may begin when you're ready good morning you may please the court my name is jerry pres i'm counsel for christopher hall in this matter i'm going to focus my comments today on the issue of discordant because that's the i think the biggest impact of this judgment of my client and also the clearest error on the part of the district court as i'm sure the court is aware we had two orders here we had an issue ordered by the district court on disgorgement they basically said mr hall obtained seven million dollars through misrepresentations as the jury found but he also provided collateral and connection with the pertinent transactions that adds up to more than twenty four million dollars and what the court said that's that's punitive it's speculative it doesn't focus on hall's unjust enrichment and i can't do it and we think that that order has precisely right on this issue and the f c c files a  motion for reconsideration and the district court essentially adopts the f c c as argument which is which is these counter parties could have obtained this collateral anyway so we should we should just ignore it we should treat the money that mr hall obtained as his ill gotten gains as his net profits and pay no attention to the twenty four million dollars in collateral that he provided do you dispute the contention of the s u c that th e party that was seeking the collateral assuming that there were no liens on it could have obtained that amount of collateral in any event yes we do and there i would prefer the court to  a reply brief at pages seven through ten where the evidence in light of that is laid out so this is this is a brokerage firm in a margin situation and it's a margin call situation back during the financial crisis where where valuations were down the brokerage was demanding additional collateral mr hall was putting the collateral up all of the assets all the clowder that we're talking about today was held outside of the brokerage firm wrote from did not have any right to obtain those assets that's why these transactions occurred where it was necessary for them to occur because without them they would have never received any of that collateral and they would have liquidated the collateral they already hand yes they that was their one option to liquidate the collateral they already had they did not want to do that though and as also explained in the section the the the stock here is a company called call it owns some bonds in the bonds were involved in a race track in texas i believe and all parties start that the texas legislature was going to legalize gaming at the racetrack so they don't want to liquidate that position because they a value in it they being the brokerage firm and just reported to mr hall also owned as part of that collateral stock in an affiliate of the brokerage firm and that was liquidated at these at these low prices it would have had a negative impact on the brokerage firm so their option was to liquidate it like you would in the margin call situation but they didn't do that but they called for more collateral they did it so i guess what i'm trying to get at is what the f c c is saying is that they were entitled to get this collateral in any event to avoid having to liquidate which nobody seemed to want and if they were entitled to get this collateral in any event and yet mr hall so lied and said there are liens on it i need and they want to preserve the brokerage firm wanted to preserve their position on the loan so they gave him money that they would not have given him but for the law so how do you address that if they could have gotten the collateral unencumbered which is what the government's saying how does that not make a difference i've seen the government saying that but i think the trial evidence the evidence cited in the briefs shows that they could not have done that and i will refer to because that's that's exactly the argument that  record adopted and we excerpt part of it in our national brief a page twenty eight and one fifty five in the district court record well i guess that's one trying to get at is is so there's a certain value of collateral that your client gave to the brokerage firm with would and i guess i'm just trying to get at what is your point to dispute that they were not entitle to get this collateral in any event because they could look at the account we agree that's one option but they can also call for more collateral and they did saying your client gave them a higher value of collateral than he needed to because he then got these the loan money well he he obtained five point five million dollars from the brokerage firm to pay off those liens which did not exist so that happen but he gave twenty four million dollars or the collateral and that that can't be ignored and i think the the problem here is a misunderstanding or misapplication of the burden shifting analysis  a rich man and then the burden shifts to mr hall and the reason for it for that is because the defendant usually has better knowledge about what he paid for the securities what they were worth and things like that but here we're not we're not talking about numbers we're not talking about valuations we're not talking about dollars the mr hall didn't give an additional five million dollars of collateral to offset the money that he took right in a series of transactions he well yes because he gave twenty four million dollars in total collateral and took approximately five there's a range that he was also collateralized in the amount he was already underwater plus however much security of his happens all the time you know your ten million underwater i want to lot more than ten million and collateral because of what you're like and what the market's like isn't that right i mean the reason he gave them x amount was that that was what they negotiated that is right that is what the parties negotiate and all and all i'm saying is you have to both sides of that negotiation you can't just focus on the money that there would have been enough money to make everybody whole but instead we've got you know who's holding the bag when the money has gone away because the market went away isn't that right there are two pools of  initial assets that went south that required the margin call and then there isn't the additional twenty four million dollars that went south also because one of in your own unsupported statement that well they returned a couple of hundred thousand you know is because those assets evaporated as well isn't that right otherwise there'd be a there would in fact be enough to pay off that is if there was enough to pay off you would have you would have some argument ok that well we're just shifting peas around but because of the lies he got money which he then dissipated or whatever that pence and wouldn't have given  him that last sentence is the issue here and that's the the what the district court says and in the order as demonstrated by the f c c and not rebutted by hall had hall not lied about the leans in covering the collateral henson and hall about human behavior what people would have done in the hypothetical situations and it's contrary to the record evidence which i think set forth in the citations of the reply brief that i cited that these assets were all held outside of the brokerage firm hall could have told the firm no i'm not posting anymore collateral liquidate what happens then how does the economics of everything shake out who comes up on and on top and who and who doesn't what we don't know that but that's my point it's speculative the burden shifting analysis and the disgorgement calculation should be about paul's unjust enrichment dollars in dollars out what the f c c wants to do is look at the dollars in and ignore all of the dollars out because well this would have happened anyways but what would have could have happened and what mr hall would have or could have done if that did happen in this hypothetical scenario it's speculative and it's not what is gorge ms let me ask you about something else before you sit down about your materiality argument why is that not an argument about the sufficiency of the evidence that you can't make because of your failure to make a r relates here is plains of this courtroom and in that the the parties made certain arrangements and they entered into documents and the those documents transaction documents are the best evidence of the parties intent they show dollars going this way and dollars coming this way and you can't ignore one side of that transaction morning your honour's may please the court paul alvarez for the securities and exchange commission and with me is sarah concannon lead trial counsel for the commission in the district court the undisputed evidence shows that christopher hall repeatedly lied to his broker regarding his margin account and as a result of those lies he walked away with millions of dollars that he wouldn't have gotten had he told the truth he used that money for his own personal gain and he's never paid any of it back in light of that undisputed evidence it was not in could not have been an abus discretion for the district court to order him to discours to disgorge the proceeds of his fraud on penson now my friend has argued that the district court erred because it it he claims it failed to consider the value of the call now shares that were deposited in his margin account in two thousand and nine but the district court didn't ignore the value of those shares at all in fact the district court found in light of the undisputed evidence here that mr hall had deposited those shares in his margin account to offset the tens of millions of dollars in preexisting margin debt that he had accrued up until that point and the district court further found that in light of that fact  penson gave him the full credit for the value of those shares against his preexisting margin debt so he received a reduction in the value of those shares against his preexisting debt by the virtue of that pledge in two thousand and nine to the district court didn't ignore that evidence but rather the district court reasonably concluded that because he had received a credit of the full value of those shares against his preexisting margin debt he was not entitled to a second credit relying on the the value of the same shares against the proceeds of his fraud and in terms of my friend is referred to this is sort of a quid pro quo exchange of dollars from penson in exchange for shares from mr hall but there's absolutely no evidence to support that as you said judge boggs remember this was he was tens of millions of dollars in debt and my friend my friends argument ignores the thirty eight million dollar elephant in the room and that is his preexisting debt though shares were pledged to offset that and the value of the i understand that and i understand that when he pledged the collateral he got a credit in his account was now bigger of course  things went south my question is this when you're a brokerage and you want collateral you know it's just like taking a mortgage you only want to lend sixty percent on a mortgage so the collateral is going to be bigger than the exact amount that you're collateralized and why isn't it plausible to say that had he not made this lean argument they wouldn't have demanded fifteen million in collateral they would only demanded twelve million or eleven or ten or thirteen or some to go she hated him out because it's not exact what's wrong with that argument well sure your question actually illustrates the fact that the money that pence and paid out to pay down the fictitious liens is completely independent from the value of the collateral that he pleasure i mean if mr hall he said that this is a hypothetical when you say completely independent this was all isn't it plausible that penson is going to want more collateral to some degree i'm not saying it's dollar for dollar but simply as an economic negotiating instrument isn't that that you're to want more collateral if you're actually going to give the money back well two things on that number one that's not what happened in this case penson issued separate promissory notes for the money it paid out for the liens and in terms of what he did if he tells the truth and he pledges the collateral whatever the value is whether it's twenty four million fifteen million three million twenty five thousand he would have gotten the full credit against his preexisting margin debt but penson isn't out the millions of dollars it paid to pay off the fictitious liens that it thought existed that's why i have argued that they are two independent things obviously they happened at the same time but if he tells the truth whether he pledge as collateral or doesn't penson isn't defrauded by millions of dollars and so in and in terms of your question again penson issued those promissory notes separately didn't demand separate collateral for that and at this point it wouldn't have made sense for penson to have given that money because he was already tens of millions of dollars in debt  and had they known that they didn't exist after the fifty million collateral yes by the time by the end he was he was his account was thirty eight million dollars at the end yet at the time he had had over nine million in the in the equity was underwater nine million and he had had fifteen million dollars in margin calls up to that point so he was about twenty five million already at the time in two thousand and nine so and then it continued to get to this to be seen it still wasn't enough to get him above water no it wasn't enough to get him above water and was willing to carry him just getting somewhat better but not by getting well right and i think this illustrates the problem in the sees interest in this issue i mean the margin the extension of margin debt is a very significant thing that the commission is concerned with and when you don't comply with section seven is neither mr hall nor pence and had done here you run into these problems where you're sort of borrowing to kick the can down the road as much as you can and then you end up in a situation like penson was in where they are now liquidated because of the overextension of this model this money if you  see it's our policy to try and restore money to victims of fraud and i know that their pension is still in liquidation so we're still identifying the process of identifying victims and to the extent that there are victims that we can identify we in joining hall from violating the securities laws in the future isn't that the type of follow the law injunction that our court has said is on enforceable no no and he's not challenging that here he's really only challenging the fact that he wasn't egregious he's not saying he's not making that argument here as i understand it but rather he's only challenging the level of agree just this and i think the evidence supports this was significantly agree just to warrant a permanent injunction so you're not familiar with our case law about junctions no i am but i don't think but he's but again i don't think he's challenging the injunction on those grounds  o you know and i think that it was appropriate for the district court to have to have been joined him here given the significantly agree just nature of his misconduct and the fact that he has not challenged the other five factors found by the district court so even on the basis of those five factors alone i think the permanent injunction should stand particularly in light of the fact he's not making that argument here hasn't made it before this court on the issue of the mr paul has insisted that there is an additional amount that he paid to three hundred fifty thousand dollars plus share thirty two thousand an interest why wouldn't the payments have been excluded from the dischord well as we demonstrated below and i think in this court we are happy to reduce the amount of his discourse may order to the extent that there is evidence that he has paid that money mr hall is referred to two things one his own unsupported testimony into a document that was not introduced at the remedy stage that shows only that a thirty one thousand dollars payment was made we don't know what that payment was made for and it certainly doesn't indicate that there was three hundred fifty thousand dollars that were made to ms ocean or so there's just no evidence to show certainly wasn't any evidence before the district court to show that he had paid that money to the extent that he can show proof of that after you know in terms of paying that down  would reduce it but that because there is no evidence of that it was not error for the district court not to have produced the discordian amount by that three hundred fifty thousand plus interest amount unless the court has any further questions we'll see the remainder of my time and ask that the district court's final judgment be affirmed thank you very much i just have one or two very brief points the commission just now reference hauls multimillion dollars in margin debt the only numbers that i've seen in its brief  was a reference to the ten million dollars in in the red that the account was at the time that these transactions occurred and i think that the issue whether you will be whether you count that collateral not is it has to be addressed and arguing that ok it was applied to the margin debt is one thing but arguing that it should be ignored entirely because they would have gotten it anyways and that's what the commission argues and that's what the court does find in the second order and it's there it's the reason that the court determines that the commission carried its burden under the burden shifting the hypothetical so i think in some ways the the what was applied to the margin account what was the balance and what time when each of these things happened is is a little bit of a side issue because the decision the second order really rests on this hypothetical about what would have happened and the courts finding that the hypothetical not any not in the calculation but this hypothetical ability to obtain the collateral carried the day in the burden shifting analysis in the hall didn't didn't rebut that and the only way to rebut that is with another hypothetical or holes testimonial what he would of or could have done which calculation and for that reason i think in addition to other arguments in our briefs that the district court did abuse its discretion in the second or