Securities Fraud News: Union Pension Funds Settle Class Action Case for $64M, Deadline for Implementing Volcker Rule is Extended, and Ex-Panther Energy Trader Goes to Prison For Spoofing
$64M Pension Fund Fraud Settlement Reached Against Dana Holding Corp. Executives
Plaintiffs in the shareholder class action case brought against Michael Burns and Robert Richter have reached a $64M out-of-court settlement with the two ex-Dana Holding Corp. executives. The union pension funds include lead plaintiffs SEIU Pension Plans Master Trust, Plumbers & Pipefitters National Pension Fund, and the West Virginia Laborers Pension Trust Fund.
They accused Bornes and Richter, the company’s ex-CEO and CFO, respectively, of purposely misleading investors about Dana Holding’s financial woes in the months prior to its filing for bankruptcy in 2006. Although the securities fraud case was initially dismissed by a district court on the grounds that the plaintiffs failed to show that the two men and Dana knew they were engaging in wrongdoing, the 6th U.S. Circuit Court of Appeals in Cincinnati reversed that decision, saying evidence showed otherwise.
Federal Reserve Gives Banks More Time to Meet Volcker Rule Requirements
The U.S. Federal Reserve has extended the deadline for banks to rid themselves of ownership in certain legacy investments and cut ties with funds that are barred under the Volcker Rule. The rule, part of the Dodd-Frank Act, aims to stop banks with government-backed deposits from betting on Wall Street for their benefit. It doesn’t allow insured banks and their subsidiaries to own or be affiliated in any way with a private equity fund or hedge fund or take part in proprietary trading. Lenders are not allowed to trade using their own capital and are restricted from investing in funds.
The Fed had granted extensions in the past when banks expressed concern that they needed more time to comply with the Volcker Rule or risk sustaining huge losses. This latest one, with a July 21, 2017 deadline, is expected to be the last.
Former Panther Energy Trader Gets Prison Term for Spoofing
Michael Coscia, a former trader and head of Panther Energy Trading, has been sentenced to three years behind bars for spoofing. Coscia is the first person convicted of this activity since it became illegal under the Dodd-Frank Act. Spoofing usually involves the systematic making of orders without the intention of executing them. This is done to deceive the market into thinking there is interest in the trade.
A jury convicted Coscia of six fraud counts and six spoofing counts. Prosecutors said he made over $1M over 2 ½ months from his scam. Meantime, high frequency trading houses that were placing and making orders at the same time lost money.
Coscia had testified that he didn’t know about the Dodd-Frank Act provision regarding spoofing. His lawyers tried to convince the court that the law was not constitutional.
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2 former Dana executives settle securities fraud case for $64 million, The Blade, July 15, 2016
Fed Extends Deadline for Banks to Shed Certain Investments Under Volcker Rule, The Wall Street Journal, July 7, 2016
The Volcker Rule, Federal Reserve
Dodd-Frank Act, CFTC
Trader Michael Coscia 1st in nation to be sentenced under ‘anti-spoofing’ law, Chicago Tribune, July 13, 2016