Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-07-03416/USCOURTS-ca3-07-03416-0/pdf.json

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

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 06-5173

 

DAVID H. MARION, as receiver for Bentley

Financial Services, Inc.

v.

TDI INC, (f/k/a Traders and Dealers, Incorporated,

f/k/a TDI, Incorporated, f/k/a The Trading Desk, Inc. and

f/k/a U.S. Central Securities, Inc.; SOUTHEASTERN

SECURITIES INC.; SFG FINANCIAL SERVICES, INC.;

PENINSULA BANK; THEODORE BENGHIAT; CASTO

EDWIN RIVERA; JERRY MANNING; JOHN STRINE;

JEFFREY WILSON; JOSEPH MARZOUCA

v.

SANFORD GOLDFINE; S.D. GOLDFINE & CO.;

(Third-Party Defendants)

(D.C. No. 02-cv-07032)

DAVID H. MARION, as receiver for Bentley 

Financial Services, Inc.

v.

Case: 07-3416 Document: 00319967779 Page: 1 Date Filed: 01/04/2010
2

S.D. GOLDFINE & COMPANY; SANFORD GOLDFINE;

JEFFREY WILSON; JERRY MANNING; JOSEPH

MARZOUCA; THEODORE BENGHIAT; 

PENINSULA BANK; CASTO EDWIN RIVERA;

SFG FINANCIAL SERVICES, INC.; 

SOUTHEASTERN SECURITIES, INC.; JOHN STRINE;

THE TRADING DESK, INC. d/b/a TDI, INC.;

(D.C. No. 02-cv-07076)

Peninsula Bank; Joseph

Marzouca,

Appellants (No. 06-5173)

 

No. 06-5196

 

DAVID H. MARION, as receiver for Bentley

Financial Services, Inc.

v.

TDI INC, (f/k/a Traders and Dealers, Incorporated,

f/k/a TDI, Incorporated, f/k/a The Trading Desk, Inc. and

f/k/a U.S. Central Securities, Inc.; SOUTHEASTERN

SECURITIES INC.; SFG FINANCIAL SERVICES, INC.;

PENINSULA BANK; THEODORE BENGHIAT; CASTO

EDWIN RIVERA; JERRY MANNING; JOHN STRINE;

JEFFREY WILSON; JOSEPH MARZOUCA

Case: 07-3416 Document: 00319967779 Page: 2 Date Filed: 01/04/2010
3

 v.

SANFORD GOLDFINE; S.D. GOLDFINE & CO.;

(Third-Party Defendants)

(D.C. No. 02-cv-07032)

DAVID H. MARION, as receiver for Bentley 

Financial Services, Inc.

v.

S.D. GOLDFINE & COMPANY; SANFORD GOLDFINE;

JEFFREY WILSON; JERRY MANNING; JOSEPH

MARZOUCA; THEODORE BENGHIAT; 

JERRY MANNING; JOSEPH MARZOUCA;

PENINSULA BANK; CASTO EDWIN RIVERA; 

SFG FINANCIAL SERVICES, INC.;

SOUTHEASTERN SECURITIES, INC.; JOHN STRINE;

THE TRADING DESK, INC. d/b/a TDI, INC.;

(D.C. No. 02-cv-07076)

Southeastern Securities, Inc.; SFG 

Financial Services, Inc.; Theodore 

Benghiat,

Appellants (No. 06-5196)

 

No. 07-1010

 

Case: 07-3416 Document: 00319967779 Page: 3 Date Filed: 01/04/2010
4

DAVID H. MARION, as receiver for Bentley

Financial Services, Inc.,

Appellant (No. 07-1010)

v.

TDI INC, (f/k/a Traders and Dealers, Incorporated,

f/k/a TDI, Incorporated, f/k/a The Trading Desk, Inc. and

f/k/a U.S. Central Securities, Inc.; SOUTHEASTERN

SECURITIES INC.; SFG FINANCIAL SERVICES, INC.;

PENINSULA BANK; THEODORE BENGHIAT; CASTO

EDWIN RIVERA; JERRY MANNING; JOHN STRINE;

JEFFREY WILSON; JOSEPH MARZOUCA

v.

SANFORD GOLDFINE; S.D. GOLDFINE & CO.;

(Third-Party Defendants)

(D.C. No. 02-cv-07032)

DAVID H. MARION, as receiver for Bentley 

Financial Services, Inc.

v.

S.D. GOLDFINE & COMPANY; SANFORD GOLDFINE;

JEFFREY WILSON; JERRY MANNING; JOSEPH

MARZOUCA; THEODORE BENGHIAT; JERRY

MANNING; JOSEPH MARZOUCA;

PENINSULA BANK; CASTO EDWIN RIVERA; SFG

FINANCIAL SERVICES, INC.;

Case: 07-3416 Document: 00319967779 Page: 4 Date Filed: 01/04/2010
5

SOUTHEASTERN SECURITIES, INC.; JOHN STRINE;

THE TRADING DESK, INC. d/b/a TDI, INC.;

(D.C. No. 02-cv-07076)

 

No. 07-3398

 

DAVID H. MARION, as receiver for Bentley

Financial Services, Inc.

v.

TDI INC, (f/k/a Traders and Dealers, Incorporated,

f/k/a TDI, Incorporated, f/k/a The Trading Desk, Inc. and

f/k/a U.S. Central Securities, Inc.; SOUTHEASTERN

SECURITIES INC.; SFG FINANCIAL SERVICES, INC.;

PENINSULA BANK; THEODORE BENGHIAT; CASTO

EDWIN RIVERA; JERRY MANNING; JOHN STRINE;

JEFFREY WILSON; JOSEPH MARZOUCA

v.

SANFORD GOLDFINE; S.D. GOLDFINE & CO.;

(Third-Party Defendants)

(D.C. No. 02-cv-07032)

DAVID H. MARION, as receiver for Bentley 

Financial Services, Inc.

Case: 07-3416 Document: 00319967779 Page: 5 Date Filed: 01/04/2010
6

v.

S.D. GOLDFINE & COMPANY; SANFORD GOLDFINE;

JEFFREY WILSON; JERRY MANNING; JOSEPH

MARZOUCA; THEODORE BENGHIAT; 

PENINSULA BANK; CASTO EDWIN RIVERA;

SFG FINANCIAL SERVICES, INC.; SOUTHEASTERN

SECURITIES, INC.; JOHN STRINE; THE TRADING

DESK, INC. d/b/a TDI, INC.;

(D.C. No. 02-cv-07076)

Peninsula Bank; Joseph

Marzouca,

Appellants (No. 07-3398)

 

No. 07-3416

 

DAVID H. MARION, as receiver for Bentley

Financial Services, Inc.

v.

TDI INC, (f/k/a Traders and Dealers, Incorporated,

f/k/a TDI, Incorporated, f/k/a The Trading Desk, Inc. and

f/k/a U.S. Central Securities, Inc.; SOUTHEASTERN

SECURITIES INC.; SFG FINANCIAL SERVICES, INC.;

PENINSULA BANK; THEODORE BENGHIAT; CASTO

EDWIN RIVERA; JERRY MANNING; JOHN STRINE;

Case: 07-3416 Document: 00319967779 Page: 6 Date Filed: 01/04/2010
7

JEFFREY WILSON; JOSEPH MARZOUCA

v.

SANFORD GOLDFINE; S.D. GOLDFINE & CO.;

(Third-Party Defendants)

(D.C. No. 02-cv-07032)

DAVID H. MARION, as receiver for Bentley 

Financial Services, Inc.

v.

S.D. GOLDFINE & COMPANY; SANFORD GOLDFINE;

JEFFREY WILSON; JERRY MANNING; JOSEPH

MARZOUCA; THEODORE BENGHIAT; 

PENINSULA BANK; CASTO EDWIN RIVERA;

SFG FINANCIAL SERVICES, INC.; SOUTHEASTERN

SECURITIES, INC.; JOHN STRINE; THE TRADING

DESK, INC. d/b/a TDI, INC.;

(D.C. No. 02-cv-07076)

Southeastern Securities, Inc.; SFG

Financial Services, Inc.; Theodore

Benghiat,

Appellants (No. 07-3416)

Case: 07-3416 Document: 00319967779 Page: 7 Date Filed: 01/04/2010
8

 

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action Nos. 02-cv-07032/76)

District Judge: Honorable John P. Fullam

 

Argued December 1, 2008

 

Before: AMBRO, WEIS, and 

VAN ANTWERPEN, Circuit Judges

(Opinion filed: January 4, 2010)

Eugene E. Stearns, Esquire (Argued)

Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson

150 West Flagler Street, Suite 2200

Miami, FL 33130-0000

Alan K. Cotler, Esquire

Reed Smith

1650 Market Street

2500 One Liberty Place

Philadelphia, PA 19103-7301

Counsel for Appellants/Cross-Appellees

Peninsula Bank, Joseph Marzouca

Laurence A. Mester, Esquire (Argued)

Grossman Law Firm

Case: 07-3416 Document: 00319967779 Page: 8 Date Filed: 01/04/2010
9

1333 Race Street

Philadelphia, PA 19107-0000

Counsel for Appellant/Cross-Appellees

Southeastern Securities Inc., 

SFG Financial Services, Inc.

Theordore Benghiat

David D. Langfitt, Esquire

John H. Lewis, Jr., Esquire (Argued)

Montgomery, McCracken, Walker & Rhoads

123 South Broad Street, 24th Floor

Philadelphia, PA 19109-0000

Counsel for Appellees/Cross Appellants

David H. Marion, Esquire

 

OPINION OF THE COURT

 

AMBRO, Circuit Judge 

A receiver for a corporation through which a Ponzi

scheme was run brought suit against various third-parties

alleged to have assisted the scheme, ultimately winning a multimillion-dollar jury verdict. The receiver’s theory of the case

was that the defendants, in concert with the corporation’s chief

officer, had harmed the corporation by saddling it with

additional liability to the scheme’s victims. Following a verdict

Case: 07-3416 Document: 00319967779 Page: 9 Date Filed: 01/04/2010
Robert Bentley established BFS with his brother David 1

Bentley. Robert bought David out in 1993, well before the

scheme began.

10

in the receiver’s favor, the defendants unsuccessfully moved for

judgment as a matter of law, arguing, among other things, that

the receiver lacked standing to bring the claims submitted to the

jury and that the evidence was insufficient to support the jury’s

verdict. We agree with the receiver that, under our case law, he

had standing to bring the claims presented to the jury. But we

agree with the defendants that they cannot be liable to the

corporation on the facts presented at trial. Accordingly, we

vacate the District Court’s denial of the defendants’ post-trial

motion for judgment of law and remand with instructions to

enter judgment in their favor.

I. Facts and Procedural History

A. The Bentley Scheme

In 1986, Robert Bentley established Bentley Financial

Services, Inc. (“BFS”), a Pennsylvania corporation, through

which he brokered bank-issued certificates of deposit (CDs).1

In 1993, Bentley formed the Entrust Group (“Entrust”), a

Pennsylvania sole proprietorship, to act as custodian on BFSbrokered transactions. In the CD-selling industry, the broker is

responsible for connecting CDs available for purchase from

banks with particular investors. The custodian then collects the

money from each investor, wires it to the issuing bank and holds

Case: 07-3416 Document: 00319967779 Page: 10 Date Filed: 01/04/2010
 There are multiple forms of mismatching, many of 2

which were used by Bentley as part of his scheme. We focus

only on this form—the selling of shortened maturities—in order

to provide a general idea of how Bentley’s scheme worked. In

this regard, unless the context requires otherwise, any reference

to Bentley in this subsection A, and subsection B, includes as

well BFS and Entrust.

11

onto the CD, while issuing a “safekeeping receipt” to the

investor indicating that it has title to the CD held by the

custodian.

The CD seller’s profit (often called the “spread”) comes

from the difference between the terms of the CD purchased from

the bank and the terms on which the CD is sold to the investor.

In a simple case, a CD offered by a bank might provide a 5%

interest rate on a two-year maturity, which the broker would

then offer to the investor as a two-year CD at 4.5% interest,

taking the interest-rate difference as profit.

A more complex, and risky, way a CD broker can profit

is by mismatching maturity dates. In one form of maturity

mismatching, a broker locks in a particular interest rate for a 2

long-term CD and then, rather than selling it as a long-term CD

to an investor, sells it as a series of short-term CDs, hoping to

profit from the difference between the market rate for interest in

Case: 07-3416 Document: 00319967779 Page: 11 Date Filed: 01/04/2010
 The risk to the broker, of course, is that interest rates on 3

short-term CDs will increase higher than the locked-in longterm rate.

12

short-term CDs and the long-term rate the broker locked in.3

However, if a purchaser of one of these short-term CDs wants

the investment back at the end of the shortened maturity period

(rather than rolling over the investment), the broker cannot

simply get the principal back from the bank from whom the

broker purchased the long-term CD. In those circumstances, the

broker typically has three options: (1) find another investor for

a new short-term CD and return the outgoing investor’s

principal from the proceeds of that sale; (2) “warehouse” the

long-term CD with a cooperating bank that agrees to purchase

the long-term CD temporarily until an investor for a new shortterm CD can be found, thus allowing the broker to pay the

outgoing investor out of the money loaned by the cooperating

bank; or (3) require the investor to stay locked in to the longterm CD until its actual maturity date or until a substitute

investor can be found to provide the money to pay the outgoing

investor. This form of mismatching is legal as long as the

mismatch is disclosed to the investor (including the fact that the

investor may not be able to reclaim its principal at the maturity

date stated in the investment contract).

Bentley’s operation deviated from the standard business

Case: 07-3416 Document: 00319967779 Page: 12 Date Filed: 01/04/2010
 As indicated already, the account that follows simplifies 4

Bentley’s scheme.

 A “Ponzi scheme” gets its name from Charles Ponzi, 5

who was infamous in the early part of the 20th Century for

devising a scam operation that paid returns to investors not from

the profits earned on investments but from monies paid by later

investors.

13

model described above in at least two crucial respects. First, 4

and most dramatically, in 1996 Bentley started selling fictitious

CDs. As his own custodian, he could fool investors by issuing

bogus safekeeping receipts. According to Bentley, the decision

to sell fake CDs traced back to 1994 or 1995, when Entrust

obtained a $2 million credit line, secured by commissions, for

cash flow management. In an act that Bentley would later

describe as rooted in impatience, he forged his accountant’s

signature in a letter certifying the collateral. The bank

discovered the forgery in 1996 and called the balance on the

credit line, threatening Bentley’s business. To repay the loan,

Bentley created and sold the fictitious CDs. Because Bentley

used the proceeds of the sales to pay down the loan—rather than

to purchase CDs that would generate interest while retaining the

initial investment—he could only pay the investors the interest

and principal owed on the fake CDs by obtaining money from

new investors (money that, in turn, could not all be used to buy

new CDs).

That was the birth of Bentley’s Ponzi scheme. His 5

Case: 07-3416 Document: 00319967779 Page: 13 Date Filed: 01/04/2010
 The risk to the investor who purchases a CD with a 6

shortened maturity backed by a CD with a longer maturity is

that it might not be able to get the principal out on the shortened

maturity date.

14

ability to meet his obligations to past investors depended on his

ability to obtain money from new investors, forcing Bentley to

continue the scheme or default.

Trying to escape the financial hole he was digging,

Bentley pursued a strategy of aggressive maturity mismatching.

He purchased long-term CDs, hoping that, if interest rates on

short-term CDs went down, he could generate enough from the

mismatch that he would no longer need to sell fictitious CDs to

meet his obligations as they came due.

That led to a second way in which Bentley’s enterprise

deviated from an above-board CD brokerage operation.

Because Bentley’s customer base comprised primarily

conservative investors such as credit unions, he failed to

disclose the mismatching. Thus, investors who purchased 6

mismatched short-term CDs did not know they were actually

purchasing interests in long-term CDs. If such an investor

wanted its principal back at the end of the stated (that is,

shortened) maturity date, Bentley could not force the investor to

stay with the long-term CD without revealing its true nature.

Instead, he quickly had to find some way to generate the cash

necessary to return the principal, often (when he guessed wrong

about the direction of interest rates) by selling another

Case: 07-3416 Document: 00319967779 Page: 14 Date Filed: 01/04/2010
15

mismatched short-term CD to a new investor at a higher rate of

interest than the one he initially got from the bank on the longterm CD.

Thus, though Bentley was in fact purchasing

CDs—rather than simply recycling, or embezzling, the money

he obtained from investors—his scheme still embodied some of

the classic features of a Ponzi. In many cases, investors were

not purchasing what they thought they were purchasing. Either

(as in the case of the fictitious CDs) there was no underlying

CD, or (as in the case of the CDs used as part of Bentley’s

mismatching strategy) the terms of the underlying CD did not

match what had been disclosed to the investor. And Bentley’s

ability to make good on his obligations to his investors

depended in significant part on his finding new investors.

B. Benghiat and Marzouca

This appeal centers on the relationship between Bentley’s

scheme and two figures who would later become defendants in

this case—Ted Benghiat and Joseph Marzouca. Benghiat

owned two Florida firms—(1) SFG Financial, Inc. (“SFG”), a

CD broker with whom BFS frequently served as a co-broker

(with SFG acting as the “wholesale broker,” locating available

CDs from banks, and BFS acting as the “retail broker,”

connecting those CDs to particular clients); and (2) Southeastern

Securities, Inc. (“SSI”), a securities firm. Marzouca was VicePresident of Peninsula Bank, a Florida bank that had an ongoing

relationship with SFG as a warehouser of its CDs, and that later

Case: 07-3416 Document: 00319967779 Page: 15 Date Filed: 01/04/2010
16

served as a custodian (along with Entrust) on a number of BFS’s

sales. When Peninsula Bank and Entrust worked together as

custodians, Peninsula Bank acted as the “superior custodian,”

while Entrust acted as the “sub-custodian.” That means that

Peninsula Bank would purchase the CD from the bank and hold

it, while issuing a safekeeping receipt to Entrust, which would

then issue a separate safekeeping receipt to the investor.

Graphically depicted, the relationship between the issuing

banks, SFG, Peninsula Bank and Bentley’s two firms (BFS and

Entrust) went as follows:

Banks

(CD Issuers)

SFG (Benghiat)

(Wholesale Broker)

Peninsula Bank (Marzouca)

(Superior Custodian)

BFS (Bentley)

(Retail Broker)

Entrust (Bentley)

(Sub-Custodian)

The primary issue in dispute at trial was whether, and to

what extent, Benghiat and Marzouca knew about Bentley’s

scheme. Bentley testified that Benghiat knew Bentley was

mismatching maturities without telling his investors and had

urged him to disclose it (he did not), but Bentley did not claim

to have told either Benghiat or Marzouca directly about his sale

of fake CDs. What is undisputed is that (knowingly or not)

Benghiat and Marzouca helped the scheme stay afloat in at least

two ways. First, Bentley’s investors would sometimes call

Case: 07-3416 Document: 00319967779 Page: 16 Date Filed: 01/04/2010
 This refers to what, in the period running up to the turn 7

of the millennium, was feared to be a glitch in computer recordkeeping where, because of the practice of abbreviating four-digit

years to two digits for data-entry purposes, information would

be lost in the transition from 1999 to 2000.

17

issuing banks listed on their safekeeping receipts to confirm that

the banks really issued the CDs. Because the banks only knew

the identities of the superior custodians to which they issued the

CDs, they referred questions to Marzouca at Peninsula Bank.

He forwarded them to Benghiat, who called Bentley with the

names of curious investors. Bentley would then cash the

investors out immediately, waiving any penalty associated with

early withdrawal, to avoid further questions.

Second, on three occasions Benghiat and Marzouca

helped Bentley obtain the cash necessary to keep Bentley’s

operation afloat. The first of these occasions took place in late

1999. Investors spooked by rumors of a Y2K computer bug7

refused to roll over their short-term CDs, forcing Bentley to

return $138 million in principal. Rates on short-term CDs were

rising, souring his gamble on long-term CDs and forcing him to

pay higher rates to attract money. Bentley raised most of the

cash he needed by finding new investors and liquidating

between $5 million and $20 million of his risky long-term CDs

on the open market. But he also turned to Benghiat for help.

Benghiat spoke with Marzouca, and together the three

parties engineered what they styled as a “warehousing”

Case: 07-3416 Document: 00319967779 Page: 17 Date Filed: 01/04/2010
Whether this transaction, and the similar ones that 8

followed, should be characterized as a “loan,” rather than a

“sale”, was subject to much dispute at trial. We take no

position.

18

transaction between Bentley’s operation and Peninsula Bank.8

Under the arrangement, Peninsula Bank agreed to purchase

temporarily up to $10 million in CDs from Bentley in exchange

for (1) a non-refundable $100,000 fee to be split between

Marzouca and Benghiat, (2) interest on the CDs plus any

shortfall between such interest and the prevailing prime rate of

interest, and (3) a $1 million security deposit from Entrust

intended to cover the difference (if any) between the purchase

price of the CDs and the amount for which Peninsula Bank

resold them. The deposit was subject to forfeiture if the Bank

failed to sell all the CDs within 120 days. Bentley sold $6.8

million in CDs to Peninsula Bank under this arrangement in

October and November 1999, repurchasing them within 120

days at a total loss in fees and interest of approximately

$300,000. Two more warehousing transactions at virtually the

same terms followed in 2000 and 2001.

Finally, Bentley had a side business brokering securities,

such as bonds. For about 18 months starting at the end of 1998,

he brokered securities for SSI (Benghiat’s firm) on a

commission basis. Because of this relationship, the National

Association of Securities Dealers (NASD), of which SSI was a

member, required SSI to supervise Bentley’s operation. But,

based on legal advice it received, SSI concluded that it was not

Case: 07-3416 Document: 00319967779 Page: 18 Date Filed: 01/04/2010
19

responsible for Bentley’s CD business because the Securities

and Exchange Commission does not regulate CDs. Benghiat

therefore limited SSI’s supervision to the (much smaller) nonCD aspects of Bentley’s operation. When lawyers for SSI

started to worry that the SEC would regulate CDs, SSI (through

Benghiat) terminated Bentley in August 2000, citing Bentley’s

“other activities.”

In September 2001, a Texas bank that had purchased fake

CDs from Bentley tried to confirm its ownership. As usual,

Marzouca forwarded the request through Benghiat to Bentley,

who ultimately bought back the fake CDs from the Texas bank

after acquiring $7.5 million from Peninsula Bank (in the final of

the three warehousing transactions) to do it. But the Texas bank

alerted regulators, and, shortly thereafter, the scheme was

exposed. Bentley later pled guilty to one count of mail fraud for

selling worthless certificates of deposit and one count of bribery

(relating to an aspect of the scheme not at issue in this appeal).

He was sentenced to 55 months’ imprisonment and ordered to

pay $38 million in restitution.

C. The Civil Proceedings

In October 2001, the SEC filed a civil action against

Bentley, BFS and Entrust (collectively, the “Bentley

defendants”) in the Eastern District of Pennsylvania. In

November 2001, the District Court appointed David H. Marion

as receiver for the Bentley defendants pursuant to 28 U.S.C.

§ 754, giving him “complete jurisdiction over, and control of all

Case: 07-3416 Document: 00319967779 Page: 19 Date Filed: 01/04/2010
 In addition to this action against Benghiat and 9

Marzouca, various BFS investors later filed an action against

them in Pennsylvania state court. In a letter accompanying the

writ of summons served on Benghiat and Marzouca in that case,

the plaintiffs explained that “we have filed this action as a

protective measure in the event the Receiver’s claims are

dismissed for lack of standing. Assuming resolution of the

Receiver’s lawsuits fully addresses the pertinent issues, we

would have no reason to ever file a Complaint . . . .”

20

the property, real, personal or mixed, . . . wherever located[,] of

[Bentley, BFS, and Entrust].” In August 2002, Marion brought

an action (on behalf of BFS only) against, among others,

Benghiat, SFG and SSI (collectively referred to hereinafter as

“Benghiat”) and Marzouca and Peninsula Bank (collectively

referred to hereinafter as “Marzouca”). As amended, the 9

complaint characterized the action as one “to recover damages

from defendants for injuries, losses, obligations and liabilities

suffered by and imposed upon [BFS] as a result of, inter alia, a

fraudulent scheme orchestrated by [Bentley], and others

(including the defendants).” The complaint alleged that the

defendants had allowed the scheme to succeed “for as long as it

did” by, among other things, failing properly to supervise

Bentley in the face of a duty to do so, and “infus[ing] the

Bentley scheme with additional cash despite knowledge of the

precarious financial condition of BFS and its inability to honor

its investment contracts.”

The case was tried in June 2006. On the claims presented

Case: 07-3416 Document: 00319967779 Page: 20 Date Filed: 01/04/2010
 It was explained that, to find Benghiat and Marzouca 10

liable on either the aiding and abetting claim or the conspiracy

claim, the jury had to find that they were aware of Bentley’s

scheme when they arranged the different warehousing

transactions.

21

to the jury, there were three separate bases for finding liability.

The jury could find that, in arranging the three warehousing

transactions with Bentley, Benghiat and Marzouca had either (1)

aided and abetted, or (2) conspired in, Bentley’s fraud. Or (3) 10

the jury could find (with respect to Benghiat only) that he was

liable for Bentley’s fraud under a respondeat superior theory for

failing to exercise adequate supervision during the period in

which Bentley sold securities for SSI.

In addition, Marion submitted three separate measures of

damages to the jury. The first, which came to $32,774,330,

corresponded to the sums owed on the “new money” invested in

the scheme after August 6, 1999 (when Bentley first enlisted the

aid of Benghiat and Marzouca). The second measure, which

came to $31,414,979, corresponded to BFS’s total insolvency

(the difference between its assets and its liabilities) as of

October 23, 2001, the day before the receiver was appointed.

The final measure corresponded to the amount by which BFS’s

insolvency increased between August 6, 1999 and October 23,

2001.

Case: 07-3416 Document: 00319967779 Page: 21 Date Filed: 01/04/2010
The precise ground on which the jury found the 11

defendants liable was not specified. The interrogatory submitted

to the jury simply asked (for Benghiat and Marzouca separately)

whether each had “conspired with or aided and assisted Robert

Bentley in his fraudulent activities.” No separate interrogatory

was provided for the respondeat superior claim, nor were the

conspiracy and aiding and abetting claims distinguished.

 Benghiat and Marzouca also argued that the doctrine of 12

in pari delicto (that a plaintiff cannot recover for damages from

a defendant when the plaintiff is partly at fault) barred Marion,

as a receiver stepping into BFS’s shoes, from recovering for

harm caused by Bentley’s scheme. 

22

The jury found both Benghiat and Marzouca liable. It 11

assigned damages in the amount of $13,109,732 to Marzouca

and $19,664,598 to Benghiat, sums that, when added up, equal

the $32,774,330 under the first measure of damages listed above

(the “new money” damages).

Benghiat and Marzouca moved for judgment as a matter

of law, arguing both that Marion lacked standing to bring the

claims presented to the jury and that, at any rate, the evidence

did not support the verdict. Marion moved to mold the verdict 12

to reflect joint and several liability. The District Court denied

all the parties’ motions. Benghiat and Marzouca later moved for

relief from judgment, after discovering that Marion purportedly

had prevented one of his experts from stating his opinion that

there were no damages in the case. The Court denied that

motion as well, and both parties appeal from the denial of their

Case: 07-3416 Document: 00319967779 Page: 22 Date Filed: 01/04/2010
23

various post-trial motions.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction pursuant to 15 U.S.C.

§§ 77v(a) & 78aa over Marion’s claims against Benghiat and

Marzouca because those claims were ancillary to a suit

obtaining judgment against the Bentley defendants under federal

securities law. See Pope v. Louisville, New Albany & Chicago

R.R., 173 U.S. 573, 577 (1899); Donell v. Kowell, 533 F.3d 762,

769 (9th Cir. 2008). We have jurisdiction under 28 U.S.C. §

1291.

We review a District Court’s “denial of judgment as a

matter of law de novo, viewing the evidence in the light most

favorable to the prevailing party.” Acumed LLC v. Advanced

Surgical Servs., 561 F.3d 199, 211 (3d Cir. 2009) (quoting

Monteiro v. City of Elizabeth, 436 F.3d 397, 404 (3d Cir. 2006)

(internal quotation marks omitted). For Benghiat and

Marzouca’s challenge to Marion’s standing, we review the

District Court’s legal conclusions de novo, “but review for clear

error the factual elements underlying the District Court’s

determination of standing.” Gen. Instrument Corp. v. Nu-Tek

Elecs. & Mfg., 197 F.3d 83, 86 (3d Cir. 1999). For Benghiat

and Marzouca’s challenge to the sufficiency of the evidence

against them, we “may grant . . . judgment as a matter of law

contrary to the verdict only if ‘the record is critically deficient

of the minimum quantum of evidence’ to sustain the verdict.”

Acumed, 561 F.3d at 211 (quoting Gomez v. Allegheny Health

Case: 07-3416 Document: 00319967779 Page: 23 Date Filed: 01/04/2010
 In challenging the sufficiency of the evidence against 13

them, Benghiat and Marzouca focus particular attention on the

argument that the evidence was insufficient to show that they

had knowledge of Bentley’s scheme when they (allegedly)

contributed to it. Because we believe that their contributions to

Bentley’s scheme, even if knowing, could not give rise to

liability to BFS (transferred to Marion standing in BFS’s shoes),

we do not reach that issue.

24

Servs., Inc., 71 F.3d 1079, 1083 (3d Cir. 1995)).

III. Discussion

Benghiat and Marzouca challenge the jury’s verdict

against them on multiple grounds, including whether Marion

had standing to bring the claims on which they were found liable

and whether the evidence was sufficient to support the verdict

against them. Our case law requires that we side with Marion

on the standing issue, but we agree with Benghiat and Marzouca

that neither can be liable to Marion (as BFS’s receiver) for the

actions over which the jury passed judgment.13

A. Standing

To begin, we must confront Benghiat and Marzouca’s

argument that Marion lacked standing to bring the claims

presented to the jury. See Steel Co. v. Citizens for a Better

Env’t, 523 U.S. 83, 94–95 (1998) (explaining that the issue of

standing, because it implicates a federal court’s authority to hear

Case: 07-3416 Document: 00319967779 Page: 24 Date Filed: 01/04/2010
25

a case, must be addressed as a threshold matter). Benghiat and

Marzouca argue that Marion lacked standing because the

injuries for which he sought compensation were those of the

investors victimized by Bentley’s scheme, not BFS. Marion

concedes that, acting as the receiver for BFS, he could only

bring suit to address injuries to BFS. Marion’s Br. at 42–43.

His argument is that, appearances to the contrary, the harm over

which he asked the jury to pass judgment was to BFS.

Intuitively, Benghiat and Marzouca seem correct. That

is, this action certainly has the look and feel of an effort to avoid

the general rule that an “equity receiver may sue only to redress

injuries to the entity in receivership.” Scholes v. Lehmann, 56

F.3d 750, 753 (7th Cir. 1995) (Posner, J.,); see also Donell, 533

F.3d at 777; Eberhard v. Marcu, 530 F.3d 122, 132 (2d Cir.

2008); Javitch v. First Union Sec., Inc., 315 F.3d 619, 627 (6th

Cir. 2003); Fla. Dep’t of Ins. v. Chase Bank of Tex, N.A., 274

F.3d 924, 931 (5th Cir. 2001); Goodman v. FCC, 182 F.3d 987,

991–92 (D.C. Cir. 1999); Fleming v. Lind-Waldock & Co., 922

F.2d 20, 25 (1st Cir. 1990). That is the impression left by some

of the remarks made by Marion’s counsel to the jury over the

course of the trial. 

In his opening statement at trial, Marion’s attorney

asserted that “the purpose of this . . . case is to obtain a verdict

so that all the victims of the Bentley scheme can be paid what

they [are] owed.” In that same statement, he described Marion’s

job as a receiver as being “to help the victims of the scheme” by

first “collect[ing] the money” still existing in the scheme, and

Case: 07-3416 Document: 00319967779 Page: 25 Date Filed: 01/04/2010
26

then “investigat[ing] . . . to see if claims should be made against

all those who worked with [Bentley] so that all the obligations

to the victims can be paid.” In asking the jury for damages in

his closing argument, Marion’s counsel contended that

“[f]undamental fairness requires that at a minimum the investors

get back the full amount of their principal and the interest they

were promised,” and described the measure of damages

ultimately awarded—the “new money” damages—as “what the

receiver needs in order to repay the investors what they are

owed.”

 Marion retorts that more important than these remarks

was the District Judge’s actual jury charge, to wit:

The receiver has an obligation to take over the

assets of the business . . . , and also is empowered

to collect any monies that might be due the

businesses.

The lawsuit is an attempt by the receiver to collect

money which the receiver claims should be paid

to the receivership as due the receivership because

of the implication of the defendants in some of

Mr. Bentley’s activities.

In this context, we do not take the remarks of Marion’s

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No doubt some of the remarks of Marion’s counsel 14

(especially those delivered in his closing argument) implied that

the jury’s task was to determine whether Benghiat and

Marzouca caused the investors compensable injuries. That

certainly supports the notion that Marion was really pursuing the

claims of Bentley’s victims. Yet, if there were a cognizable

theory of injury underlying Marion’s claims, and the problem

was simply that his attorney mischaracterized those claims, the

remedy would be to order a new trial (provided that the requisite

level of prejudice was shown), not to dismiss the case for lack

of standing. See Forrest v. Beloit Corp., 424 F.3d 344, 351 (3d

Cir. 2005) (explaining that a new trial is warranted when

counsel makes “improper statements” and it is “reasonably

probable” that the “verdict was influenced by the resulting

prejudice”). Because we believe the trial evidence was

insufficient to support the verdict, we need not discuss this issue

further.

27

counsel as necessarily decisive for standing purposes.14

Moreover, it is undisputed that Marion was acting for the benefit

of the investors (even though he lacked authority to bring claims

directly on their behalf). See Wuliger v. Mfrs. Life Ins. Co., 567

F.3d 787, 795 (6th Cir. 2009) (“[T]he purpose of a receiver [is]

to marshal the receivership entities’ assets . . . so that the assets

may be distributed to the injured parties in a manner the court

deems equitable.”); SEC v. Hardy, 803 F.2d 1034, 1038 (9th

Cir. 1986) (“[A] primary purpose of equity receiverships is to

promote orderly and efficient administration of the estate . . . for

the benefit of creditors.”). As we have explained in the

analogous bankruptcy context, it is irrelevant to the issue of

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 A bankruptcy trustee lacks authority to bring a claim 15

directly on behalf of the debtor’s creditors. See Caplin v.

Marine Midland Trust Co., 406 U.S. 416, 421–34 (1972). Thus,

the standing issue in the bankruptcy context is the same one we

face here—determining to whom the claims being brought

belong.

28

standing that “a successfully prosecuted cause of action [will

result in] an inflow of money to the estate that will immediately

flow out again to repay creditors.” Official Comm. of 15

Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340,

348–49 (3d Cir. 2001). 

We thus turn to the heart of the standing issue—whether

a distinct injury to BFS underlay Marion’s claims. In his

supplemental briefing before us, Marion describes his theory of

liability as follows: Benghiat and Marzouca, through their

actions (and, in Benghiat’s case, omissions as well), allowed

Bentley’s scheme to continue, and this “damaged the

responsible corporation (BFS) . . . because . . . it is inevitable in

a Ponzi scheme that there will be obligations that the

corporation is unable to pay when the scheme is exposed.”

Marion’s Supp’l Br. at 2. In other words, the claim is that

Benghiat and Marzouca helped Bentley, and that help harmed

BFS because it caused BFS to enter into more losing investment

contracts than it otherwise would have. That (according to

Marion) is why it was appropriate for the damages awarded to

compensate BFS to equal the money owed to investors who

came on board after Benghiat and Marzouca’s involvement—the

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 In denying Benghiat and Marzouca’s post-trial motion 16

for judgment as a matter of law, the District Court framed

Marion’s theory as follows: “Bentley . . . breached his fiduciary

duty to the corporation by subjecting it to liability for fraud, and

[Benghiat and Marzouca] assisted him in doing so.” Marion v.

TDI, Inc., Nos. 02-7032 & 02-7076, 2006 WL 3742747, at *2

(E.D. Pa. Dec. 14, 2006). The problem here is that an aiding

and abetting a breach-of-fiduciary-duty claim was never

presented to the jury. The only claims presented were for aiding

and abetting, or conspiring in, Bentley’s fraud, or otherwise

assuming responsibility (in Benghiat’s case) for the fraud on a

respondeat superior theory.

 Such a suit might, however, be vulnerable to the 17

defense of in pari delicto, which embodies the idea “that a

plaintiff wrongdoer cannot recover from a defendant

wrongdoer.” In re: CitX Corp., 448 F.3d 672, 681 n.12 (3d Cir.

2006). However, the in pari delicto issue is separate from that

of standing, which is what we deal with here. See Lafferty, 267

F.3d at 346 (explaining that “[a]n analysis of standing does not

29

harm to BFS was essentially the harm in taking on additional

liability to the defrauded investors.16

This claim, if plausible (and for purposes of this opinion

we assume it is), steps over the relatively low standing

threshold. A receiver no doubt has standing to bring a suit on

behalf of the debtor corporation against third parties who

allegedly helped that corporation’s management harm the

corporation. Though Bentley controlled BFS, its separate 17

Case: 07-3416 Document: 00319967779 Page: 29 Date Filed: 01/04/2010
include an analysis of equitable defenses, such as in pari

delicto”).

30

corporate form makes it possible under our precedent to allege

that Bentley (and those who helped him) harmed BFS. See

Lafferty, 267 F.3d at 348 (“In Pennsylvania, as in almost every

other state, ‘a corporation is a distinct and separate entity,

irrespective of the persons who own all its stock.’” (quoting

Barium Steel Corp. v. Wiley, 108 A.2d 336, 341 (Pa. 1954))).

We found standing to bring a suit with that basic structure in

Lafferty (albeit in the bankruptcy context), id. at 346–354, and

other courts have done so specifically in the receiver context.

See, e.g., Donell, 533 F.3d at 777; Scholes, 56 F.3d at 753–54.

We confess to being less comfortable with what Marion’s

theory identifies as the actual harm to BFS—essentially the

harm of being responsible for the injury caused in the first

instance to the investors. That seems to eliminate the cogency

of any distinction between harm to the debtor and harm to the

creditors. Yet we recognize that Marion’s theory of injury finds

support in the law of our Court. In Lafferty, we held that a

creditors’ committee, acting on behalf of a corporation, had

standing to bring suit against third-party professionals who had

allegedly conspired with the corporation’s management to

prolong the Ponzi scheme operated through it. 267 F.3d at

346–54. We based standing on the notion that, under

Pennsylvania law, the third-party defendants, by offering

“professional opinions” that were alleged to have wrongfully

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Thabault does not appear to have addressed the issue 18

of standing directly. Its discussion of what constitutes a distinct

injury to the insurance company arose in the context of

considering a challenge to the damages awarded to the receiver

for that company. Id. at 518–23.

31

helped the scheme evade detection, had injured the corporation

by deepening its insolvent condition. Id. at 347.

Thabault v. Chait, 541 F.3d 512 (3d Cir. 2008), is even

more helpful to Marion. There we held that a corporation

suffered injury “separate from an injury to its creditors” when

allegedly negligent auditing allowed it to write insurance

policies that it lacked the reserves to cover, a conclusion we

based on the notion that “an increase in liabilities is a harm to

the company.” Id. at 523; see also id. at 521 (“[T]he damages 18

here are losses incurred on insurance policies that would not

have been written but for [the auditor’s] negligence.”). That

seems to be more or less the theory on which Marion

proceeded—that Benghiat and Marzouca injured BFS because

their actions led it to take on additional liability to the investors.

With our case law framing the context, we conclude that

Marion sufficiently alleged an injury distinct to BFS (suffered

at the hands of Benghiat and Marzouca) to get past the standing

threshold. See Lujan v. Defenders of Wildlife, 504 U.S. 555,

560–61 (1992) (explaining that standing requires (1) a

cognizable injury suffered by the plaintiff, that is (2) fairly

traceable to the challenged actions of the defendant, and (3)

Case: 07-3416 Document: 00319967779 Page: 31 Date Filed: 01/04/2010
Because the jury found both Benghiat and Marzouca 19

liable, it had to have found (1) to be true. We do not know

whether it also found (2) to be true, and can only speculate that

it did based on its having apportioned more liability to Benghiat

than Marzouca.

32

redressable by a court). Probing Marion’s theory any further

would, we believe, take us into a discussion of the merits of his

claims, something separate from the standing inquiry. See

Warth v. Seldin, 422 U.S. 490, 500 (1975) (“[S]tanding in no

way depends on the merits of the plaintiff’s contention that

particular conduct is illegal . . . .”). 

B. The Merits

We turn to the merits directly, and here the outcome is

less happy for Marion. There are two factual determinations

that the jury could have made in finding both Benghiat and

Marzouca liable—(1) that Benghiat and Marzouca helped

Bentley infuse cash into his operation knowing that the money

would be used to keep the scheme afloat; and (2) (in Benghiat’s

case only) that he failed to exercise adequate supervision over

Bentley’s CD-brokerage operation during a time in which

Bentley sold securities for SSI. 

19

Neither of those findings, however, could give rise to

liability to Marion standing in BFS’s shoes. In the case of the

first finding, the requisite causal link between Benghiat and

Marzouca’s actions and the harm BFS allegedly suffered (i.e.,

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33

economic loss) is missing. In the case of the second finding, the

relevant breach of a duty would have been to the investors, not

BFS. Thus, in neither case is the verdict supported by the

evidence.

1. The Warehousing Transactions

In instructing the jury, the District Court summarized

Marion’s theory with regard to the warehousing transactions

entered into between Bentley, Benghiat and Marzouca as

follows:

[T]he fundamental contention is

that if the money had not been put

up by [Peninsula Bank when it

was,] . . . the fraudulent scheme

would have terminated at that time

because Mr. Bentley was running

out of money and could not have

continued and, therefore[,] . . . the

damages amount to all of the

money that was invested in the

receivership estate after the loan

was agreed to.

This cannot serve as a basis for finding Benghiat and Marzouca

liable to Marion (substituting for BFS). Our cases make clear

that there cannot be liability to a corporation for increasing its

short-term liquidity. This is so even where (as alleged here) the

new money brought into the company allowed it to stay afloat

Case: 07-3416 Document: 00319967779 Page: 33 Date Filed: 01/04/2010
34

long enough to put itself in a worse position than it was in prior

to the cash infusion. See In re CitX Corp., 448 F.3d 672, 677-78

(3d Cir. 2006); Thabault, 541 F.3d at 521.

The problem in this kind of scenario is one of proximate

causation. Between the initial act (the injecting of money into

the business) and the end result (the expansion of the company’s

debt relative to where it was prior to the cash infusion) stand the

intervening acts of the company’s management (i.e., what it

chose to do with the money). We illustrated this point in CitX.

There the trustee for a company that had operated a Ponzi

scheme brought suit against the company’s accounting firm,

arguing that the firm’s negligent financial reports had allowed

it to hide its true financial condition from investors, thus raising

more money and eventually going even deeper into debt. 448

F.3d at 674–78. We held that a jury could not conclude that the

accounting firm had caused the company’s economic injuries on

those facts, reasoning as follows:

[Citx argues] that the $1,000,000

equity investment allowed CitX to

exist long enough for its

management to incur millions more

in debt. But that looks at the issue

through hindsight bias. . . .[T]he

equity investment was hardly

harmful to CitX. Its management .

. . misused the opportunity created

by that investment; . . . and therein

lies the harm to CitX.

Case: 07-3416 Document: 00319967779 Page: 34 Date Filed: 01/04/2010
 We take no position on whether, in a suit brought by 20

the investors against Benghiat and Marzouca, the same

proximate cause problem would arise. An investor suit might

bring in a wider scope of activity than this one—what Benghiat

and Marzouca allegedly helped Bentley do to the investors.

Here, our focus is simply on what transpired among Benghiat,

Marzouca and BFS and our conclusion that the transactions at

issue did not harm BFS. 

.

35

Id. at 677–78; see also Thabault, 541 F.3d at 521 (“To the extent

that the extra capital, which decreased CitX’s insolvency,

extended the corporation’s life and allowed management to

incur more debt, the ultimate harm was caused by

mismanagement, not the auditor.”). For just that reason, the

warehousing transactions cannot serve as basis for Benghiat and

Marzouca’s liability to BFS (even if engineered with full

awareness of Bentley’s scheme). The losses BFS suffered as a

result were proximately caused by Bentley’s subsequent actions,

not the cash infusion itself.20

2. Benghiat’s Supervision of Bentley’s Operation

The other basis for finding liability (with respect to

Benghiat) related to the roughly 18 months during which

Bentley brokered securities under the supervision of SSI

(Benghiat’s firm). Pre-trial, it was a matter of considerable

dispute whether Benghiat’s duty to supervise Bentley’s sales of

securities at SSI extended to his CD-brokerage operation, since

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Rule 10b-5 makes it “unlawful . . . [t]o engage in any 21

act, practice, or course of business which operates or would

operate as a fraud or deceit upon any person, in connection with

the . . . sale of any security.” 17 C.F.R. § 240.10b-5. It

36

CDs purchased from federally regulated banks are not generally

considered securities for purposes of federal securities law. See

Marine Bank v. Weaver, 455 U.S. 551, 558–59 (1982). The

position ultimately taken by the District Court (and charged to

the jury) was that “[t]o the extent that [Bentley] altered the terms

of [the] certificates of deposit, the certificates themselves would

be considered securities, and to the extent that he issued what

amounted to investment contracts certifying that he was

investing or had invested, those certificates he issued would

qualify as securities.”

We need not decide whether the District Court was

correct to conclude that, insofar as Bentley was brokering fake

CDs, he was selling securities, and thus that Benghiat had a duty

to supervise that aspect of Bentley’s operation as well. That is

because, even if Benghiat had such a duty, it ran to the investors

who purchased the fake CDs, not to BFS, the company through

which the fake CDs were sold.

In his complaint, Marion asserted that Benghiat is

secondarily liable under section 20(a) of the Securities

Exchange Act of 1934 for Bentley’s violations of SEC Rule

10b-5, which prohibits fraudulent schemes and devices in

connection with the sale of securities. Section 20(a) provides 21

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implements section 10(b) of the Securities Exchange Act of

1934, which makes it “unlawful" to “use or employ, in

connection with the purchase or sale of any security . . ., any

manipulative or deceptive device or contrivance in

contravention of such rules and regulations as the Commission

may prescribe.” 15 U.S.C. § 78j(b).

37

in pertinent part that

[e]very person who, directly or

indirectly, controls any person

liable under any provision of this

chapter or of any rule or regulation

thereunder shall also be liable

jointly and severally with[,] and to

the same extent as[,] such

controlled person to any person to

whom such controlled person is

liable . . . .

15 U.S.C. § 78t(a). In the context of the “broker-dealer”

relationship like the one at issue here, we have described section

20(a) as imposing “a stringent duty to supervise employees.”

Rochez Bros. Inc. v. Rhoades, 527 F.2d 880, 886 (3d Cir. 1975).

But, even though section 20(a) could make Benghiat

liable for Bentley’s Rule 10b-5 violations in the right

circumstances, we do not see how it could make Benghiat liable

to BFS (and thus Marion) for those violations. To make out a

securities fraud claim under Rule 10b-5, “a plaintiff must show

Case: 07-3416 Document: 00319967779 Page: 37 Date Filed: 01/04/2010
38

that ‘(1) the defendant made a materially false or misleading

statement or omitted to state a material fact necessary to make

a statement not misleading; (2) the defendant acted with

scienter; and (3) the plaintiff’s reliance on the defendant’s

misstatement caused him or her injury.’” In re Merck & Co. Sec.

Litig., 432 F.3d 261, 268 (3d Cir. 2005) (quoting Cal. Pub.

Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 143 (3d Cir.

2004)). Plainly, BFS could not establish the third of these

elements against Bentley—that it was caused harm through its

reliance on Bentley’s deceit. BFS did not rely on Bentley’s

misrepresentations. Rather, as we said earlier, any harm to it

was brought about by becoming liable for Bentley’s fraud on the

investors.

If Bentley could not be liable to BFS for violating Rule

10b-5, then Benghiat could not be secondarily liable to BFS for

Bentley’s violation. The liability section 20(a) imposes on

“controlling persons” is specifically liability to those “to whom

[the] controlled person is [also] liable.” § 78t(a) (emphasis

added). In this case, that could only be the defrauded investors.

Section 20(a) therefore cannot support the use to which Marion

put it here—to impose a duty on Benghiat to BFS to prevent

Bentley from defrauding the investors. Because Bentley’s duty

under Rule 10b-5 not to defraud his investors only ran to them,

any corresponding supervisory duty Benghiat might have had

only ran to those investors as well.

Once again, the facts we presume were found by the jury

(in this instance, that Benghiat provided inadequate supervision

Case: 07-3416 Document: 00319967779 Page: 38 Date Filed: 01/04/2010
39

of Bentley’s activities at SSI) cannot support liability to Marion.

If Benghiat did breach a duty to supervise under these facts, it

was a duty owed to Bentley’s investors, not to the corporation

through which the securities were sold.

* * * * *

We conclude that, based on our case law, Marion did

have standing to bring the claims presented to the jury.

However, we also conclude that, on the facts presented to the

jury, neither Benghiat nor Marzouca can be liable to Marion

acting as BFS’s receiver. Accordingly, we reverse the District

Court’s denial of Benghiat and Marzouca’s post-trial motion for

judgment as a matter of law and remand with instructions to

enter judgment in favor of the defendants.

Case: 07-3416 Document: 00319967779 Page: 39 Date Filed: 01/04/2010