Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01620/USCOURTS-casd-3_08-cv-01620-8/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

CASE NO. 08cv1620-WQH-RBB

ORDER

vs.

RETAIL PRO, INC. (fka Island Pacific,

Inc.), BARRY M. SCHECHTER, RAN

H. FURMAN, and HARVEY BRAUN,

Defendants.

HAYES, Judge:

The matter before the Court is the Motion for Directed Verdict, filed by Defendant Ran

H. Furman. (ECF No. 143).

I. Background

On September 4, 2008, Plaintiff Securities and Exchange Commission (“SEC”) filed

a Complaint in this Court. (ECF No. 1). The Complaint alleged the following claims against

Furman: (1) fraud in connection with the purchase or sale of securities pursuant to Section

10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule

10b-5 thereunder, 17 C.F.R. § 240.10b-5; (2) aiding and abetting issuer reporting violations

pursuant to Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), and Section 13(a) of the

Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1 and 13a-13 thereunder, 17 C.F.R.

§§ 240.12b-20, 240.13a-1 and 240.13a-13; (3) record-keeping violations pursuant to Section

13(b)(2)(A) of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A) and Rule 13b2-1 thereunder; (4)

misrepresentations to accountants pursuant to Exchange Act Rule 13b2-2, 17 C.F.R. §

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1

 The Court rules on the Motion for Relief in a separate order.

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240.13b2-2; (5) internal control violations pursuant to Section 13(b)(5) of the Exchange Act,

15 U.S.C. § 78m(b)(5); and (6) false certification violations pursuant to Exchange Act Rule

13a-14, 17 C.F.R. § 240.13a-14.

Following the Court’s November 18, 2009 Order granting in part and denying in part

Plaintiff’s motion for summary judgment (ECF. No. 47), the following claims remained to be

tried against Furman: (1) Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (2)

aiding and abetting Island Pacific’s violations of Section 13(a) of the Exchange Act and Rules

12b-20, 13a-1 and 13a-13 thereunder; and (3) Exchange Act Rule 13a-14.

On February 15, 2011, a jury trial commenced as to the SEC’s remaining claims against

Furman. (ECF No. 136).

On February 23, 2011, after the close of the SEC’s case, Furman filed the Motion for

Directed Verdict. (ECF No. 143). 

On February 25, 2011, the jury returned a unanimous Verdict, finding the following:

“Furman violate[d] Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5

promulgated thereunder”; “Furman aid[ed] and abet[ted] one or more violations by Island

Pacific of Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and

13a-13 promulgated thereunder”; and “Furman violate[d] Rule 13a-14 promulgated under the

Securities Exchange Act of 1934.” (ECF No. 147 at 1-2).

On March 4, 2011, the SEC filed an opposition to the Motion for Directed Verdict and

a Motion for Relief, accompanied by a proposed judgment and proposed findings of fact and

conclusions of law.1

 (ECF Nos. 160, 161).

On March 25, 2011, Furman filed a reply in support of the Motion for Directed Verdict,

and objections and responses to Plaintiff’s proposed findings of fact and conclusions of law.

(ECF Nos. 168, 170).

II. Contentions of the Parties

Furman contends that, pursuant to Federal Rule of Civil Procedure 50(a)(1), a directed

verdict in Furman’s favor should be entered as to each of the three claims against Furman at

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issue in the trial. With respect to the first claim, Furman contends: “Directed verdict must be

granted on the SEC’s 10(b) claim because there is no evidence from which a jury could

conclude that Furman knew that any of his representations regarding the License or Sublicense

Agreements was false or that he was reckless as to the truth or falsity of any such

representation.” (ECF No. 143 at 3). With respect to the second claim, Furman contends:

“Directed verdict must be granted on the SEC’s aiding and abetting claim because there is no

evidence from which a jury could conclude that Furman had actual knowledge of any

underlying violation by Island Pacific.” Id. at 8. With respect to the third claim, Furman

contends: “Directed verdict must be granted on the SEC’s Rule 13a-14 claim because there is

no evidence from which a jury could conclude that Furman’s certifications were false in light

of his knowledge.” Id. at 9. Furman also “reaffirms his objection that Rule 13a-14 is not a

separate cause of action.” Id. at 10 n.6.

The SEC contends that Furman’s motion should be denied because the jury’s verdict

is supported by substantial evidence. The SEC contends:

First, [Furman’s] motion contains an incomplete and one-sided presentation of

the evidence, while ignoring the substantial evidence that supports the jury’s

verdict, even though all inferences are to be drawn in the Commission’s favor.

Among other things, he ignores key emails and exhibits that evidence his

scienter, as well as key admissions he himself made. Second, Furman ignores

the law: In effect, he asks this Court to reweigh the evidence (giving certain of

his own testimony the most weight) and also to consider the credibility of

witnesses (assessing certain of his own testimony as the most credible). But,

these are exclusive functions of the jury, and a court cannot substitute its view

of the evidence – or, for that matter, the moving party’s view of the evidence –

for that of the jury when deciding a Rule 50 motion.

(ECF No. 161 at 6).

III. Standard of Review

Motions for a directed verdict, known as judgment as a matter of law, are governed by

Federal Rule of Civil Procedure 50. A court may grant a motion for judgment as a matter of

law “[i]f a party has been fully heard on an issue during a jury trial and the court finds that a

reasonable jury would not have a legally sufficient evidentiary basis to find for the party on

that issue.” Fed. R. Civ. P. 50(a)(1). A motion for judgment as a matter of law must be denied

if there is substantial evidence to support a jury verdict. See Wallace v. City of San Diego, 479

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F.3d 616, 624 (9th Cir. 2007) (“A jury’s verdict must be upheld if it is supported by substantial

evidence.”). “Substantial evidence is such relevant evidence as reasonable minds might accept

as adequate to support a conclusion even if it is possible to draw two inconsistent conclusions

from the evidence.” Maynard v. City of San Jose, 37 F.3d 1396, 1404 (9th Cir. 1994); see also

Three Boys Music Corp. v. Bolton, 212 F.3d 477, 482 (9th Cir. 2000) (“‘[S]ubstantial

evidence’ ... is such relevant evidence as reasonable minds might accept as adequate to support

a conclusion.”).

“In making this determination, the court must not weigh the evidence, but should simply

ask whether the plaintiff has presented sufficient evidence to support the jury’s conclusion.”

Wallace, 479 F.3d at 624 (citation omitted); cf. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

255 (1986) (“Credibility determinations, the weighing of the evidence, and the drawing of

legitimate inferences from the facts are jury functions, not those of a judge, whether he is

ruling on a motion for summary judgment or for a directed verdict.”). “While the court must

review the entire evidentiary record, it must disregard all evidence favorable to the moving

party that the jury is not required to believe. The evidence must be viewed in the light most

favorable to the nonmoving party, and all reasonable inferences must be drawn in favor of that

party.” Wallace, 479 F.3d at 624 (citation omitted). “Judgment as a matter of law may be

granted only where, so viewed, the evidence permits only one reasonable conclusion, and that

conclusion is contrary to the jury’s verdict.” Id. (citations omitted).

IV. Discussion

The jury found against Furman as to each of the three claims at issue: (1) Section 10(b)

of the Exchange Act of 1934 and Rule 10b-5 thereunder; (2) aiding and abetting one or more

violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13

thereunder; and (3) Exchange Act Rule 13a-14. (ECF No. 147).

A. Section 10(b) and Rule 10b-5

Section 10(b) is “the central antifraud provision of the Securities Exchange Act.” SEC

v. Fehn, 97 F.3d 1276, 1289 (9th Cir. 1996). Section 10(b) makes it unlawful “for any person,

directly or indirectly”:

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To use or employ, in connection with the purchase or sale of any security

registered on a national securities exchange or any security not so registered, ...

any manipulative or deceptive device or contrivance in contravention of such

rules and regulations as the Commission may prescribe as necessary or

appropriate in the public interest or for the protection of investors.

15 U.S.C. § 78j(b). Rule 10b-5 further defines the conduct prohibited under Section 10(b),

making it unlawful:

(a) [t]o employ any device, scheme, or artifice to defraud,

(b) to make any untrue statement of a material fact or to omit to state a

material fact necessary in order to make the statements made, in the light

of the circumstances under which they were made, not misleading, or

(c) to engage in any act, practice, or course of business which operates

or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5.

“[T]he SEC must prove four elements to establish a misrepresentation violating Rule

10b-5...: (1) a material misrepresentation, (2) in connection with the purchase or sale of a

security, (3) scienter, [and] (4) use of the jurisdictional means....” SEC v. Rana Research, Inc.,

8 F.3d 1358, 1364 (9th Cir. 1993) (citations omitted); see also SEC v. Phan, 500 F.3d 895,

907-08 (9th Cir. 2007) (“Section 10(b) of the 1934 Act, and Rule 10b-5 forbid making [1] a

material misstatement or omission [2] in connection with the offer or sale of a security [3] by

means of interstate commerce.... Violations of ... Section 10(b) and Rule 10b-5 require

scienter.”).

Furman challenges the sufficiency of the evidence as to the scienter element. Scienter

is “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v.

Hochfelder, 425 U.S. 185, 193 n.12 (1976). In the Section 10(b) context, scienter requires

“proof that the defendant acted knowingly or recklessly.” Hollinger v. Titan Capital Corp.,

914 F.2d 1564, 1568-69 (9th Cir. 1990) (en banc). Recklessness is defined as:

a highly unreasonable omission, involving not merely simple, or even

inexcusable negligence, but an extreme departure from the standards of ordinary

care, and which presents a danger of misleading buyers or sellers that is either

known to the defendant or is so obvious that the actor must have been aware of

it.

Id. at 1569 (quotation omitted). “Recklessness satisfies the scienter requirement only ‘to the

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extent that it reflects some degree of intentional or conscious misconduct.’” SEC v. Rubera,

350 F.3d 1084, 1094-95 (9th Cir. 2003) (quoting In re Silicon Graphics Inc. Sec. Litig., 183

F.3d 970, 977 (9th Cir. 1999)). “Scienter can be established by direct or circumstantial

evidence.” Provenz v. Miller, 102 F.3d 1478, 1490 (9th Cir. 1996) (citation omitted).

At trial, the SEC presented substantial evidence that Furman, as Chief Financial Officer

(“CFO”) of Island Pacific, was aware of, and participated in, significantly altering the License

Agreement with QQQ Systems Pty Limited (“QQQ”) after September 30, 2003, which was the

end of Island Pacific’s fiscal second quarter 2004. See, e.g., Trial Exs. 309, 384, 385-88, 595-

96, 616; Dietzler testimony, Trial Tr. Vol. 4 at 111, 115-16. The SEC presented substantial

evidence that the only version of the License Agreement agreed to by Shaun Rosen, on behalf

of QQQ, was Trial Exhibit 405, which provided for payment by QQQ of a onetime licensing

fee of $3,250,000 or the payment of royalties for 36 months. As Furman conceded,

recognition of revenue would not have been appropriate under this version of the agreement

because of the alternative payment provisions, which caused the fee not to be fixed or

determinable. The SEC produced substantial evidence that the only version of the License

Agreement that Furman signed on behalf of Island Pacific was Exhibit 616, which provided

for payment by QQQ of a onetime licensing fee of $3,250,000 and the payment of royalties.

See Trial Ex. 616; see also Trial Ex. 309 at 1 (October 3, 2003 e-mail wherein Furman stated

that he booked “$3.25mm [revenues] for QQQ”); Rosen Dep. at 73 (Rosen did not recall ever

agreeing to pay $650,000 for Island Pacific’s Direct software). 

The SEC presented substantial evidence that Furman knew or must have been aware

that it was improper for Island Pacific to record revenue of $3.9 million in the second quarter

of fiscal 2004 under both Generally Accepted Accounting Principles (“GAAP”) and Island

Pacific’s own revenue recognition policy because there was neither a signed license agreement

nor “persuasive evidence of an arrangement” on September 30, 2003 for $3.9 million. (Trial

Ex. 1505 ¶ .08 (statement of position 97-2); see also Trial Ex. 1502 at 15 (Island Pacific’s

revenue recognition policy)). The SEC supported this evidence with expert testimony

regarding revenue recognition.

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The SEC produced substantial evidence that Furman knew or must have known that

recognizing $3.9 million in revenue in the second quarter of fiscal 2004 was improper for the

additional reason that collectability was not probable. For example, the SEC produced

evidence of Furman’s failure to perform due diligence as to QQQ; the lack of a prior payment

history between Island Pacific and QQQ; and Shaun Rosen’s testimony that he did not recall

ever receiving an invoice from Island Pacific, and QQQ did not have the cash available to

make a $3.9 million payment if had received an invoice. The SEC supported this evidence

with expert testimony.

The SEC produced substantial evidence that Furman directed Island Pacific to record

a second transaction with QQQ on its financial statements for the third quarter (ended

December 31, 2003) pursuant to which Island Pacific agreed to purchase the sublicense to

market QQQ’s Pyramid software for $3.9 million, which would offset the $3.9 million

receivable issued to QQQ the prior quarter. The SEC produced substantial evidence that

Furman knew that the third quarter Sublicense Agreement was not finalized at quarter end.

See, e.g., Trial Exs. 226, 389, 390, 408, 453; Furman testimony, Trial Tr. Vol. 2 at 169-72,

177-78; Dietzler testimony, Trial Tr. Vol. 4, at 122-24. The SEC produced substantial

evidence that Furman knew that it was improper to record the Sublicense Agreement in the

third quarter under both GAAP and Island Pacific’s own revenue recognition policy. The SEC

supported this evidence with expert testimony regarding revenue recognition.

The SEC produced substantial evidence that Island Pacific contract administrator Joseph

Dietzler, who reported directly to Furman, repeatedly expressed concerns to Furman regarding

the QQQ transactions. See, e.g., Dietzler testimony, Trial Tr. Vol. 4 at 118-26. The SEC

produced substantial evidence that Furman refused to read a memo Dietzler wrote

memorializing his concerns, and that Dietzler’s “expressions of [his] concerns to Ran Furman

were falling on deaf ears.” Id. at 124-25. On February 4, 2004, Dietzler sent an e-mail to

Furman and others explaining why “certain transactions involving the company QQQ appear

to be structured in a manner that is intended to inflate revenues for the purpose of boosting the

corporation’s share price.” Trial Ex. 226 at 1. The SEC produced substantial evidence that

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 The jury was entitled to find Furman’s explanation of his earlier deposition testimony

to be not credible. See Furman testimony, Trial Tr. Vol. 2 at 189-90.

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Furman understood at the time that Dietzler had been alleging potential fraud.2 The SEC

produced substantial evidence that Furman terminated Dietzler the following day.

The SEC presented substantial evidence that Furman failed to provide Island Pacific’s

outside auditors with all material information, including Dietzler’s e-mail and the information

and concerns contained therein, the version of the License Agreement signed by Rosen, the

version of the License Agreement signed by Furman, and the documents showing that neither

QQQ transaction was finalized by the end of the quarter in which the transaction was reported.

See, e.g., Aubury testimony, Trial Tr. Vol. 1 at 68, 78-86; Furman testimony, Trial Tr. Vol. 2

at 179. The SEC presented substantial evidence that Furman knowingly signed materially false

management representation letters to the auditors, including: (1) a November 11, 2003,

management representation letter in which Furman represented that Island Pacific’s financial

statements were reported in accordance with GAAP; (2) a February 12, 2004 management

representation letter in which Furman represented that Island Pacific’s financial statements

were reported in accordance with GAAP and—eight days after receiving Dietzler’s email—that management had “no knowledge of any allegations of fraud or suspected fraud

affecting the company received in communications from employees, [or] former employees”;

and (3) a June 11, 2004 management representation letter in which Furman represented that

Island Pacific’s financial statements were reported in accordance with GAAP and that he had

no knowledge of any allegations of fraud or suspected fraud received from employees, and that

a QQQ transactional history provided to the auditors was accurate. Trial Ex. 333 at 2; see also

Trial Exs. 322, 313, 504. The SEC presented substantial evidence that Furman knowingly

withheld material information from the auditors. Accordingly, the jury was entitled to reject

Furman’s defense of reliance on professional assistance. See Provenz, 102 F.3d at 1491 (“If

it is true that defendants withheld material information from their accountants, defendants will

not be able to rely on their accountant’s advice as proof of good faith.”) (citation omitted); see

also SEC v. Goldfield Deep Mines Co., 758 F.2d 459, 467 (9th Cir. 1985) (in order to establish

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3

 Even if Furman had established each of the required elements of good faith reliance

on professionals, such reliance does not operate as an automatic defense to the SEC’s claims.

Cf. Goldfield Deep Mines Co., 758 F.2d at 467 (“Even if appellants had established a claim of

[good faith] reliance [on professionals], such reliance does not operate as an automatic defense,

but is only one factor to be considered in determining the propriety of injunctive relief.”)

(quotation omitted); cf. also United States v. Bush, 626 F.3d 527, 540 (9th Cir. 2010)

(“[A]dvice of counsel is not regarded as a separate and distinct defense but rather as a

circumstance indicating good faith which the trier of fact is entitled to consider on the issue

of fraudulent intent....”).

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the defense of good faith reliance on the advice of professionals, a defendant must show he

“made complete disclosure” to the professional) (citation omitted); cf. id. (“If a company

officer knows that the financial statements are false or misleading and yet proceeds to file

them, the willingness of an accountant to give an unqualified opinion with respect to them does

not negate the existence of the requisite intent or establish good faith reliance.”) (quotation

omitted).3

The SEC produced substantial evidence that Furman drafted or was responsible for the

means by which Island Pacific’s fiscal 2004 second and third quarter and annual financial

information was disseminated to the investing public (i.e., earnings press releases, scripts for

earnings conference calls, and Forms 10-Q and 10-K). The SEC produced substantial evidence

that Furman knew or must have known that this information materially misrepresented Island

Pacific’s financial results and also contained material omissions. This evidence is sufficient

to support the jury’s verdict that Furman acted with the scienter necessary to violate Section

10(b) and Rule 10b-5. Cf. Provenz, 102 F.3d at 1490 (“Not only have plaintiffs provided

documentary evidence that suggests that defendants may have recognized revenue before it

was earned, they also provided expert testimony in support of their contentions. This evidence

is sufficient to overcome summary judgment [as to a Section 10(b) and Rule 10b-5 claim].”).

Although not challenged in the Motion for Directed Verdict, the Court further finds that

substantial evidence supports the jury’s verdict that each of the other elements of the SEC’s

Section 10(b) and Rule 10b-5 claim were satisfied.

Furman presented evidence at trial—primarily in the form of his own testimony—to

counter much of the evidence discussed above. However, the jury was entitled to find

Furman’s testimony on these points to be not credible in light of the substantial evidence

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presented by the SEC and the reasonable inferences which could be made from the SEC’s

evidence. Cf. Wallace, 479 F.3d at 624 (in ruling upon a Rule 50 motion for judgment as a

matter of law, “[w]hile the court must review the entire evidentiary record, it must disregard

all evidence favorable to the moving party that the jury is not required to believe”) (citations

omitted). Even if the jury believed Furman’s testimony that he relied upon representations of

others at Island Pacific, the jury was entitled to find that Furman possessed the requisite

scienter for a Section 10(b) and Rule 10b-5 violation. Cf. Gebhart v. SEC, 595 F.3d 1034,

1044 (9th Cir. 2010) (“Substantial evidence ... supports the SEC’s finding of recklessness

[sufficient to establish a Section 10(b) and Rule 10b-5 claim]. The Gebharts represented that

the MHP notes were a good investment, that they were secured by recorded trust deeds and

that in the event of a problem investors would be able to get their investments back because

the parks were not heavily leveraged. The Gebharts based these statements on representations

by [a co-worker] and conducted no meaningful independent investigation to confirm the truth

of their representations. It was therefore reasonable for the SEC to infer that the Gebharts were

consciously aware that they lacked sufficient information for their statements.”) (citation

omitted).

The Motion for Directed Verdict is denied as to the Section 10(b) and Rule 10b-5 claim.

B. Aiding and Abetting

The jury found that Furman aided and abetted one or more violations by Island Pacific

of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 promulgated

thereunder. “In order to find that [an individual defendant] aided and abetted [a company]’s

violation of federal securities laws, it must be found that: (1) [the company] violated the

relevant securities laws; (2) [the individual defendant] had knowledge of the primary violation

and of his or her own role in furthering it; and (3) [the individual defendant] provided

substantial assistance in the primary violation.” Ponce v. SEC, 345 F.3d 722, 737 (9th Cir.

2003) (citations omitted).

Issuers of securities registered pursuant to Section 12 of the Exchange Act are required

to file annual Forms 10-K and quarterly Forms 10-Q with the SEC. See Section 13(a) of the

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4

 As the Court ruled at the final pretrial conference on February 11, 2011, the Court

holds that Section 21(d)(1) of the Exchange Act, 15 U.S.C. § 78u(d)(1), enables the SEC to

bring a claim to enforce Rule 13a-14. See SEC v. Brown, 740 F. Supp. 2d 148, 164-65 (D.D.C.

2010) (“[T]he SEC’s claim to enforce Rule 13a-14 states a valid cause of action.”); see also

SEC v. Fuhlendorf, No. C09-1292, 2011 WL 999221, at *9 (W.D. Wash. Mar. 17, 2011)

(agreeing with Brown); SEC v. Das, No. 8:10cv102, 2010 WL 4615336, at *10 (D. Neb. Nov.

4, 2010) (agreeing with Brown); SEC v. Indigenous Global Dev. Corp., No. C-06-5600, 2008

U.S. Dist. LEXIS 50434 (N.D. Cal. June 30, 2008) (granting summary judgment in favor of

the SEC for a defendant’s violation of Rule 13a-14); but see SEC v. Black, No. 04C7377, 2008

WL 4394891, at *16-17 (N.D. Ill. Sept. 24, 2008) (“[A] false ... certification does not state an

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Exchange Act, 15 U.S.C. § 78m(a), and Rules 13a-1 and 13a-13 thereunder, 17 C.F.R. §§

240.13a-1 & 240.13a-13; see also 17 C.F.R. § 240.12b-20 (“In addition to the information

expressly required to be included in a statement or report, there shall be added such further

material information, if any, as may be necessary to make the required statements, in the light

of the circumstances under which they are made not misleading.”). These provisions require,

inter alia, that the reports filed be prepared in conformity with GAAP. See Ponce, 345 F.3d

at 735.

The SEC presented substantial evidence of a primary violation of Section 13(a) and

Rules 12b-20, 13a-1, and 13a-13. As discussed above, the SEC presented substantial evidence

that Island Pacific’s fiscal 2004 second and third quarter and annual reports were not prepared

in conformity with GAAP. As discussed above, the SEC presented substantial evidence that

Furman substantially assisted in the primary violation, and that Furman knew of the primary

violation and of his role in furthering it. The jury was entitled to find Furman’s testimony to

the contrary to be not credible. The evidence that other officers and/or shareholders of Island

Pacific approved of Furman’s actions is not sufficient to warrant overturning the jury’s finding

that each of the elements of aiding and abetting liability were satisfied as to Furman.

The Motion for Directed Verdict is denied as to the aiding and abetting claim.

C. Rule 13a-14

Rule 13a-14 provides: “Each report ... filed on Form 10-Q [or] Form 10-K ... under

Section 13(a) of the Act ... must include certifications.... Each principal executive and

principal financial officer of the issuer ... must sign a certification.” 17 C.F.R. §

240.13a-14(a).4

 Among the certifications made by Furman in the Forms 10-Q and the Form

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28 independent violation of the securities law.”); SEC v. Mozilo, No. CV09-3994, 2010 WL

3656068, at *21 (C.D. Cal. Sept. 16, 2010) (agreeing with Black).

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10-K was a certification that, based on his knowledge, the Forms 10-Q and Form 10-K fully

complied with the requirements of the Exchange Act and fairly presented, in all material

respects, Island Pacific’s financial condition and results of operations. As discussed above,

the SEC presented substantial evidence that Furman knew at the time that his certifications

were false.

The Motion for Directed Verdict is denied as to the Rule 13a-14 claim.

V. Conclusion

IT IS HEREBY ORDERED that the Motion for Directed Verdict is DENIED. (ECF

No. 143).

DATED: June 23, 2011

WILLIAM Q. HAYES

United States District Judge

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