Financial Company Charged With Improper Accounting and Impeding Whistleblowers

The Securities and Exchange Commission today announced that Seattle-based financial services company HomeStreet Inc. has agreed to pay a $500,000 penalty to settle charges that it conducted improper hedge accounting and later took steps to impede potential whistleblowers.

HomeStreet’s treasurer Darrell van Amen agreed to pay a $20,000 penalty to settle charges that he caused the accounting violations.

According to the SEC’s order, HomeStreet originated approximately 20 fixed rate commercial loans and entered into interest rate swaps to hedge the exposure.  The company elected to designate the loans and the swaps in fair value hedging relationships, which can reduce income statement volatility that might exist absent hedge accounting treatment.  Companies are required to periodically assess the hedging relationship and must discontinue the use of hedge accounting if the effectiveness ratio falls outside a certain range.

The SEC’s order finds that in certain instances from 2011 to 2014, van Amen saw to it that unsupported adjustments were made in HomeStreet’s hedge effectiveness testing to ensure the company could continue using the favorable accounting treatment.  The test results with altered inputs to influence the effectiveness ratio were provided to HomeStreet’s accounting department, which resulted in inaccurate accounting entries.

“HomeStreet disregarded its internal accounting policies and procedures to come up with different testing results to enable its use of hedge accounting,” said Erin Schneider, Associate Director of the SEC’s San Francisco Regional Office.  “Companies must follow the rules rather than create their own.”

The SEC’s order further finds that after HomeStreet employees reported concerns about accounting errors to management, the company concluded the adjustments to its hedge effectiveness tests were incorrect.  When the SEC contacted the company in April 2015 seeking documents related to hedge accounting, HomeStreet presumed it was in response to a whistleblower complaint and began taking actions to determine the identity of the “whistleblower.”  It was suggested to one individual considered to be a whistleblower that the terms of an indemnification agreement could allow HomeStreet to deny payment for legal costs during the SEC’s investigation.  HomeStreet also required former employees to sign severance agreements waiving potential whistleblower awards or risk losing their severance payments and other post-employment benefits.

“Companies that focus on finding a whistleblower rather than determining whether illegal conduct occurred are severely missing the point,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, added, “This is the second case this week against a company that took steps to impede former employees from sharing information with the SEC.  Companies simply cannot disrupt the lines of communications between the SEC and potential whistleblowers.”

HomeStreet and van Amen consented to the SEC’s order without admitting or denying the findings that they violated internal accounting controls and books and records provisions of the federal securities laws.  HomeStreet also violated Rule 21F-17, which prohibits taking actions to impede communication with the SEC.

The SEC’s investigation was conducted by Rebecca Lubens and John Roscigno, and the case was supervised by Tracy Davis in the San Francisco office.

SEC Chief of Staff Andrew J. Donohue to Leave Agency

The Securities and Exchange Commission today announced that SEC Chief of Staff Andrew J. ”Buddy” Donohue will be leaving the agency at the end of January.

SEC Chair Mary Jo White named Mr. Donohue as Chief of Staff in May 2015. As Chief of Staff, Mr. Donohue was a senior adviser to the Chair on all policy, management, and regulatory issues. Mr. Donohue had previously served as the Director of the SEC’s Division of Investment Management from May 2006 to November 2010.

“Buddy is a seasoned professional whose deep knowledge of the securities laws and broad market expertise have been invaluable to me and the Commission,” said SEC Chair Mary Jo White.  “I am very grateful to Buddy for agreeing to return to the Commission so that all of us could benefit from his leadership, wise counsel, and wealth of knowledge and experience.”

Mr. Donohue added, “It has been a privilege to serve Chair White and the agency, to work with an incredibly talented and dedicated staff and to be a part of the agency’s important mission. I consider myself very fortunate to have had the opportunity to work at the agency twice during my career. I will miss greatly the agency and its staff.”

Prior to rejoining the agency, Mr. Donohue had been managing director, associate general counsel and investment company general counsel at Goldman, Sachs & Co. from November 2012 to May 2015. He had also been a partner in the Investment Management Practice Group at Morgan Lewis & Bockius LLP from March 2011 to October 2012.

From May 2003 to May 2006, Mr. Donohue served as global general counsel at Merrill Lynch Investment Managers. In that role, he oversaw the firm’s legal, regulatory and compliance matters for the investment advisory business.

For over a decade from June 1991 to November 2001, Mr. Donohue served as executive vice president general counsel, director, and as a member of the executive committee of OppenheimerFunds Inc.

Prior to that, and since 1975, Mr. Donohue served in senior roles at other firms.

Mr. Donohue earned his J.D. From New York University School of Law in 1975 and his B.A. cum laude, with high honors in Economics from Hofstra University in 1972. 

General Counsel Anne K. Small to Leave SEC

The Securities and Exchange Commission today announced that General Counsel Anne K. Small will leave the agency later this month. 

Ms. Small has served as the SEC’s General Counsel since April 2013.  As the agency’s chief legal officer, Ms. Small has provided counsel on virtually all of the legal and policy issues before the Commission. This has included providing advice on a record number of enforcement actions, representing and counseling the Commission on high-profile appeals throughout the country on issues ranging from the scope of the anti-fraud provisions to insider trading, advising the Commission on more than 50 significant rulemaking initiatives including those implementing the Dodd-Frank Wall Street Reform and Consumer Protection and the Jumpstart Our Business Startups Acts, and defending against legal challenges to Commission regulations. Ms. Small also led the Commission’s efforts in revising the rules of practice that govern administrative enforcement proceedings.

SEC Chair Mary Jo White said, “Annie is brilliant and has an extraordinary legal mind and tremendous judgment.   She has always provided thoughtful and wise counsel on countless important and complex issues before the Commission.  She is a true champion of the Commission who uses her keen intellect and judgment to guide the Commission to the right result.  She has served me and the Commission superbly well, and I am very grateful that I have always been able to count on her, day or night, for her strategic thinking and knowledgeable advice and counsel.” 

Ms. Small added, “It has been an incredible honor to serve alongside the talented and dedicated SEC staff.  I owe Chair White my profound gratitude for giving me this opportunity and for all of her support. I particularly want to express my appreciation to my phenomenal colleagues in the Office of the General Counsel, whose expertise and professionalism have benefitted me and the Commission in all areas of our work.”

Prior to joining the SEC in April 2013, Ms. Small served as Special Assistant to the President and Associate Counsel to the President.  Prior to that, Ms. Small served as the SEC’s Deputy General Counsel for Litigation and Adjudication.  Ms. Small was previously a litigation partner in the law firm of WilmerHale LLP.  Ms. Small served as a law clerk for Judge Guido Calabresi on the U.S. Court of Appeals for the Second Circuit and for Justice Stephen G. Breyer on the U.S. Supreme Court.  She is a graduate of Yale University and Harvard Law School, where she served as President of the Harvard Law Review.‎

Upon Ms. Small’s departure, Sanket Bulsara, Deputy General Counsel for Appellate Litigation, Adjudication, and Enforcement, will become the Acting General Counsel.

Company Settles Charges Over Undisclosed Perks and Improper Use of Non-GAAP Measures

The Securities and Exchange Commission today announced that New York-based marketing company MDC Partners has agreed to pay a $1.5 million penalty to settle charges that it failed to disclose certain perks enjoyed by its then-CEO and separately violated non-GAAP financial measure disclosure rules.

The SEC’s order finds that MDC Partners disclosed an annual $500,000 perquisite allowance for its senior-most executive, but failed to disclose additional personal benefits the company paid on the CEO’s behalf such as private aircraft usage, club memberships, cosmetic surgery, yacht and sports car expenses, jewelry, charitable donations, pet care, and personal travel expenses.  The CEO later resigned and returned $11.285 million worth of perks, personal expense reimbursements, and other items of value improperly received from 2009 to 2014.

“Compensation paid to high-ranking executives must be fully disclosed,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement.  “MDC Partners failed to give its shareholders all of the relevant information about how its top executive was being compensated by the company.”

The SEC’s order also finds improper use of non-GAAP measures, which are allowed under SEC rules to convey information to investors that a company believes is relevant and useful in understanding performance.  But non-GAAP measures must be accurate and must be reconciled to the appropriate GAAP measures so investors and analysts can compare them.  According to the SEC’s order, MDC Partners presented a metric called “organic revenue growth” that represented the company’s growth in revenue excluding the effects of two reconciling items: acquisitions and foreign exchange impacts.  But from the second quarter of 2012 to year end 2013, MDC Partners incorporated a third reconciling item into its calculation without informing investors of the change, which resulted in higher “organic revenue growth” results.  MDC Partners also failed to give GAAP metrics equal or greater prominence to non-GAAP metrics in its earnings releases.

“The reason these rules are in place is so investors can compare non-GAAP financial measures to those consistently defined under GAAP requirements,” said G. Jeffrey Boujoukos, Director of the SEC’s Philadelphia Regional Office.  “The lack of equal or greater prominence for GAAP measures is a practice that we will continue to focus upon.”

MDC Partners consented to the SEC’s cease-and-desist order without admitting or denying the findings.

The SEC’s continuing investigation is being conducted by Brendan P. McGlynn, Oreste P. McClung, Lisa M. Candera, and Brian R. Higgins of the Philadelphia office, and supervised by Mr. Boujoukos.

SEC Deputy Chief of Staff Nathaniel Stankard to Leave Agency

The Securities and Exchange Commission today announced that Nathaniel Stankard, deputy chief of staff for policy, will be leaving the agency. 

Since being named deputy chief of staff in May 2013, Mr. Stankard has served as a senior advisor to Chair Mary Jo White on a broad range of complex legal and policy matters, including all aspects of rulemakings before the Commission, significant market events, and the agency’s implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.  He has also been responsible for coordinating teams from across the agency to implement the rulemaking agenda of the Commission and has served as the Chair’s principal policy liaison to the Financial Stability Oversight Council and other federal financial regulators.

SEC Chair Mary Jo White said, “Nathaniel is brilliant, always provides thoughtful and sound legal advice, and has extraordinary judgment.  He is truly a key reason why so many important rules got done.  He is a person of the highest character and unparalleled capability, always doing what is right and just on behalf of America’s investors and our markets. I could not be more fortunate, proud, or grateful to have had Nathaniel as such an integral part of my team.”

“The strength of the Commission is rooted in its staff, and I have been privileged to work closely with extraordinary teams from across the agency to enhance the Commission’s oversight of the securities markets,” said Mr. Stankard.  “I am deeply grateful for the opportunity to serve under Chair White’s leadership to protect investors.”

During Mr. Stankard’s time working with Chair White, the Commission advanced more than 50 major rulemakings, including significant measures addressing equity market structure, asset management, corporate disclosures, over-the-counter derivatives, capital raising by smaller issuers, credit rating agency operations, asset-backed securities, clearance and settlement, and municipal advisors.

Mr. Stankard joined the Commission in June 2010 as counsel to the director of the Division of Trading and Markets.  Previously, he was an executive director at Morgan Stanley and an associate at the law firm of Cleary Gottlieb Steen & Hamilton LLP.

Mr. Stankard earned his law degree cum laude from Harvard Law School and his undergraduate degree in economics magna cum laude from Oberlin College.

SEC Deputy Chief of Staff Nathaniel Stankard to Leave Agency

The Securities and Exchange Commission today announced that Nathaniel Stankard, deputy chief of staff for policy, will be leaving the agency. 

Since being named deputy chief of staff in May 2013, Mr. Stankard has served as a senior advisor to Chair Mary Jo White on a broad range of complex legal and policy matters, including all aspects of rulemakings before the Commission, significant market events, and the agency’s implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.  He has also been responsible for coordinating teams from across the agency to implement the rulemaking agenda of the Commission and has served as the Chair’s principal policy liaison to the Financial Stability Oversight Council and other federal financial regulators.

SEC Chair Mary Jo White said, “Nathaniel is brilliant, always provides thoughtful and sound legal advice, and has extraordinary judgment.  He is truly a key reason why so many important rules got done.  He is a person of the highest character and unparalleled capability, always doing what is right and just on behalf of America’s investors and our markets. I could not be more fortunate, proud, or grateful to have had Nathaniel as such an integral part of my team.”

“The strength of the Commission is rooted in its staff, and I have been privileged to work closely with extraordinary teams from across the agency to enhance the Commission’s oversight of the securities markets,” said Mr. Stankard.  “I am deeply grateful for the opportunity to serve under Chair White’s leadership to protect investors.”

During Mr. Stankard’s time working with Chair White, the Commission advanced more than 50 major rulemakings, including significant measures addressing equity market structure, asset management, corporate disclosures, over-the-counter derivatives, capital raising by smaller issuers, credit rating agency operations, asset-backed securities, clearance and settlement, and municipal advisors.

Mr. Stankard joined the Commission in June 2010 as counsel to the director of the Division of Trading and Markets.  Previously, he was an executive director at Morgan Stanley and an associate at the law firm of Cleary Gottlieb Steen & Hamilton LLP.

Mr. Stankard earned his law degree cum laude from Harvard Law School and his undergraduate degree in economics magna cum laude from Oberlin College.

SEC Deputy Chief of Staff Nathaniel Stankard to Leave Agency

The Securities and Exchange Commission today announced that Nathaniel Stankard, deputy chief of staff for policy, will be leaving the agency. 

Since being named deputy chief of staff in May 2013, Mr. Stankard has served as a senior advisor to Chair Mary Jo White on a broad range of complex legal and policy matters, including all aspects of rulemakings before the Commission, significant market events, and the agency’s implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.  He has also been responsible for coordinating teams from across the agency to implement the rulemaking agenda of the Commission and has served as the Chair’s principal policy liaison to the Financial Stability Oversight Council and other federal financial regulators.

SEC Chair Mary Jo White said, “Nathaniel is brilliant, always provides thoughtful and sound legal advice, and has extraordinary judgment.  He is truly a key reason why so many important rules got done.  He is a person of the highest character and unparalleled capability, always doing what is right and just on behalf of America’s investors and our markets. I could not be more fortunate, proud, or grateful to have had Nathaniel as such an integral part of my team.”

“The strength of the Commission is rooted in its staff, and I have been privileged to work closely with extraordinary teams from across the agency to enhance the Commission’s oversight of the securities markets,” said Mr. Stankard.  “I am deeply grateful for the opportunity to serve under Chair White’s leadership to protect investors.”

During Mr. Stankard’s time working with Chair White, the Commission advanced more than 50 major rulemakings, including significant measures addressing equity market structure, asset management, corporate disclosures, over-the-counter derivatives, capital raising by smaller issuers, credit rating agency operations, asset-backed securities, clearance and settlement, and municipal advisors.

Mr. Stankard joined the Commission in June 2010 as counsel to the director of the Division of Trading and Markets.  Previously, he was an executive director at Morgan Stanley and an associate at the law firm of Cleary Gottlieb Steen & Hamilton LLP.

Mr. Stankard earned his law degree cum laude from Harvard Law School and his undergraduate degree in economics magna cum laude from Oberlin College.

General Motors Charged With Accounting Control Failures

The Securities and Exchange Commission today announced that General Motors has agreed to pay a $1 million penalty to settle charges that deficient internal accounting controls prevented the company from properly assessing the potential impact on its financial statements of a defective ignition switch found in some vehicles.

According to the SEC’s order, when loss contingencies such as a potential vehicle recall arise, accounting guidance requires companies like General Motors to assess the likelihood of whether the potential recall will occur, and provide an estimate of the associated loss or range of loss or otherwise provide a statement that such an estimate cannot be made.  The SEC’s order finds that the company’s internal investigation involving the defective ignition switch wasn’t brought to the attention of its accountants until November 2013 even though other General Motors personnel understood in the spring of 2012 that there was a safety issue at hand.  Therefore, during at least an 18-month period, accountants at General Motors did not properly evaluate the likelihood of a recall occurring or the potential losses resulting from a recall of cars with the defective ignition switch.   

“Internal accounting controls at General Motors failed to consider relevant accounting guidance when it came to considering disclosure of potential vehicle recalls,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Proper consideration of loss contingencies and assessment of the need for disclosure are vital to the preparation of financial statements that conform with Generally Accepted Accounting Principles.” 

Without admitting or denying the charges, General Motors consented to the SEC’s order finding that the company violated Section 13(b)(2)(B) of the Securities Exchange Act by not devising and maintaining a sufficient system of internal accounting controls.

The SEC’s investigation was conducted by Peter Pizzani, Lisa Knoop, Scott York, and Thomas P. Smith Jr.  The case was supervised by Sanjay Wadhwa.

Medical Device Company Charged With Accounting Failures and FCPA Violations

The Securities and Exchange Commission today announced that Texas-based medical device company Orthofix International has agreed to admit wrongdoing and pay more than $14 million to settle charges that it improperly booked revenue in certain instances and made improper payments to doctors at government-owned hospitals in Brazil in order to increase sales.

Four then-executives at Orthofix also agreed to pay penalties to settle cases related to the accounting failures, which according to the SEC’s order involved Orthofix improperly recording certain revenue as soon as a product was shipped despite contingencies requiring certain events to occur in order to receive payment in the transaction.  In other instances, Orthofix immediately recorded revenue when it had provided customers with significant extensions of time to make payments.  The accounting failures caused the company to materially misstate certain financial statements from at least 2011 to the first quarter of 2013.

“Orthofix’s accounting failures were widespread and significant, causing Orthofix to make false statements to the public about its financial condition,” said Antonia Chion, Associate Director in the SEC’s Enforcement Division.

The SEC’s order further finds that Orthofix violated the Foreign Corrupt Practices Act (FCPA) when its subsidiary in Brazil schemed to use high discounts and make improper payments through third-party commercial representatives and distributors to induce doctors under government employment to use Orthofix’s products.  Fake invoices were used for purported services.

Kara N. Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Orthofix did not have adequate internal controls across all its subsidiaries and failed to detect and prevent the improper payments in Brazil that were intended to boost sales.”

Orthofix agreed to pay an $8.25 million penalty to resolve the accounting violations and more than $6 million in disgorgement and penalties to settle the FCPA charges.  The company agreed to retain an independent compliance consultant for one year to review and test its FCPA compliance program.  The SEC’s order noted Orthofix’s cooperation and remedial acts.

Jeff Hammel, a former accounting executive in Orthofix’s largest business segment, agreed to pay a $20,000 penalty and former sales executives Kenneth Mack and Bryan McMillan agreed to pay penalties of $40,000 and $25,000 respectively.  Hammel also agreed to be suspended from appearing or 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 Hammel to apply for reinstatement after two years.  Orthofix’s former corporate CFO Brian McCollum agreed to pay a $35,000 penalty and reimburse the company $40,885 for bonuses he received during the period when the company committed accounting violations.  The four consented to the SEC’s orders without admitting or denying the findings.

Orthofix’s then-CEO Robert Vaters, who was not charged with wrongdoing, has reimbursed the company $72,886 for cash bonuses and certain stock awards he received during the period when the company committed accounting violations.  Therefore, it wasn’t necessary for the SEC to pursue a Sarbanes-Oxley Section 304(a) clawback action against him. 

The SEC’s investigation into the accounting violations was conducted by Noel Gittens and Richard Haynes with assistance from Gregory Bockin.  It was supervised by Ricky Sachar and Ms. Chion.  The SEC’s investigation into the FCPA violations was conducted by Sana Muttalib and supervised by Ansu N. Banerjee and Ms. Brockmeyer.  The SEC appreciates the assistance of the Comissao de Valores Mobiliarios in Brazil.

SEC Charges Businessman With Misusing EB-5 Investments

The Securities and Exchange Commission today announced fraud charges against an Oakland, Calif.-based businessman accused of misusing money he raised from investors through the EB-5 immigrant investor program intended to create or preserve jobs for U.S. workers.

The SEC alleges that Thomas M. Henderson and his company San Francisco Regional Center LLC falsely claimed to foreign investors that their $500,000 investments would help create at least 10 jobs within several distinct EB-5 related businesses he created, including a nursing facility, call centers, and a dairy operation.  This would qualify the investors for a potential path to permanent U.S. residency through the EB-5 program.

But according to the SEC’s complaint, Henderson jeopardized investors’ residency prospects and combined the $100 million he raised from investors into a general fund from which he allegedly misused at least $9.6 million to purchase his home and personal items and improperly fund several personal business projects such as Bay Area restaurants that were unrelated to the companies he purportedly established to create jobs consistent with EB-5 requirements.  According to the SEC’s complaint, Henderson also improperly used $7.5 million of investor money to pay overseas marketing agents, and he shuffled millions of dollars among the EB-5 businesses to obscure his fraudulent scheme.

“We allege that Henderson exploited a program meant to create employment for Americans and abused the trust of investors seeking residency in the U.S.,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Rather than using investor funds to create jobs and develop communities as promised, Henderson allegedly played a shell game with investor money to buy his home and support personal ventures.”

The SEC is seeking a court order appointing a receiver over San Francisco Regional Center and Henderson’s other businesses involved in the alleged fraud.  The SEC’s complaint, filed in U.S. District Court for the Northern District of California, seeks preliminary injunctions as well as disgorgement of ill-gotten gains plus interest, penalties, and other relief.

The SEC’s investigation was conducted by Thomas Eme and Ellen Chen of the San Francisco office and supervised by Steven Buchholz.  The litigation will be led by Andrew Hefty and Susan LaMarca.  The SEC appreciates the assistance of the U.S. Citizenship and Immigration Services, which administers the EB-5 program.   

Allergan Paying $15 Million Penalty for Disclosure Failures During Merger Talks

The Securities and Exchange Commission today announced that Allergan Inc. has agreed to admit securities law violations and pay a $15 million penalty for disclosure failures in the wake of a hostile takeover bid.

The SEC’s order finds that Allergan failed to disclose in a timely manner its negotiations with potentially friendlier merger partners in the months following a tender offer from Valeant Pharmaceuticals International and co-bidders in June 2014.  Allergan publicly stated in a disclosure filing that the Valeant bid was inadequate and it was not engaging in negotiations that could result in a merger.  It was required to amend the filing if a material change occurred.  According to the SEC’s order, Allergan never publicly disclosed material negotiations it entered with a different company that would have made it more difficult for Valeant to acquire a larger combined entity.  And after those negotiations failed, the investing public wasn’t informed that Allergan entered into merger talks with Actavis, the company that ultimately acquired Allergan, until the announcement that a merger agreement had been executed.

“Allergan failed to fully and timely disclose information about potential merger transactions it was negotiating behind the scenes in response to the Valeant bid,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “As outlined in our order, Allergan was slow to act even after SEC staff reminded the company about its disclosure obligations.”

Allergan, now a wholly owned subsidiary of Allergan plc, admitted the facts in the SEC’s cease-and-desist order finding that the company violated Section 14(d) of the Securities Exchange Act of 1934 and Rule 14d-9. 

The SEC’s investigation was conducted by John Lehmann, Mark Germann, and Charles Riely of the New York office, and the case was supervised by Sanjay Wadhwa.

10 Firms Violated Pay-to-Play Rule By Accepting Pension Fund Fees Following Campaign Contributions

The Securities and Exchange Commission today announced that 10 investment advisory firms have agreed to pay penalties ranging from $35,000 to $100,000 to settle charges that they violated the SEC’s investment adviser pay-to-play rule by receiving compensation from public pension funds within two years after campaign contributions made by the firms’ associates.

According to the SEC’s orders, investment advisers are subject to a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence.  The SEC’s orders find that these 10 firms violated the two-year timeout by accepting fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates with the potential to wield influence over those pension funds.

“The two-year timeout is intended to discourage pay-to-play practices in the investment of public money, including public pension funds,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit.  “Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates.” 

Without admitting or denying the findings, the 10 firms consented to the SEC’s orders finding they violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-5.  The firms are censured and must pay the following monetary penalties:

• Adams Capital Management – $45,000
• Aisling Capital – $70,456
• Alta Communications – $35,000
• Commonwealth Venture Management Corporation – $75,000
• Cypress Advisors – $35,000
• FFL Partners – $75,000
• Lime Rock Management – $75,000
• NGN Capital – $100,000
• Pershing Square Capital Management – $75,000
• The Banc Funds Company – $75,000

The SEC’s investigations were coordinated by Louis A. Randazzo, who conducted them along with Kevin B. Currid, Brian Fagel, Natalie G. Garner, William T. Salzmann, and Monique Winkler of the Public Finance Abuse Unit and Kelly Gibson and Benjamin D. Schireson of the Philadelphia Regional Office.