SEC Charges Oil Company CEO, Board Member With Hiding Personal Loans

Loans From Vendors Helped CEO Meet Margin Calls, Finance Extravagant Lifestyle

The Securities and Exchange Commission today charged the former CEO of Energy XXI Ltd. with hiding more than $10 million in personal loans that he obtained from company vendors and a candidate for Energy XXI’s board.  At the time of the alleged misconduct, Energy XXI was NASDAQ-listed and one of the largest oil and gas producers on the Gulf of Mexico shelf. 

According to the SEC’s complaint, CEO John D. Schiller Jr. maintained an extravagant lifestyle by using a highly leveraged margin account secured by his Energy XXI stock.  The complaint alleges that in 2014, when faced with significant margin calls, Schiller extracted more than $7.5 million in undisclosed personal loans from company vendors in exchange for business contracts with Energy XXI. read more » 

Former Second Chance Body Armor President Settles False Claims Act Case Related to Defective Bullet Proof Vests

Richard C. Davis, the founder and former president and CEO of Michigan-based Second Chance Body Armor, Inc., agreed to resolve claims under the False Claims Act in connection with his role in the sale of defective Zylon bullet-proof vests purchased by the United States for federal, state, local and tribal law enforcement agencies, the Justice Department announced today. Mr. Davis will relinquish his interest in $1.2 million in assets previously frozen by the United States and will pay an additional $125,000 to the United States. read more »  

Och-Ziff Judge Told by U.S. That Africo Isn't Fraud Victim

U.S. prosecutors told a judge that they don’t consider Africo Resources Ltd to be a victim of Och-Ziff Capital Management Group LLC’s sprawling African bribery scheme and that an Och-Ziff unit’s sentencing should go forward.

Investors in Africo say they’re entitled to as much as $600 million in restitution because they were victims of Och-Ziff’s 10-year conspiracy to bribe judges and other government officials. The investors say the scheme cost Africo control of the mine.

But federal prosecutors said Friday that they weren’t persuaded by new evidence that Africo was harmed, which lawyers for the Africo investors presented to them in April.

"The government does not believe that this new information changes the analysis," Assistant U.S. Attorney David Pitluck said in a letter to U.S. District Judge Nicholas Garaufis in Brooklyn, New York.

The judge is set to sentence an Och-Ziff unit after it pleaded guilty in September 2016 to participating in a bribery conspiracy to help acquire mining assets in several African countries, including the rights to the Kalukundi copper and cobalt mine in the Democratic Republic of Congo. read more »

SEC Files Charges in Busted Microcap Schemes

The Securities and Exchange Commission has charged a stock promoter and four others involved in an alleged series of microcap fraud schemes that were foiled by FBI undercover work and an SEC trading suspension.

According to the SEC’s complaint filed in federal court in southern California on July 6, stock promoter Gannon Giguiere took control of a purported medical device company.  Giguiere, together with a Cayman Islands-based broker, then allegedly engaged in a matched trading scheme that caused the company’s share price to rise from zero to $1.20 per share.  Giguiere and the brokerage owner, Oliver-Barret Lindsay, allegedly coordinated their matched trading through an individual who turned out to be an FBI cooperating witness.  According to the complaint, despite extensive encrypted communications, the defendants were caught by an undercover FBI operation that recorded their communications, with Lindsay going so far as to tell an individual cooperating with the FBI, “I’m a little hesitant about typing all of these details into this app. … You can just imagine if it finds its way somewhere it’s fairly incriminating.”  According to the complaint, the pair’s plan to dump millions of shares in the purported medical device company was thwarted when, this past March, the SEC suspended trading in the securities of the purported medical device company.

The SEC’s complaint also charges three others who began laying the groundwork for a pump-and-dump scheme involving a purported digital media company.  The SEC alleges that Kevin Gillespie, Annetta Budhu, and Andrew Hackett entered into a number of sham stock and debt issuances, and Hackett wound up communicating with someone he believed to be a participant in the scheme who in reality was an undercover FBI agent. read more »