Justia Securities Law Opinion Summaries

Appellant appealed the bankruptcy court's approval of a multi-million dollar, global settlement in one of the largest Ponzi scheme bankruptcies in American history. The settlement had been substantially consummated and the appeal had been rendered largely moot. The court held that the bankruptcy court did not abuse its discretion in approving the settlement where the record upon which the bankruptcy court based its approval of the settlement was sufficient and where the settlement satisfied the Flight Transportation/Drexel factors. Accordingly, the order of the bankruptcy court approving the settlement was affirmed. View "Interlachen Harriet Investment v. Kelley, et al." on Justia Law

In 1991, Carpenter pled guilty to aggravated theft and bank fraud. He served jail time and was disbarred. Between 1998 and 2000, he ran a Ponzi scheme, selling investments in sham companies, promising a guaranteed return. A class action resulted in a judgment of $15,644,384 against Carpenter. Plaintiffs then sued drawee banks, alleging that they violated the UCC "properly payable rule" by paying checks plaintiffs wrote to sham corporations, and depositary banks, alleging that they violated the UCC and committed fraud by depositing checks into accounts for fraudulent companies. The district court dismissed some claims as time-barred and some for failure to state a claim. After denying class certification, the court granted defendant summary judgment on the conspiracy claim, based on release of Carpenter in earlier litigation; a jury ruled in favor of defendant on aiding and abetting. The Sixth Circuit affirmed. Claims by makers of the checks are time-barred; the "discovery" rule does not apply and would not save the claims. Ohio "Blue Sky" laws provide the limitations period for fraud claims, but those claims would also be barred by the common law limitations period. The district court retained subject matter jurisdiction to rule on other claims, following denial of class certification under the Class Action Fairness Act, 28 U.S.C. 1332(d). View "Metz v. Unizan Bank" on Justia Law

This case stemmed from appellant's participation in the Bayou Hedge Fund Group (Bayou), a classic Ponzi scheme masked as a group of domestic and offshore hedge funds. Appellant appealed from his sentencing, following a plea of guilty to misprision of felony in violation of 18 U.S.C. 4. At issue was whether the district court's order of restitution in the amount of $60 million was improper because it relied on events occurring outside the relevant time period and the putative victims' losses were neither directly nor proximately caused by his actions as required by the Mandatory Victims Restitution Act of 1996 (MVRA), 18 U.S.C. 3663A. The court found no error, much less plain error, in the district court's use of appellant's fraudulent 2003 faxes at sentencing. The court also found no error in the district court's conclusion that appellant's failure to report the Bayou fraud was both the direct and the proximate cause of the victim investors' losses. Accordingly, the judgment was affirmed. View "United States v. Marino" on Justia Law

Companies filed suit, alleging that an employee engaged in a collusive trading scheme in violation of the Securities Exchange Act of 1934. Under section 9(a) of the Act, a private plaintiff must plead that: a series of transactions in a security created actual or apparent trading in that security or raised or depressed its market price; scienter; the purpose of the transactions was to induce the security's sale or purchase by others; plaintiffs relied on the transactions; and the transactions affected plaintiff's purchase or selling price. The district court dismissed for failure to state a claim. The Seventh Circuit reversed and remanded. The complaint adequately stated with particularity the circumstances constituting the securities fraud, and the economic loss impact on the plaintiffs as a result of the fraud and satisfied the pleading requirements of FRCP 9(b). View "Anchor Bank, FSB v. Hofer" on Justia Law

Former investors with Bernard L. Madoff appealed from an order entered by the United States Bankruptcy Court in the liquidation proceedings of Bernard L. Madoff Investment Securities LLC under the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa et seq. At issue was whether the Net Investment Method the trustee selected for carrying out his responsibilities under SIPA was legally sound under the language of the statutes. The court held that the trustee's determination as to how to calculate "net equity" under SIPA was legally sound in light of the circumstances of the case and the relevant statutory language. Accordingly, the court affirmed the order of the bankruptcy court. View "In Re: Bernard L. Madoff" on Justia Law

The Mississippi Public Employees' Retirement System filed a class action, claiming that senior management of a publicly traded manufacturer of medical devices in which it invested, withheld material information and made misleading statements about devices for treating coronary artery disease, in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Securities Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. In an earlier opinion, the First Circuit reversed dismissal, finding that the inference of scienter advanced by the plaintiff was at least as cogent and compelling as the contrary inference, satisfying the "strong inference" pleading standard of the Private Securities Litigation Reform Act. After discovery, the district court entered summary judgment in favor of defendants. The First Circuit affirmed, finding that plaintiff did not produce evidence that would support a reasonable inference of scienter. Given the statements and disclosures that defendants did make concerning the devices, they had no obligation to disclose the fact that they were working on an improvement that would reduce the very small number of no-deflate complaints that they received, and of which the market was aware. View "MS Pub.Emps. Ret. Sys. v. Boston Scientific Corp." on Justia Law

This was a consolidated appeal from, inter alia, an order of the district court lifting an asset freeze for the purpose of authorizing the interlocutory sale of a vacation home owned by relief-defendant Lynn A. Smith. The magistrate judge held in relevant part that the sale was necessary to preserve the value of the asset pending resolution of the merits of the action. The court held that there was no error in this finding and held that it was not an abuse of discretion to lift the asset freeze in order to authorize the sale. Accordingly, the court affirmed the judgment of the district court. View "Securities and Exchange Commission v. McGinn, Smith & Co., Inc., et al." on Justia Law

Petitioner, a former stockbroker, sought review of an order of the Securities and Exchange Commission (SEC), which found that he willfully violated the antifraud provisions of the Securities and Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5, by orchestrating a scheme that allowed certain customers to engage in late trading of mutual funds, and that he aided and abetted and caused the failure of his firm to keep accurate books and records, in violation of the Exchange Act's recordkeeping requirements. At issue was whether the SEC's order, which barred petitioner from working in the securities industry, issued a cease and desist order against him, ordered him to disgorge his unjust enrichment amount plus interest, and imposed a civil penalty, should be vacated. The court denied the petition and affirmed the SEC's order because petitioner's conduct clearly violated the Exchange Act's antifraud and recordkeeping provisions and because the penalties imposed by the SEC were not unreasonable. View "Vancook v. Securities and Exchange Commission" on Justia Law

This case concerned petitioner's handling of accounts belonging to seven Wachovia Securities, Inc. (Wachovia) customers. Petitioner, a registered representative associated with Wachovia, a member of the New York Stock Exchange (NYSE), petitioned for review of an order of the SEC sustaining a disciplinary action against her by the NYSE. The court denied the petition for review and affirmed the SEC order because the court concluded that the SEC's decision was reasonable and supported by substantial evidence. View "Katz v. Securities and Exchange Commission" on Justia Law

This case concerned petitioner's handling of accounts belonging to seven Wachovia Securities, Inc. (Wachovia) customers. Petitioner, a registered representative associated with Wachovia, a member of the New York Stock Exchange (NYSE), petitioned for review of an order of the SEC sustaining a disciplinary action against her by the NYSE. The court denied the petition for review and affirmed the SEC order because the court concluded that the SEC's decision was reasonable and supported by substantial evidence.