine false claims for refund on behalf of WRE in 2013.

The IRS administered tax credits designed to increase the amount of renewable fuel used and produced in the United States. These tax credits were paid by the IRS regardless of whether the taxpayer owed other taxes.

From 2010 through 2016, as part of their fraud to obtain the fuel tax credits, the defendants allegedly created false production records and other paperwork routinely created in qualifying renewable fuel transactions along with other false documents.  To make it falsely appear that qualifying fuel transactions were occurring, the defendants rotated products through places in the United States and through at least one foreign country.  The defendants also allegedly used “burner phones” and other covert means to communicate during the scheme. read more »