summary judgment order based on an incorrect application of law the summary judgment order was granted while there were pending motions for discovery which  it was based also on a lack of any evidentiary hearings and solely on a legal argument of collateral estoppel arising out of a criminal conviction in miami florida involving mr stein that criminal conviction does not support the collateral stoppel argument as it was a general verdict not with specific findings was not a dance a call on the merits did not involve all of the good issues and most glaring check which the d o j in the uk but in the ultimately in the trial although the trial seemed to begin on the assumption that there was no document relating to the first i read the closing argument and it seemed to me that the argument was pretty parallel somewhat alleged here i e that this individual there was a purchase order from this requires that there have to be identical issues now they general verdict or a general idea and that's a different question and i would like to talk about that it it does seem trail that the jury could have it i think i believe the jury in the criminal case could have said well we don't believe the as he sees the prosecution as to the first purchase all or but we do believe them about the second to purchase orders and so we're going to find guilty on the ten p five and so on now would it matter to the civil case whether that happened could the civil case go forward on the same bas another words if the finding that was made in the in the criminal trial is sufficient to support the judgment in the civil trial then it doesn't then it's identical for those purposes but if on the other ha for example in the civil trial doesn't matter whether each of the three allege phony purchase orders or purchase sequences existed for  answer my question but that's fine that we don't want to tell supreme court said you can not support of collateral stoppel are you with a general criminal over your cat if the general verdict if it decides the fact that that civil case turns on i to general verdict is that this person murdered helms and the only thing that matters in the civil trial is whether he murdered jones that's good enough even if they don't find anybody jealous of all that went to them is that he murdered jealous doesn't matter if he murdered with five stab wounds or three i can't compare a murder to a civil white collar crime conviction especially when the general verdict made no findings of fact concluded nothing as to which the jury relied on our didn't rely on to tell me in order to make that matter what was necessary to the hold to the result in the civil trial the civil trial allege that there was the existence in the civil that fraud was the absence of a contract then it's certainly a different result if there is no contract in one case and they use that as a basis for fraud if it does exist if the same verdict follows in the civil trial i e ten ten million dollars whether there was a whether there was a contract which evolved into a fraud or there was a fraudulent contract mean it doesn't matter and it has to be material in some fashion it can't simply be a difference it doesn't matter what i would i would think that the truth does matter and if the truth but this is the sort of that same distinction without a difference so are you make a distinction without a difference i think but you know so could always find something that it's a little bit like in cases one in precedent all the facts are exactly the same but in one the person was wearing a red shirt and the other they were in a blue shirt so then you say well if we distinguish the case because and a evidence they just simply said he was convicted in florida they stated i can't tell you here today what the truth is we're not truth finders at the f c c so they're admitting they're saying or tell you what he was convicted of well there's they're saying that our allegations represented a for a material fact that is an opposite of what happened in the criminal case and the material fact was the existence of a check existence of it raised hearsay objections and in the discovery motions that were still pending before the civil matter and those discovery motions was a bomb body of interviews with the individuals that even damages and the time that was going to be served it wasn't on the underlying convictions if that's your question that's right so it's nothing to do with the bread and again you're correct your honor i was stating that there are glaring differences between the two cases which prevent collateral stop and i can't i can't get around in the courts shouldn't be able to get around the requirement for a collateral stop opposition which is identical factual issues not identif stein to have those issues considered by a jury and if there are different issues based on different facts the conclusion should be that even if it's a mere possibility that there will be a different result you can't say in one breath ok we don't have a contract that's fraud and then another said hey we do have a contract that's fraud what about us callahan's red and blue shirts and other words if this is just a question of whether it's a red or a blue shirt and it doesn't matter to the outcome of either case you need to tell me why it matters to the outcome of either you have a different in the outcome of this case the jury would have been able to hear in a civil proceeding actual testimony from mr tribe you that he did write a check he did purchase materials he did expect them to be delivered they were delivered and that he did sign the contract that's totally and then according to the facts and the other case he he h up that there was a c h m company and then send somebody to japan to save change the address of the c h m company and then made believe that in other words the first guy didn't go forward with the  actual purchases and therefore a new way to show the purchases he had to make up the whole rest of the story why does it matter that you began with a an actual order if you did if the actual order never went forward what differences that make anything that's a call for the jury to make the issue is is there material facts that are different that's in somebody's joints material about when the question is whether he did he made up a purchase that didn't happen and a ccording to your the story in the civil case and the story in the other case after the fifty thousand dollars deposit was went back and he made it up some what difference does it make well that that's not correct you honor it was not made up mr tribe you testified in an interview with the f c c that he did purchase them he did receive them he was making payments and it was a made up for a made up company was a company mr tribe use of it's in their f c c interview that was not available to mr stein at the criminal case had it been available to him of these documents he could have done something with them that then that should be used to attack the crown on conviction but short of that i mean i suppose you could say  i thought was due i think it was delayed and there were already here it was to nine and i mean initially snow which we're talking i'm ahead of that case so i don't know the answer that question specifically but in this case again judge this is a simple analysis of the collateral stop argument  the court has to look at the identical facts not the same result if the facts are different they can't use it and here the s e c clearly made the only different presentation could have amended any time in the even said their intent all along was to use collateral because the the because excuse me the set sing isn't over so there's no there is no twenty two fifty five is there a pending twenty two fifty five hey b s you know there is not a there is a pending a four year case was decided in the foyer case is that the documents that the f c c made available to mr stein during its case those documents are now not available to mr straw and so the united r a certain amount of time i think ok ok what's what's also pending eleventh in the eleventh circuit is the issue of the amount of losses of the losses to investors because that factors into the sentencing guidelines but the court has affirmed the conviction and so i so what about my basic question which is i gather the that the the what went to the jury in the criminal case tried to not depend on it finding that any particular one of these purchase orders was fraudulent that his regular honor was a general verdict as requested by the defendant the can they have to find at least one of them but they have to find the least one of them well your honor was fraudulent but look if you look at accounts five six and seven those three  relate to different purchase orders he was fun libel on three counts each one of them relates to one of the purchase or so all three purchase orders the jury found the libel i say because they will have to have you the evidence of the particular documents that are described in the counts if you'd like to see them so i've looked at it was hard to figure out because that they're talking about mail and wire price you're talking are based on the mailing of stock certificates but the wire fraud accounts are based on fictitious material fabricated documentation and each piece of fabricated documenta perhaps then we can get a response to to to try and match up what was actually found specifically in the criminal case and what was necessary to the result in  hundred eighty one case it's six four to five second eleven seventy four in that case it said that collateral stoppel the application of collateral stock was not impaired if there are alternatives if the judge is holding was based on an alternative holding and this case the district court judge said that even if the c h m purchase order were not real then you still have the other two purchase orders and i believe that my question is is that the case particularly with regard i know we that he actually received the amount of discouragement that he actually received from the sale of the of the of the stock so it was based on and it would have been the same if there were only two yelling deals simple one waited for the criminal to finish that's right so i'm gathering you didn't say this exactly but you said that counsel for mr stein wanted general burdick's and what you're saying is that they knew of the civil enforcement action when the criminal trial was going on right well i have a five so i mean i may have confused the two cases your honor i think i did confuse th chart what what are the elements of everything that you're convicted of and what do you have to prove in a civil enforcement action that you're basing the collateral stoppel on i mean that would be the least you could have done in your brief so that we don't have to go and dig through and do all of that  collateral estoppel would not apply to the enforcement action i don't understand the question well if it's a completely different charge and offended and there's no match up yes and so the match up is important but your honor they did match up that's the problem another words there are specific allegations in the civil case let's take for example what he's complaining about he's complaining that there was a specific iraq so i understood all that now suppose that is it possible this is what i don't understand because you've never really broken it out that the jury in the criminal case  h that that's not and then i understood things so therefore you would also say that it doesn't matter in today's civil case whether the original purchase saw it whether there was an original purchase order  a purchase order was cancelled purchase order was cancelled it was it was that they used that to me to see a jam purchase order and then they took the check for both check and they put the number of the phony purchase order on the check which is why the check which is at issue ok is that is that how it's alleged in the civil case yes and that is ours that that is how but what is alleged what is alleged is that all three purchase orders were fraudulent all three purchase orders for fabricated and that is what the eleventh circuit found that all always purchase orders were fabricated and the fact that that mr stein managed to get mr bose signature on a check and mr chabot signature on a purchase order doesn't mean anything it's meaningless so ok so the the government proved that stein invented the names of the individuals or in connection with three allegedly fraudulent purchase orders in order to tout the company's prospects right right and then in the civil the f c c it seemed that you tacitly had knowledge that occurs two of these purchasers might exist but that they are not the actual signatories on the purchase order document is that true no religion paragraph forty is the mr true bow signed a purchase order and that mr true both signed a check what we allege and paragraph forty two is that the the company that's at issue here so cardiac health care management c h m was a fictitious company that is what we allege in our complaint that these were fictitious purchase orders with the tissues companies and that is what the justice department proved to the jury in the southern district of florida this purpose the only thing the principal did and so what i want to know is does this matter what what is the relevance of the ending in a betting judgment can anything  i wish you'd tell me that but i think he was he said that he was counsel for the company he was so to have to have the existence of an independent primary as an officer of the company is a true to the company fine ok but that's not independent of him so now he's going to aid and abet and sell you a debate the company because he's a principal of a company and th to the company his his actions resulted in the company filing false documents and his actions result in the company being liable for s how the pieces fit together i think we did this we did take the your honor we did take the indictment and we did carefully parsed the indictment out in parts and relate i just would be real brief i would like to address the cloud will stop or hopefully i'm hoping the court seemed to be maybe confusing the court on the issue mr putin just said something that is incorrect the civil complaint specifically alleging paragraph forty the existence of agreements contracts and checks which the d o j in their complete and their prosecution argued in closing were false made up and never occurred convictions are based on the same elements they can't prove them if they have different facts and there's different victims in both cases the civil case is more of a public victim based on short selling and they could short selling whereas the victim in the criminal case was individual victims based on individuals who relied on what was the turn to be false representations or or igs grimm is a didn't exist so if the elements are par tolly in opposite of one another there can't possibly be the same conviction based on different criminal elements different allegations and different factual allegations that's why when a defendant is used as a collateral stop of the supreme courts and that's an unfair application of that doctrine and it's clear that the identical requirement is not been met by the civil remedy through the f c c they said all along we're just going rely on collateral stoppel they did no discovery didn't provide discovery and ultimately this so that a jury trial can go on the merits of the case as should have been required by the court at the outset thank you add a little perspective beyond what's in the briefs because i think that we briefed it i hope we briefed it thoroughly and adequately i it occurs to me that what potentially life altering punishments for misleading in this case and the jury found there was no fraud by mr cult so on what basis net right i believe that what they found was negligent participation in a fraud and so since they did not find fraud as far as fraud they nonetheless found negligent purchase a start with a procedural problem because there is one with regard to whether we reach the sufficiency questions  two of the three counts that he was convicted of in other words you to make a fifty a motion you made a rule fifty nine motion as i understand it but then you have an appeal to denial of the fifty nine motion so what are we supposed to do with  well i think that we find that there was there is not sufficient evidence how do we do that if there wasn't a fifty motion i have to a motion i'm sorry i know our laws are really tough on this it's really tough i feel we've dealt with i'm talented in several cases whether it makes sense or not it is really tough there's you know the record is what it is and there are that you can appeal the fifty nine motion which you could but you  i'm not sure i'm not sure that that's if that's i'm not prepared to address that i don't know right well it's a central problem in the whole case and there's not a whole lot of point in arguing about this efficiency questions if we don't have any procedural way to reach them i do think that the essential issues were addressed in the appeal i believe that there must be some proof of breach of standard of care with respect t negligent participation in a fraudulent scheme mr gault who was at the company for only two months is not a lawyer he's not a c p a he had no experience in a public company i believe that it's undisputed that mr gault discharge his obligation by reasonable reliance on the assurance of experts lawyers and so forth winning a securities lawyer licensed by the state of california that's undisputed in the case of armstrong versus brooke dale university hospital second circuit well but ok so your client he you know he has centrally gets convicted of whatever certification for heart tronics two thousand and form ten q filing so and then he they convicted him of circumventing internal accounting controls by diverting calling next loan to his private brokerage account and authorizing the purchase of part tronic security with those funds i don't believe it's appropriate to say that he was convicted of anything like that convicted of something he was a criminal aspect to it there's that punitive component to it that is unjust in this case it seems to me i want to make the point that as a matter of public and corporate governance policy officers such as mr gault was for two months only need to be allowed to reasonably rely on experts such as securities lawyers  own brokerage account and use it for your own basis but it was not used for his own he did not profit a penny from this it was not used for his own benefit the money i times he actually jury find based on the fact that it was put in his account it was his stock that was sold and that he put it on the proceeds and his and his tax return whether he actually then gave it all whole operation he was sure he was absolutely duped and i want to make the point though that i understand the point of securities laws is to protect investors how do you protect investors in a situation like this where what do you say do you say that all officers have to be lawyers or c p a s is it not enough for but since he did engage in this activity that at least circumvented the usual i mean whether or not he made money on it it was hiding a set of transactions stock account so he knew that another words and at least to that degree why should have been reflected why should he be signing a form that says that everything was falling when he knew it wasn't certainly he was whatever he the record is very clear on this i think whatever he did he did at the instruction request of mr spine and others who were in the company who knew better mr gault unfortunately he didn't know better said he signed a document required to protect investors that he had done the checking necessary that all was in order and then he testified he didn't know anything about that so when he signed the document this to protect investors he signed a document that he was unaware of was in that he had not checked to find out now i understand i understand that he was being duped but that isn't the point is it isn't it the point whether or not he violated a rule that has been used for years to protect investors that is what is his excuse that mr stein was advise ing him did is there anything in the record that mr stein came in and talk with him about this particular document and said we don't need to have you sign this even though you haven't go done it is or anything like that i believe in the briefs the real there is there are references to the record establishing that the only evidence is that he relied on the advice and in fact insistence of professional people within the company whether it was mr stein personally at any given moment i can't say without going back and looking at the record but there are the references in the record who told him what to do at which point in time and i don't believe the record the record now show that he admitted he did not know anything about what he signed was he had checked on and  do your honor is he relied on people who were in a position to know and who were in a position to advise him securities including a securities lawyer including mr stein who was a licensed l made money on it or didn't make money on it so the fact that they if i seem to sign it as to whether the internal systems were know can't work for a well because he knew something that i gather it without problem was they didn't but he would have to know the significance of it why would he have to know the significance of it why when he just have to know that in fact there was this off book stuff going on i don't i don't know what i know that everything he did he did at the request and on the advice of professional people and i think that's the test but if they don't have the information then it doesn't matter and if he had gone to the professionals and said you know are you know they're asking me our internal systems are being followed are they and they said yes that would be one thing if he didn't know they weren't well it certainly wasn't his idea to put the money in the source idea it was doesn't matter the happening and that's the problem i think what about smith expert testimony i thought excluding him was extremely question but doesn't make any difference well i think it establishes that there was no damage to or harm to anyone and well it doesn't establish anything and it establishes his opinion as to what a reasonable investor would think but why aren't the isn't the jury reasonable able to determine that for itself liability as a principle that is all and not to mr and i understand he mentioned mr called several times although not in the sense as you put your brave but he did mention mr call but i mean unless you're  it basically suggesting that it was it was simply too prejudicial to spite the fact that the jury was told not to use it for x x x against mr call which it were somebody what do you say about that jury was told not to use yes it is but i think that it was prejudicial and i think that it goes to another issue which is whether the government's lawyers ought to put forth that evidence  was found liable by a jury of his peers in the central district of florida three serious violations of the firm's securities laws first one is fraud under seventeen a three the second is negligent fraud your honor the difference i think a contradiction to me i'd say yes i understand there is it does sound weird but it's a seventeen a three unlike seventeen a one focuses on the results the effect of a conduct that the good the conduct operate as a fraud seventeen a one on the other hand focuses on the mental state and that's that's the difference between the two in any event he was found liable for fourteen there is not really what happened here basically is that he was hired by mr stein as a pitch man later on after being hired as a pitch man he actually agreed to become an officer and director of the company and then  company despite the fact that he admits that he really didn't know anything about the responsibilities of an officer or director of the federal securities laws so i mean it there is a flavor about this case it does appear that he was being used and i don't quite know why you unfollowed with him but let's leave that aside you know what you want to people can't go out and used a trusted name and tell of celebrities and tell people that put your picture put your he stayed after all this happened and to continue to work with the company quite a while after after he claimed that he lost all this money yes because it's a financially distressed company he had an investment in it when you invest in the financially distressed company you put in your your two cents a player two cents of stock in your hoping eventually it's worth twenty dollars a share price and after he lost all the money we  defrauded and didn't realize it was being used for stocks even though the ration of the e mail said stocks he still stayed in the company email that's in question here that you're talking about said stock was referred to stock different when buyback means that you're taking money and you're buying the company's stock back stock buys means buying he in his line stop that he mr conic is buying stock for the company that's something different challenge the sufficiency of the evidence and then in this opening briefs he did not ask for a new trial nevertheless the evidence in this case does overwhelmingly support the verdict of the jury as to the thirteen a  certifying as to the adequacy of the company's internal controls when he admits when he testified he did not know what internal controls were the standard is negligence that is per se negligent he did negligence even sa that i didn't read the sock certification carefully again this is per se negligence your honor and how he was while he was not found liable be with what happened here are as to these the thirteen of the five claim the claim of knowingly evading internal controls mr gold admits he admitted that he deliberately he consciously deliberately  this is what he testified to consciously deliberately did not provide the c f o of the company with information that he needed to in order to to make accurate company books and records  that the money in question there was mr cohen it's one hundred fifty thousand dollars investment as to the one claim to does that this is properly before the court the rule thirteen  versus jensen recently in india as you see versus janssen it was it was found it was the court also decided that in order when you are liable under thirteen reliable under thirteen a fourteen if you sign a sock certification without a sufficient basis to believe in its accuracy here again mr stein mr gold rather mr gold siamese sock certification well what about and you say is everything on the up and up and they say yes is that sufficient to sign the document no one who lives in reading is not in the open though that that's what i was saying earlier but as to reliance on experts ordinarily you can do it is that right the way you just described transcend what you suggest that you pay it you have to sit there by yourself and go investigating whether or not the internal controls were operating are not your honor he signed this lock yes it would be no no it wouldn't always be negligent it might not be negligent and a jury could find you not liable under certain circumstances i realize that you're clinging to the facts of this case and why and that's a whole different thing but hypothetically if the jury had believed him that he was just totally rely on experts had given the experts all the information or whatever they could have found him not liable so it doesn't necessarily follow because you rely on an expert you're not negligent but it can follow that relying on an expert can be enough under the facts of certain circumstances right that's possible you are but legally speaking it's supposed to the jury was instructed that it could be used to lower the mental state from from so here into two but again they were told what negligence was yes and they found that he wasn't negligent ron if they had  seen other the fact that he doesn't know what an internal control is whatever that means doesn't seem to me to be the important point here what's the important point is that he knew something specific that he knew the people he was asking didn't securities laws are of an officer director or c e o and one of those is to know what internal controls it is enough to ask an expert whether we have an your honor he can't say that he does that he can't say that internal controls me the question really is harmless terror with respect to this method to her ration or whether there was an alternative ground for not admitting it which is that it wasn't to be helpful to the jury  and you want to buy security and you look at the total mix of information he was applying a different standard of materiality he was applying a not not looking at the time value i have been asked to upon as to whether any disclosures related to the colonic loan emitted information that would have significantly alter the total mix of information available to investors total value added now i just read you what it said it didn't say that but  that have got financial or financially secure in one way or another start up companies their companies that are financially distressed what met would have mattered to investors that would have that would have been very significant to them is if they he didn't know the the professor smith did know what internal controls were he didn't know what the legal significance was of signing a stock certification all these how do we know that why do you say that because that's what did the judge found that's what the district court judge found district court judge found my thought he found that he wouldn't apply the totality of the circumstances standard even though he said he did it i think i think there were four grounds actually found that the use of the materiality standard is a standard that's fairly favorable to you right but so why didn't the judge abused his discretion why was this not an abuse of discretion was not an abus discretion because it would have confused the jury because the expert was not qualified honour's just momentarily the oh off the books issue that the court was interested in it looks to me from looking at the record and our brief pages thirty to thirty one that there is plenty of evidence that mr stein told mr called what to do with respect to that and to open the account and most so want money he still knew what happened sorry i don't know why that matters record that mr stein is a lawyer that mr stein was mr cults lawyer that mr stein was running the company and that mr stein said go ahead and do this and that mr stein was so if mr stein tell them to go kill someone but he'd be able