Washington D.C., May 26, 2015 — The Securities and Exchange Commission has announced that fraud charges have been filed against a securities lawyer who used his New York law office as the headquarters for planning and implementing market manipulation schemes. Also charged are two stock promoters from Canada who assisted him.
The SEC alleges that Adam S. Gottbetter orchestrated promotional campaigns that touted the prospects of microcap companies and enticed investors to buy their stock at inflated prices so he and his cohorts could sell shares they controlled and reap massive profits. Gottbetter enlisted Mitchell G. Adam and K. David Stevenson to help him in the last of three schemes he conducted in a six-year period. They repeatedly cautioned each other about the dangers of missteps that might draw law enforcement attention to the scheme, such as failing to keep secret the identities of Adam and Stevenson. The three rehearsed stories they would tell if ever questioned by law enforcement. During one meeting in New York City, Gottbetter complained about the difficulties of stock manipulation but conceded that robbing a bank was the only other way to make so much money so quickly.
Gottbetter agreed to pay $4.6 million to settle the SEC’s charges. Stevenson also agreed to settle the SEC charges against him while a case against Adam will be litigated in federal court in Newark, N.J.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Gottbetter, Adam, and Stevenson.
“As a securities lawyer, Gottbetter should have served as a gatekeeper and protected the capital markets and investors from fraudsters. Instead, he swung the gates wide open and illicitly profited at investors’ expense,” said Andrew Ceresney, director of the SEC’s Division of Enforcement.
According to the SEC’s complaint, Gottbetter was involved in the manipulation of the stocks of Kentucky USA Energy Inc. (KYUS) and Dynastar Holdings Inc. (DYNA) before teaming up with Adam and Stevenson in July 2013 to utilize their offshore ties for a new and potentially more lucrative scheme. Together they schemed to drive up the stock price for purported oil and gas exploration company HBP Energy Corp. (HBPE) through fraudulent trades generated by a trading algorithm. They then planned to launch an extensive promotional campaign featuring multiple call centers, roadshows, and a listing on the Frankfurt Stock Exchange. After creating the false appearance of liquidity and investor interest, they planned to dump their shares of the stock on unsuspecting investors around the world. While Stevenson and Adam managed to do some small coordinated trades, the scheme was thwarted before the planned manipulation and promotion could be launched when Stevenson was arrested by the FBI.
The SEC’s complaint alleges that Gottbetter violated Sections 5(a), 5(c) and Section 17(a) of the Securities Act of 1933, and violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleges that Adam and Stevenson violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
Gottbetter agreed to be barred from the penny stock industry in addition to paying $4.6 million in disgorgement and prejudgment interest from ill-gotten gains in the Kentucky USA Energy manipulation scheme. He consented to injunctions against future violations. Stevenson also agreed to be barred from the penny stock industry and consented to an injunction against future violations. The settlements are subject to court approval.
The SEC’s investigation was conducted by Simona Suh of the Market Abuse Unit and Nancy A. Brown and Elzbieta Wraga of the New York office. The case was supervised by Amelia A. Cottrell and Michael J. Osnato Jr. The SEC’s litigation against Adam will be led by Ms. Brown and Ms. Suh. The SEC appreciates the assistance of the Newark Field Office of the Federal Bureau of Investigation, the U.S. Attorney’s Office for the District of New Jersey, and the Financial Industry Regulatory Authority.
Source: U.S. Securities and Exchange Commission
MARK TWAIN: FATHER OF AMERICAN LITERATURE -- FACT FACTS
ABOVE: Samuel Clemens, aka Mark Twain, was cemented as a premier writer of late 19th century America with his works "The Adventures of Tom Sawyer" and "Adventures of Huckleberry Finn." Find out more about his life and writing in this video.
Showing posts with label stocks. Show all posts
Showing posts with label stocks. Show all posts
Investment Fund Chief Pleads Guilty in Scheme
NEW YORK - July 19, 2013 - Abdul Walji and Reniero Francisco, the chief executive officer and president, respectively, of Arista LLC (Arista), a California investment fund, pleaded guilty on July 2 in New York federal court to defrauding and misappropriating nearly $10 million from more than 35 investors by misrepresenting the nature and performance of the fund, and issuing fraudulent account statements to investors to cover up massive losses, announced Preet Bharara, the U.S. Attorney for the Southern District of New York.
Walji also pleaded guilty to perpetrating a multi-million dollar fraudulent scheme with pension plan funds that he managed through three California-based trusts: Allied Benefits Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the Trusts). Both defendants were charged in December 2012, and pleaded guilty today before U.S. District Judge Denise Cote.
“Abdul Walji and Reniero Francisco told one lie after another in order to squeeze millions of dollars out of their investors, even as they misappropriated nearly $10 million, including at least $2.7 million solely for their own personal benefit,” Bharara said. “Walji even went a step further and orchestrated a second scheme that ultimately cost his victims another approximately $9.5 million. With today’s guilty pleas, they will begin to be held responsible for their actions and repay those wronged by their unlawful conduct.”
According to the three-count superseding information to which Walji pleaded guilty, the indictment to which Francisco pleaded guilty, the defendants’ plea agreements and other documents in the public record:
The Arista Fraudulent Scheme :
Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, Calif. In April 2011, Arista became a registered commodity pool operator with the U.S. Commodity Futures Trading Commission, and a National Futures Association member.
In early 2010, Walji and Francisco began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out their fraudulent scheme through three methods. First, Walji and Francisco misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, Walji and Francisco falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, Walji and Francisco sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, Walji and Francisco misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which Walji and Francisco diverted for their own personal benefit. Based on their false representations, Walji and Francisco collected nearly $10 million from over 35 investors, and they ultimately misappropriated a large portion of the money.
From early 2008 through June 2013, Walji also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, Walji executed his fraudulent scheme through three principal methods. First, Walji made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, Walji distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, induce new clients to contribute to the plans, and induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, Walji sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, Walji misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 35 additional victims in an aggregate amount of approximately $9.5 million.
Walji, 60, of San Juan Capistrano, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. The securities fraud charge carries a maximum sentence of 20 years in prison; the commodities fraud charge carries a maximum sentencing of 10 years in prison; and the conspiracy charge carries a maximum sentence of five years in prison. Francisco, 57, of Newport Coast, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.
In connection with their guilty pleas, Walji consented to forfeit $13.6 million and Francisco consented to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.
This case is being handled by the U.S. Attorney’s Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
Source: Financial Fraud Enforcement Task Force
Walji also pleaded guilty to perpetrating a multi-million dollar fraudulent scheme with pension plan funds that he managed through three California-based trusts: Allied Benefits Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the Trusts). Both defendants were charged in December 2012, and pleaded guilty today before U.S. District Judge Denise Cote.
“Abdul Walji and Reniero Francisco told one lie after another in order to squeeze millions of dollars out of their investors, even as they misappropriated nearly $10 million, including at least $2.7 million solely for their own personal benefit,” Bharara said. “Walji even went a step further and orchestrated a second scheme that ultimately cost his victims another approximately $9.5 million. With today’s guilty pleas, they will begin to be held responsible for their actions and repay those wronged by their unlawful conduct.”
According to the three-count superseding information to which Walji pleaded guilty, the indictment to which Francisco pleaded guilty, the defendants’ plea agreements and other documents in the public record:
The Arista Fraudulent Scheme :
Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, Calif. In April 2011, Arista became a registered commodity pool operator with the U.S. Commodity Futures Trading Commission, and a National Futures Association member.
In early 2010, Walji and Francisco began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out their fraudulent scheme through three methods. First, Walji and Francisco misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, Walji and Francisco falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, Walji and Francisco sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, Walji and Francisco misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which Walji and Francisco diverted for their own personal benefit. Based on their false representations, Walji and Francisco collected nearly $10 million from over 35 investors, and they ultimately misappropriated a large portion of the money.
From early 2008 through June 2013, Walji also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, Walji executed his fraudulent scheme through three principal methods. First, Walji made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, Walji distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, induce new clients to contribute to the plans, and induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, Walji sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, Walji misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 35 additional victims in an aggregate amount of approximately $9.5 million.
Walji, 60, of San Juan Capistrano, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. The securities fraud charge carries a maximum sentence of 20 years in prison; the commodities fraud charge carries a maximum sentencing of 10 years in prison; and the conspiracy charge carries a maximum sentence of five years in prison. Francisco, 57, of Newport Coast, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.
In connection with their guilty pleas, Walji consented to forfeit $13.6 million and Francisco consented to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.
This case is being handled by the U.S. Attorney’s Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
Source: Financial Fraud Enforcement Task Force
Subjects
fraud,
investment,
stocks
Securities Broker Sentenced to 84 Months
(DOJ) - 5/22/2013 - A former stock broker was sentenced to prison on May 16 for his role in an extensive pump-and-dump stock manipulation scheme.
The announcement was made by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division , U.S. Attorney Danny C. Williams Sr. of the Northern District of Oklahoma, Special Agent in Charge James E. Finch of the FBI’s Oklahoma City Division and Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber.
Joshua Wayne Lankford, 39, of Dallas, was sentenced by U.S. District Judge James H. Payne in the Northern District of Oklahoma to serve 84 months in prison. In addition to his prison term, Lankford was ordered to forfeit $250,000. Proceeds from forfeited assets will be used to bring partial restitution to victims.
On Dec. 10, 2012, Lankford pleaded guilty to one count of money laundering.
“Mr. Lankford and his co-conspirators took advantage of innocent investors to the tune of millions of dollars, pumping and dumping penny stocks without regard to anything but their wallets,” Raman said. “As this case shows, stockbrokers and other professionals will be punished if they break the law. Lankford now faces substantial time in prison for his manipulation scheme.”
According to court documents and evidence presented at the 2010 trial, Lankford and his co-defendants manipulated the stocks of three companies: Deep Rock Oil & Gas Inc. and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments, both of Tulsa, Okla., and National Storm Management Group Inc. of Glen Ellyn, Ill. The defendants devised and engaged in a scheme to defraud investors known as a “pump and dump,” in which they manipulated publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. Lankford and his co-defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
According to court records, Lankford and other conspirators “parked” their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Subsequently, they engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and email “blasts” were sent to millions of recipients. According to evidence presented at the 2010 trial, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the conspirators’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
According to Lankford’s guilty plea, he laundered $250,000 in proceeds derived from the stock manipulation scheme.
Evidence presented in the 2010 trial showed that the overall scheme resulted in illegal proceeds of more than $43 million from more than 17,000 investor victims.
Lankford was originally charged in a 24-count indictment unsealed on Feb. 10, 2009, against five defendants. Prior to trial, Lankford fled to Costa Rica, where he remained until he was extradited to the United States in May 2012. James Reskin, 54, of Louisville, Ky., was sentenced today to serve five years of probation for his role in the scheme. Co-defendants George David Gordon and Richard Clark, were convicted by a federal jury in May 2010 for their roles in the scheme. Gordon was sentenced to serve 188 months in prison, and Clark was sentenced to serve 151 months in prison. The fifth defendant, Dean Sheptycki, remains a fugitive.
The case is being prosecuted by trial attorneys Andrew Warren and Kevin Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma. The case is being investigated by IRS-CI and the FBI.
Joshua Wayne Lankford, 39, of Dallas, was sentenced by U.S. District Judge James H. Payne in the Northern District of Oklahoma to serve 84 months in prison. In addition to his prison term, Lankford was ordered to forfeit $250,000. Proceeds from forfeited assets will be used to bring partial restitution to victims.
On Dec. 10, 2012, Lankford pleaded guilty to one count of money laundering.
“Mr. Lankford and his co-conspirators took advantage of innocent investors to the tune of millions of dollars, pumping and dumping penny stocks without regard to anything but their wallets,” Raman said. “As this case shows, stockbrokers and other professionals will be punished if they break the law. Lankford now faces substantial time in prison for his manipulation scheme.”
According to court documents and evidence presented at the 2010 trial, Lankford and his co-defendants manipulated the stocks of three companies: Deep Rock Oil & Gas Inc. and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments, both of Tulsa, Okla., and National Storm Management Group Inc. of Glen Ellyn, Ill. The defendants devised and engaged in a scheme to defraud investors known as a “pump and dump,” in which they manipulated publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. Lankford and his co-defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
According to court records, Lankford and other conspirators “parked” their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Subsequently, they engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and email “blasts” were sent to millions of recipients. According to evidence presented at the 2010 trial, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the conspirators’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
According to Lankford’s guilty plea, he laundered $250,000 in proceeds derived from the stock manipulation scheme.
Evidence presented in the 2010 trial showed that the overall scheme resulted in illegal proceeds of more than $43 million from more than 17,000 investor victims.
Lankford was originally charged in a 24-count indictment unsealed on Feb. 10, 2009, against five defendants. Prior to trial, Lankford fled to Costa Rica, where he remained until he was extradited to the United States in May 2012. James Reskin, 54, of Louisville, Ky., was sentenced today to serve five years of probation for his role in the scheme. Co-defendants George David Gordon and Richard Clark, were convicted by a federal jury in May 2010 for their roles in the scheme. Gordon was sentenced to serve 188 months in prison, and Clark was sentenced to serve 151 months in prison. The fifth defendant, Dean Sheptycki, remains a fugitive.
The case is being prosecuted by trial attorneys Andrew Warren and Kevin Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma. The case is being investigated by IRS-CI and the FBI.
Subjects
investment,
money,
securities,
stocks
Former co-founder of hedge fund sentenced
NEW YORK - 2/14/2013 - Steven Fortuna, who co-founded the hedge fund S2 Capital LLC (S2), was sentenced today to two years of probation for his participation in an insider trading scheme in which he obtained and traded on material, nonpublic information about various publicly-traded companies from employees at other hedge funds, announced U.S. Attorney for the Southern District of New York Preet Bharara. Fortuna pleaded guilty in October 2009 to three counts of conspiracy to commit securities fraud and one count of securities fraud under a cooperation agreement with the government. He was sentenced on February 13 in federal court by U.S. District Judge Sidney H. Stein.
According to court documents, statements made during Fortuna’s guilty plea proceeding and the government’s sentencing submission in his case suggest that from July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, Fortuna obtained inside information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The inside information was disclosed by company insiders in breach of their duties to their respective employers.
For example, in July and August 2008, Fortuna obtained inside information concerning Akamai Inc. from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told Fortuna that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. Fortuna executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.
As part of the conditions of his probation, Fortuna, 50, of Westwood, Mass., was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Antonia M. Apps is in charge of the prosecution.
According to court documents, statements made during Fortuna’s guilty plea proceeding and the government’s sentencing submission in his case suggest that from July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, Fortuna obtained inside information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The inside information was disclosed by company insiders in breach of their duties to their respective employers.
For example, in July and August 2008, Fortuna obtained inside information concerning Akamai Inc. from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told Fortuna that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. Fortuna executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.
As part of the conditions of his probation, Fortuna, 50, of Westwood, Mass., was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Antonia M. Apps is in charge of the prosecution.
Subjects
hedge fund,
Insider trading,
stocks
Insurance Executive Indicted for Insider Trading
DENVER – 11/2/2012 - Insurance executive Michael Van Gilder, age 45, of Denver, was indicted by a federal grand jury in Denver on five counts of insider trading, U.S. Attorney for the District of Colorado John Walsh and FBI Denver Special Agent in Charge James Yacone announced.
The case is being prosecuted in conjunction with the U.S. Attorney’s Office for the Southern District of New York. The U.S. Securities and Exchange Commission (SEC), which has filed a complaint charging Van Gilder with civil insider trading violations, conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. The defendant allegedly traded based on inside information regarding a Denver oil and natural gas company called Delta Petroleum Corp. Van Gilder surrendered to the FBI this morning at the U.S. Marshals’ Office, and will appear in U.S. District Court in Denver this afternoon for an initial appearance.
According to the indictment, Van Gilder was the CEO and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.
From Nov. 5, 2007, and continuing until at least Jan. 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.
Specifically, on Nov. 8, 2007, Delta publicly announced and filed with the SEC a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended Sept. 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.
The Barron’s article was brought to Van Gilder’s attention. Based on the article, Van Gilder called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to Van Gilder that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.
Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the Nov. 8, 2007, third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.
In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with Van Gilder, and that, on Nov. 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.
As the indictment further relates, the Delta executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on Dec. 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.
On Dec. 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later, Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.
On Dec. 19, 2007, a representative of Tracinda contacted the Delta executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on Dec. 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”
On Dec. 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On Dec. 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, Van Gilder caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”
On Dec. 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35 percent of Delta’s common stock for $19 per share. On Monday, Dec. 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by Jan. 4, 2008. On Jan. 9, 2008, Van Gilder sold the 290 call options that he had purchased between Dec. 19 and Dec. 24, 2007, realizing a profit of approximately $86,100 on the transaction.
The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between Nov. 6, 2007 and Dec. 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.
“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”
Thr case was investigated by the FBI, New York and Denver Divisions, with the assistance of and working with the SEC.
Van Gilder is being prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
According to the indictment, Van Gilder was the CEO and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.
From Nov. 5, 2007, and continuing until at least Jan. 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.
Specifically, on Nov. 8, 2007, Delta publicly announced and filed with the SEC a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended Sept. 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.
The Barron’s article was brought to Van Gilder’s attention. Based on the article, Van Gilder called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to Van Gilder that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.
Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the Nov. 8, 2007, third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.
In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with Van Gilder, and that, on Nov. 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.
As the indictment further relates, the Delta executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on Dec. 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.
On Dec. 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later, Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.
On Dec. 19, 2007, a representative of Tracinda contacted the Delta executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on Dec. 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”
On Dec. 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On Dec. 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, Van Gilder caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”
On Dec. 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35 percent of Delta’s common stock for $19 per share. On Monday, Dec. 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by Jan. 4, 2008. On Jan. 9, 2008, Van Gilder sold the 290 call options that he had purchased between Dec. 19 and Dec. 24, 2007, realizing a profit of approximately $86,100 on the transaction.
The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between Nov. 6, 2007 and Dec. 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.
“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”
Thr case was investigated by the FBI, New York and Denver Divisions, with the assistance of and working with the SEC.
Van Gilder is being prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
Subjects
Insider trading,
insurance,
securities,
stocks
Brokerage Firm Chief, Stock Promoter Convicted
WASHINGTON – 2./2/2012 - The principal of a Costa Rican brokerage firm and a Las Vegas stock promoter were each convicted on January 31 in the Southern District of Florida of all charges for their roles in a stock manipulation scheme that defrauded investors, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, assistant director in Charge of the FBI’s Washington Field Office.
Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.
The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.
Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme. Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.
According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public. The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida. The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech. The cash was delivered to Miami via a private jet from an airport outside New York.
The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners. The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.
At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy. Montgomery faces a sentence of up to five years for the conspiracy to defraud count. The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.
Stock promoters Weidenbaum, Barham and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud. They also will be sentenced by Judge Goldberg on May 9, 2012. Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud.
The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The SEC has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
Source: Financial Fraud Enforcement Task Force
Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.
The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.
Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme. Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.
According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public. The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida. The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech. The cash was delivered to Miami via a private jet from an airport outside New York.
The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners. The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.
At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy. Montgomery faces a sentence of up to five years for the conspiracy to defraud count. The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.
Stock promoters Weidenbaum, Barham and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud. They also will be sentenced by Judge Goldberg on May 9, 2012. Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud.
The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The SEC has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
Source: Financial Fraud Enforcement Task Force
2010 Called 'Wonderful Year' for Energy Investors
NORWALK, Conn.- (BUSINESS WIRE) - 1/13/2011 - Despite a poor start, 2010 finished as a “wonderful year” for energy investors, with more than 65 percent of oil and gas stocks delivering positive returns last year, according to the IHS Herold 2010 Energy Peer Group Stock Market Performance Report, which was just released by information and insight provider IHS.
Driven by economic growth, crude prices, which hit bottom in late May 2010 at around $65 per barrel, rose steadily and consistently through the second half of the year, and took oil company shares with them.
The median gain for the 503 stocks covered in the report was 21 percent, which, while it did not match the record-setting 59 percent gain posted in the 2009 IHS report, did outperform the market indices of nearly all Organization for Economic Cooperation and Development (OECD) countries. Total capitalization jumped by more than $300 billion, further reducing the severe losses the sector incurred in 2008 the report said, but did not extinguish them.
“Sometime in the first quarter of 2009, equity markets began to move upward in response to the economic growth that was becoming apparent in OECD countries,” said Robert Gillon, senior vice president and co-director of energy equity research at IHS. “It seemed as though every statistic that confirmed expansion was under way was reflected in a rise in the price of crude, which boded well for oil stocks. That pattern continued throughout the year, with oil prices and oil shares at a recovery high at the closing bell of 2010. In particular, North American oil stocks delivered the most returns to their investors.”
After finishing second-to-last as a peer group in 2009, U.S. Royalty Trusts earned redemption by taking top honors in 2010 as the best performing peer group reviewed, posting a gain of more than 44 percent. MV Oil Trust led the group by posting a return of 111 percent.
Companies in the E&P Limited Income Partnerships group followed closely with gains of nearly 43 percent. According to the IHS report, these survey-leading returns were in response to monetary stimuli by numerous central banks, where open-market interest rates fell to the lowest levels seen in decades, which forced yield-conscious investors to take on more risk in order to maintain their desired level of income.
“The vast amount of liquidity being injected into the economic system, particularly in the U.S. has resulted in a strong correlation between equity prices and oil prices,” Gillon noted. “By contrast, for many years prior to 2009, there was a reverse relationship, with higher crude prices perceived to cause a reduction in disposable income, lower consumer spending, and declining domestic product and stock prices. To our mind, this is the normal state of affairs, but to predict we will be back to normal in short order would be unwise.”
Mid-sized U.S. E&Ps, led by McMoRan Exploration Company, generated a segment return of nearly 42 percent, outperforming every other group of oil and gas producers globally. McMoRan delivered a total return in 2010 of nearly 114 percent.
As a group, Master Limited Partnerships — mostly pipeline and storage companies — enjoyed a hearty gain of nearly 35 percent, while the peer group of Integrated Oil Stocks with U.S. Downstream returned 22 percent, which was marginally above the survey average. Canadian Integrated Oil Stocks and Integrated Oil Stocks without U.S. Downstream Operations gained less than half that amount, at 10 percent and nine percent, respectively. Returns from the latter group, the report said, were dragged down by the generally poor performance of European markets. On the other hand, shares in the Refining and Marketing category offered a healthy median gain of 38 percent and did well globally as demand for distillates rose with increasing economic activity.
EnCore Oil plc of the U.K., whose shares rocketed by 773 percent following the discovery of the Catcher field in the U.K. sector of the North Sea, was the runaway leader of the Smaller E&P Companies Outside North America, but among companies starting at more than $0.50 per share, Xcite Energy Ltd. of the U.K. stole top survey honors for best total return of 552 percent due to its North Sea heavy oil project. Notably, Xcite Energy was also the top performer in last year’s survey.
Pacific Rubiales Energy enjoyed splendid results with its heavy oil development program in Colombia, and the sizzling gain of 131 percent placed the company at the top of the list of Largest Oil and Gas Producers for a second year in a row. CNOOC Ltd. maintained the title of largest capitalization amongst the Largest Oil and Gas Producers by a very wide margin. The Chinese producer, which had a steaming 56 percent total return, is the first in this sector to have its market valued exceed $100 billion.
Amongst the Largest Integrated and Diversified Oils, top-ranked Ecopetrol’s 84 percent gain reflected rapidly growing oil production, and it also got an updraft from the soaring Bogota market. Sunoco Inc. and Valero Energy, last year’s bottom two performers in the Largest Integrated and Diversified Oils group, moved into the top 10 due to a dramatic turnaround in refining margins. BHP Billiton is the only member of the 2009 crop to repeat in the top 10 this year.
In a stunning turnaround, nine of last year’s top 10 finishers fell to the bottom half of the table in 2010, with Petroleo Brasileiro and Rosneft Oil, numbers one and two in the previous ranking, being hit particularly hard.
Thanks in part to the Greek financial crisis, European markets were among the worst-performing financial exchanges and companies there had a tough 12 months, the report noted. Eni, Spa and Husky Energy repeated in the group’s bottom 10. BP p.l.c., as anticipated following the Deepwater Horizon incident, suffered through a horrendous year and now ranks eighth by capitalization, down from second in 2005.
While oil stocks carried the sector in 2010, continued weakness in the North American natural gas market did not prevent the large producers from generating solid shareholder returns, with the median performance of the group nearly matching that of the entire survey. However, a high concentration of North American natural gas in the production mix detracted from returns, since U.S. natural gas spot prices, which began the year at what now seems like the lofty price of $6/MMBtu, ended the year at a nine-year low for the date, which was about 30 percent below where they began. This led to the denouement of Southwestern Energy, which had been a stellar performer in the previous three years, the report said.
“Natural gas inventories were well above average and U.S. domestic production showed no signs of topping out,” Gillon added. “Fortunately for everyone but the Europeans, it has been ferociously cold in Europe, so gas is being shipped to the higher priced markets. The world is well supplied with gas, and the modest upward slope to the current futures curve is testimony to the glut in supply.”
Stocks in the Alternative Energy group held the basement position as worst in class, posting losses of more than 24 percent after gaining 26 percent in 2009. Said Gillon, “We’re not sure what to say about alternative energy, except perhaps a requiem. In the five years we have shown this segment in the survey, it has been the worst performing group twice, second worst twice, and soared to fourth from the bottom on one happy occasion. They suffer when natural gas prices go down, when government subsidies are cut, when the wind doesn’t blow, when it blows too much, and when the sun doesn’t shine. There may be other problems as well, which we will probably find out about in 2011.”
See: IHS Herold
Driven by economic growth, crude prices, which hit bottom in late May 2010 at around $65 per barrel, rose steadily and consistently through the second half of the year, and took oil company shares with them.
The median gain for the 503 stocks covered in the report was 21 percent, which, while it did not match the record-setting 59 percent gain posted in the 2009 IHS report, did outperform the market indices of nearly all Organization for Economic Cooperation and Development (OECD) countries. Total capitalization jumped by more than $300 billion, further reducing the severe losses the sector incurred in 2008 the report said, but did not extinguish them.
“Sometime in the first quarter of 2009, equity markets began to move upward in response to the economic growth that was becoming apparent in OECD countries,” said Robert Gillon, senior vice president and co-director of energy equity research at IHS. “It seemed as though every statistic that confirmed expansion was under way was reflected in a rise in the price of crude, which boded well for oil stocks. That pattern continued throughout the year, with oil prices and oil shares at a recovery high at the closing bell of 2010. In particular, North American oil stocks delivered the most returns to their investors.”
After finishing second-to-last as a peer group in 2009, U.S. Royalty Trusts earned redemption by taking top honors in 2010 as the best performing peer group reviewed, posting a gain of more than 44 percent. MV Oil Trust led the group by posting a return of 111 percent.
Companies in the E&P Limited Income Partnerships group followed closely with gains of nearly 43 percent. According to the IHS report, these survey-leading returns were in response to monetary stimuli by numerous central banks, where open-market interest rates fell to the lowest levels seen in decades, which forced yield-conscious investors to take on more risk in order to maintain their desired level of income.
“The vast amount of liquidity being injected into the economic system, particularly in the U.S. has resulted in a strong correlation between equity prices and oil prices,” Gillon noted. “By contrast, for many years prior to 2009, there was a reverse relationship, with higher crude prices perceived to cause a reduction in disposable income, lower consumer spending, and declining domestic product and stock prices. To our mind, this is the normal state of affairs, but to predict we will be back to normal in short order would be unwise.”
Mid-sized U.S. E&Ps, led by McMoRan Exploration Company, generated a segment return of nearly 42 percent, outperforming every other group of oil and gas producers globally. McMoRan delivered a total return in 2010 of nearly 114 percent.
As a group, Master Limited Partnerships — mostly pipeline and storage companies — enjoyed a hearty gain of nearly 35 percent, while the peer group of Integrated Oil Stocks with U.S. Downstream returned 22 percent, which was marginally above the survey average. Canadian Integrated Oil Stocks and Integrated Oil Stocks without U.S. Downstream Operations gained less than half that amount, at 10 percent and nine percent, respectively. Returns from the latter group, the report said, were dragged down by the generally poor performance of European markets. On the other hand, shares in the Refining and Marketing category offered a healthy median gain of 38 percent and did well globally as demand for distillates rose with increasing economic activity.
EnCore Oil plc of the U.K., whose shares rocketed by 773 percent following the discovery of the Catcher field in the U.K. sector of the North Sea, was the runaway leader of the Smaller E&P Companies Outside North America, but among companies starting at more than $0.50 per share, Xcite Energy Ltd. of the U.K. stole top survey honors for best total return of 552 percent due to its North Sea heavy oil project. Notably, Xcite Energy was also the top performer in last year’s survey.
Pacific Rubiales Energy enjoyed splendid results with its heavy oil development program in Colombia, and the sizzling gain of 131 percent placed the company at the top of the list of Largest Oil and Gas Producers for a second year in a row. CNOOC Ltd. maintained the title of largest capitalization amongst the Largest Oil and Gas Producers by a very wide margin. The Chinese producer, which had a steaming 56 percent total return, is the first in this sector to have its market valued exceed $100 billion.
Amongst the Largest Integrated and Diversified Oils, top-ranked Ecopetrol’s 84 percent gain reflected rapidly growing oil production, and it also got an updraft from the soaring Bogota market. Sunoco Inc. and Valero Energy, last year’s bottom two performers in the Largest Integrated and Diversified Oils group, moved into the top 10 due to a dramatic turnaround in refining margins. BHP Billiton is the only member of the 2009 crop to repeat in the top 10 this year.
In a stunning turnaround, nine of last year’s top 10 finishers fell to the bottom half of the table in 2010, with Petroleo Brasileiro and Rosneft Oil, numbers one and two in the previous ranking, being hit particularly hard.
Thanks in part to the Greek financial crisis, European markets were among the worst-performing financial exchanges and companies there had a tough 12 months, the report noted. Eni, Spa and Husky Energy repeated in the group’s bottom 10. BP p.l.c., as anticipated following the Deepwater Horizon incident, suffered through a horrendous year and now ranks eighth by capitalization, down from second in 2005.
While oil stocks carried the sector in 2010, continued weakness in the North American natural gas market did not prevent the large producers from generating solid shareholder returns, with the median performance of the group nearly matching that of the entire survey. However, a high concentration of North American natural gas in the production mix detracted from returns, since U.S. natural gas spot prices, which began the year at what now seems like the lofty price of $6/MMBtu, ended the year at a nine-year low for the date, which was about 30 percent below where they began. This led to the denouement of Southwestern Energy, which had been a stellar performer in the previous three years, the report said.
“Natural gas inventories were well above average and U.S. domestic production showed no signs of topping out,” Gillon added. “Fortunately for everyone but the Europeans, it has been ferociously cold in Europe, so gas is being shipped to the higher priced markets. The world is well supplied with gas, and the modest upward slope to the current futures curve is testimony to the glut in supply.”
Stocks in the Alternative Energy group held the basement position as worst in class, posting losses of more than 24 percent after gaining 26 percent in 2009. Said Gillon, “We’re not sure what to say about alternative energy, except perhaps a requiem. In the five years we have shown this segment in the survey, it has been the worst performing group twice, second worst twice, and soared to fourth from the bottom on one happy occasion. They suffer when natural gas prices go down, when government subsidies are cut, when the wind doesn’t blow, when it blows too much, and when the sun doesn’t shine. There may be other problems as well, which we will probably find out about in 2011.”
See: IHS Herold
Subjects
energy,
investment,
oil,
stocks
