SEC Charges Quant Manager with Fraud – AXA Rosenberg

September 22, 2011
U.S. Securities and Exchange Commission – (National)

The U.S. Securities and Exchange Commission (SEC)September 22 charged the co-founder of institutional money manager AXA Rosenberg with securities fraud for concealing a significant error in the computer code of thequantitative investment model he developed and provided to the firm’s entities for use in managing client assets. According to the SEC’s order instituting administrative proceedings, the money manager learned of the error in June 2009, but directed othersto keep quiet about it and not fix it immediately. He denied the existence of anysignificant errors during an October 2009 board meeting discussion about performance. AXA disclosed the error to SEC examination staff in March 2010 after being informed of an impending SEC examination. The error was not disclosed to clients until April2010, causing them $217 million in losses. The money manager has agreed to settle the SEC’s charges by paying a $2.5 million penalty, and consenting to a lifetime securities industry bar. The SEC previously charged AXA and its affiliated investment advisers, and they agreed to pay $217 million to harmed clients plus a $25 million penalty.

According to the SEC’s order, the manager created the model, oversaw research projects to improve and enhance it, and exercised significant authority. The material error in the computer code disabled a key component for managing risk, and affected the model’s ability to perform. The SEC’s order found that due to the man’s misconduct, AXA and its affiliated investment advisers misrepresented to clients that the model’s underperformance was attributable to factors other than the error, and inaccurately stated the model was controlling risk correctly. His instructions to delayfixing the error caused additional client losses. In its order, the SEC found the man willfully violated anti-fraud provisions of the Investment Advisers Act of 1940, Sections 206(1) and 206(2).

Source: http://www.sec.gov/news/press/2011/2011-189.htm

WESCO International, Inc. [Identity Stolen]

Scammers have again stolen the identity of yet  another company. This time Wesco International, Inc. a leading distributor of electrical supplies and integrated supply services. Wesco issued the “Alert” below.

**Security Caution**

Vendors Are Encouraged to Verify Any Suspected Fraudulent WESCO Purchase Orders

Beware of Online Fraud:

WESCO Distribution, Inc. (“WESCO”) has become aware from both outside parties and various internal business units that a number of vendors have received fraudulent purchase orders from persons falsely representing themselves as authorized WESCO representatives in an effort to obtain product or obtain vendor bank account information for fraudulent purposes. Vendors have reported receiving suspicious purchase orders bearing names of actual WESCO officers and employees, including WESCO’s Chief Executive Officer.

Report Suspicious Activities or Information:

Please immediately report any suspicious requests to WESCO’s Asset Protection group at: (412) 454-4824, ethics@wesco.com, or WESCO Distribution, Inc., 225 West Station Square Drive, Suite 700, Pittsburgh, PA 15219.

Please follow safe business and computing practices to help protect your information.

What you can do to Verify a WESCO Purchase Order:

First time vendors receiving purchase orders purporting to originate from WESCO are encouraged to contact WESCO’s Asset Protection group in order to verify the authenticity of such purchase order.

If you suspect that you have received a fraudulent purchase order, please contact WESCO’s Asset Protection group for verification.

To expedite WESCO’s Asset Protection group’s review, please have available the suspect purchase order(s) and any other details giving rise to your suspicions.

The information on this page is provided by WESCO for information purposes only. WESCO is proud of its business and services and is working diligently to provide the best service to our customers and vendors including sharing market and security information as soon as learned. WESCO is concerned about fraudulent practices being perpetrated in its name and suggests you follow the guidance outlined in this Security Alert. Vendors are ultimately responsible for protecting themselves and their business from all forms of fraud; however, WESCO will use commercially reasonable efforts to work with any vendor suspecting fraud.

Wesco International,  Inc

Two Sentenced To Prison For Online Money Laundering

Two Sentenced To Prison For Online Money Laundering

December 3, IDG News Service – (International)

Two Bulgarians have been sentenced for their roles in an online
money-laundering scheme that collected about $1.2 million from U.S. residents and sent it to a criminal group in Eastern Europe, the U.S. Department of Justice (DOJ) said. The two used eBay and other Web sites to advertise expensive vehicles and boats they did not own, the DOJ said. The two defendants and co-conspirators ran the scheme from about July 2005 to May 2006, the DOJ said in a news release. When victims expressed interest in the vehicles or boats, they were contacted directly by an e-mail from a purported seller, the DOJ said. The victims were then instructed to wire transfer payments through eBay Secure Traders, an entity with no affiliation to eBay. EBay Secure Traders was supposedly an escrow account service, but instead, the victims’ funds were wired directly into bank accounts in Hungary, Slovakia, the Czech Republic and Greece that were controlled by the two and their co-conspirators. Both were sentenced in U.S. District Court in the District of Columbia on December 2.




Formulating Insurance Agency Owner Arrested

Brown Arrests Mastermind of Multi-Million Dollar Ponzi Scheme

Sacramento-Attorney General Edmund G. Brown Jr. today announced the arrest of William Arthur Sassman II who “looted” the life savings of dozens of investors to bankroll his lavish lifestyle and prop up a multi-million dollar Ponzi scheme.

Sassman, 41, of Sacramento, was arrested at his residence this morning on a total of 100 counts: 43 counts of grand theft, 40 counts of misrepresentation or omission in the sale of a security, 16 counts of first-degree burglary and 1 count of use of a device, scheme, or artifice to defraud in the sale of a security. If convicted, Sassman faces up to 52 years in prison. Sassman is being held in the Sacramento County Jail and bail has been set at $3.2 million.

“William Arthur Sassman solicited millions of dollars from California investors with promises of high returns on business and real estate investments,” Brown said. “In reality, Sassman looted their savings to prop up a Ponzi scheme, so he could buy homes and Ferraris.”

Over the past decade, Sassman used four companies-InTex, LLC; Formulating Insurance Agency (FIA); Formulating Investments (FI); and Systematic Management Services (SMS)-to solicit investments ranging from approximately $10,000 to $500,000 from more than 50 individuals across Northern California and beyond.

Sassman, a licensed insurance agent, convinced investors, many of whom were senior citizens, to shift their savings from IRAs, annuities, life insurance accounts, 401(k)s and certificates of deposit to “high return” investments with his companies. These investments included foreclosed properties and real estate in Georgia, Mare Island and Vallejo; a strip mall in Folsom; commercial property in El Dorado Hills; the production of a laptop computer stand called the “Notefloat” and annuity, stock and foreign currency investments.

However, Sassman made few, if any, of these investments and rarely paid the double to triple digit returns he promised. Instead, Sassman spent investors’ millions financing his lavish lifestyle, including $1.1 million on his American Express card, $300,000 on automobiles, $75,000 at Polo Ralph Lauren and three homes.

The limited funds Sassman invested were channeled into other illegal operations including a “stock trading program” run by a group indicted in federal court earlier this year for running a Ponzi scheme and a European investment scam that promised a 200 percent profit in 45 days or 800 percent annually.

As Sassman burned through investor funds, he paid returns to early investors by using funds from new ones. Investors are still owed close to $4.4 million, and additional losses could reach $3 million.

In September 2009, Sassman and his companies filed for bankruptcy.

Some of Sassman’s Victims

In October 2004, a Sacramento resident invested more than $250,000 in FIA. Sassman promised her a seven percent annual return. Her money was combined with money from other investors for a total of more than $700,000. Of that money, approximately $400,000 was spent on Sassman’s personal expenses, more than $50,000 went to Sassman’s wife, and more than $34,000 was paid in returns to other investors. The victim lost $170,000 of her investment.

In late 2005, Sassman promised a Rancho Cordova woman that if she closed her $78,000 life insurance policy and invested the funds with him, she would receive an 8 percent return on her investment. In early 2009, the victim was diagnosed with cancer and her son took over her finances. Her son contacted Sassman and requested $7,000 from his mother’s investment to help pay for her medical expenses. Sassman promised to send a check, which never arrived. Soon after, the victim’s son contacted Sassman and asked him to return the entire balance of the $78,000 investment. Sassman sent a check for $14,000 that bounced. The victim’s investment was never returned.

In January 2007, a Sacramento couple invested more than $80,000 with Sassman’s company SMS to be invested into real estate and to earn interest. Sassman informed the couple that their money had been used to purchase property, which was undergoing renovation. The couple was unaware that their entire investment had been used to pay other investors.

News Release

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