SEC Charges UAE-Based Company, Former Execs with Financial Fraud

SEC Charges UAE-Based Brooge Energy and Former Executives with Fraud

The Securities and Exchange Commission today announced fraud charges against Brooge Energy Limited, a publicly-traded energy company located in the United Arab Emirates, the company’s former CEO, Nicolaas Lammert Paardenkooper, and its former Chief Strategy Officer and Interim CEO, Lina Saheb.

According to the SEC order, before and after going public through a special purpose acquisition transaction, Brooge, whose securities trade on NASDAQ, misstated between 30 and 80 percent of its revenues from 2018 through early 2021 in SEC filings related to the offer and sale of up to $500 million of securities. The order finds that Brooge created false invoices to support inflating revenues from its oil facilities in Fujairah, UAE by over $70 million over three years, and that Paardenkooper and Saheb knew, or were reckless in not knowing, of the fraud. The SEC order also finds that Brooge provided these false invoices to its auditors to conceal the inflated revenue. According to the order, Brooge agreed during the SEC’s investigation not to issue the $500 million in securities. In April 2023, the company announced a restatement of its audited financial statements from 2018 through 2020.

SEC Admits Errors in Enforcement Proceedings, Staff Training Made Mandatory

In a notable admission of procedural missteps, the U.S. Securities and Exchange Commission (SEC) has expressed “serious and deep regret” over errors made during a recent enforcement proceeding. This rare acknowledgment from the regulatory body came via a new filing, highlighting a commitment to rectify these inaccuracies and prevent future occurrences.

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In response, the SEC has launched a comprehensive set of corrective measures. Notably, the Enforcement Director has designated senior attorneys from the Denver Regional Office for oversight. To bolster expertise and oversight, a veteran trial attorney from this office will helm the litigation team.

A pivotal step forward is the upcoming mandatory training for all Division of Enforcement personnel, slated for January 2024. This session will underscore the significance of accuracy, transparency, and the swift rectification of identified errors.

Raymond Dirks, Whose Tipster Case Redefined Insider Trading, Dies at 89

Raymond L. Dirks, a maverick Wall Street analyst who was accused of insider trading by securities regulators but then vindicated by the U.S. Supreme Court as a whistle-blower in a major fraud, died on Dec. 9 in Manhattan. He was 89.

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Mr. Dirks, whom Bloomberg News once branded as “arguably Wall Street’s most famous securities analyst,” figured in exposing one of the largest corporate frauds in American history.

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The threat of suspension by the commission and other potential penalties, coupled with the $1.5 million (in today’s dollars) that Mr. Dirks said he spent on legal fees from 1973 through 1983 as he challenged the S.E.C. in the federal court system, severely affected his earnings, his brother said.

That 10-year odyssey ended in 1983, when the Supreme Court overturned the S.E.C. censure, rejecting the agency’s interpretation of insider trading. (The interpretation had also been challenged by the Justice Department in a strongly worded brief.)

Guest Post: The New U.K. Economic Crime and Corporate Transparency Act 2023

The Government’s promised crackdown on economic crime looks set to become a legislative reality through the introduction of the U.K. Economic Crime and Corporate Transparency Act (the “Act”). Two of its most heralded provisions include the new corporate offence of “failure to prevent fraud” and a reformed “identification principle”. Together, they represent the cornerstone of the Government’s policy to increase the criminal accountability of corporate entities. The new U.K. Act received Royal Assent on 26 October 2023 and the reforms to the identification principle will take effect this Boxing Day, 26 December 2023.

Following our previous article, we discuss below these two key changes brought about by the Act, what the reforms to the identification principle mean in practice, and the Act’s wider implications for entities and their insurer.

Former Federal Prosecutor to Return to SDNY as Chief Counsel

A former federal prosecutor who investigated an Iranian-linked assassination plot against the Saudi ambassador to the US more than a decade ago will leave private practice to take up a top role at the US Attorney’s Office in Manhattan.

Edward Y. Kim will become chief counsel to US Attorney Damian Williams, according to two people familiar with the move. The coveted position became vacant after former Deputy US Attorney Margaret Garnett was recommended to serve as a US District judge, prompting a reshuffle in the office’s ranks.

Musk Blasts Public Markets, Says Indexing Has ‘Gone Too Far’

Wood and Musk also discussed how passive investing has punished stocks that are not in major indexes and unequally rewarded companies that are in key benchmarks. Their comments come as academic critics continue to lament that the passive-investing boom is distorting stock prices and causing extreme market moves.

While Musk praised Vanguard Group Inc. founder Jack Bogle for bringing passive-investing into mainstream finance, he said the money-management trend has “gone too far.”

“The percentage of the market that is passive is simply, is too great at this point. At the end of the day, somebody actually has to make an active decision. The passive investors are riding on the decisions of the active investors,” Musk said. “You get essentially massive movements of the stock, based on the decisions of maybe four or five active major stock pickers.”