Sep 21, 2018 | Consumer Protection, Employment & Technology Archive
On September 21, 2018, the FTC announced that the operators of an illegal debt collection scheme have agreed to be permanently banned from the debt collection business in order to settle FTC charges that they falsely threatened to have people arrested if their debts were not paid.
The defendants, Gregory MacKinnon, Angela Burdorf, Vantage Point Services LLC and Payment Management Solutions, and Joseph Ciffa and Bonified Payment Solutions Inc., falsely claimed consumers would spend up to 120 days in jail or pay thousands of dollars in bail, according to a complaint filed by the FTC and the New York Attorney General’s Office.
According to the complaint, the defendants also failed to provide information about their identities during phone calls, or information about the supposed debt within five days of a call, as required by law, and illegally added unauthorized amounts to consumer’s debts.
The settlement orders also prohibit these defendants from misrepresenting material facts about financial-related products and services, profiting from customers’ personal information collected as part of the challenged practices, and failing to dispose of such information properly.
The orders impose a judgment of $22.5 million against Gregory MacKinnon, Vantage Point Services LLC, Joseph Ciffa and Bonified Payment Solutions, Inc. The orders impose a judgment of $4.4 million against Angela Burdorf and Payment Management Solutions Inc. The judgment against Ciffa and Bonified Payment Solutions will be suspended due to their inability to pay. The full judgment against Ciffa and Bonified Payment Solutions will become due immediately if they are found to have misrepresented their financial condition.
The FTC vote approving the proposed stipulated order against Gregory MacKinnon, Angela Burdorf, Vantage Point Services and Payment Management Solutions was 5-0. The FTC vote approving the proposed stipulated order against Ciffa and Bonified Payment Solutions was 5-0. The U.S. District Court for the Western District of New York entered the orders on September 17, 2018, and July 16, 2018, respectively.
Source: FTC.gov
Sep 21, 2018 | Consumer Protection, Employment & Technology Archive
The FTC announced that beginning September 21, 2018, consumers concerned about identity theft or data breaches can freeze their credit and place one-year fraud alerts for free.
Under the new Economic Growth, Regulatory Relief, and Consumer Protection Act, consumers in some states – those who previously had to pay fees to freeze their credit – will no longer have to do so.
Credit Freeze
A credit freeze, also known as a security freeze, restricts access to a consumer’s credit file, making it harder for identity thieves to open new accounts in the consumer’s name. The new law also allows parents to freeze for free the credit of their children who are under 16, while guardians, conservators, and those with a valid power of attorney can get a free freeze for their dependents.
In addition, the new law extends the duration of a fraud alert on a consumer’s credit report from 90 days to one year. A fraud alert requires businesses that check a consumer’s credit to get the consumer’s approval before opening a new account.
As part of its work to implement the new law, the Federal Trade Commission has updated its IdentityTheft.gov website with credit bureau contact information, making it easier for consumers to take advantage of the new provisions outlined in the law.
To place a credit freeze on their accounts, consumers will need to contact all three nationwide credit bureaus: Equifax, Experian, and TransUnion. Whether consumers ask for a freeze online or by phone, the credit bureau must put the freeze in place within one business day. When consumers request to lift the freeze by phone or online, the credit bureaus must take that action within one hour. (If consumers make these requests by mail, the agency must place or lift the freeze within three business days.)
Fraud Alert
To place a fraud alert, consumers need only contact one of the three credit bureaus, which will notify the other two bureaus.
According to the FTC, credit freezes and fraud alerts are two important steps consumers can take to help prevent identity theft. Identity theft was the second biggest category of consumer complaints reported to the FTC in 2017 — making up nearly 14 percent of all the consumer complaints filed last year. Consumers who believe they have been the victim of identity theft can report it and receive a personalized recovery plan at IdentityTheft.gov.
For more information, see “New Credit Law FAQs” and “Extended Fraud Alerts and Credit Freezes”
Source: FTC.gov
Sep 20, 2018 | Shareholder & Investor Protection
On September 20, 2018, the Securities and Exchange Commission announced that it charged the former chief financial officer of Barrett Business Services Inc. for his role in an accounting fraud involving BBSI’s workers’ compensation expenses. The SEC also charged BBSI in the accounting fraud and charged the company’s former controller for his role in improperly approving certain of the CFO’s accounting entries. Both BBSI and the former controller agreed to settle the Commission’s charges against them.
The SEC’s complaint against BBSI’s former CFO James D. Miller filed in federal district court in the Western District of Washington, alleges that Miller manipulated BBSI’s accounting records to hide the fact that its workers’ compensation expense was increasing relative to its revenue. According to the complaint, Miller took steps to conceal from BBSI’s independent auditor a third-party actuarial report concluding that BBSI needed to add tens of millions of dollars to its workers’ compensation liability. BBSI’s stock dropped 32 percent when the Vancouver, Washington-based firm announced it needed to restate its financial results to reflect increased workers’ compensation expenses.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced criminal charges against Miller.
The SEC instituted a settled administrative proceeding against BBSI for violations of the antifraud, books and records, internal accounting controls, and reporting provisions of the federal securities laws, and former Controller Mark Cannon for books and records violations. Without admitting or denying the SEC’s findings, BBSI agreed to pay a $1.5 million civil penalty and Cannon agreed to pay a $20,000 civil penalty and to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Cannon to apply for reinstatement after one year.
BBSI CEO Michael Elich, who was not charged by the SEC, has reimbursed the company for $20,800 in cash bonuses he received during the period of the alleged accounting violations.
Source: SEC.gov
Sep 19, 2018 | Shareholder & Investor Protection
On September 18, 2018, the Securities and Exchange Commission announced that a Boulder, Colorado-based biopharmaceutical company, its CEO, and its former CFO will pay more than $20 million in penalties to settle charges of misleading investors about the company’s developmental lung cancer drug.
The SEC’s complaint filed in federal court in Denver alleges that over a four-month period starting in July 2015, Clovis Oncology Inc. and CEO Patrick Mahaffy misled investors about how well Clovis’ flagship lung cancer drug worked compared to another drug. According to the SEC’s complaint, the company’s investor presentations, press releases, and SEC filings stated that the drug was effective 60 percent of the time, far higher than suggested by actual results available internally. Clovis raised approximately $298 million in a public stock offering in July 2015 and saw its stock price collapse in November 2015, after disclosing that the effectiveness rate was actually 28 percent. The company stopped development on the drug in May 2016.
According to the SEC’s complaint, in evaluating Clovis’ stock, investors closely followed prospects for its lung cancer drug rociletinib, or Roci, and an important driver was its “efficacy,” or how well the drug worked. In May 2015, Clovis disclosed in an investor presentation that Roci’s efficacy was 60 percent, meaning that in 60 percent of patients Roci caused targeted tumors to shrink. The complaint alleges that soon after, certain data provided to Mahaffy and Erle Mast, the company’s CFO at that time, showed that Roci’s efficacy rate was substantially lower and by early July 2015, Mahaffy and Mast learned that the efficacy for Roci at that time was 42 percent. Clovis continued referring to the 60 percent efficacy figure, including in the solicitation materials for the July 2015 offering and afterward. In November 2015, after Clovis disclosed the true efficacy using the methodology required by the U.S. Food and Drug Administration, its stock price dropped approximately 70 percent.
The SEC’s complaint charges Clovis with violating Section 17(a)(2) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934. The complaint charges Mahaffy with violating Section 17(a)(2) and aiding and abetting Clovis’ violations of Section 13(a). The complaint also charges Mast with aiding and abetting Clovis’ federal securities laws violations.
The defendants agreed to the settlements without admitting or denying the allegations and the settlements are subject to court approval. Clovis agreed to a $20 million penalty. Mahaffy agreed to a $250,000 penalty. Mast agreed to pay a $100,000 penalty and to provide disgorgement and prejudgment interest of $454,145, attributable to selling Clovis stock during the relevant period at inflated prices. The SEC plans to seek the creation of a Fair Fund for distribution of the penalties to harmed investors.
Source: SEC.gov
Sep 19, 2018 | Whistleblower
On September 14, 20185, the Securities and Exchange Commission announced that a whistleblower has earned an award of more than $1.5 million. The whistleblower provided the SEC with vital information and ongoing assistance that proved important to the overall success of an enforcement action. However, the SEC’s order notes that the award was reduced because the whistleblower did not promptly report the misconduct and benefited financially during the delay.
“This award reflects the value of the information while underscoring the need for individuals to come forward without delay so that our enforcement staff may quickly leverage the information and prevent further investor harm,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “This is especially critical and, as is the case here, may result in an award reduction where an individual provided valuable information but it came after receiving a benefit from the wrongdoing.”
The SEC’s whistleblower program has now awarded approximately $322 million to 58 individuals since issuing its first award in 2012. In that time, more than $1.6 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received by whistleblowers.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
Source: SEC.gov
