Securitized financing and self dealing penalties

Funny this one occured in a family owned health product business, and it really is a warning to those tho securitize their financiang and then get creative with the money. Since it is a public entity the money is not the owners to do with as they like, they have fiduciary responsibility to other regulatory rules


Ex-CFO Settles Self-Dealing Fraud Charges
Former president and finance chief of Natural Health Trends, along with a unit executive, come to terms in SEC civil case.
Stephen Taub - CFO.com | US
September 4, 2008


The former president and CFO of a Dallas health-product marketing company, along with another one-time executive, settled Securities and Exchange Commission civil charges that they engaged in a fraud arising from undisclosed related-party transactions.

Mark D. Woodburn, former president, director and CFO of Natural Health Trends Corp., agreed to pay a $60,000 penalty, while Terry LaCore, the former president of NHT's chief subsidiary and an NHT director, agreed to pay $50,000. Both individuals agreed to settle the SEC's charges without admitting to or denying allegations in the complaint.


The SEC alleged that from 2001 through August 2005, NHT's top distributor paid Woodburn and LaCore, directly and indirectly, about $2.5 million in undisclosed payments. Also, in February 2004 Woodburn caused NHT to loan $256,200 to a Woodburn family-controlled company, and that fall took steps to conceal the related-party nature of the loan after NHT's new accounting management discovered it.

As a result of Woodburn and LaCore's activities, NHT failed to disclose, or inadequately disclosed, the related party transactions in periodic filings, registration statements, and proxy statements, according to the complaint.

After NHT discovered the extent of the executives' conduct in the fall of 2005, it demoted, and later terminated, Woodburn and Lacore. NHT's stock price dropped about 25 percent after the company's October 5, 2005 announcement that it was demoting the officers, who had failed to cooperate with an Audit Committee investigation initiated in the fall of 2004, the SEC noted.

Under the settlement, each of the two individuals also agreed to a five-year officer and director bar.