12-0357 SEC v. Razmilovic

AMENDED OPINION 1
UNITED STATES COURT OF APPEALS 2
FOR THE SECOND CIRCUIT 3

- - - - - - 4 August Term, 2012 5 (Argued: February 5, 2013 D ecided: July 22, 2013 6 Amended: November 26, 2013) 7 Docket No. 12-0357 8

_________________________________________________________ 9 SECURITIES AND EXCHANGE COMMISSION, 10 Plaintiff-Appellee , 11

- v. - 12 TOMO RAZMILOVIC, 13 Defendant-Appellant , 14

SYMBOL TECHNOLOGIES, INC., KENNETH JAEGGI, LEONARD 15 GOLDNER, BRIAN BURKE, MICHAEL DEGENNARO, FRANK 16 BORGHESE, CHRISTOPHER DESANTIS, JAMES HEUSCHNEIDER, 17 GREGORY MORTENSON, JAMES DEAN, ROBERT DONLON, 18 Defendants

. 19

_________________________________________________________ 20 Before: JACOBS, Chief Judge , KEARSE and CARNEY, Circuit Judges

. 21 Appeal from a judgment of the United States District Court for the Eastern District of 22 New York, Sandra J. Feuerstein, Judge , ordering appellant, following entry of his default for 23 noncompliance with an order to appear for hi s deposition in the United States, to, inter alia , disgorge 242 $41,753,623.04, plus interest in the amount of $27,260,953.99, and to pay a civil penalty of 1 $22,876,811.52. See822 F.Supp.2d 234 (2011). 2 Affirmed in part, vacated and remanded in part. 3 SUSAN S. McDONALD, Se nior Litigati on Counsel, Securities and 4 Exchange Commission, Washington, D.C. (Mark D. Cahn, General 5 Counsel, Michael A. Conley, Deputy General Counsel, Jacob H. 6 Stillman, Solicitor, Securities and Exchange Commission, Washington, 7 D.C., on the brief), for Plaintiff-Appellee

. 8 JEFFREY B. COOPERSMITH, Seattle, Washington (John A. 9 Goldmark, Davis Wright Tremaine, Seattle, Washington; Katherine A. 10 Heaton, DLA Piper, Seattle, Washington, on the brief), for Defendant11 Appellant

. 12

KEARSE, Circuit Judge : 13 Defendant Tomo Razmilovic appeals from somuch of a judgment of the United States 14 District Court for the Eastern District of New York, Sandra J. Feuerstein, Judge , as orders him to 15 disgorge to plaintiff Securities and Exchange Commission ("SEC") $41,753,623.04, plus prejudgment 16 interest in the amount of $27,260,953.99, and to pay a civil penalty of $22,876,811.52, for violations 17 of various provisions of the Securities Act of 1933 (the "Securities Act") and the Securities Exchange 18 Act of 1934 (the "Exchange Act") (collectively the "1933 and 1934 Acts"). The district court entered 19 a default against Razmilovic as a sanction for his refu sal to comply with an order to appear for his 20 deposition in the United States; the court ordered Razmilovic to pay the above amounts following an 21 evidentiary hearing. On appeal, Razmilovic contends principally that the district court (1) abused its 22 discretion in imposing a default, rather than a less severe sanction, for his refusal to appear for his 23 deposition, and (2) erred in its calculations of the disgorgement, prejudgment interest, and statutory 24 penalty amounts. Razmilovic also contends, principally in connection with the proceedings on relief, 253 that the district judge exhibited bias in favor of the SEC and against Razmilovic and should have 1 recused herself. For the reasons that follow, we fi nd no error or abuse of discretion in the entry of the 2 default, the denial of Razmilovic's recusal motion, and the disgorgement award. However, we remand 3 for recalculation of prejudgment interest and for the clerical correction of a discrepancy between the 4 amount of the civil penalty ordered in the district court's ruling and the amount of the penalty awarded 5 in the judgment. 6

I. BACKGROUND 7

This is a civil enforcement action brought by the SEC against defendant Symbol 8 Technologies, Inc. ("Symbol"), a supplier of mob ile information systems using handheld electronic 9 devices for barcode and other data capture technol ogy, and various officers and employees of Symbol, 10 alleging that the defendants engaged in fraudulent and manipulative practices in violation of, inter 11 alia , § 10(b) of the Exchange Act and Rule 10b-5 th ereunder, § 13(b)(5) of the Exchange Act and 12 § 17(a) of the Securities Act, and various rules promulgated under the latter sections. The complaint's 13 well-pleaded allegations as to Razmilovic's liab ility, which, in light of his default, are deemed 14 admitted, seeGreyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp. , 973 F.2d 155, 158 (2d Cir. 15 1992), cert. denied , 506 U.S. 1080 (1993), include the following. 16 Razmilovic was Symbol's president and chief operating officer ("COO") from 1995 17 through June 2000, its President and Chief Executiv e Officer ("CEO") from July 2000 until February 18 2002, and a member of its board of directors fr om 1995 to February 2002. "From at least 1998 until 19 as recently as February 2003," Razmilovic and others "engaged in a wide array of fraudulent 204 accounting practices and other misconduct that had a cumulative net impact of over $230 million on 1 Symbol's reported revenue and over $530 million on its reported pre-tax earnings." (Complaint ¶ 1.) 2 That conduct included entering into artificial swap transactions and other fraudulent schemes, 3 publishing false reports of earnings, issuing fraudul ent press releases, and filing false reports or 4 registration statements with the SEC. (See , e.g. , id . ¶¶ 44-48, 143.) Razmilovic regularly authorized 5 changes to quarterly reports in order to conform Symbol's reported results to management's prior 6 forecasts. For example, on one occasion, management's prediction was matched by making fraudulent 7 adjustments, authorized by Razmilovic, that ma de a $2.5 million quarterly loss appear to be a 8 $13.4 million gain. (SeeComplaint ¶ 40(f).) The frauds are de scribed in greater detail in the district 9 court's Memorandum of Decision dated September 30, 2011, and reported at 822 F.Supp.2d 234 10 ("September 2011 Opinion"), familiarity with which is assumed. 11 Razmilovic received bonuses and other compensation directly related to Symbol's 12 performance. He also profited from the frauds because they artificially inflated Symbol's stock price, 13 and he had received as compensation for his employment thousands of Symbol stock options that he 14 was able to exercise at prices well below the inflatedmarket price and to sell at that market price. In 15 the present action, commenced in June 2004, the SEC sought--and largely won--a judgment that 16 would, inter alia , enjoin Razmilovic from further violations of the securities laws, bar him from again 17 serving as an officer or director of any public company, require him to disgorge all executive 18 compensation he had received from Symbol from 1998 onward and all profits from his securities 19 violations, plus prejudgment interest on those sums , and order him to pay penalties authorized by the 20 1933 and 1934 Acts. As to the relief ordered by the di strict court, only the monetary awards are at 21 issue on this appeal. 225 A. The Criminal Case and Razmilovic's Default in the Present Case 1 In mid-2004, prior to the filing of the present complaint, an indictment was handed 2 down in the United States District Court for the Ea stern District of New Yo rk against Razmilovic and 3 his codefendants, charging them with violations of the securities laws. Razmilovic, who was in 4 Europe at the time, has not since returned to the United States. He is considered a fugitive by the 5 United States Department of Justice ("Justice Department"). 6 In 2004 in the present case, Judge Leonard D. Wexler, to whom the case was then 7 assigned, granted a motion by those defendants who werenot fugitives for a stay of these proceedings 8 pending resolution of the criminal case. Razmilovi c's motion for that relief was denied on the ground 9 of his fugitivity, and he timely filed an answer, de nying the material allegations of the complaint; the 10 SEC agreed to postpone discovery until the stay granted by the district court was lifted. 11 In September 2007, the case was reassigned to Judge Feuerstein, who lifted the stay 12 in October 2007. In July2009, the court set a tentative date for trial in January 2010. Promptly 13 thereafter, the SEC served Razmilovic with notice that his deposition would be taken at the SEC's 14 office in New York City on September 28, 2009. 15 In a letter dated September 11, 2009, Razmilovic's counsel informed the SEC that 16 Razmilovic was "abroad," and asked the SEC to "l et us know whether you wish to make arrangement 17 to take Mr. Razmilovic's deposition abroad, eith er in person or by videoconference or telephone." 18 (Letter from Jeffrey B. Coopersmith to Todd D. Brody dated September 11, 2009.) The SEC rejected 19 these alternatives. Razmilovic's counsel informed the SEC that Razmilovic would not come to the 20 United States. 216 On September 29, 2009, after Razmilovic failed to appear for the scheduled September 1 28 deposition, the SEC moved for an order compelling him to appear for his deposition in New York. 2 Razmilovic cross-moved to have his deposition taken via videoconference pursuant to Fed. R. Civ. 3 P. 30(b)(4). 4 In an Order dated October 9, 2009 ("October 2009 Order"), the district court granted 5 the SEC's motion and denied that of Razmilovic. The court ordered Razmilovic "to appear in person, 6 on a mutually agreeable date on or before October 22, 2009, as provided in plaintiff's notice of 7 deposition." October 2009 Order at 1. The court warned that "[f]ailure of Mr. Razmilovic to appear 8 in person for a deposition on or before October 22, 2009 may result in sanctions being imposed 9 against him and/or his attorneys pursuant to Rule 37(b)(2)(A), including a default judgment being 10 entered against him." October 2009 Order at 1. 11 The SEC thereafter proposed to Razmilovic several alternative dates for his deposition. 12 On October 15, Razmilovic informed the SEC that, despite the court's October 2009 Order, he would 13 not appear for the deposition. 14 On December 10, the SEC moved pursuant to Fed. R. Civ. P. 37(b)(2)(A)(vi) for entry 15 of a default judgment against Razmilovic as a sanction for his refusal to obey the court's order to 16 appear for his deposition. Razmilovic opposed the motion. He acknowledged that his violation of 17 the court order "may result in some form of sanc tion" but argued that a default judgment was drastic, 18 the "harshest of sanctions," and was not warranted because "le sser, effective sanctions may be 19 imposed." (Razmilovic Memorandum of Law in Opposition to Motion for Sanctions ("Razmilovic 20 Sanctions Memorandum") at 4-5.) Razmilovic propose d, for example, that he instead be barred from 21 disputing certain facts or asserting certain defenses, or be required to appear for his deposition in 227 Sweden and to pay for the expenses of the deposition. (Seeid . at 5-6.) Razmilovic also argued that 1 a default judgment would be improper because, in his view, the Supreme Court, in Degen v. United 2
States , 517 U.S. 820 (1996), had "rejected automatic disentitlement" of fugitives in civil cases. 3 (Razmilovic Sanctions Memorandum at 9.) He argued that imposing a default "as the sanction for the 4 sole discovery transgression of failing to attend an in-person deposition in the United States as ordered 5 would be the same as automatic disentitlement." (Id .) 6 In an order announced on the record at the en suing status conference, the district court 7 granted the SEC's motion and imposed a default against Razmilovic ("Default Order"). (SeeStatus 8 Conference Transcript, December 22, 2009 ("Conf. Tr."), at 5.) The court noted that the SEC was 9 entitled, except in circumstances not present here, to choose the location for depositions it wished to 10 take and that Razmilovic had offered "no excuse fo r his failure to appear at the deposition which was 11 ordered other than his [own] convenience." (Id . at 2.) The court found that Razmilovic's refusal to 12 appear was "willful and intentional." (Id . at 3; see also id . at 4-5 ("Considering the factors that courts 13 are to consider in cases of this type, there is no question that Razmilovic's noncompliance with this 14 court's October 9th order was willful . . . .").) 15 Although Razmilovic argued that Degenforeclosed entry of a default against him under 16 the fugitive disentitlement doctrine, the court pointed out that the SEC was not invoking that doctrine: 17 The SEC sought a default judgment not because Razmilovic was a fugitive from the criminal case but 18 solely because he had willfully violated the c ourt's October 2009 Order to appear for his deposition 19 in the present case. (Id . at 3.) 20 Quoting from its October 2009 Order, the district court also pointed out that 21 Razmilovic had been "specifically warned" that if hefailed to comply with that order "'to appear in 228 person for a deposition on or before October 22, 2009,'" he could be subject to sanctions, "'including 1 a default judgment.'" (Id . at 5.) The court noted that Razmil ovic himself, in opposition to the SEC's 2 Rule 37 motion, "admits that he should be sanctioned" (id . at 3), and it rejected his request for a 3 sanction less severe than the entry of a default. The court found that Razmilovic's proposal that the 4 court should simply order him to have his depos ition taken in Sweden--given that this was what 5 Razmilovic had proposed all along--could hardly be considered a "sanction" at all. (Id .) 6 Given the facts that Razmilovic had receive d an explicit warning that his failure to 7 comply with the October 2009 Order could result in a default, that the SEC's motion papers described 8 evidence indicating that there was a factual basi s for finding that Razmilovic had violated the 9 securities laws (seeid . at 4), and that Razmilovic's refusal tocomply with the October 2009 Order was 10 willful and intentional, the court concluded th at the entry of a default was appropriate (seeid . at 5). 11 Razmilovic moved for reconsideration, largely reiterating his Degenargument and his 12 contention that lesser sanctions would be more appropriate, and arguing that the district court had 13 failed to assess whether Razmilovic had a meritorious defense to the complaint's allegations. In an 14 order dated February 25, 2010 ("February 2010 Order"), the district court denied the motion, stating, 15 inter alia , that a motion for a default judgment under Rule 37(b)(2)(A)(vi) does not require 16 determination of the merits of the complaint. Th e court noted that Razmilovic's other arguments had 17 been previously raised and rejected, and there wa s neither an intervening change of controlling law 18 nor a clear error by the court warranting a different result. 199 B. The Proceedings With Respect to Relief 1 With Razmilovic's liability established by the de fault, the district court held a trial to 2 determine the relief to which the SEC was entitled against Razmilovic. (All of Razmilovic's 3 codefendants reached settlements with the SEC.) 4

1. The Expert Evidence With Regard to Disgorgement 5 With respect to the SEC's request for disgorgement of the profits gained by Razmilovic 6 as a result of his fraud, Razmilovic and the SEC submitted expert reports (seePart II.B.2. below) 7 principally addressing how to calculate the total amount of Razmilovic's fraud-related profits from 8 stock transactions. In order to determine the value by which Symbol's share price was inflated due 9 to Razmilovic's fraud, both the SEC's expert, Edward S. O'Neal, and Razmilovic's expert, Denise 10 Neumann Martin, used "event-study methodology." Th at is, assuming that the company's share price 11 has been affected by prior fraud, the economist seek s to quantify that effect by looking at changes in 12 the stock's prices in the one or two days after the public availability of new information suggesting 13 a fraud, and comparing those changes to the changes that would have been predicted based solely on 14 market or industry factors. The two experts di ffered in their applications of that methodology. 15 O'Neal identified three statistically significant events which publicly disclosed or 16 suggested that Symbol's profitability had previously been overstated and which were followed by 17 declines in Symbol's share price. O'Neal opined th at as a result of Razmilovic's prior frauds, Symbol's 18 share price, prior to the first of these events, had been inflated by a to tal of $11.54. Martin, in 19 contrast, found eleven statistically significant events--only one of which was among the three 20 identified by O'Neal--and she opined th at much of the stock price movement following the events she 2110 cited was attributable to industry trends. She thus calculated that the frauds had inflated Symbol's 1 share price by a total of only $3.42. 2

2. The District Court's Decision 3 In its September 2011 Opinion, the district c ourt ruled, to the extent pertinent to this 4 appeal, that Razmilovic should disgorge $41,753,623.04, plus prejudgment interest, and pay a civil 5 penalty of $20,876,811.52 [sic ]. See822 F.Supp.2d at 284. 6 With respect to the SEC's request that Razmilovic be required to disgorge all of the 7 compensation he received from Symbol from the time his fraudulent conduct began, the district court 8 disagreed, ruling that he should disgorge only so muchas was causally related to the fraud. The court 9 found that since Razmilovic's promotion from C OO to CEO occurred shortly after an announcement 10 of Symbol's increased revenue "which indisputably re sulted from the fraud," the part of his salary that 11 should be disgorged was the difference between his salaries as COO and CEO. Id . at 255-56. The 12 district court also ordered disgorgement of, inter alia , Razmilovic's performance bonuses and 13 severance payment, finding that both had been depe ndent on Symbol's fraudulently inflated success. 14
Seeid . at 256-59. The court found that the amount of executive compensation Razmilovic should 15 disgorge totaled $7,883,647.84. 16 As to the SEC's request that Razmilovic be required to disgorge his profits from 17 transactions in Symbol stock, measured simply by the difference between his sales price and his 18 purchase price, the district court again disagreed. It ruled that his unlawful gains from the stock 19 transactions should be measured by the "amount by which the value of Symbol's stock was inflated 20 as a result of the fraud." Id . at 261. In determining the amount of that inflation, the court credited the 2111 calculation by the SEC's expert, O'Neal, over that of Razmilovic's expert, Martin. The court noted that 1 Martin lacked "prior experience with disgorgement cases involving th e exercise of stock options," that 2 she failed to base her opinions on economic literature , and that she failed to follow her own described 3 procedures. Id . at 262-63. The court concluded that the fr auds in which Razmilovic participated had 4 inflated Symbol's stock price by $11.54 per share. Seeid . at 261-66. On that basis, the court 5 calculated that with respect to Razmilovic's stock transactions--including his exercise of stock options 6 by selling fraudulently inflated shares to Symbol to fund the exercise of options having far lower 7 prices; "zero-cost collar" transactions (i.e. , offsetting put and call options), that Razmilovic entered 8 into while fraudulently representing to the other party that he had no material, non-public information 9 concerning Symbol; and his sales of Symbol stock on the open market while its price was inflated-- 10 Razmilovic's fraudulent gains totaled $33,869,975.20. 11 Thus, the court concluded that, given his fr aud-related gains in executive compensation 12 and stock transactions, Razmilovic should disgorge a total of $41,753,623.04. Id . at 276. 13 As discussed in Part II.C.1. below, the district court ruled that Razmilovic should pay 14 prejudgment interest on that disgorgeable amount "f rom the time of his unlawful gains to the entry 15 of judgment," 822 F.Supp.2d at 278. The court rejected Razmilovic's contention that he should not 16 be required to pay such interest because the Ju stice Department had cau sed $17.4 million of his funds 17 in Swiss bank accounts to be frozen in 2004, denying him access to those funds since that time. See 18 id . at 277-78. The court directedthe SEC "to file a proposed judgment including the amount of 19 prejudgment interest calculated in accordance with this order." Id . at 279. 20 Finally, as discussed in Part II.C.2. below, the district court imposed a statutory penalty 21 pursuant to § 20(d) of the Securities Act, 15 U.S.C. § 77t(d)(1), and § 21(d) of the Exchange Act, 15 2212 U.S.C. § 78u(d)(3)(A), to the extent of one-half the amount of Razmilovic's disgorgeable pecuniary 1 gain, or $20,876,811.52. See822 F.Supp.2d at 279-82. In the proposed judgment submitted by the 2 SEC and entered by the court, however, the penalty figure was $2 million higher, $22,876,811.52. 3

II. DISCUSSION 4

On appeal, Razmilovic argues principally that the district court's imposition of a default 5 judgment was an abuse of discretion and that its disgorgement, penalty, and prejudgment interest 6 awards were erroneous. He also contends that the district judge should have recused herself from the 7 case, arguing that her rulings evinced partiality toward the SEC. We reject Razmilovic's contentions 8 except to the extent that Razmilovic was ordered to pay prejudgment interest on funds that had been 9 frozen at the behest of the United States governme nt, and except to the extent that the judgment must 10 be corrected to have the civil penalty match the amount awarded by the district court in its September 11 2011 Opinion. 12

A. The Entry of Default 13 Rule 37 of the Federal Rules of Civil Proce dure provides in part that if a party "fails 14 to obey an order to provide . . . discovery, . . . the court where the action is pending may issue further 15 just orders," including 16 (i) directing that the matters embraced in the order or other designated 17 facts be taken as established for purposes of the action, as the prevailing party 18 claims; 19 (ii) prohibiting the disobedient party from supporting or opposing 20 designated claims or defenses, or from introducing designated matters in 21 evidence; 2213 (iii) striking pleadings in whole or in part; 1 (iv) staying further proceedings until the order is obeyed; 2 (v) dismissing the action or proceeding in whole or in part; 3 (vi) rendering a default judgment against the disobedient party; or 4 (vii) treating as contempt of court the failure to obey . . . . 5 Fed. R. Civ. P. 37(b)(2)(A). Clearly, the most severeof these sanctions for a disobedient plaintiff is 6 the dismissal of his action; the most severe for a disobedient defendant is the imposition of a default. 7 "[D]ismissal or default" should be ordered "only when the district judge has considered lesser 8 alternatives." Southern New England Telephone Co. v. Global NAPs Inc. , 624 F.3d 123, 144 (2d Cir. 9 2010) ("SNET "). No sanction should be imposed without giving the disobedient party notice of the 10 particular sanction sought and an opportunity tobe heard in opposition to its imposition. See , e.g. , 11 Reilly v. NatWest Markets Group Inc. , 181 F.3d 253, 270 (2d Cir. 1999), cert. denied , 528 U.S. 1119 12 (2000); United States Freight Co. v. Penn Central Transportation Co. , 716 F.2d 954, 955 (2d Cir. 13 1983) ("U.S. Freight "). 14 We review a district court's imposition of sanctions for abuse of discretion. See , e.g. , 15 National Hockey League v. Metropolitan Hockey Club, Inc. , 427 U.S. 639, 642 (1976) ("NHL "); 16 Agiwal v. Mid Island Mortgage Corp. , 555 F.3d 298, 302 (2d Cir. 2009) ("Agiwal "); U.S. Freight , 716 17 F.2d at 955; Sieck v. Russo , 869 F.2d 131, 134 (2d Cir. 1989) ("Sieck "). 18 "[S]everal factors may be useful in ev aluating a district court's exercise of 19 discretion" to impose sanctions pursuant to this rule, including "(1) the 20 willfulness of the non-compliant party or the reason for noncompliance; (2) the 21 efficacy of lesser sanctions; (3) the dur ation of the period of noncompliance, 22 and (4) whether the non-compliant party had been warned of the consequences 23 of noncompliance." 24
SNET , 624 F.3d at 144 (quoting Agiwal , 555 F.3d at 302). 2514 Because the text of the rule requires only that the district court's orders be 1 "just," however, and because the district court has "wide discretion in imposing 2 sanctions under Rule 37," Shcherbakovskiy v. Da Capo Al Fine, Ltd. , 490 F.3d 3 130, 135 (2d Cir.2007) (internal quotation marks omitted), these factors are not 4 exclusive, and they need not each be resolved against the party challenging the 5 district court's sanctions for us to conclude that those sanctions were within the 6 court's discretion. 7 SNET , 624 F.3d at 144. In Sieck , we affirmed the entry of defaults against defendants who "elected 8 to defy" two court orders to attend their depositions. 869 F.2d at 134. We noted that 9 [t]he mere availability of softer sanctions . . . does not bar a court from 10 imposing the default sanction. As the Supreme Court recognized, 11 here, as in other areas of the law, the most severe in the spectrum of 12 sanctions provided by statute or rule must be available to the district 13 court in appropriate cases, not merely to penalize those whose conduct 14 may be deemed to warrant such a sanction, but to deter those who 15 might be tempted to such conduct in the absence of such a deterrent. 16 Sieck , 869 F.2d at 134 (quoting NHL , 427 U.S. at 643); see alsoNHL , 427 U.S. at 640, 642 (extreme 17 sanction of dismissal of complaint justified where failure to comply with court's order was due to 18 plaintiffs' willfulness and bad faith); Agiwal , 555 F.3d at 302 ("dismissal with prejudice is a harsh 19 remedy to be used only in extreme situations, and then only when a court finds willfulness, bad faith, 20 or . . . fault by the non-compliant litigant" (internal quotation marks omitted)); id . ("[w]hether a 21 litigant was at fault or acted willfully or in bad faith are questions of fact"). 22 An abuse of discretion may consist of an erroneous view of the law, a clearly erroneous 23 assessment of the facts, or a decision that cannot belocated within the range of permissible decisions. 24
See , e.g. , Agiwal , 555 F.3d at 302 n.2; Sims v. Blot , 534 F.3d 117, 132 (2d Cir. 2008). "A district 25 court would necessarily abuse its discretion if it ba sed its ruling on an erroneous view of the law or 26 on a clearly erroneous assessment of the ev idence." Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 27 405 (1990) (reviewing sanction imposed pursuant to Fe d. R. Civ. P. 11). But in the absence of such 2815 an error, "[t]he question, of course, is not whether [the reviewing court] woul d as an original matter 1 have [imposed the sanction in question]; it is whether the District Court abused its discretion in so 2 doing." NHL , 427 U.S. at 642; see , e.g. , SNET , 624 F.3d at 143. 3 In the present case, we see no error of law nor any clearly err oneous finding of fact 4 with respect to the district court's decision to im pose on Razmilovic the sanction of default. To begin 5 with, we reject Razmilovic's contention that the di strict court violated the principle established by 6 Degen , i.e. , that the fugitive disentitlement doctrine shoul d not be applied to prevent a fugitive from 7 a criminal case from participating in a civil case. 8 The fugitive disentitlement doctrine allows an appellate court to, inter alia , "dismiss 9 the appeal of a defendant who is a fugitive from ju stice during the pendency of his appeal." Ortega10 Rodriguez v. United States , 507 U.S. 234, 239 (1993). The DegenCourt held that this doctrine does 11 not authorize the district court to "strike the fili ngs of a claimant in a forfeiture suit" and enter 12 judgment against him merely "for failing to appear in a related criminal prosecution," 517 U.S. at 821, 13 "or otherwise . . . resisting[ the] related criminal prosecution," id . at 823. 14 In the present case, however, as describe d in Part I.A. above, the court rejected 15 Razmilovic's Degenargument because the SEC did not seek--and the court did not enter--sanctions 16 under the fugitive disentitlement doctrine (seeConf. Tr. 3). Rather, the court entered the default 17 against Razmilovic on the express basis that he had willfully disobeyed the October 2009 Order. (See 18 id . at 3, 4-5.) 19 Further, that basis for imposition of a default was plainly one as to which the Degen 20 Court had indicated approval. That Court stated that a "District Court has its usual authority to 21 manage discovery in a civil suit, including the pow er to enter protective orders limiting discovery as 22 the interests of justice require." 517 U.S. at 826. The DegenCourt added: 2316 [O]f course, [the fugitive's] absence entitles him to no advantage. If his 1 unwillingness to appear in person results in noncompliance with a legitimate 2 order of the court respectingpleading, discovery , the presentation of evidence, 3 or other matters, he will be exposed to the same sanctions as any other 4 uncooperative party . A federal court has at its disposal an array of means to 5 enforce its orders, including dismissal in an appropriate case . Again, its 6 powers include those furnished by federal rule , see, e.g. , Fed. Rules Civ. Proc. 7 37 , 41(b); National Hockey Leaguev. Metropolitan Hockey Club, Inc. , 427 8 U.S. 639 (1976) (per curiam) . . . . 9 Degen , 517 U.S. at 827 (emphases added). The entry of a default in the present case pursuant to Rule 10 37(b)(2)(A)(vi) because of Razmilovic's refusal to co mply with the district court's legitimate discovery 11 order plainly did not run afoul of Degen

. 12 Razmilovic does not even attempt to argue that the court's finding of willfulness was 13 erroneous. Nor, plausibly, could he. His adaman t and express insistence that he would not comply 14 with the October 2009 Order requiring that he appear for his deposition in New York made plain that 15 his disobedience was willful and intentional. 16 None of Razmilovic's proposed alternative sanctions was likely to lead to his 17 compliance with the court's order for his deposition as noticed by the SEC or to provide the SEC with 18 the discovery methods to which it was entitled. As i ndicated in Part I.A. above, the court had warned 19 that if Razmilovic did not appear for his depositi on in accordance with the SEC's notice he would be 20 exposed to "sanctions . . . pursuant to Rule 37( b)(2)(A), including a default judgment being entered 21 against him," October 2009 Order at 1. Although R azmilovic disobeyed only that single court order, 22 his adamance in the face of the court's warning of possible sanctions that included the extreme 23 sanction of default clearly supported an inference th at renewed orders to appear would be unavailing 24 and that no lesser sanction would be effective to induce Razmilovic to appear in New York for his 25 deposition. The court was not required to relieve him of that obligation. Given that "the most severe 26 in the spectrum of sanctions provided by" Rule 37 "must be available to the district court in 2717 appropriate cases," not only to make such discovery orders effective in the case at hand but also "to 1 deter those who might be tempted to [engage in similar disobedience] in the absence of such a 2 deterrent," NHL , 427 U.S. at 643, we cannot conclude that the entry of default against Razmilovic in 3 the present case was an abuse of discretion. 4

B. Disgorgement 5 Razmilovic attacks the district court's di sgorgement order on several grounds. First, 6 he contends that the judge should have recused herself on the ground of what he characterizes as 7 "extreme bias against" him and an abuse of discretion in, inter alia , allowing the SEC to reopen its 8 case-in-chief in the remedies hearing in order to present expert evidence in support of disgorgement. 9 (Razmilovic brief on appeal at 23.) He urges this Court to vacate the default judgment against him 10 and remand for proceedings before a different di strict judge. Second, Razmilovic argues that the 11 court's calculations of the disgorgeable amounts were without foundation and that the court should 12 have credited the views of Razmilovic's expert and excluded the report of the SEC's expert. None of 13 these contentions is persuasive. 14

1. Recusal 15 As indicated above, the district court entered the default against Razmilovic in 16 December 2009 and denied his motion for recons ideration in February 2010. March 15, 2010, was 17 eventually set as the date for the evidentiary hearing needed to determine the amounts that Razmilovic 18 should be required to disgorge. The hearing started on that date; the SEC rested after presenting 19 evidence of Razmilovic's executive compensation at Symbol and of the proceeds of his other 20 transactions in Symbol stock after his fraudul ent activity began. On March 16, the hearing was 2118 resumed but was adjourned without either side presenting evidence; the SEC said it had not decided 1 whether it would call an expert witness in rebuttal to the expert to be called by Razmilovic. The 2 hearing was adjourned until May 10 to allow the parties to produce and exchange information with 3 regard to the reports of their respective experts. After a further adjournment--and after the district 4 court "denied the parties' respective motions to ex clude the testimony of each other's expert witness"-- 5 the court, over the SEC's objection, granted Razmilovic's request that the remaining issues be 6 determined "upon submission of experts' reports, deposition transcripts and post-hearing briefs." 822 7 F.Supp.2d at 242. 8 In the meantime, on April 5, 2010, Razmilovic moved pursuant to Fed. R. Civ. P. 52(c) 9 for a judgment on partial findings, dismissing the SE C's disgorgement claims on the ground that the 10 SEC had failed to introduce evidence of any causal connection between the moneys gained by 11 Razmilovic and his fraudulent conduct. At an unrecorded telephone conference call among the court 12 and the parties on April 9, 2010, the SEC indicated that it wished to reopen its case-in-chief to offer 13 two documents it had inadvertently failed to introdu ce. The SEC also said it would produce an expert 14 in rebuttal to the evidence anticipated from Razmilovic's expert. At that point, counsel for Razmilovic 15 announced that Razmilovic did not intend to put on a defense case. According to Razmilovic, the 16 district court 17 then pointedly asked [SEC counsel] whether the Commission wanted to move 18 to reopen its case-in-chief to present an expert witness. It was the Court, not 19 SEC counsel, that suggested reopening fo r the purpose of presenting an expert 20 witness. [SEC counsel] hesitated, and then responded that the Commission did 21 want to reopen its case to present an expert witness. 22 (Declaration of Jeffrey B. Coopersmith dated April 27, 2010 ("Coopersmith Decl."), ¶ 21.) Over 23 Razmilovic's objection, the court set dates for the making of, and the response to, the SEC's motion 2419 to reopen. The court thereafter granted the SEC' s motion before Razmilovic's formal response was 1 due. 2 On April 27, 2010, Razmilovic moved pursuant to28 U.S.C. § 455 to have the district 3 judge recuse herself from further presiding over the case "on the ground that the Court's impartiality 4 might reasonably be questioned." (Razmilovic Memorandum of Law in Support of Motion for 5 Recusal at 1 (internal quotation marks omitted).) The motion, supported also by a declaration of 6 counsel, argued that the court had exhibited bias ag ainst Razmilovic and in favor of the SEC by, inter 7 alia , granting default as a sanction; denying Razmilovi c's motion to preclude the SEC from presenting 8 any evidence in support of disgorgement or civil penalties because the SEC's damages statement was 9 filed less than 15 days before the hearing date, in violation of the judge's individual rules; denying that 10 motion prior to the deadline for Razmilovic's reply brief in support of his motion; urging the SEC to 11 move to reopen its case-in-chief in order to introduce expert evidence on disgorgement; and granting 12 that motion prior to the deadline the court had set for Razmilovic's response to the motion. (Id . at 3-5; 13 see alsoCoopersmith Decl. ¶¶ 10-22.) 14 The SEC opposed the motion for recusal on se veral grounds. It argued that the motion 15 principally complained of legal rulings by the c ourt with which Razmilovic disagreed, and that such 16 rulings and disagreements were not a valid basis for a motion to recuse. The SEC also argued that the 17 motion was untimely: that a litigant must make sucha motion "'at the earliest possible moment after 18 obtaining knowledge of facts demonstrating the basis for such a claim,'" rather than continuing to 19 participate in the proceedings and waiting to s ee how the court rules on the various issues, as 20 Razmilovic had done. (SEC Memorandum in Oppo sition to Razmilovic Mo tion for Recusal at 7 21 (quoting In re International Business Machines Corp. , 45 F.3d 641, 643 (2d Cir. 1995)).) And the 2220 SEC argued that the court had exhibited no bias but had treated the parties even-handedly, 1 overlooking many procedural transgressions by Razmilovic. 2 In an order dated June 14, 2010, the district court denied Razmilovic's recusal motion. 3 The court ruled that in large part the motion was based on its legal rulings, which provided no basis 4 for recusal. The court acknowledged that in tw o instances it had inadvertently ruled on motions 5 prematurely, ascribing those errors to the fact that the court had failed to adhere to its own so-called 6 "Bundle" rule, which required that no motion be filed until all of the papers, for and against, were 7 ready. The court noted that after denying Razmilovi c's preclusion motion prior to the deadline for his 8 reply brief, the court had rectified that mistake by granting his motion for reconsideration and fully 9 considering Razmilovic's reply brief submitted on recons ideration; the court had adhered to its original 10 decision only after reconsideration. The court also pointed out that Razmilovic had not even bothered 11 to move for reconsideration of the order allowing the SEC to reopen its case-in-chief; he had instead 12 immediately moved for recusal. 13 As to the merits of its order allowing the SEC to reopen its case-in-chief to present 14 expert evidence, the court noted that Razmilovic's Rule 52(c) motion, which was 15 filed with the Court on Ap ril 5, 2010, clearly apprized the SEC of the defects 16 in its evidence, of which it presumably was otherwise unaware. Razmilovic 17 had not yet commenced his presentation of a defense and had previously 18 secured an expert witness. There is nothing improper or inappropriate in 19 permitting a party to reopen its case to remedy the defects in its evidence, 20 particularly absent any prejudice to the opposing party. 21 Order dated June 14, 2010, at 12. 22 The court concluded that none of the actions attributed to it by Razmilovic could 23 reasonably be perceived as emanating from any bias against Razmilovic or infavor of the SEC, and 24 that recusal would be inappropriate. Razmilovic contends that this conclusion was error. We 25 disagree. 2621 A judge is required to recuse herself from"any proceeding in which h[er] impartiality 1 might reasonably be questioned." 28 U.S.C. § 455( a). The standard for disqualification under 28 2 U.S.C. § 455(a) is "an objective" one, IS C Holding AG v. Nobel Biocare Finance AG , 688 F.3d 98, 3 107 (2d Cir. 2012) ("ISC Holding ") (internal quotation marks omitted); the question is whether an 4 objective and disinterested observer, knowing and understanding all of the facts and circumstances, 5 could reasonably question the court's impartiality, see , e.g. , id .; In re Drexel Burnham Lambert Inc. , 6 861 F.2d 1307, 1313 (2d Cir. 1988), reh'g denied en banc , 869 F.2d 116 (2d Cir.), cert. denied , 490 7 U.S. 1102 (1989). 8 To be disqualifying under § 455, "'[t]he allege d bias and prejudice . . . must stem from 9 an extrajudicial source and result in an opinion on th e merits on some basis other than what the judge 10 has learned from his participation in the case .'" In re International Business Machines Corp. , 618 F.2d 11 923, 927 (2d Cir. 1980) (quoting Un ited States v. Grinnell Corp. , 384 U.S. 563, 583 (1966) (emphasis 12 ours)). 13 [O]pinions formed by the judge on the basis of facts introduced or events 14 occurring in the course of the current proceedings, or of prior proceedings, do 15 not constitute a basis for a bias or partiality motion unless they display a 16 deep-seated favoritism or antagonism that would make fair judgment 17 impossible. Thus, judicial remarks duri ng the course of a trial that are critical 18 or disapproving of, or even hostile to, counsel, the parties, or their cases, 19 ordinarily do not support a bias or partiality challenge. 20 Liteky v. United States , 510 U.S. 540, 555 (1994). Accordingly, recusal is not warranted where the 21 only challenged conduct "consist[s] of judicial ru lings, routine trial administration efforts, and 22 ordinary admonishments . . . to counsel and to witnesses," where the conduct occurs during judicial 23 proceedings, and where the judge "neither (1) relie[s] upon knowledge acquired outside such 24 proceedings nor (2) display[s] deep-seated and unequivocal antagonism that would render fair 25 judgment impossible." Id . at 556. 2622 A district judge's decision not to recuse herself from a proceeding is reviewed under 1 an abuse-of-discretion standard. See , e.g. , ISC Holding , 688 F.3d at 107; Diamondstone v. Macaluso , 2 148 F.3d 113, 120 (2d Cir. 1998). It is "rare" for "a di strict judge's denial of a motion to recuse" to 3 be "disturbed by an appellate court." ISC Holding , 688 F.3d at 107 (internal quotation marks 4 omitted). We see no abuse of discretion here. 5 The court found that Razmilovic's refusal to comply with the court's order was willful-- 6 a finding he does not suggest was in any way erroneous or inaccurate. As discussed in Part II.A. 7 above, the entry of a default based on that willf ul choice was well within the proper bounds of the 8 court's discretion. 9 All of Razmilovic's complaints about the district judge center on judicial rulings, 10 ordinary trial administration efforts, and relatively routine commentary on the positions and conduct 11 of the parties in the litigation. And although, asthe court acknowledged, two administrative errors 12 occurred when the court ruled on two motions before they were fully submitted, we see no objective 13 basis for attributing those errors to bias. Judges are human. Errors are made; some are corrected; 14 some are not, but are harmless. Few are attributable to bias. 15 Nor are we persuaded that the district c ourt's allowing the SEC to reopen its case-in16 chief could reasonably be viewed as emanating from bias. The absence of bi as in favor of the SEC 17 is reflected by the fact that a h earing was being held. The judge had agreed with Razmilovic's position 18 that a hearing was needed to determine the amount Razmilovic gained as a re sult of the frauds, and 19 had rejected the position of the SEC that it wa s entitled, without the need for a hearing, to 20 disgorgement of "every single dollar of Mr. R azmilovic's compensation while he was at Symbol" 21 (Conf. Tr. 9 (Razmilovic's counsel characterizing the SEC's position)). And having agreed with 22 Razmilovic that the equitable remedy of disgorgement should be granted only with respect to so much 2323 of Razmilovic's gains as were causally related to the frauds, it was well within the court's equitable 1 powers and discretion to allow the SEC, prior to R azmilovic's presentation of any defense, to reopen 2 its case-in-chief to present evidence of causation. 3 We note that Razmilovic complains that he "moved in essence for a directed verdict [ 4 and] the Court sua sponteinvited the SEC to reopen its reme dies case to cure th[e] defect" 5 (Coopersmith Decl. ¶ 4 (emphasis added); seeid . ¶ 22 (Razmilovic made "a motion effectively for a 6 directed verdict after a party has rested"))--as if such a motion itself precluded any further presentation 7 of evidence by the SEC. But when a party moves for a "directed verdict" (known since 1991 as a 8 "judgment as a matter of law") in a jury trial, it must do so--with specificity as to the alleged 9 evidentiary deficiency--before the case is submitted to the jury, seeFed. R. Civ. P. 50(a)(2); both the 10 timing requirement and the specificity requirement are designed "to assure the responding party an 11 opportunity to cure any deficiency inthat party's proof," Piesco v. Koch , 12 F.3d 332, 340 (2d Cir. 12 1993) (internal quotation marks omitted); see , e.g. , Lore v. City of Syracuse , 670 F.3d 127, 152-53 13 (2d Cir. 2012); 9B C. Wright & A. Miller, Federal Practice and Procedure§ 2533, at 494-507 (3d ed. 14 1998). While the standards for assessing such motions under Rule 50 do not govern motions for 15 judgment in a case tried to the court without a jury, it should be beyond cavil that the court, in a 16 proceeding in which it will rule on proposed equitable remedies, has no less authority than it has in 17 a case to be decided by a jury to allow a party to attempt to cure an alleged deficiency in its proof 18 before the matter is submitted to the decisionmaker. 19 In sum, we see no abuse of discretion in th e district judge's denial of Razmilovic's 20 recusal motion. 2124 2. The Merits 1 Razmilovic contends that the district court erred in ordering him to disgorge any more 2 than $4,870,849, arguing principally (a) that the court should not have required disgorgement of any 3 of his executive compensation from Symbol, and (b) th at, with respect to his stock transactions, the 4 court should have, inter alia , excluded the evidence of the SEC's expert O'Neal and should not have 5 found that Razmilovic's expert Martin was unqualified. We are unpersuaded. 6 "Once the district court has found federal securities law violations, it has broad 7 equitable power to fashion appropriate remedies, including ordering that culpable defendants disgorge 8 their profits." SEC v. First Jersey Securities, Inc. , 101 F.3d 1450, 1474 (2d Cir. 1996) ("First Jersey "), 9 cert. denied , 522 U.S. 812 (1997). Disgorgement "is a method of forcing a defendant to give up the 10 amount by which he was unjustly enriched." SEC v. Commonwealth Chemical Securities, Inc. , 574 11 F.2d 90, 102 (2d Cir. 1978). Thus, in order to establish a proper disgorgement amount, "the party 12 seeking disgorgement must distinguish between th e legally and illegally derived profits," CFTC v. 13 British American Commodity Options Corp. , 788 F.2d 92, 93 (2d Cir.), cert. denied , 479 U.S. 853 14 (1986), so that disgorgement is ordered only with respect to those that were illegally derived. 15 Nonetheless, because of the difficulty of determining with certainty the extent to which 16 a defendant's gains resulted from his frauds--especially profits from transactions in securities whose 17 market price has been affected by the frauds--the court need not determine the amount of such gains 18 with exactitude. "The amount of disgorgement ordered need only be a reasonable approximation of 19 profits causally connected to the violation." First Jersey , 101 F.3d at 1475 (internal quotation marks 20 omitted); see alsoSEC v. Warde , 151 F.3d 42, 50 (2d Cir. 1998) ("Warde "); SEC v. Patel , 61 F.3d 21 137, 139 (2d Cir. 1995) ("Patel "). 2225 Despite sophisticated econometric modelling, predicting stock market 1 responses to alternative variables is . . . at best speculative. Rules for 2 calculating disgorgement must recognize that separating legal from illegal 3 profits exactly may at times be a near-impossible task. 4 SEC v. First City Financial Corp. , 890 F.2d 1215, 1231 (D.C. Ci r. 1989) ("First City "). Given these 5 difficulties, "[s]o long as the measure of disgorgeme nt is reasonable, any risk of uncertainty should 6 fall on the wrongdoer whose illegal conduct created that uncertainty." Warde , 151 F.3d at 50 (internal 7 quotation marks omitted); see , e.g. , First Jersey , 101 F.3d at 1475; Patel , 61 F.3d at 140. 8 Once the SEC has met the burden of estab lishing a reasonable approximation of the 9 profits causally related to the fraud, the burden shifts to the defendant to show that his gains "were 10 unaffected by his offenses." SEC v. Lorin , 76 F.3d 458, 462 (2d Cir. 1996) ("Lorin "); see alsoWarde , 11 151 F.3d at 50 (after district c ourt reached a "reasonable approximation of profits causally connected 12 to the violation," defendant "was entitled to prove th at the district court's measure [wa]s inaccurate" 13 (internal quotation marks omitted)); First City , 890 F.2d at 1232 (after SEC provided a reasonable 14 approximation of unjust enrichment, defendants "were then obliged clearly to demonstrate that the 15 disgorgement figure was not a reasonable approximation"); SEC v. Platforms Wireless International 16 Corp. , 617 F.3d 1072, 1096 (9th Cir. 2010) (same). 17 We review a district court's disgorgement order, and its ancillary findings, for abuse 18 of discretion. See , e.g. , Warde , 151 F.3d at 49; First Jersey , 101 F.3d at 1475; Lorin , 76 F.3d at 462 19 (amount to be disgorged); Patel , 61 F.3d at 140 (causation). 20

a. Razmilovic's Executive Compensation 21 With regard to Razmilovic's executive compensation, the district court rejected the 22 SEC's contention that all of the salary and bonuses received by Razmilovic throughout his tenure at 2326 Symbol should be disgorged, finding that only so mu ch of that compensation as resulted from the 1 fraud should be disgorged. Although Razmilovic argues that the court made no sustainable finding 2 as to causation, we disagree. 3 The frauds at issue were principally accounting frauds that created the appearance that 4 Symbol's performance met the company's prior optimistic financial predictions. The district court 5 excluded from disgorgement most of Razmilovic's base salary because, inter alia , under Razmilovic's 6 employment agreement, adjustments in his base salary were unrelated to Symbol's performance. 7 However, noting that Symbol's reported increase inearnings in 1999 "indisputably resulted from the 8 fraud," 822 F.Supp.2d at 255, and that Razmilovi c was promoted from COO to CEO shortly 9 thereafter, id . at 255-56, the court found it "reasonable to infer a causal connection between 10 Razmilovic's fraud and his promotion to CEO," id . at 255. It thus ordered disgorgement of the 11 difference between Razmilovic's salary as COO and his higher salary as CEO. The district court's 12 findings as to the sequence and timing of these events are not clearly erroneous, and we see no abuse 13 of discretion in its ruling that Razmilovic should disgorge that difference. 14 The court also noted that Symbol's proxy materials stated that, while adjustments in 15 an executive's base salary were generally not tied to the company's performance, the opposite was true 16 of bonuses and stock options. Those materials stated that "'[Symbol] promotes a pay-for-performance 17 philosophy,'" that "'[o]verall compensation paid to senior executives should be tied to how well 18 [Symbol] performs financially,'" and that "'[u] nder the Executive Bonus Plan, each year [Symbol] 19 establish[es] corporate financial performance objec tives . . . , based on earnings per share.'" 822 20 F.Supp.2d at 243 (quoting Symbol's 2000, 2001, and 2002 proxy statements). The district court found 21 that "there is evidence in the record as [a] w hole, including Martin's expert report, supporting the 2227 SEC's claim that Razmilovic's performance bonuses were causally connected to his fraud," noting that 1 "[Razmilovic's] own expert admitted inher report that Symbol's restatedearnings would not have met 2 the target earnings amounts for performance-related bonuses in either year that he received those 3 bonuses." 822 F.Supp.2d at 257 (emphasi s added). Thus, the court reasonably ruled that Razmilovic 4 should disgorge the performance bonuses he received during his fraudulent conduct. 5 Nor do we see any abuse of discretion in th e district court's ruling that Razmilovic 6 should disgorge the bonus he received in connection with Symbol's acquisition of Telxon Corporation 7 in a stock-for-stock merger. The court noted that the complaint--whose factual allegations are deemed 8 true by reason of Razmilovic's default--alleged th at the entire transaction "had been improperly 9 recorded and fraudulently used to 'prop up' Symbol's earnings." Id . at 258. 10 The court also reasonably ruled that Razmilovic should disgorge his $5 million 11 severance payment, see822 F.Supp.2d at 258-59, which he received at least in part for 12 "'relinquish[ing] his right to all outstanding stock op tions whether vested or unvested as of [February 13 14, 2002], with the exception of 236,250 shares gr anted to Razmilovic on October 19, 1998,'" id

. 14 at 247 (quoting the severance agreement). 15 In sum, the district court carefully s ought to distinguish compensation Razmilovic 16 received from Symbol that was not dependent on the company's performance--and thus was not 17 disgorgeable--from his various bonuses and stock option awards that were dependent on that 18 performance and from the increased salary resulti ng from his promotion to CEO shortly after the 19 fraudulently manipulated financial reports "improved" Symbol's performance. We see no abuse of 20 discretion in the court's order that Razmilovic should disgorge those sums, which totaled 21 $7,883,647.84. 2228 b. Razmilovic's Stock Transactions 1 As indicated in Part I.B. above, the partie s' experts presented competing views as to 2 the amount by which the frauds in which Razmilovic participated had inflated the market price of 3 Symbol's shares. The SEC's expert, O'Neal, focused on three sharp declines in the market price of 4 Symbol's shares: (1) a drop of 30 percent following a July 16, 2001 announcement by Symbol that 5 its quarterly earnings were below expectations, (2) a drop of 17 percent following a February 13, 2002 6 Newsdayarticle revealing, inter alia , that Symbol had received an SEC inquiry and had commissioned 7 an independent review of its sales practices, and (3) a drop of 29 percent following announcements 8 by Symbol after the close of trading on February14, 2002, that it was lowering earnings guidance for 9 future quarters and that Razmilovic had retired that day--a retirement that investors could view as 10 significantly abrupt, given the announcement of an SEC inquiry the day before. O'Neal opined that 11 prior to the first of these events, the frauds had inflated Symbol's share price by $11.54. 12 Martin, Razmilovic's expert, opined that the amount by which the frauds had inflated 13 Symbol's share price was only $3.42. Her analysis focused on the price change following the 14 Newsdayreport of the SEC inquiry and on price changes following 10 other events not mentioned by 15 O'Neal; and she concluded that most of the declin es in Symbol's share price were attributable to 16 industry trends. Martin disregarded both the 30 percent price decline that followed the July 16, 2001 17 announcement that Symbol would not meet prior expectations for quarterly earnings and the 29 18 percent decline that followed the similar February 14, 2002 announcement of lower earnings 19 guidance, which was accompanied by the announcement of Razmilovic's sudden retirement. 20 Razmilovic contends the district court's conclusion that the Symbol share price was 21 inflated by $11.54 was erroneous, arguing first that the court should have excluded the opinion of 2229 O'Neal on the ground that O'Neal confined his price fluctuation analysis to the time period that the 1 SEC instructed him to consider, and second that the court should not have viewed Martin as less 2 qualified than O'Neal to opine on the inflation question. We disagree. 3 In a section of its opinion entitled "Weight Affo rded Expert Reports," the district court 4 explained as follows: 5 Although I accept Razmilovic's contention that the proper measure of 6 disgorgement in this case is the amount by which the value of Symbol's stock 7 was inflated as a result of the fraud, I nonetheless reject his expert's calculation 8 of the value of that inflation. 9 . . . . Both parties' experts utilized an "event study" methodology, 10 which, inter alia , examines the effect of an event on a corporation's stock price 11 by looking for "abnormal returns during those event periods, usually days, 12 when a stock moves differently than predicted based upon market and industry 13 factors" and determines whether those abnormal returns are related to the 14 alleged fraud. In re Xerox Corp. Securities Litigation , 746 F.Supp.2d 402, 408 15 (D.Conn. 2010). It is undisputed that such methodology is a generally 16 accepted method of calculating the inflation in a stock's price in cases 17 involving securities fraud. . . . Where the experts' opinions diverge, however, 18 is in their selection of the variables to use in their analysis and the weight to be 19 accorded to such variables. For the reasons set forth below, I find O'Neal's 20 opinion to be entitled to greater weight than Martin's. 21

. . . . 22 Martin's opinions, and particularly her calculations of the amount by 23 which the value of Symbol shares were inflated during the fraud period and the 24 amount Razmilovic is liable to disgorge, are entitled to little or no weight 25 because, inter alia , in addition to her omission of two (2) statistically relevant 26 dates ,[] (a) she is not qualified to testify as to the amount Razmilovic is liable 27 to disgorge from his stock transactions insofar as she testified during her 28 deposition that she has no prior experience with disgorgement cases involving 29 the exercise of stock options and that she did not literally know how the [stock 30 exercise] transaction oc cur[red] in this case. . . ; (b) she did not base her 31 opinion upon economic literature . . . and used an earnings response model 32 unsupported by accepted econometric principles ; and (c) she did not follow her 33 own procedures in this case, e.g., sh e compared the performance of Symbol 34 stock against only one (1) index, as opposed to two (2) or more. . . . In sum, 35 although Martin properly utilized anevent study methodology, she did not 36 apply that methodology reliably to the facts of this case. 3730 To the contrary, O'Neal's opinions are based upon a reliable foundation. 1 In his report, O'Neal, inter alia , adequately explains how he identified the 2 statistically relevant dates he utilizedin his event study and how heutilized 3 those events to determine the effect th at the pervasive fraud scheme had on the 4 value of Symbol's stock during the fraud period. 5 822 F.Supp.2d at 261-63 (other internal quotation marks omitted) (emphases added). 6 We see no basis for reversal in these observations and evaluations. Assessments of 7 relevance are committed to the sound discretion of the district court, see , e.g. , George v. Celotex 8 Corp. , 914 F.2d 26, 28 (2d Cir. 1990), and it was entirely reasonable for the court to discount Martin's 9 opinion on inflation on the basis that she disregarde d two events (followed, respectively, by 30 percent 10 and 29 percent price drops) that the court considered relevant and significant. 11 Further, perceived gaps, inconsistencies, or errors in the reasoning leading to an 12 expert's opinion are matters that properly go to the weight of the evidence; and the weight of the 13 evidence is a matter to be argued to the trier of fact, not a basis for reversal on appeal, see , e.g. , 14 Anderson v. Bessemer City , 470 U.S. 564, 573-74 (1985); Schwartzv. Capital Liquidators, Inc. , 984 15 F.2d 53, 54 (2d Cir. 1993). Although the court's relian ce on a clearly erroneous finding of fact would 16 constitute an abuse of discretion, we see no suchfindings here, for the factfinder's choice between 17 competing views of the facts or events cannot be clearly erroneous. SeeAnderson , 470 U.S. at 574. 18 Given the district court's permissible assessments of the relevance of the various events 19 and the opinions of the experts, we see no basis for disturbing its finding that Razmilovic's fraud 20 inflated the Symbol share price by a total of $11.54. 21 Razmilovic does not challenge the court's mathematical applications of the $11.54 22 figure in its determination of the amounts that Razmilovic should disgorge with respect to his collar 23 transactions and his exercises of stock options, see822 F.Supp.2d at 267-74, although he does contend 2431 that none of his profits from those transactions should be disgorged. These contentions are meritless 1 as well. The district court's order that Razmilovic disgorge his profits from the collar transactions was 2 based on the finding that the transactions themse lves were fraudulent because Razmilovic falsely 3 represented to the other party that he was not in possession of material nonpublic information. 4 Further, had it not been for the fraud, the market price of Symbol stock at the time Razmilovic entered 5 into the collar transactions would have been lower, and it was not clear error for the court to infer that 6 the strike price of the put options too would have b een set lower. To the extent that there is any 7 uncertainty as to whether a lower strike price would have been below Symbol's market price at the 8 time the option period expired, the burden of that uncertainty must be borne by Razmilovic, whose 9 fraud caused the distortion of the market prices. 10 Razmilovic's argument with respect to his stock options--that he should not have been 11 required to disgorge "paper" profits, i.e. , profits from price increases of shares he did not sell--finds 12 no support even from his own expert, as Razmilovic used the fraudulently appreciated value of those 13 shares to fund his exercise of the stock options. The district court noted that 14 Razmilovic's expert concedes that th e profits Razmilovic earned on the shares 15 of Symbol stock that he "swapped" duri ng his exercise of stock options to pay 16 the options price and withholding taxes should be included in any 17 disgorgement calculation "since they would not have been earned absent the 18 alleged earnings misstatement and associated stock price inflation." (Martin 19 Rpt., at 8; seeMartin Decl., at 8) ("Once the co rrect inflation is calculated, . . . 20 it has to be applied to Mr. Razmilovic's four exercises of employee stock 21 options . . . .") 22 822 F.Supp.2d at 259. 23 In sum, we reject all of Razmilovic's challenges to the district court's requirement that 24 he disgorge a total of $33,869,975.20 in unlawful profits from his stock transactions. Including the 2532 $7,883,647.84 in executive compensation gained from his fraud, we affirm the court's order that 1 Razmilovic disgorge a total of $41,753,623.04. 2

C. Prejudgment Interest and the Civil Penalty 3 In connection with a disgorgement award, the district court has discretion to require 4 the defendant to pay prejudgment interest for the period during which he had the use of his unlawful 5 gains. See , e.g. , First Jersey , 101 F.3d at 1477. In addition, the 1933 and 1934 Acts give the court 6 discretion to order a defendant who has violated those statutes to pay civil penalties. Razmilovic 7 challenges the amounts of the district court's awards of prejudgment interest and penalties on several 8 grounds. He challenges both on the basis that they were calculated with reference to the amount he 9 is ordered to disgorge and argues that each shoul d be lower because the disgorgement amount should 10 be lower; these challenges fail because we uphold the disgorgement order. 11

1. Prejudgment Interest 12 Razmilovic's other challenge to the order that he pay $27,260,953.99 in prejudgment 13 interest may have somewhat greater merit. The district court ruled that Razmilovic was "liable to pay 14 prejudgment interest on the entire amount of his ill- gotten gains for the entire period from the time 15 of his unlawful gains to the entry of judgment." 822 F.Supp.2d at 278; seeid . n.72 (setting various 16 starting dates--the earliest being February 1, 2002--for interest calculations with respect to different 17 components of the $41,753,623.04 disgorgement amount). Razmilovic contended that he should not 18 be liable for prejudgment interest because the United States government had caused some 19 $17.4 million of his funds in Swiss bank accounts to be frozen in 2004, and he had been denied access 2033 to those funds since that time. Th e district court rejected that contention, stating (1) that there was 1 "no evidence . . . that allof [Razmilovic's] assets have been frozen by the government since 2004," 2 (2) that there was no evidence that Razmilovic had attempted to access the frozen funds to pay living 3 expenses, and (3) that the total disgorgement ordered was well in excess of the total amount of frozen 4 funds. Id . at 278 (emphasis in original). Although the district court's third rationale justifies an award 5 of prejudgment interest on at least the amount by which the disgorgement sum exceeds the frozen 6 $17.4 million, the remainder of the court's reasoning appears flawed. And there is uncertainty with 7 respect to the frozen funds that neither side has addressed on appeal or, apparently, in the district 8

court. 9 Since "[t]he primary purpose of disgorgement as a remedy for violation of the 10 securities laws is to deprive violators of their ill-gotten gains, thereby effectuating the deterrence 11 objectives of those laws," First Jersey , 101 F.3d at 1474; see alsoSEC v. Palmisano , 135 F.3d 860, 12 865 (2d Cir.) ("Palmisano ") ("'deterrence may serve civil as we ll as criminal goals'" (quoting Hudson 13 v. United States , 522 U.S. 93, 105 (1997) (other internal quotation marks omitted))), cert. denied , 525 14 U.S. 1023 (1998), it is within the discretion of a court to award prejudgment interest on the 15 disgorgement amount for the period during which a defendant had the use of his illegal profits, see , 16
e.g. , First Jersey , 101 F.3d at 1474-77. However, where, as here, the defendant has had some or all 17 of his assets frozen at the behest of the government in connection with the enforcement action, an 18 award of prejudgment interest relating to those funds would be inappropriate with respect to the period 19 covered by the freeze order, for the defendant has already, for that period, been denied the use of those 20 assets. In such a case, after a final order of disgorgement, the funds previously frozen would 21 presumably be turned over to the government in co mplete or partial satisfaction of the disgorgement 2234 order, along with any interest that has accrued on them during the freeze period. In that circumstance, 1 the remedial purpose of prejudgment interest would already have been served with respect to the 2 period of the freeze; to require the defendant to pay prejudgment interest on the entire disgorgement 3 amount including the earlier frozen amount would, fo r the freeze period, deprive him twice of interest 4 on the portion of the disgorgement award that is satisfied by the frozen assets. Cf. Palmisano , 135 5 F.3d at 863 (noting the SEC's conce ssion that a defendant should not be required to disgorge amounts 6 that he paid as restitution to his victims as ordered in his criminal case, becau se a "[d]efendant is only 7 required to give back the proceeds of his securities fraud once" (internal quotation marks omitted)). 8 The first and second facts cite d by the district court, i.e. , that Razmilovic apparently 9 has assets other than those that were frozen and that he has had no need to use the frozen assets for 10 his living expenses, did not take into account either the fact that Razmilovic has been denied the right 11 to use the assets that were frozen or the fact th at the disgorgement order was not designed to strip 12 Razmilovic of "all" of his assets. "The [disgorgement] remedy consists of factfinding by a district 13 court to determine the amount of money acquired through wrongdoing . . . and an order compelling 14 the wrongdoer to pay that amount plus interest to the court. . . . Because the remedy is remedial rather 15 than punitive, the court may not order disgorgement above this amount." SEC v. Cavanagh , 445 F.3d 16 105, 116 & n.25 (2d Cir. 2006). The very purpose of the trial in this case was to allow the court to 17 distinguish Razmilovic's fraudulent gains from those that did not result from his frauds, and to order 18 disgorgement of only the former. 19 The question remains, however, whether Razmilovic's frozen funds can or will be used 20 in satisfaction of his disgorgement obligation. The SEC does not dispute that an order freezing 21 $17,379,735 of Razmilovic's assets in two Swiss bank accounts was obtained on or about July 2, 2004. 2235 However, the freeze was sought not by the SEC in c onnection with this enforcement action but by the 1 Justice Department in connection with the crimin al prosecution. The Justice Department explained 2 to the Swiss authorities that Razmilovic had been indicted for various fraud and conspiracy offenses 3 in a 25-count indictment, that the funds in those acc ounts were "believed to be proceeds of fraud," that 4 "each conspiracy and substantive securities fraud count carries a maximum fine of $5,000,000 ," and 5 that the indictment seeks the "forfeiture " of "approximately $63 million ." (Letter from Mary Ellen 6 Warlow, United States Department of Justice, to Raphael Mauro, Swi ss Federal Office of Justice dated 7 July 1, 2004, at 1-2 (emphases added).) The Justice Department's letter stated that the freeze was 8 needed "to prevent the dissipation of substantial criminal proceeds which are subject to forfeiture 9 under United States law." Id . at 3 (emphasis added). Thus, Razmilovic's potential monetary liability 10 in criminal fines and forfeiture in the criminal case far exceeds the value of his frozen assets. 11 Since Congress has the power to impose both criminal and civil sanctions for the same 12 conduct, a defendant may be required in a criminal proceeding to pay a fine and forfeiture and be 13 required in a civil enforcement proceeding to disgorge his unlawful gains. See , e.g. , Palmisano , 135 14 F.3d at 865-66. If Razmilovic's frozen $17,379,735 is toremain frozen in connection with still15 pending criminal charges against Razmilovic, Razmilovic would be obligated to pay the entire 16 $41,753,623.04 disgorgement amount ordered in this civil enforcement action; and given the 17 nonpunitive, remedial purpose of disgorgement, it woul d be within the district court's discretion to 18 order him to pay prejudgment interest on that entire amount. If, however, Razmilovic's frozen funds 19 are to be used in partial satisfaction of his disgorgement obligation, we would conclude that 20 Razmilovic should not be required to pay prejudgment interest on such funds as were frozen, for the 21 period during which they were frozen. 2236 On remand, the government will be required to decide whether to apply the frozen 1 $17.4 million to the judgment in the present case and forgo prejudgment interest on it, or to persist 2 in demanding prejudgment interest on the entire forfe iture amount. But for the reasons stated above, 3 a judgment granting prejudgment interest on the entire forfeiture amount would preclude the 4 application of the $17.4 million to this civil judgment. 5

2. The Civil Penalty 6 Razmilovic's remaining challenges to the $22,876,811.52 civil penalty imposed on him 7 are (a) that the amount is disproportionate to the civil penalties imposed on other defendants in this 8 case, and (b) that it is $2 million higher than the penalty amount stated in the court's opinion. Only 9 the latter contention has merit. 10 Both the 1933 and 1934 Acts authorize three tiers of monetary penalties for statutory 11 violations. See15 U.S.C. § 77t(d); 15 U.S.C. § 78u(d)(3). Under each statute, a first-tier penalty may 12 be imposed for any violation; a second-tier penaltymay be imposed if the violation "involved fraud, 13 deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement"; a third-tier 14 penalty may be imposed when, in addition to meeting the requirements of the second tier, the 15 "violation directly or indirectly resulted in substantial losses or created a significant risk of substantial 16 losses to other persons," 15 U.S.C. §§ 77t(d)(2)(A )-(C); 15 U.S.C. §§ 78u(d)(3)(B)(i)-(iii). Each tier 17 provides that, for each violation, the amount of penalty "shall not exceed the greater of" a specified 18 monetary amount or the defendant's "gross amount of pecuniary gain"; the amounts specified for an 19 individual defendant for the first, second, and third tiers, respectively, are $5,000, $50,000, and 20 $100,000. 15 U.S.C. § 77t(d)(2) (emphasis added); 15 U.S.C. § 78u(d)(3)(B) (same). Since the 2137 amount of Razmilovic's disgorgeable gain was $41,753,623.04, the maximum civil penalty the court 1 was allowed to impose on him was $41,753,623.04. 2 Beyond setting maximum pe nalties, the statutes leave "the actual amount of the penalty 3 . . . up to the discretion of th e district court." SEC v. Kern , 425 F.3d 143, 153 (2d Cir. 2005). We thus 4 review an award of penalties under the statutes for abuse of discretion. Seeid . at 153-54. 5 The district court determined that the appropriate penalty for Razmilovic was one-half 6 the authorized maximum. In reaching this decision, it stated: 7 Razmilovic was a direct participant in a pervasive fraud scheme, 8 spanning over three (3) years and invol ving fraud, deceit, manipulation and 9 deliberate, or at least, reckless disregard of regulatory requirements, which 10 either resulted in substantial losses to Symbol investors or, at the very least, 11 created a risk of substantial losses toSymbol investors. Yet instead of 12 responding to the charges against him, Razmilovic fled the country, continues 13 to refuse to admit any wrongdoing , and has never expressed any remorse for 14 his conduct. . . . In light of, inter alia , the seriousness and pervasiveness of the 15 fraud scheme, the significant role played by Razmilovic in the scheme, the 16 extent of the benefits Razmilovic received from his violations of the securities 17 laws and his lack of remorse, a third tier penalty is appropriate. 18 822 F.Supp.2d at 280-81 (emphasis added). The court concluded that a penalty of $20,876,811.52, 19 equal to one-half the amount of Razmilovic's fraud-en abled pecuniary gains, wa s appropriate "to serve 20 the punitive and deterrent purposes of the civil penalty statutes." Id . at 282. 21 We conclude that the penalty of $20,876,811.52 was within the bounds of the district 22 court's discretion. We reject Razmilovic's proporti onality challenge because we see no other similarly 23 situated codefendant. 24 The judgment, however, which was prepared by the SEC, stated the amount of the civil 25 fine as $22,876,811.52, or $2 million greater than the amount ordered in the district court's opinion. 26 Nothing in the record justified this increase; the SEC states that the discrepancy was an inadvertent 2738 clerical error (seeSEC brief on appeal at 4 n.2). The judgmen t thus must be corrected to order that 1 Razmilovic pay a civil penalty of $20,876,811.52. 2

CONCLUSION 3

We have considered all of Razmilovic's contentions on this appeal, and except as 4 indicated above, have found them to be without merit. The judgment of the district court is vacated 5 to the extent that it orders Razmilovic (a) to pay prejudgment interest in the amount of 6 $27,260,953.99, and (b) to pay a civil penalty in the amount of $22,876,811.52 in stead of 7 $20,876,811.52, and in all other respects is affirmed. The matter is remanded for further proceedings 8 in accordance with the foregoing to determine the appropriate amount of prejudgment interest 9 Razmilovic is to pay and for correction of the penalty amount to $20,876,811.52. 10