Provectus Accused of Disclosure and Accounting Controls Violations Related to Executive Perks
The US Securities and Exchange Commission has filed civil charges against the biopharmaceutical company Provectus. According to the regulator, the Tennessee-based company committed violations related to disclosures and accounting controls. Among the alleged failures was that Provectus did not properly report that its then-CFO and former CEO made millions of dollars in perks as compensation.
The SEC contends that Provectus did not have “sufficient controls” in place regarding the reporting and disclosure of entertainment and travel expenses of executives. Ex-CEO Dr. H. Craig Dees is accused of using fabricated, limited or “non-existent expense documentation” for millions of dollars of benefits of which investors were not informed. Then-CFO Peter R. Culpepper is accused of receiving more than $199K in undisclosed and unauthorized benefits and perks.
The Commission has filed a separate securities fraud case against Dees. Not only did he allegedly get $3.2M in reimbursements and cash for business travel that he didn’t go on, but also, he is accused of hiding these perks, which personal expenses, including restaurant tips and cosmetic surgery for women friends.
As the SEC noted, reimbursement to executives for perks, including entertainment and travel expenses, is material information and must be properly disclosed in public filings. Provectus settled without denying or admitting to the regulator’s findings, as did Culpepper. The ex-CFO also consented to pay over $152K in disgorgement plus interest and a civil penalty. He is suspended from practicing before the commission as an accountant for three years. The SEC’s case against Dees is ongoing.
Provectus does not have to pay a penalty. The SEC said that this is because the biopharmaceutical company cooperated with the regulator and took “proactive remediation,” which included firing wrongdoers.
Seattle Therapist Settles Insider Trading Case
Without denying or admitting to the SEC charges, a therapist has settled regulator’s case accusing him for allegedly insider trading in Zulily Inc. stock. Kenneth Peer, who is based in Seattle, purportedly found out that a media holding company was going to acquire Zulily during counseling sessions with a company employee.
Peer bought more than $28K of Zulily stock over three instances following these sessions. He allegedly sold all his shares in the company after the acquisition became public news and made about $10K in allegedly illegal profits.
As part of the settlement, Peer will disgorge over $10K plus interest. He also will pay a $10K penalty.
Immigration Lawyer Accused of Defrauding Immigrant Investors
Attorney Steve Qi and his Law Offices of Steve Qi and Associates are accused of defrauding immigrant investors seeking permanent residency in the US. According to the SEC, Qi and his firm acted as unregistered brokers when they did not disclose that they received compensation for selling the EB-5 investments.
The attorney and his law firm marketed the investments to their immigration law clients. Over 70 of them ended up investing in the securities. Meantime, Qi and his firm were paid more than $1.6M in transaction-related compensation from the entities that were selling the Eb-5 offerings—a fact that clients didn’t know. In instances when these entities would not pay US-based persons commissions because of broker registration requirements in this country, Qi’s relatives who were based abroad were nominated so they could receive over $1M in this compensation.
Qi and his law firm are accused of securities law violations, including violating the broker-dealer registration provision of the Exchange Act. The Commission wants disgorgement, prejudgmenet interest, penalties, and permanent injunctions.
SEC Charges Biopharmaceutical Company With Failing to Properly Disclose Perks for Executives, SEC, December 12, 2017
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