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SEC files charges against former attorney over MBC offering fraud

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The Securities and Exchange Commission has filed a complaint against Defendant Michael J McNerney, charging him with violations of the federal securities laws arising from his involvement in Mutual Benefits Corp’s (MBC) offering fraud which raised more than USD1 billion from approximately 29,000 investors.

From 1995 through at least May 2004, McNerney served as primary securities regulatory counsel for MBC. The complaint alleges that in this role, he helped conceal the fraud, met with investors, and supervised the filing of false reports with state regulators. The Commission’s complaint charges McNerney with aiding and abetting MBC’s violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Commission seeks permanent injunctive relief against McNerney, who has consented to the entry of Final Judgment providing for full injunctive relief.

In addition to the civil action against McNerney, the Commission simultaneously issued an Order pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice forthwith suspending McNerney from appearing or practicing before the Commission based on the entries of a felony conviction against him. On 26 August, 2011, the Honorable Adalberto Jordan, United States District Judge for the Southern District of Florida, sentenced McNerney to five years in prison, followed by three years of supervised release, and ordered him to pay restitution, along with his co-conspirators, in the amount of USD826,839,642.

On 3 May, 2004, the Commission first halted the on-going fraud at MBC when it filed a contested emergency civil enforcement action against MBC and its principals. In its complaint, the Commission alleged that the defendants raised over USD1 billion from thousands of investors through a fraudulent, unregistered offering of securities in the form of fractionalized interests in viatical and life settlements. The Commission obtained a restraining order to halt the alleged fraud at MBC, and thereafter the United States District Court for the Southern District of Florida appointed a receiver to identify and trace the assets of MBC.

The Commission’s actions regarding MBC have resulted in nine injunctions and other relief against nine defendants and eight relief defendants, and orders to pay disgorgement and civil penalties totalling USD30 million. In addition, the United States Attorney’s Office for the Southern District of Florida has charged 12 defendants in criminal actions for their roles in the fraud.

 

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