Securities and Exchange Comm’n v. Whittemore, et al.

As part of a civil enforcement action brought by the SEC, the district court entered a disgorgement order against Peter S. Cahill, imposing joint and several liability for the full proceeds of his sales of stock in a small, thinly traded corporation not listed on a major stock exchange. Cahill challenged the order. The court held that because Cahill presented no evidence in rebuttal, the district court did not clearly err in finding that the SEC had met its burden to show that his ill-gotten gains were the full proceeds of his stock sales at inflated prices resulting from a fraudulent "pump and dump" scheme. Neither did the district court abuse its discretion in crafting the disgorgement remedy. Inclusion of the transferred funds was consistent with the court's precedent. Absent any rationale for a different approach, the court joined other circuits in holding that the imposition of joint and several liability for the amount ordered to be disgorged did not require proof of a close relationship among the defendants beyond their collaboration in the fraudulent scheme in violation of the securities laws. Accordingly, because Cahill's evidentiary objections were also unavailing, the court affirmed the order of disgorgement. View "Securities and Exchange Comm'n v. Whittemore, et al." on Justia Law