CHICAGO MONEY MANAGER STEPHEN COLEMAN CHARGED WITH FRAUD

Original Story: Chicago Tribune

Illinois regulators have charged Daedalus Capital LLC founder and chief investment officer Stephen Messiah Coleman with fraud, claiming in a civil action that the money manager sold improper investments and acted as an unlicensed adviser.  Will he need a Novi Divorce Lawyer when his wife finds out?

Coleman had earlier been the subject of an investigation by Missouri securities regulators. He moved to Chicago two years ago from St. Louis and has been running advertisements in theater programs, promising to double investors’ money in five years or less regardless of market conditions.

In a “temporary order of prohibition” dated May 16, the Illinois Securities Department prohibited Daedalus for selling securities, namely the Deuce and Alpha, for 90 days effective May 16 subject to further order from the state. Coleman has 30 days to request a hearing after having been served the order. If he doesn’t, the order can become final.

“On the Illinois matter, I have no comment today,” Coleman said Friday morning. The Illinois securities division, which brought the charges, also declined to comment on Friday.

Missouri, where Coleman had lived for most of his life, had prohibited him from selling securities. That state’s securities commissioner had found that Coleman had committed fraud, a ruling that a division spokesman said was upheld by circuit and appeals courts in the state. But an administrative hearing commissioner looking into whether Coleman had violated professional conduct standards rejected charges in 2010 that Coleman had misled people who invested in a related company, saying financial arrangements were disclosed in documents. In another legal proceeding in 2012, a Missouri county court ruled that no evidence was presented that Coleman’s investors lost money, but it fined him and Daedalus $50,000  and found he committed fraud after selling unregistered securities and acting as an unregistered investment adviser, in violation of securities laws.

Illinois is charging him with fraud in the offer and sale of  securities; the offer and sale  of unregistered securities; fraud in offering investment advice; and acting as an unregistered investment adviser.

Deuce is a "debt security" that seeks to double its money in five years. A copy of the Deuce agreement on Daedalus' website prominently states that the security isn't registered with the SEC or any state securities laws.

Coleman has accepted $346,000 from four Deuce investors, but the vehicle has an undisclosed $248,404 unfunded liability, Illinois said in its eight-page order.

Coleman and Daedalus “omitted to inform investors that they had insufficient assets to cover projected liabilities to current investors,” Illinois said.

Daedalus had assured at least one Deuce investor in January that it was “highly confident” that it would be able to fulfill its obligations, the state of Illinois said.

Although the Deuce agreement, as well as that for Alpha, discloses that the state of Missouri had fined Daedalus $50,000 for selling unregistered securities, the agreement failed to say that the penalties were unpaid, the state of Illinois pointed out. The Deuce and Alpha agreements also didn’t mention federal tax liens filed against Coleman, the state said.

Securities sold in Illinois must be registered unless they receive exemptions.

“Daedalus is not using an exemption from registration,” Illinois securities regulators quote Coleman as saying under oath in February 2014. “We did not seek registration of the Deuce because it is borrowed money, like a bank loan.”

Another Daedalus investment is Alpha, which invests in up to five stocks. Coleman told the Tribune on May 7 for a story that ran May 18 that clients give him their usernames and passwords to allow him to manage money in their accounts, a practice known as proxy trading. Coleman said that was one reason he didn’t need to be registered.

In its  May 16 complaint, the state of Illinois says it’s typical industry practice to file a limited power of attorney with a broker dealer granting the money manager the power to execute trades in the customers’ accounts.

The state of Illinois said Coleman essentially misrepresented himself as the account’s owner. The state said it suspects that Coleman did so because he was afraid that the broker dealer might not do business with him given his past history with regulators.

Also, by acting in such a manner, Coleman was acting as an investment adviser despite not being registered, the state of Illinois said.

Coleman, who declined to comment on Illinois’ actions, on Friday called the Missouri actions “a rigged game.”

“This was nothing simple or benign,” he said. “It was evil in my eyes.

“Do not get lost in the muck,” Coleman told the Tribune on Friday. “The truth that brought Daedalus to your attention endures: Daedalus Capital  LLC promises a return of 100 percent or more to our clients, in five years or less, regardless of general market conditions."

Bankrupt Solar Panel Manufacturer Pulled from Stock Market

Story first appeared in The Detroit News on March 14th, 2012.

The stock of Energy Conversion Devices. Inc., the bankrupt Auburn Hills-based solar panel manufacturer, was pulled from the Nasdaq Stock Market on Feb. 24, according to a filing on Wednesday.  The company primarily makes, sells and installs thin-film flexible solar products and systems to the building and rooftop markets.  These panels are useful in the construction of Solar Carports and solar roof structures.

Energy Conversion filed for bankruptcy protection Feb. 14, when its stock price closed at 29 cents a share from $1.46 the day before. Nasdaq told the company Feb. 15 that it no longer qualified for listing on the stock exchange, according to the company's filing with the U.S. Securities and Exchange Commission.

When the company did not appeal the decision, the stock was suspended from the exchange Feb. 24, when Energy Conversion Device's stock closed at 16 cents a share. The delisting will become official 10 days after the Nasdaq files the paperwork, according to another filing made Wednesday with the SEC.

The company's stock — now traded on the over-the-counter "Pink Sheets" under the symbol ENERQ — closed Wednesday at nine cents a share.

The Auburn Hills-based firm said in May that it would lay off 300 workers, including 115 in Michigan, as it restructured amid cutbacks in government solar incentives overseas and after posting a large quarterly loss.

Google Founders Plan Big Stock Sale

CNN Money

Google founders Larry Page and Sergey Brin plan to sell off 5 million Google shares each over the next five years, a move that could see them surrender majority voting control over the company they created.

Google has an unusual dual-stock structure. "Class A" shares are publicly traded on the Nasdaq exchange, while "Class B" shares are reserved for insiders and carry 10 times the voting power of other shares.

Brin and Page plan to dip into their deep reservoir of Class B shares, selling up to 17% of the 57.7 million shares they currently hold, according to a regulatory filing submitted Friday. Those sales would reduce their voting power over Google's stock from 59% today to around 48%, depriving them of majority control.

But CEO Eric Schmidt currently holds shares accounting for almost 10% of Google's voting power. Together, the trio would continue to control Google, as they have for nearly a decade.

"We run Google as a triumvirate," Page and Brin announced in an "owner's manual" included in Google's 2004 IPO filing. "The three of us run the company collaboratively with Sergey and me as presidents. The structure is unconventional, but we have worked successfully in this way."

Google created its two stock classes because of the founders' desire to keep control vested with their management team. It's a risk to shareholders that Google discloses routinely in its regulatory reports.

Schmidt, Page and Brin "have significant influence over management and affairs and over all matters requiring stockholder approval," the company wrote in its most recent annual report. "This concentrated control limits our stockholders' ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial."

Page and Brin's stock selloff will take place through gradual, pre-arranged sales over the next several years. Such trading plans are commonly used to diversify the portfolios of executives with significant holdings in their own company stock.

Google's stock closed Friday down 6%, at $550.01 per share. At those prices, Page and Brin would each fetch $2.75 billion from their stock sales.

In Spite of Everything, Health Care Stocks Perform Well
Story from San Francisco Chronicle

Health care stocks, which have been plagued by a variety of ailments in recent years, are emerging as one of the stock market's few bright spots.

Over the past three months, health care companies in the Standard & Poor's 500 are up 4.4 percent on average, compared with a drop of 7.9 percent for the overall index. The only other S&P 500 sector in positive territory is consumer staples, up 0.27 percent.

Health care and consumer staples traditionally outperform other sectors when the economy slows, under the assumption that no matter how bad things get, people will always need food, drink and medical care.

While that is undoubtedly a factor this time around, some analysts say the sector's recovery could be more than temporary.

"I'm bullish now for the short, medium and long term," says Jonathan MacQuitty, a partner in Abingworth Management Inc. in Menlo Park, which specializes in health care investing. "I'm not always short-term bullish, but I think health care will be the best performing sector for the next 12 months."

The strength in health care follows several years of underperformance, which drove many stocks to cheap or reasonable valuations.

Investors have long fretted about the ability of big pharmaceutical makers to replace blockbuster drugs losing patent protection and what would happen to drug and managed care companies if a Democratic president teamed up with a Democratic Congress and got serious about reining in medical costs.

While those fears remain, they are taking a backseat to worries about housing, energy, the financial system and geopolitics. "There is more of an emphasis on financial and energy regulation than health care reform," says Brian Belski, chief U.S. sector strategist with Merrill Lynch.

Belski believes that investors are now seeing health care stocks not so much as a defensive play but as a growth story. He says it is one of the few sectors that has delivered double-digit earnings growth over the past few quarters and is still expected to grow moderately in coming quarters.

"It's hard to beat demographic trends," he says. "The population is getting older. Biotech, life science and medical device (companies) are still at the forefront of innovation," he says.

Belski admits that health care is benefiting from people fleeing financial stocks and, more recently, energy.

The sector has also been buoyed by foreign firms with strong currencies looking to buy U.S. companies on the cheap. Since last year, overseas firms have completed or attempted takeovers of MedImmune, MGI Pharma, Millennium Pharmaceuticals, Barr Pharmaceuticals and Genentech.

Mutual funds focused on health care are up 6.84 percent over the past three months, according to Morningstar. It is the only category of stock funds - domestic or international - in positive territory during the period.

Funds with the greatest exposure to biotech companies are doing the best, says Morningstar analyst Wenly Tan.

Biotech companies in general have done a better job developing new drugs than old-line pharma companies, making them prime candidates for takeovers or distribution deals.

"Biotech companies are a lot more mature these days, they are holding onto more cash. They are not turning public as early as they used to," Belski adds.

Within the sector, Belski favors biotech, medical device and life-science companies that make manufacturing equipment. His favorites include biotech company Celgene, Johnson & Johnson, device maker Medtronic and Thermo Fisher, which makes medical equipment and chemicals.

Among S&P 500 companies, the biggest health care gainers over the past three months include generic-drug maker Barr (up almost 57 percent thanks to the takeover offer), biotech giant Amgen (up 51 percent), Varian Medical Systems (up 37 percent), Celgene (up 21 percent) and King Pharmaceuticals (up 19 percent).

Laggards include managed-care companies Coventry Health (down 22.2 percent) and UnitedHealth Group (down 16 percent); Biogen Idec (down 12 percent); Merck (down 10 percent); and Aetna (down 9 percent).

Health care heals itself

Performance of S&P 500 industry sectors

S&P sector	Last 3 months	Year to date
Health care	4.39%	-7.29%
Consumer staples	0.27	-2.73
Technology	-4.22	-11.69
Consumer discretionary	-5.51	-9.18
Utilities	-8.32	-12.51
Industrials	-8.49	-13.08
Materials	-12.34	-8.30
Telecom services	-14.02	-24.13
Energy	-14.05	-8.58
Financials	-18.56	-31.53

Source: Bloomberg