Guy P. Riordan, Exchange Act Rel. 61153, December 11, 2009
Time since appeal – 1 year 3 months 24 days
Time since last brief – 1 year 14 days
Time between last brief and oral argument – 11 months 5 days
It is simply unconscionable that the Commission delayed oral argument and hence a ruling on this matter for 11 months.
Riordan was a former Wachovia Securities registered rep. The ALJ found that Riordan from 1996-2002 made secret cash payments to the state treasurer of New Mexico in exchange for obtaining state securities trading business. New Mexico required that all securities transactions be subject to a competitive bidding process. Riordan claimed his payments to the treasurer were not kickbacks for securities trades, but were instead campaign contributions. The treasurer was convicted of extortion and sentenced to prison. The Commission barred Riordan, entered a cease and desist order, ordered disgorgement of $938,000, prejudgment interest of $459,000 and a penalty of $500,000.
Kickbacks schemes such as this violate the anti-fraud provisions. See, footnote 44 of the opinion for a list of citations.
The Commission found that the kickbacks were material because it would have caused the state to question the integrity of the administration of the bidding process and increased the costs of the transactions.
The Commission found no error in the ALJ's reliance on hearsay contained in FBI Form 302 interview reports. In doing so it noted that hearsay is admissible under the Administrative Procedure Act.
Relying on SEC v. Zanford, 535 U.S. 819 (2002) the Commission rejected Riordan's argument that the payments were not "in connection with" a securities transaction as they occurred after the trades were executed.
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