Justia Securities Law Opinion Summaries

With little formal education (a high school GED) Miller passed several securities industry examinations and “maintained a public persona of a very successful entrepreneur.” Miller sold investors over $41 million in phony “promissory notes,” which were securities under the Securities Act of 1933 and the Securities Exchange Act of 1934, 15 U.S.C. 77b(a)(1), 78c(a)(10), and not exempt from federal or state registration requirements. Miller did not register the notes; he squandered the money, operating a Ponzi scheme. Miller pled guilty to one count of securities fraud, 15 U.S.C. 78j(b), and one count of tax evasion, 26 U.S.C. 7201. He was sentenced to 120 months’ imprisonment. The Third Circuit affirmed, rejecting an argument that the court improperly applied the Sentencing Guidelines investment adviser enhancement, U.S.S.G. 2B1.1(b)(19)(A)(iii). The court interpreted the Investment Advisers Act of 1940, 15 U.S.C. 80b-2(a)(11) to apply broadly, with exceptions that do not apply to Miller. The court also rejected arguments that the government breached Miller’s plea agreement and that his sentence was substantively unreasonable. View "United States v. Miller" on Justia Law

Defendant, a tile salesman, received material, nonpublic information from a corporate inside and then passed that information along to friends, who used it to obtain substantial trading gains. After a jury trial, Defendant was convicted of committing securities fraud and conspiring to commit securities fraud. Defendant appealed, arguing that there was insufficient evidence in the record to support his conviction, where he was neither a corporate insider nor a trader of securities. The First Circuit affirmed, holding (1) the evidence was sufficient to show that Defendant knowingly breached a duty of confidence; (2) the district court’s instructions did not improperly shift the burden of proof or misstate the state of mind element of the securities fraud offense; and (3) the evidence was sufficient to show that Defendant anticipated receiving a benefit as a result of his disclosure. View "United States v. McPhail" on Justia Law

Based on their involvement in promoting or selling stock for Petro America, an unregistered company that had no value, eight coconspirators were charged with conspiracy to commit securities fraud and wire fraud 18 U.S.C. 371. Hawkins was also charged with aiding and abetting securities fraud, 15 U.S.C. 77q and 18 U.S.C. 2, aggravated currency structuring, 31 U.S.C. 5324(a)(3) and (d)(2), money laundering, 18 U.S.C. 1957, and two counts of wire fraud, 18 U.S.C. 1343. Brown was also charged with securities fraud and wire fraud; Heurung was charged with two additional counts of wire fraud; and Miller was charged with money laundering and wire fraud. The others pled guilty to various charges. Hawkins, Brown, Heurung, Miller and Roper proceeded to trial. Hawkins argued that Petro America was a legitimate company and that the government was prosecuting so that it could confiscate the company's substantial assets. The others acknowledged that Petro America was a sham but claimed they had believed in good faith that the company was real and that they could promote or sell its stock. The Eighth Circuit affirmed their convictions on all counts, rejecting challenges concerning jury selection and evidentiary rulings. View "United States v. Hawkins" on Justia Law

Fry solicited funds from investors for promissory notes issued by Petters, stating that the notes would finance purchases of merchandise that would be resold at a profit. In fact, the notes were part of a Ponzi scheme orchestrated by Petters, who was convicted separately. The transactions were fictitious, documentation was fabricated, and early investors were paid purported profits with money raised from the sale of notes to later investors. From 1999-2008, Fry and his recruits raised more than $500 million. Fry continued to misrepresent the investments and to solicit investments after the scheme began to unravel, causing $130 million in losses for 44 victims, while he collected tens of millions of dollars in fees. Fry made false statements to the SEC during its investigation. He was convicted of securities fraud, 15 U.S.C. 77q(a), 77x ,18 U.S.C. 2; wire fraud, 18 U.S.C. 1343; and making false statements to the SEC, 18 U.S.C. 1001(a)(2). The district court sentenced Fry to 210 months’ imprisonment. Other participants in the Petters scheme pleaded guilty to various charges and were sentenced by the same judge. The Eighth Circuit affirmed Fry’s conviction and sentence, rejecting an argument that it should presume that the court sentenced him vindictively, in retaliation for his exercise of the right to a jury trial, because Fry’s sentence was longer than sentences imposed on defendants who pleaded guilty. View "United States v. Fry" on Justia Law

Hansen, a farmer, served as a bank trust officer. In 2003, he invested, through Johnson (a stock broker), in the Hudson Fund, a hedge fund Johnson ran with Onsa and Puma. Hansen continued investing with the three. In 2007 Hansen and Johnson formed RAHFCO limited partnership. Hansen served as general partner, but delegated responsibility for executing trades to the Hudson Fund. Hansen misrepresented RAHFCO to investors, directly and through a private placement memo. Hansen prepared and sent investors earnings statements that falsely inflated RAHFCO’s performance. Hansen later testified that he relied on Onsa and Johnson to provide the numbers and never confirmed them. Hansen hired an accounting firm for an audit, but the firm quit after Hansen refused to authorize it to obtain a brokerage statement confirming RAHFCO’s investments. RAHFCO’s law firm withdrew. Johnson was charged in 2007 with securities fraud concerning another company. Onsa was sued civilly for fraudulent securities trading in 2009. Hansen never informed investors of any of these events nor did he attempt to find another auditor. In 2011, RAHFCO collapsed. Convicted of mail fraud, wire fraud, and conspiracy to commit mail fraud and wire fraud, 18 U.S.C. 1341, 1343, 1349, Hansen was sentenced to 108 months imprisonment and ordered to pay $17 million restitution to 75 victims. The Eighth Circuit affirmed, upholding the use of a willful blindness instruction and an instruction on conspiracy. View "United States v. Hansen" on Justia Law

Rodd, an investment advisor who produced and was regularly featured on a Minnesota local radio show, “Safe Money Radio,” was convicted of wire fraud, 18 U.S.C. 1343 and mail fraud, 18 U.S.C. 1341, for swindling 23 investors out of $1.8 million. Rodd used the radio show to market low-risk investment products to gain customers’ trust and maintain a client base for soliciting participants in a fraudulent investment scheme. Rodd solicited money by promising liquidity, safety, and a 60% six-month return. Rodd instead used the money for personal and business expenses, hiding behind false assurances of security and payouts to his early investors. Finding an advisory guidelines range of 70 to 87 months, the district court sentenced Rodd to 87 months in prison, applying a two-level enhancement for abusing a position of trust, U.S.S.G. 3B1.3, The Eighth Circuit affirmed, upholding the finding that Rodd occupied a position of trust. As a self-employed investment advisor, Rodd was subject to no oversight except by his investors. The discretion and control he possessed over client funds adequately supported the finding. The court did not err in failing to apply a two-level acceptance-of-responsibility reduction. Rodd took his case to trial and denied his guilt to the end. View "United States v. Rodd" on Justia Law

After a jury trial, Defendant was convicted of securities fraud, mail fraud, conspiracy to conceal assets and make fraudulent transfers, concealment of assets, fraudulent transfer, uttering coins, and money laundering. The offenses arose from Defendant’s fraudulent schemes used to cheat numerous victims out of more than a million dollars and to manipulate the U.S. Bankruptcy Code to shield his ill-gotten gains from creditors. The First Circuit affirmed Defendant’s conviction and sentence, holding (1) there was sufficient evidence to support the jury’s guilty verdict; and (2) the district court properly calculated the applicable Sentencing Guidelines range and imposed a procedurally and substantively reasonable sentence. View "United States v. Pacheco-Martinez" on Justia Law

Doolittle was a registered securities broker/dealer, and a registered investment advisor. He or his corporations held licenses, permits, or certificates to engage in real estate and insurance brokerage and tax preparation. Around 1990 his primary business became “trust deeds investments,” in which he “would arrange groups of investors together to buy those loans or to fund those transactions for different types of individuals and institutional borrowers.” After investors lost money, Doolittle was convicted and sentenced to 13 years in prison for three counts of theft by false pretenses; six counts of theft from an elder or dependent adult; nine counts of false statements or omissions in the sale of securities; selling unregistered securities; and sale of a security by willful and fraudulent use of a device, scheme, or artifice to defraud The appeals court reversed in part, holding that Doolittle’s challenge that the trial court’s implied finding of timely prosecution was not supported by substantial evidence required remand with respect to two of the charges. A further hearing may be necessary with respect to applicability of a sentence enhancement for aggregate losses over $500,000. Doolittle’s conviction for sale of unregistered securities and sale of securities by means of a fraudulent device did not rest on the same conduct as his convictions for fraud against specific victims; his sentence on the former counts therefore does not offend the proscription against duplicative punishment. View "People v. Doolittle" on Justia Law

Defendant challenged his conviction and sentence for conspiracy to commit securities fraud in violation of 18 U.S.C. 371. This case arose out of a complex scheme designed to defraud investors through a group of hedge funds called the Lancer Fund. The court affirmed defendant's conviction; affirmed the denial of defendant's motion for a new trial; but vacated defendant's sentence because the district court erred when it enhanced defendant's sentence and ordered restitution based on the losses from Morgan Stanley's investment. The court remanded for resentencing. View "United States v. Isaacson" on Justia Law

After a jury trial, Defendant was convicted of theft by misapplication of property and securities fraud. Defendant appealed, contending that the court's jury instructions impermissibly shifted the burden of proof onto him to prove his innocence. The Supreme Court affirmed, holding that the burden of proof was not improperly shifted onto Defendant to prove his innocence where (1) there was no obvious error in the instructions the trial court gave because, as a whole, the instructions correctly stated the law; and (2) the court correctly stated the State's burden of proof and Defendant's presumption of innocence several times during the jury selection, at the beginning of the trial, in its final instructions, and in its written instructions sent to the jury room. View "State v. Philbrook" on Justia Law