Justia Securities Law Opinion Summaries

Wilson was the Director, Chairman of the Board, President, and CEO of Imperial, which acquired e-Bio, which ran a fraud scheme, "Alchemy." It involved purchasing biodiesel from a third party and reselling it as though it had been produced by e-Bio, to take advantage of government incentives for renewable-energy production without expending production costs. Wilson was convicted of 21 counts: fraud in connection with the purchase or sale of securities, 15 U.S.C. 78j(b) and 78ff; fraud in the offer or sale of securities, 15 U.S.C. 77q(a) and 77x, and 18 U.S.C. 2; material false statements in required SEC filings, 15 U.S.C. 78ff and 18 U.S.C. 2; wrongful certification of annual and quarterly reports by a corporate officer, 18 U.S.C. 1350(c)(1); material false statements by a corporate officer to an accountant, 15 U.S.C. 78m(b)(5) and 78ff, and 18 U.S.C. 2; and false statements to government investigators, of 18 U.S.C. 1001. The dcourt sentenced Wilson to 120 months’ imprisonment and to pay $16,468,769.73 in restitution. The Seventh Circuit affirmed. None of Wilson’s contentions reach the high threshold of showing that a reasonable jury could not have found him guilty. Viewed in the light most favorable to the prosecution, the evidence adequately supports the jury’s finding that Wilson knowingly and willfully made false statements to investors, regulators, an outside accountant, and government agents, and the reasonable inference that Wilson participated in “Alchemy.” View "United States v. Wilson" on Justia Law

The First Circuit affirmed Appellant’s convictions of securities fraud, wire fraud, and conspiracy to commit both. The convictions arose from Appellant’s writing of false opinion letters so that his two co-conspirators could sell stock to the public in a “pump and dump” scheme. On appeal, Appellant argued that the evidence was insufficient to support his convictions in light of his interpretation of section 3(a)(9) of the Securities Act and that the district court constructively amended the indictment in its instructions to the jury. The First Circuit held (1) even if Appellant’s interpretation of section 3(a)(9) was correct, the evidence was sufficient to support his convictions; and (2) Appellant’s constructive amendment claim was without merit. View "United States v. Weed" on Justia Law

In 2009, Lopez created financial investment business entities and solicited funds from family and friends. He received approximately $450,000 total from five people, stating that he intended to invest in companies such as Coca-Cola, ExxonMobil, Wells Fargo, Visa, American Express, and Procter & Gamble. Documents the investors signed reserved Lopez’s discretion to invest where he saw fit. Lopez deposited their funds into accounts that he controlled and never invested in the companies listed in his advertising materials. Lopez used much of the money for personal expenses. Lopez unilaterally changed the terms of each investors’ promissory note; they were not aware of these changes, did not give Lopez permission to make them, and did not sign documents. After an investor complained to the Indiana Secretary of State and the IRS investigated Lopez’s businesses, Lopez was convicted of 15 counts of wire fraud, 18 U.S.C. 1343; four counts of money laundering, 18 U.S.C. 1957; and securities fraud, 15 U.S.C. 78j(b), 77ff(a). The Seventh Circuit affirmed, rejecting claims that the district court erred in allowing a government witness to testify that payments Lopez made to his investors were “lulling payments,” that the government’s references to Bernie Madoff in its closing argument denied him a fair trial, that the court erred in denying Lopez’s request to label his witness an “expert” in front of the jury, that the court improperly prevented him from introducing extrinsic evidence of a government witness's prior inconsistent statement. View "United States v. Lopez" on Justia Law

Plaintiffs appealed the district court's dismissal of their amended securities fraud class action complaint, alleging that Atossa and its Chairman and CEO, Steven Quay, made a series of public statements about Atossa's breast cancer screening products that were materially false or misleading. The district court dismissed the complaint. The Ninth Circuit held that plaintiffs have properly alleged falsity and materiality as to some, but not all, of these statements. In this case, plaintiffs have sufficiently alleged that the following were materially false or misleading: (1) Quay's statement quoted in Atossa's December 20, 2012 Form 8–K filing describing the ForeCYTE Test as "FDA-cleared"; (2) Quay's statement during his interview with NewsMedical.Net that the ForeCYTE test had "gone through all of the FDA clearance process"; (3) Atossa's Form 8–K filing on February 25, 2013, giving notice of the FDA's warning letter; and (4) Quay's statement during his interview with the Wall Street Transcript that "FDA clearance risk has been achieved." Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "Levi v. Atossa Genetics, Inc." on Justia Law

The Securities and Exchange Commission (SEC) filed suit against American Pension Services ("APS"), a third-party administrator of self-directed individual retirement and 401(k) accounts (collectively "IRA Accounts"), and its President and CEO, Curtis DeYoung. The SEC alleged that DeYoung misappropriated $24 million in APS customer funds that APS had commingled in a Master Trust Account at First Utah Bank, custodian of the funds. The district court appointed a Receiver, who ultimately entered into a Settlement Agreement with First Utah. The settlement included a Claims Bar Order, which barred all other claims against First Utah relating to any IRA Accounts established with APS. Three of the approximately 5,500 APS clients who had a financial stake in the receivership entity intervened and contended that the court could not bar them from filing their own claims against First Utah. The district court disagreed and approved the settlement. The intervenors appealed, but finding no reversible error, the Tenth Circuit affirmed. View "SEC v. American Pension Services" on Justia Law

Petitioner Austin Veith pleaded guilty to theft and securities fraud. He asked the trial court to sentence him to probation instead of a term of incarceration. The trial court rejected his request for probation with no incarceration and sentenced Veith to ten years of incarceration on the theft count, and twenty-five years of probation on the securities fraud count. Veith did not object when the judge announced his sentence.  But, he did not sign the probation order acknowledging and accepting the terms and conditions of his sentence of probation. Instead, he filed a motion to correct his sentence pursuant to Crim. P. 35(a), arguing that the probationary portion of his sentence must be vacated because he did not consent to it. The trial court denied the motion, and Veith appealed.  The court of appeals affirmed in part and reversed in part, concluding that Veith had consented to the terms and conditions of the sentence of probation by requesting probation prior to the hearing, but that his consent did not include certain terms of probation added by the court. As a result, the court of appeals remanded the case to the trial court to remove the terms of probation from his sentence that Veith had not requested before sentencing.I t did not order any modification of the prison sentence. The Colorado Supreme Court granted certiorari to determine the legality of Veith’s sentence of probation, and reversed the appellate court's judgment. The Supreme Court held that a trial court cannot impose a sentence of probation without the defendant’s consent. In this case, Veith consented to probation in lieu of incarceration; therefore, the trial court exceeded the scope of Veith’s consent when it imposed a ten-year sentence of incarceration in addition to probation. The trial court lacked authority to impose the sentence of probation.  Accordingly, the Court vacated Veith’s sentence in its entirety, reversed the judgment of the court of appeals, and remanded the case to that court to return the case to the trial court for resentencing consistent with Veith’s plea agreement. View "Veith v. Colorado" on Justia Law

Black called Knarr to suggest a real estate investment. Knarr gave Black $124,456, documented by a May 2006 promissory note. Knarr testified that he would not have invested without a promised 10 percent return if sale or development of the property failed. The parties modified the note in May 2007 to reflect Knarr’s additional investment of $155,474 and extended the maturity date of the note several times, through mid-January 2012. Knarr obtained information inconsistent with what Black had told him and asked Black for his money. Receiving no response, Knarr initiated an investigation. In 2013, Black was charged with five counts (there were other investors) of using false statements in the offer or sale of a security (Corp. Code, 25401, 25540(b)). The trial court set aside two counts, finding that the note was not a security. The court of appeals affirmed, holding that the promissory notes offered for Knarr’s investment in the real estate development scheme were not securities within the meaning of the Corporate Securities Law. The evidence of other investors was insufficient to meet the public offering prong of the risk-capital test and there was insufficient evidence that Knarr was “led to expect profits solely from the efforts of the promoter.” View "People v. Black" on Justia Law

Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b–5 prohibit undisclosed trading on inside corporate information by persons bound by a duty not to exploit that information for their personal advantage. These persons are also forbidden from tipping inside information to others for trading. The Supreme Court has held (Dirks) that tippee liability hinges on whether the tipper disclosed the information for a personal benefit; personal benefit may be inferred where the tipper receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.” Salman was convicted for trading on inside information he received from Kara, who had received the information from his brother, Maher, a former investment banker at Citigroup. Maher testified that he expected his brother to trade on the information. Kara testified that Salman knew the information was from Maher. While Salman’s appeal was pending, the Second Circuit decided that personal benefit to the tipper may not be inferred from a gift of confidential information to a trading relative or friend, unless there is “proof of a meaningfully close personal relationship … that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature.” The Ninth Circuit declined to follow the Second Circuit. A unanimous Supreme Court affirmed. When an insider gives a trading relative or friend confidential information, the situation resembles trading by the insider himself followed by a gift of the profits to the recipient. Maher breached his duty to Citigroup and its clients—a duty acquired and breached by Salman when he traded on the information, knowing that it had been improperly disclosed. View "Salman v. United States" on Justia Law

The Securities and Exchange Commission (SEC) brought an enforcement action against Defendant Charles Kokesh for misappropriating funds from four SEC-registered business development companies (BDCs) in violation of federal securities laws. After a jury returned a verdict in favor of the SEC, the district court entered a final judgment permanently enjoining Defendant from violating certain provisions of federal securities laws, ordering disgorgement of $34.9 million plus prejudgment interest of $18.1 million, and imposing a civil penalty of $2.4 million. Defendant appealed, arguing that the court’s imposition of the disgorgement and permanent injunction was barred by 28 U.S.C. 2462, which set a five-year limitations period for suits “for the enforcement of any civil fine, penalty, or forfeiture.” He also argued that the district court erred by precluding him from presenting evidence of attorney and accountant participation to show his lack of knowledge of the misconduct. After review, the Tenth Circuit held that both the permanent injunction and the disgorgement order were remedial and not subject to section 2462. The Court rejected the evidentiary claim. View "SEC v. Kokesh" on Justia Law

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