Lexisnexis

LexisNexis Corporate & Securities Law Community 2011 Top 50 Blogs

Bon mots

"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

"In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 862 (2d Cir. 1964)

Fraud Findings and Sanctions Dismissed Following Circuit Remand

John A. Carley, Eugene C. Geiger, Thomas A. Kaufmann, Edward H. Price, Christopher H. Zacharias, Exchange Act Rel. 34-6196, April 23, 2010

In 2008 the Commission issued an opinion finding that Carly and Zacharias violated the registration provisions of the Securities Act and anti-fraud and registration requirements of both the Securities Act and Exchange Act. They were ordered to cease and desist various violations and to disgorge $2.4 million and $1.4 million respectively in connection with a scheme to distribute unregistered stock. In 2009 the D.C. Court of Appeals upheld the registration violations and sanctions based on them and the cease and desist orders based on those violations. The court remanded the fraud charges and reporting charges to the Commission finding that it had not established materiality in its original opinion.

The Commission dismissed the remanded allegations (fraud and Exchange Act reporting) against Carley and Zacharias and dissolved the cease and desist orders based on those violations. The Commission made no attempt to salvage the fraud and materiality findings in its previous order. Its only explanation was a  cryptic statement that in light of the sanctions based on the registration violations upheld by the circuit it was "in its discretion" voluntarily dismissing the remaining charges.
Posted by