Legal

Internal Fixation Accused of Manipulation, Misleading Reporting

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Medical implant maker Internal Fixation Systems (IFIX) allegedly delayed numerous regulatory filings as part of a scheme to manipulate the company’s stock price, according to a lawsuit filed by investors. By delaying disclosure of financings and other events, the suit claims, executives of the South Miami-based company “secured the ability to sell-off over 1 million shares of IFS stock to the detriment of IFS shareholders who were not provided with the true picture of IFS until after the stock price had plummeted from $2.30 per share in December 2011 to less than 2 cents per share in June 2012.”

Near the end of that period, the company arranged a $7.5 million equity line with Hyde Park Advisors according to a regulatory filing. (The company was founded in 2006 and became public in May 2011 through the filing of an S-1 registration statement.)

The suit, which was filed on Aug. 29 in Miami’s U.S. District Court, seeks financial compensation of unspecified amount. The investors are a group of about twenty individuals and investment entities including Bromson Investments Ltd., AACJ Properties LP, J Bones Holding LLC and KAKT Inc.

Internal Fixation has not yet replied to the suit in court.

Legal

SEC Suspends Shell Accountant Hatfield

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Scott Hatfield and his S. W. Hatfield CPA firm (SWH) practiced without a license for almost a year and a half, according to a Securities and Exchange Commission cease-and-desist proceeding. Hatfield let his registration with the Public Company Accounting Oversight Board (PCAOB) lapse from January 2010 into May 2011, during which time he oversaw filings for a number of PIPE issuers, reverse merger companies and shells. “During this period,” the SEC maintains, Hatfield “issued 38 audit reports that 21 issuers included in periodic reports and registration statements filed with the Commission.”

While the commission did not suggest that there were improprieties in the numbers Hatfield signed off on, the news comes as a costly embarrassment to the issuers. Operating as a reporting company is expensive, and errors and other problems in financial filings are to be avoided at all costs. “Scott Hatfield and SWH billed issuers $199,722 in connection with audits conducted or completed while SWH’s license was expired,” commission documents say.

Legal

SEC Sues China Sky One for Fake Revenue

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Weight loss supplement maker China Sky One Technologies (CSKI) pumped up its revenues illegally, according to a Securities and Exchange Commission lawsuit alleging that the company concocted almost $20 million in fictional revenues it improperly reported in 2007 and 2008. In March, the complaint says, Nasdaq halted trading in the China-based company’s shares following the resignation of 26 mid-level managers, including nine from the accounting department and two handling internal controls. China Sky allegedly recorded revenues of $12.2 million and $7.5 million in 2007 and 2008 respectively for sales of weight loss patches to Takasima Industries, a Malaysian company that in reality purchased only about $167,000 worth of the products. The commission sued the company and its CEO Yan-qing Liu, who allegedly signed misleading regulatory filings. The suit seeks to have Liu repay incentive-based compensation and to have him barred from serving as officer or director of a public company.

Legal
Larry Goldfarb

Baystar’s Goldfarb Still Fighting Criminal Prosecution

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BayStar Capital founder Larry Goldfarb is continuing efforts to avoid criminal prosecution, while the Securities and Exchange Commission and criminal prosecutors insist that he violated a deferred prosecution agreement (DPA) by illegally transferring nearly $300,000 for “personal luxury items” in 2011 and 2012. The civil and criminal cases were both filed in the U.S. District Court in San Francisco. In settling with the SEC last year, Goldfarb did not dispute charges that he and BayStar diverted $12 million of investor capital into assets the investors had not intended to purchase, and that he had also improperly used investor funds for personal expenditures. Goldfarb formed BayStar Capital I in 1999 and BayStar Capital II in 2003, according to the company’s website, which says the two entities invested some $1.5 billion in private and public companies. LRG Capital Group was formed as general partner to BayStar Capital III in 2005.