NOT RE CO M M E NDE D F OR F UL L
- T E XT P UB L I CA T I ON Fi l e N ame: 10a0246n. 06 N o. 08- 2619 UNI TED S TATES CO URT O F AP PEALS F O R T H E S IX T H C IR C U IT
S E CU RI T I E S AND E XC HANGE CO M M I S S I ON, Pl ai nt i ff- A ppel l ee,
v. P AT RI CK D. QUI NL AN, D e f e n d a n t-A p p e llan t. O n A ppeal fr om t he U ni t ed St at es D i s t r i ctC our tfort he E as t ern D i s t r i ctof M i chi gan atA nn A rbor

/ B efore: G U Y , C O L E , an d S U T T O N , C i rcu i t Jud ges. R A L P H B . G U Y , JR . , C i rcui t Judge
. D e f e n d a n t P a trick D . Q u in lan , S r., ap p e a ls fr om t he entr yof j udgm ent a g ains t h im i n t hi s ci vi l enfor cementact i on br oughtbyt he Secur i t i es and E xchange C om m i s s i on ( SE C orC om m i s s i on)
. T he di s t r i ctcour t , fi ndi ng t hat Q ui nl an’ s cr i m i nal convi ct i ons es t abl i s hed thathe comm i t t ed var i ous s ecur i t i es l aw vi ol at i ons , ent er ed j udgm entenj oi ni ng hi m fr om futur e vi ol at i ons of s ecuri t i es l aw s and
or der i ng t hat Q ui nl an be pr ohi bi t ed fr om act i ng as an offi cerordi r ect orof anyi s s uerhavi ng
a cl as s of s ecur i t i es r egi s t er ed w i t h t he SE C pur s uant t o Sect i on 12 of t he Exchange A ct( 15 U
. S. C
. § 78l ) , ort hati s r equi r ed t o fi l e r epor t s pur s uantt o Sect i on 15( d) of t he Exchange A ct ( 15 U
. S. C
. § 7 8o( d) )
. Q ui nl an’ s pr o s e appe al r ai s es a number of compl ai nt s aboutt he pr ocee di ngs , m os tof w hi ch he a l s o di s avow s as a b asis fo r r el i ef f r om t hi s cour t . A ft erNo. 08-2619 2

r evi ew i ng t he r ecor d and co n side r i ng t he ar gum ent s pr es ent ed on appe al , w e fi nd no err or
a n d a f f i r m. I. T he SE C fi l ed thi s ci vi l enfor cem en t a ct i on i n A pr i l 2002, agai ns tPat r i ck Q ui nl an, Sr
. , and s i x ot herdefe ndant s al l egi ng a “l ar ge s cal e s ecur i t i es offe r i ng and ac count i ng fr aud p e rp e tra ted b ys e n io r o f f ice rs a n d p e rso n n e l o f

M C A F in a n c ial C o rp o ra tio n (“ M C A ” ) to but t r es s a fa i l i ng, hi gh- r i s k m or t gage ba nki ng bus i nes s . ” M C A , a p ri vat el yhel d hol di ng
com p an y , consi s t ed of thr ee mor t gage- r el at ed bus i nes s es . T hos e bus i nes s es i ncl uded the
or i gi nat i on of conf

or m i ng m or t gages , t he or i gi nati on and s ecur i t i zat i on of nonconf or m i ng l oans and mort gages , and the acqui s i t i on and r ent al of l ow i ncome housi ng i n and nea rt he C ityo f D e tro it. Q u in lan w a s M C A ’s C E O , C h a irm a n o f th e B o a rd , an d a d ire c to r f ro m its in c e p tio n in 1 9 8 9 u n til it file d f o r b a n k ru p tcy i n Ja n u a ry1 9 9 9 . M C A h a d , at its h e ig h t, off i ces i n 1 2 st at es and a s m anyas 1, 00 0 em ploy ees. T he SE C al l eged thatfr om 1994 unt i l J anuary1999, t he def end an ts e n g ag ed i n a fraudu l ent s chem e t o fals el yi nflat e i nco m e and equ i t yt o en han ce cas h fl ow t o h i de loss es. M at eri al m i sr epresent atio n s w ere m ade in con necti on w i t h the offer or sal e of secu ri t i es; sp e c if ica lly , co rp o ra te d e b e n tu re s a n d se c u ritize d p o o ls o f n o n c o n f o rm in g m o rtg a g e s s o ld
a s “ re a l es tate p a ss -th ro u g h c e rtific a tes .” T h e m isre p re se n tatio n s m a d e th e f in a n c ial re p o rts
a n d r e g i s t r a t i o n s t a t e m e n t s r e l i e d u p o n b y i n v e s t o r s a n d l e n d e r s m a t e r i a l l y f a l s e . U l t i m a t e l y, t he fr aud atM C A r es ul t ed i n l os s es of m or e than $256 mi l l i on. Feder al cr i m i nal pr ocee di ngs w er e al r eadyunderw ayw hen thi s act i on w as fi l ed, andNo. 08-2619 3

char ges agai ns tQ ui nl an and t w o ot her s w er e added by s uper cedi ng i ndi ct m enti n J une 2002. N otl ong aft er , att he r eques tof t he U ni t ed S t at es A t t or ney ’ s O ffi ce, t he di s t r i ctcour tor der ed
a s t ayof t hi s act i on pendi ng r es ol ut i on of t he cr i m i nal char ges . I n February 2004, Q ui nl an p lea d e d g u iltyp u rsu a n t to a R u le 1 1 P lea A g re e m e n t to tw o c o u n ts— m a k in g f a lse sta tem e n ts to th e S E C a n d c o n sp irin g w ith o th e rs to c o m m it a f e d e ra l c rim e
— a n d th e re m a in in g c o u n ts
w er e di s m i s s ed. M or e t han a y ear l at er , aft er s ever al change s i n couns el , Q u inlan m o v ed
un successful l yt o w i t hd raw his gu i l t yple a . Q uinl an w as sent enced t o 1 20 m on t hs’ i m pr i s onm entand or der ed t o paym or e than $256 mi l l i on i n r es t i tut i on. W i t houtr epea t i ng i n ful l t he f act ual bas i s s etfor t h i n t he Pl ea A gr eement , Q ui nl an admi t t ed that : (1) h e di r ect ed and pa r t i ci pat ed i n t he r ai s i ng of funds fr om i nves t or s and l ender s t o fi nance M C A ; ( 2) he know i ng ly co n sp ir ed t o obt ai n s uch funds byfal s e and fr audul entr epr es ent at i ons ; and (3) as par tof M C A ’ s Fi nanci al M anage m entC om m i t t ee, he know i ngl ym ade de ci s i ons t o del i ber at el yengage i n bus i nes s and acc ount i ng pr act i ces t hat
w er e fr audul ent . Q ui nl an st i pul at ed t hat m at er i al m i s r epr es ent at i ons w er e m ade w i t h r es pect t o bot h t he r i s ks of and r etur ns on t he pas s - t hr ough certi fi cat es . I nves t or s w er e s ent
s t at ement s t hatcont ai ned mat er i al m i s r epr es ent at i ons , and som e pool as s et s w er e s ol d and used f or M C A corporat e pu rposes. Q ui nl an al s o admi t t ed t hat M C A know i ngl y pr epar ed fal s e and fr audul entfi nanci al
s t at ement s t hatconce al ed M C A ’ s t rue fi nanci al condi t i on, as w el l as t he val ue, qual i t y , and
e v e n o w n e rsh ip o f

th e lo a n s a n d m o r tg a g e s . T h o se f in a n c ial s tate m e n ts w e re p ro v id e d to M CA ’ s l e n d e r s t h a t p r o v i d e d s e c u r e d l i n e s o f c r e d i t o f a s muc h a s $ 2 1 0 mi l l i o n and aNo. 08-2619 4

pens i on fund t hatpr ovi ded guar ant ees and l oans t ot al i ng $60 m i l l i on. I tw as al s o s t i pul at ed th a t M C A f

iled q u a rte rlyre p o rts (1 0 -Q s), a n n u a l re p o rts (1 0 -K s), a n d re g istra tio n sta tem e n ts ( S- 18s , SB
- 2s , S1s) w i t h t he SE C t hatcont ai ned mat er i al l yfal s e s t at ement s and omi s s i ons
conce al i ng M C A ’ s t rue fi nanci al condi t i on. Sp ec if i cal l y , Q ui nl an s t at ed thaton A pr i l 29, 1 9 9 8 , d u rin g a n d in f

u rth e ra n c e o f

th e c o n sp ira c y , h e sig n e d th e F o rm 1 0 -K (a n n u a l re p o rt) forfi s cal y ear endi ng J anuary 31, 1998, as C E O and C hai r m an of M C A , “know i ng t hatt he 1 0 -K c o n ta in e d m a te ri a lly f a ls e a n d f

ra u d u le n t s ta te m e n ts a n d c o n c e a le d m a te ri a l f a c ts .” D u rin g 2 0 0 4 , Q u in lan a lso p lea d e d g u iltyin sta te c o u r t to c o n sp ira c yto c o m m it
s ecur i t i es fr auda n d thr ee c ount s of vi ol at i ng ant i
- fr aud pr ovi s i ons underM i chi gan Secur i t i es law
. T he cr i m i nal com plai nt i n that case focu sed on the m at eri al m i sst at em ents m a d e to i nves t or s w i t h r es pect t o t he m or t gage pool s , i ncl udi ng: t hati nves t or s w er e noti nfor m ed that
m or t gages w er e r emoved fr om pool s ; t hat , as a r es ul t , cert ai n pool s di d nothave s uffi ci ent
as s et s t o pay i nves t or s w hat w oul d be due; and t hatM C A s enti nves t or s l et t er s t hatcont ai ned fal s e i nfor m at i on about t he ra t e of r etur n t o conce al t he shor t fal l
. T he s t at e courts ent ence d Q ui nl an t o one y ear i n pr i s on, t o run concurr ent l y w i t h hi s fede r al s ent ence , and or der ed that he payr es t i tut i on of $83 m i l l i on. O n M ay26, 2006, aft ers ent enci ng i n t he fe der al cas e, t he SE C fi l ed a m ot i on t o l i ft t he s t ayi n t hi s ci vi l enfor cementact i on. Q ui nl an as ked t hatt he di s t r i ctcourtdefe rrul i ng on th e m o tio n to a llo w tim e f o r a d e c isio n in h is d ire c t a p p e a l, w h ich th e c o u rt d id . O n c e th is
c o u rt a f f ir m e d , U ni t ed St at es v. Q ui nl an , 4 7 3 F .3 d 2 7 3 , 2 7 7 -7 8 (6 th C ir .), cer t . deni ed , 128No. 08-2619 5

Qui nl an c o mp l a i ns r e p e at e dl y thathe was n ot pre s e ntatthi s he ar i ng , b uthe s t at e d i n h i s ne xt 1 distri ct court filing that h e wouldnot have opp osed liftin g the stay hadhe been there. In fact, this is one of thec o mp l a i nt s thatQ ui nl an e xp r e s s l y dis av o ws as a b a s i s fo r

re l i e f o n a p p e a l
. N o r

ha s he m a de as ho wi ng of ei th e r err ororpr e

j u d i c e re s u l t i n g f

r omth e li f

t i n g o f th e st ay. Quinlan argue s that

the deni alo f his re que st

f or a pp oi ntme nt o f co unselc aus ed hi m to beunab le 2 t o m o unt a“c o mp l e t e de f

e ns e ” i n v i o l at i o n o f hi s Si xth and Fo urt e e nth Am e ndm e ntr i g ht s . A s ac i v i l a c t i o n, how ever, Q uin lan hadno Six th A men dm ent righ t to coun sel. She phe rd v . W

e l lman , 313 F.3d 963, 970 (6th Cir. 20 02 ). Nor can we conclu de th at it was an a buse of discretionto den y his request for c ourt-appointed coun sel. Lavado v . K

e ohan e , 992 F.2d 601, 605 (6th Ci r. 1993). S
. C t. 2 5 1 (20 0 7 ), the d istri ct co u rtli fted the s tayan d d ir ec ted th at Q u inlan an sw er. 1 Q ui nl an’ s February14, 2007 r es p o n sive p l eadi ng m oved t o di s m i s s t he ac t i on as barr ed byt he thr ee- y ea r statute of l i m i t at i ons found appl i cabl e t o p riv a te s ecur i t i es fr aud act i ons under § 10( b) of t he E xchange A cti n Lam pf , P l eva, Li

pki nd, P r upis & Pet t igr ow v. G i l ber t s on , 501 U
. S. 350 ( 1991)
. T he SE C ’ s t w ofol d r es pons e ar gued thatt hi s l i m i t at i ons per i od di d not appl y t o enfor cementact i ons , butconce ded thatt he gene r al “ca t ch- al l ” fi vey e a r lim itatio n s p e rio d f o u n d in 2 8 U .S .C
. § 2 4 6 2 w o u ld a p p lyto th e re q u e st f o r c iv il penal t i es . Q ui nl an’ s r eques t s for ext ens i ons of t i m e t o r epl yw er e gr ant ed, buthi s m ot i on for appoi nt m entof couns el w as deni ed. Q ui nl an fi l ed hi s r epl yon M ay7, 2007. 2 B efor e Q ui nl an’ s m ot i on t o di s m i s s w as decide d , the S E C fi l ed i t s ow n m ot i on for
v o lun ta ry d is m issal of

the re q u est fo r civil p en alt ies. T h e d istri ct co u rtg ran ted th e S E C ’s
m o tio n a n d d e n ie d Q u in la n ’ s s e v e r a l m o tio n s f o r r e c o n s id e ra tio n , f

in d in g , in tera lia , t hat Q ui nl an w as not pr ej udi ced byw hatw as i n eff ectan amendm entdi s m i s s i ng t he r eques tfor civil pen alt ies; that the lim it ati o n s p eriod im p li ed fo r pr i vat e s ecur i t i es fr aud cl ai m s does not ap p lyto civ il en fo rce m en t acti o n s b ythe S E C ; and that § 2 4 6 2 w as n o t a ba r t o the S E C ’s
re m a in in g c laim s fo r i n

ju n c tio n a n d a n o f

f ice r/d ire c to r ba r. T h e sta tu te o f lim itatio n s w o u ldNo. 08-2619 6

Qu inl an’s assertions con cernin g improp er co nduct by the SE C are not entirelyclear, althou gh th ey 3 s e e m t o r e l y

o n a re p o rt e d st at e me ntby

FB IA g e ntH unt

t o Q ui nl an’ s de f

e ns e att o rne y

i ndi c at i ngthatthe inv es ti gati on had r ev ea le d that M CA’s gene ra l le dge rs bal anc ed “to the pe nny . ” Quinlan chara ct eriz es thi s statement as a “wh istleblower’s” ac cusationthat the S EC ’s civil co mplaintin th is casewas not base d upon i t s “own” inv e s t i g at i o n. On ap p e a l , Q ui nl an c o mp l a i ns thatthe SE C’ s f a i l ur e t o r e s p o nd t o q

ue s t i o ns a b o ut thi s in conn ection with its motion fo r sum mary j ud gment deniedhim h is right to co nfron tation andresulted in the wi thhol ding of

inf or mat io n v it alto the def

ens e. Whileit

appe ar s th att h e si gni fi cance o f this statement w as a point of co nten tion betweenQui nlan a n dhis crimin al defen se atto rney before Qu inl an pl ea ded g ui l ty , n o thi ngi n the s e ar gum e nt s s ug g e s t s thatthed i s tr i c tc o urte rr e d i n g r ant i ngs umm ary j ud gment inthis case. Nor was it error to disregardQui nlan ’s multiple supplemen tal filings, which inclu ded thi s argumen t, b ecause they were filed with out leave. be r ai s ed aga i n on s um m ary j udgm ent , and Q ui nl an’ s m ai n cont ent i on on appea l i s t hatt he di s t r i ctcour terr ed i n i t s appl i cat i on of § 2462. T h e S E C ’s m o ti o n fo r sum m aryjud g m en t, fil ed A p ri l 2 8 , 2 0 0 8 , reli ed o n Q u inlan ’s
c o n v ictio n s to p re c lu d e h im f ro m re lit ig a tin g th e f

a c ts o f M C A ’s f

ra u d u len t co n d u c t o r h is know l edge a nd par t i ci pat i on i n t he fr aud. Q ui nl an’ s r es pons e ar gued the s t atut e of lim itatio n s is su e , as k e d th a t a d e c isio n o n th e m o tio n b e d e f e rre d b e c a u se h e in ten d e d to f ile
a § 2 2 5 5 m o tio n to se t as id e h is g u iltyp lea , an d c laim e d th a t th e S E C h a d e n g a g e d in

“ u n p r o f e s sio n a l” o r “ im p ro p e r” c o n d u c t. A lth o u g h Q u in lan th e n f iled a § 2 2 5 5 m o tio n in t he fe der al cr i m i nal cas e, t he di s t r i ctcour tdeni ed hi s § 2255 m o ti o n , and thi s cour thas d en ied h is m o ti o n fo r c erti fica te o f ap p ea labili ty . A n yclaim that a d ec isi o n o n the s u m m ary ju d g m e n t m o tio n s h o u ld h a v e b e e n d e f e rr e d is n o w m o o t. Bu ts e e Smi th v . S EC , 129 F. 3d 356, 362 n. 7 ( 6t h C i r . 1997) ( obs er vi ng t hat a di r ectappea l does notdepr i ve convi ct i on of p rec lusive co ll ateral estop p el ef fe ct). 3 O n N ovember 7, 2008, i n a thor ough 25- page opi ni on, t he di s t r i ctcour t , i n tur n,
cons i der ed the al l eged vi ol at i ons byQ ui nl an; found appl i cat i on of col l ateral es t oppel w as
w arr ant ed; and det er m i ned that injunct i ve r el i ef a nd a perm anentoffi cerand di r ect orbarNo. 08-2619 7

s houl d be i m pos ed aga i ns tQ ui nl an. T he di s t r i ctcour tal s o found t h at th e s t atut e of l i m i t at i ons di d notappl y t o t he cl ai m s for t hi s r el i ef. J udgm ent w as ent er ed ac cor di ngl yon N ovember 14, 2008, and Q ui nl an’ s m ot i on forr econs i der at i on w as deni ed on D ece m ber1, 2008. T hi s appea l fol l ow ed. II. I n deci di ng a m ot i on fors um m aryj udgm ent , t he courtm us tvi ew t he fa ctual evi dence
a n d d ra w a ll re a s o n a b le in f e re n c e s in f

a v o r o f th e n o n m o v in g p a rt y . M ats ushita E l ec. Indus. C o. v. Zeni th R adi o C or p. , 4 7 5 U .S
. 5 7 4 , 5 8 7 (1 9 8 6 ). S u m m a ry ju d g m e n t is a p p r o p ria te
w h e n th e re a re n o iss u e s o f m a ter ial f

a c t in d is p u te a n d th e m o v in g p a rtyis e n tit led to ju d g m e n t a s a m a tte r o f la w . F ED . R. C IV . P. 56( c). A d ist ri ctcour t ’ s deci s i on gr ant i ng
su m m ary jud g m en t is rev iew ed d e n o v o . S m i th v. A m er i t ech , 1 2 9 F
. 3 d 8 5 7 , 8 6 3 (6th C ir
. 1 9 9 7 ). A . C ol l at eral E s t oppel C ol l at er al es t oppel , al s o know n as i s s ue pre cl us i on, “ bar s ‘ s ucce s s i ve l i t i gat i on of an iss u e o f f a c t o r la w a c tu a llylit ig a ted a n d re so lv e d in a v a lid c o u rt d e ter m in a tio n e ss e n tial to t he pr i orj udgm ent , ’ e ven i f t he i s s ue r ecur s i n t he cont extof a di ffe r entcl ai m . ” Tayl orv. S tu rg e ll , 128 S. C t . 2161, 2171 ( 2008) ( ci t at i on om i t t ed)
. A fede r al co ur tdeci s i on has col l at er al es t oppel eff

ectw hen the fol l ow i ng fourel ement s ar e s at i s fi ed: ( 1) t he pr eci s e issu e rais ed i n t he pr es entcas e musthave be en r ai s ed and act uall yl i t i gated i n the pri or proceeding; (2) determ i nati on of t he is sue m ust have b e e n n e c e s s a r y t o t h e o u t c o me o f t h e p r i o r p r o c e e d i n g ; ( 3 ) t h e pr i or pr ocee di ng m u st h av e r es ul t ed i n a fi nal j udgm enton t he mer i t s ; and ( 4) t he p a rtya g a in st w h o m e sto p p e l is so u g h t m u s t h a v e h a d a f u ll an d f

a ir oppor tuni t yt o l i t i gat e the i s s ue i n t he pr i orpr ocee di ng.No. 08-2619 8

Smi th v . S

EC , 129 F. 3d 356, 362 ( 6t h C i r . 1997) ( en banc ) ( quot i ng D et roi tP oli ce O f f i cers A s s ’ n v. Y

oung , 8 2 4 F
. 2 d 5 1 2 , 5 1 5 (6th C ir
. 1 9 8 7 )). T he di s t r i ctcour tfound, and Q ui nl an does notd ispu te, tha tt he pr er equi s i t es for
c o llate ra l e s to p p e l a re m e t an d h e is p re c lu d e d f ro m re lit ig a tin g M C A ’s f ra u d o r h is know l edge of

and part i ci pat i on i n t he fr audul entconduct
. Q ui nl an’ s m i s r epr es ent at i on and
s ecur i t i es fr aud w er e es s ent i al t o hi s convi ct i ons , and t he s ame conductfor m ed the bas i s of t he vi ol at i ons al l eged i n t hi s enfor cementact i on. Q ui nl an’ s cul pabi l i t yw as a c tu a l l yl i t i gat ed,
w as nece s s aryt o t he out come, r es ul t ed i n a fi nal j udgm ent of convi ct i on, and w as r es ol ved aft era ful l and fa i roppor tuni t yt o l i t i gat e i n t he cr i m i nal cas e. B . Sub s t ant i ve V i ol at i ons, P erm anent I nj unct i on, and O f f i cer / D i rec t or B ar A ddr es s i ng t he al l egat i ons byt ype, t he di str i ctcour tfound t hatt he SE C had
es t abl i s hed thatQ ui nl an w as p ri m ar i l yl i abl e forvi ol at i ng t he ant i
- fr aud pr ovi s i ons of Sect i on 17( a) of t he Secur i t i es A ct( 15 U
. S. C
. § 77q( a) ) , Sect i on 10( b) of t he Exchange A ct ( 15 U
. S. C
. § 78j ( b) ) , and R ul e 10b- 5 ( 17 C
. F. R
. § 240. 10b- 5)
. T he di s t r i ctcour tal s o found t hatQ ui nl an w as l i abl e for vi ol at i ng t he books and r ecor ds and i nt ernal contr ol s pr ovi s i ons of Sect i on 13( b) ( 5) of t he Secur i t i es A ct( 15 U
. S. C
. § 78m ( b) ( 5) ) and E xchange A ctR ul es 1 3 b 2 -1 an d 1 3 b 2 -2 (17 C
. F
. R
. § § 2 4 0
. 1 3 b 2 -1 an d 2 4 0
. 1 3 b 2 -2). F inally , th e d is tr ic t co u rt found Q ui nl an ai ded and a bet t ed M C A ’ s vi ol at i ons of t he r epor t i n g an d rec or d keepi ng pr ovi s i ons of Sect i ons 13( b) ( 2) ( A ) , 13b( 2) ( B ) , and 15( d) of t he Exchange A ct( 15 U
. S. C
. §§ 78m ( b) ( 2) ( A ) , 78m ( b) ( 2) ( B ) , and 78o( d) ) , and Exchange A ctR ul es 12b- 20, 15d- 1, and 15d1 3 (17 C
. F
. R
. § § 2 4 0
. 1 2 b -20 , 1 5 d -1, 15 d -13 ). O n ap p ea l, Q u inlan d o es n o t argu e tha t th ereNo. 08-2619 9

ar e anym at er i al ques t i ons of fa ctw i t h r es pectt o t he al l eged s ubs t ant i ve vi ol at i ons , and our
r evi ew r evea l s no err ori n t he di s t r i ctcour t ’ s det erm inati on t hatt he SE C es t abl i s hed Q uinl an’s l i abil i t yfor such v i olat i on s. T he SE C m ays eek pe r m anentort empora r yi nj unct i on ag ai ns tfutur e vi ol at i ons of
s ecur i t i es l aw s underSect i on 20 (b) o f the Secur i t i es A ct( 15 U
. S. C
. § 77t ( b) ) and Sect i on 2 1 (d )(1 ) of th e E x c h a n g e A c t (1 5 U .S .C . § 7 8 u (d )(1 )), u p o n sh o w in g th e re is a re a so n a b le
a n d s u b s t a n t i a l l i k e l i h o o d t h a t , i f n o te n j o i n e d , t h e d e f

e n d a n two u l d v i o l a t e s e c u r i t i e s l a ws in th e f u tu re . See SECv. Y

oum ans , 729 F
. 2 d 4 13, 415 ( 6t h C i r . 1984)
. T hi s cour thas iden ti fied th e fo ll o w ing fa ctors to b e c o n side red in d eterm ining the likeliho o d o f f u ture vi ol at i ons : ( 1) “the egr egi ous nes s of t he vi ol at i ons ”; ( 2) “the i s ol at ed orr epea t ed natur e of the v io la tio n s”; (3) “ the d eg ree o f sc ienter inv o lved ”; (4) “th e sin ce ri tyo f th e d ef en d an t’ s
as s ur ance s , i f any , agai ns tfutur e vi ol at i o n s ” ; ( 5 ) “ th e d e f e n d a nt ’ s r ecogni t i on of t he w r ongful natur e of hi s condu ct”; ( 6) “the l i kel i hood t hatt he def endant ’ s occupa t i on w i l l pr es ent oppor tuni ti es ( orl ack ther eof) forfutur e vi ol at i ons ”; and ( 7) “the def endant ’ s age a nd heal t h. ” Id . N o s in g le f a c to r i s d e te rm in a tiv e . Id
. I n addi t i on, Sect i on 20( b) of t he Secur i t i es A ct and Sect i on 21( d) ( 1) of t he Exchange A c t p ro v id e th a t a p e rso n m a yb e b a rre d f ro m se rv in g a s a n o f

f ice r o r d ire c to r o f

a p u b lic companyi f t hatper s on vi ol at es t he ant i
- fra u d p rovi s i ons of ei t herA ctand hi s conduct demonst r at es “unf

it n ess t o s er ve as an off i cerordi r ect or . ” The fol l ow i ng fac t or s m aybe
con side r ed i n det er m i ni ng w hethera def endanti s “unfi t ”: “( 1) t he ‘ egr egi ous nes s ’ of t he under l y i ng s ecur i t i es l aw vi ol at i on; ( 2) t he def endant ’ s ‘ r epea toffe nder ’ s t atus ; ( 3) t heNo. 08-2619 10

defe ndant ’ s ‘ r o l e ’ o r p o s i t i o n whe n h e e n g a g e d i n t h e f r a u d ; ( 4 ) t h e d e f

e n d a n t ’ s d e g r e e of
s ci ent er ; ( 5) t he def

endant ’ s economi c s t ake i n t he vi ol at i on; and ( 6) t he li k el i hood t hat
m i s conductw i l l r ecur . ” SE Cv. P at el , 61 F. 3d 137, 141 ( 2d C ir
. 1 995) ( i nt ernal quot at i on
m ark s an d cit ati o n o m itted). T he di s t r i ctco u rt fo u n d t hata perm anenti nj unct i on agai ns tfutur e vi ol at i ons of
s ecur i t i es l aw and i m pos i t i on of a pe r m anentoffi cer/ di r ect orbarw er e w arr ant ed, r eas oni ng as fol l ow s: Fi r s t and for emost , t he evi dence s how s t hat Q ui nl an know i nglyand del i ber at el yengage d i n fr aud u lent bus i nes s and ac count i ng pr act i ces foran ext ended pe r i od of t i m e for1 9 9 4 thro u g h 1999. I n hi s capa ci t yas C E O of M C A , Q ui nl an r epea t edl ym ade f al s e fi nanci al s t at ement s and mi s r epr es ent ed m at eri al fact s w i t h the i ntent i on t o m i sl ead invest ors, causi ng i nv est ors t o lose m i l l i ons of dol l ar s . H e l i ed t o t he audi t or s . Q ui nl an’ s conductcert ai nl yw as egr egi ous . A t hi s s ent enci ng, t he t r i al cour t char act er i zed Q ui nl an a s t he “d o m inan t fo rce ” a n d the “ arc h it ec t” of the s ch em e. (Pl’s E x h
. 2 6 , p . 2 ). M or eover , t he C our ti s notper s uaded that D efe ndant r ecogni zes t he w r ongful natur e of hi s conduct , i n l i ght of hi s r epea t ed deni al s of anyw r ongdoi ng i n t he dow nfal l of M C A , hi s l ack of r emors e fort he tr emendous l os s s uffe r ed byt he in v e s to rs , a n d h is a tt e m p t to w ith d ra w h is g u ilty p le a . (Id
. , p . 3 9 )
. He b e n e f i t t e d f r o m h i s c o n d u c t ; h e “ l i v e d a v e r yg o o d l i f e f o ra v e r yl o n g t i me b a s e d o n t h e p r o c e e d s g e n e r a t e d b y [ t h e ] o f f e n s e . ” ( Id ., p . 4 0 ). S h o u ld Q ui nl an re t ai n acc es s t o t he s ame occupat i on upon hi s s chedul ed r el eas e fr om pr i s on, t he C our tcannotd isr eg ar d t he r eas onabl e and s ubs t ant i al l i kel i hood t hathe w i l l enga g e in fu tur e vi ol at i ons of t he fe der al s ecur i t i es l aw s att he p u b lic ’s ri s k a n d e x p e n s e . ( See i d. , p. 40, r ecogni zi ng t he l i kel i hood t hatt he p u b li c is l ikelyto su ff

er a d d it ion al da n g er f

rom Q u inlan ). B as ed on ourr evi ew of t he r ecor d, w e fi nd t hatt he di s t r i ct cour t di d not abus e i t s di s cr et i on ei t herbyenj oi ni n g Q u inl an fr om futur e vi ol at i ons orper m anent l ybarr i ng Q ui nl an fr om
s e r v i n g a s a n o f

f i c e ro rd i r e c t o ro f

a p u b l i c c o m p a n y. C . St at ut e of

Li m i t at i onsNo. 08-2619 11

Not challen ged on appeal is the find ing th at, a s other courts have co nclu ded , n o other statute of 4 limitation s is impliedor borrowed for civil enforcemen t action s bro ugh t by the SE C to vind icate p ublic (n ot private) int erests. SEC

v . Rind, 9 91 F.2d 14 86, 148 8-91 (9th Cir
. 1993); SE C v. Calvo , 37 8 F
. 3d 1211 , 12 18 ( 1 1 thC i r . 2 0 0 4 ) . W e n ot e th atth e r e is n o au th or i ty to th e co n tr ary. N ei t h e r t h e Se c u r i t i e s Act n o r t h e Ex c h a n g e Act e x p l i c i t l y c o n t a i n a s t a t ut e of l i m i t at i ons forSE C ci vi l enfor cement act i ons ; butQ ui nl an ar gues t hatt he SE C ’ s cl ai m s for i nj unct i ve r el i ef a nd i m pos i t i on of t he off i cer/ di r ect orbar ar e governed byt he fi ve- y ear lim itatio n s p e rio d f

o u n d in 2 8 U .S .C . § 2 4 6 2 . S e c tio n 2 4 6 2 p ro v id e s th a t: E xcep t as o the r w i s e pr ovi ded byA ctof C ongr es s , an ac t i on, s ui t or pr ocee di ng fort he enf or cementof anyci vi l fi ne, penal t y , orfor fei tur e, pecuni aryorot herw i s e, s hal l notbe ent er t ai ned unl es s comm ence d w i t hi n fi ve y ear s fr om t he dat e w hen the cl ai m fi r s tacc rued i f, w i t hi n t he s ame per i od, t he offe nderort he pr oper t yi s found w i t hi n t he U ni t ed S t at es i n or der t hatpr oper s er vi ce maybe made t her eon. T h e S E C ’s a b a n d o n m e n t o f th e c laim f

o r c iv il p e n a lti e s in th is c a se o b v iate s th e n e e d to d e ter m in e w h e n th e y“ f

irst ac c ru e d ” in th is c a se . N o t su rp risin g ly , h o w e v e r, cla im s f o r c iv il penal t i e s i n a c i v i l e n f

o r c e me n t a c t i o n b r o u g h t b y t h e SEC h a v e b e e n r e c o g n i z e d a s bei ng g o v e rn e d b y§ 2 4 6 2
. See SECv. Jones , 4 7 6 F . S u p p .2 d 3 7 4 , 3 8 0 (S .D .N .Y . 2 0 0 7 ); SE Cv. A l exande r , 2 4 8 F
. R
. D
. 1 0 8 (E
. D
. N
. Y
. 2 0 0 7 ); S E C v . K e lly , 663 F. Supp. 2d 276, 286 (S. D
. N
. Y
. 20 09 ). T he q uest i on here i s w hether t he equit able rem edies ordered i n this case
ar e al s o “pena l t i es ” s ubj ectt o t he s t atut e of l i m i t at i ons i n § 2462. 4 E q u itab le r e lief

in S E C e n f

o rc e m e n t ac tio n s m a yin c lu d e o rd e rs o f d isg o r g e m e n t, i n j u n c t i on s a ga i n s tf

u tu r e v i o l a t i o n s , o ri mp o s i t i o n o f a n o f f i c e ra n d d i r e c t o rb a r . S o me
co u rt s h av e h eld th at so m e o r all o f th ese eq u it ab le rem ed ies ar e e x e m p t f ro m § 2 4 6 2 ’s lim ita tio n s p e ri o d a s a m a tte r o f la w . S e e Ke lly , 6 6 3 F
. S u p p . 2 d at 28 6 (cit ing ca ses);No. 08-2619 12

Za c a r i a s v . S

EC , 5 6 9 F
. 3 d 4 5 8 , 4 7 9 (D
. C
. C ir
. 2 0 0 9 ) (ho lding d isgo rge m en t no t pu n it ive). O th e r c o u rts h a v e e n g a g e d in a f a c t-in ten siv e in q u iryto d e ter m in e w h e th e r th e e q u itab le
re m e d ie s s o u g h t in a p a rt ic u la r c a s e a re re m e d ia l o r p u n itiv e . See Al exande r , 248 F. R
. D
. at 1 1 5 -1 6 (d isc u ss in g a ltern a tiv e a p p ro a c h e s); J o h n s o n v . S

EC , 8 7 F
. 3 d 4 8 4 , 4 8 8 (D
. C
. C ir
. 1996)
. T hi s uns et t l ed ques t i on i s i m m at er i al t o t hi s cas e, as t he di s t r i ctcour tunder t ook t he fac t - i nt ens i ve i nqui r yar t i cul at ed i n Johns on and appl i ed i n Jones
. Q ui nl an r el i es on Jones , w h ich h e ld th a t “th e lim itatio n s p e rio d in § 2 4 6 2 a p p lies to ci vi l penal t i es and equi t abl e r el i ef t hat s eeks t o puni s h, butdoes notappl yt o equi t abl e r el i ef
w hi ch s eeks t o r emedya pas tw r ong or pr ot ect t he publ i c fr om futur e harm . ” Jones , 47 6 F. S u p p .2 d a t 3 8 1 ; s ee al

s o Johns on , 87 F. 3d at 488- 89. A l t hough t he courti n Jones u lti m a tely concl uded thatt he SE C fai l ed t o s how t hat t he per m anenti nj unct i on w as ai m ed atpr ot ect i ng t he publ i c fr om futur e harm , t he di s t r i ctcour tcar eful l y cons i der ed t he m at t er and found t hat t hi s s how i ng h ad been m ade i n t hi s cas e. T he di s t r i ctcour tr ecogni zed the s er i ous
c o n se q u e n c e s, e x p lain in g th a t:

T he pot ent i al col l at er al cons equences t o Q ui nl an fr om a perm anent i nj unct i on and offi cer and di r ect or bar ar e adm i t t edl y cons i der abl e, even f r om a n o b jec tiv e p o in t o f

v iew . T h e p ra c tica l ef f e c t o f su c h a n in

ju n c tio n w o u ld w or k t o s t i gm at i ze D efe ndanti n t he i nves t m entcomm unit y . M or eover , t he i nj unct i on w oul d depr i ve hi m of any abi l i t y and opportuni t y t o earn a l i vi ng as an off i c[e r ] or d ir ect ort hr oughouthi s l i fe a ft erhi s r el eas e fr om t he pr i s on. B eca us e of the far
- r eac hi ng cons equenc es t o D efe ndantt hatt he barpos es , t he C our tcar eful l ycons i der s evi den c e d e mon s t r at i ng t he l i kel i hood of r ecurr ence . T hen, cons i der i ng the l i kel i hood of r ecurr ence i n l i ghtof t he fa ct or s i dent i fi ed byt he Second C i r cui ti n SE Cv. C om m onw eal th C hem

. S ec. , I nc. , 574 F. 2d 90, 99 ( 2d C i r . 1978) , t he di s t r i ctcour tfound al l t he fa ct or s favor ed the SE C ’ s pos i t i on.No. 08-2619 13

F i rs t , Q uinl an is gu i l t yof co nspira cyt o co m m i tfraud an d to m ake f al se stat em en ts, an d o f m ak ing fa lse an d fra u d u lent stat em en ts i n an an n u al rep o rt fi l ed w i t h t he SE C
. Second, D efe ndant ’ s conductw as nott he r esultof negl i gence [or ] i ns uffi ci entat t ent i on t o t he bus i nes s –he w as aw ar e of the m i s r epr es ent at i ons t hat r es ul t ed i n i nfl at ed val ues for pr oper t y , and he al s o w as aw ar e thatM C A ’ s fi nanci al s t at ement s di d not pr oper l yr efl ectt he unfunde d li abi l i t i es i n t he pool s . A ccor di ng t o t he R ul e 11 Pl ea A gr eement , Q ui nl an “ k n o w in g lyc o n sp ire d w ith o th e r em p lo y e e s, o f f ice rs a n d d ire c to rs o f

M C A to obt ai n t hes e funds bym eans of fa l s e and f r audul entpr et ens e, r epr es ent at i ons and pr om ise s . ” Thi r d, D efe ndant ’ s s ecur i t i es l aw s vi ol at i ons w er e notan i s o l a t e d o c c u r r e n c e , b u t we r e c a r r i e d o u t o v e r a n e x t e n d e d p e r i od of t i me t hr oughoutM C A ’ s dai l yoper at i ons . Four t h, i n h is c r i m i nal cas e, Q ui nl an at t empt ed t o w i t hdr aw hi s R ul e 11 gui l t ypl ea a nd t o m ai nt ai n hi s i nnocenc e a f ter h e e n ter e d th e p lea . In th e in sta n t civ il ac tio n , D e f e n d a n t c o n tin u e s to as s er tt h a th e s h o u l d n o tb e h e l d l i a b l e f o ra n ya n d a l l o f

t h e i nj ur i ous cons equenc es ar i s i ng fr om his m i s r epr es ent at i ons and otherfr audul ent c o n d u c t. F in a lly , if th e e q u itab le r e lief is no t g ra n ted , th e C o u rt f in d s it lik e ly t hatD efe ndant w oul d r etur n t o t he i nves t m enti ndus t r yupon hi s r el eas e fr om p riso n , g iv e n th a t th e c u rre n t d isp u te o v e r th e a p p lica b ili tyo f S e c tio n 2 4 6 2 is broug ht befo re t he C ou rt preci sel y becau se D efen dan t w ants t o r et ai n acce ss t o t he s ame occupat i on. (C i t at i on s om i t t ed. ) B ased o n th ese fi nd i ng s, t he d i stri ctcou rtcon cl ud ed thatt here w as a
r i s k of r ec u rre nce, t hatt he r i s k t o t he i nves t i ng publ i c outw ei ghed the s ever e col l at er al
cons equenc es of t he equi t abl e r el i ef, and, t her efor e, t hat t he perm anenti nj unct i on and off i cer and di r ect orbarw er e r emedi al r ather than puni t i ve. T hes e fi ndi ngs ar e s uppor t ed byt he
r ecor d, and es t abl i s h t hatt he equi t abl e r el i ef w as nota “pe nal t y ” s ubj ectt o § 2462’ s fi ve- y ear st atute of l i m i t at i on s. AFF I RM ED
.