14-2425

Securities & Exchange Commission v. Amerindo Investment Advisors et al.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED

ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE

PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A

DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN

ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST

SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

1 At a stated term of the United States Court of Appeals

2 for the Second Circuit, held at the Thurgood Marshall United

3 States Courthouse, 40 Foley Square, in the City of New York,

on the 26th 4 day of February, two thousand sixteen.

5

6 PRESENT: DENNIS JACOBS,

7 DENNY CHIN,

8 CHRISTOPHER F. DRONEY,

9 Circuit Judges.

10

11 - - - - - - - - - - - - - - - - - - - -X

12 SECURITIES & EXCHANGE COMMISSION, 

13 Plaintiff-Appellee,

14

15 -v.- 14-2425

16

17 AMERINDO INVESTMENT ADVISORS et al., 

18 Defendants-Appellants.

19 - - - - - - - - - - - - - - - - - - - -X

20

21 FOR APPELLANTS: VIVIAN SHEVITZ, South Salem, New

22 York.

23

24 FOR APPELLEE: EMILY T.P. ROSEN (with Anne K.

25 Small, Michael A. Conley, John

26 W. Avery & Stephen G. Yoder on

27 the brief), UNITED STATES

28 SECURITIES & EXCHANGE

29 COMMISSION, Washington, D.C.

1
1 Appeal from a judgment of the United States District

2 Court for the Southern District of New York (Sullivan, J.).

3

4 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED

5 AND DECREED that the judgment of the district court be

6 AFFIRMED. 

7

8 Appellants Amerindo Investment Advisors Inc. et al.

9 appeal from the judgment of the United States District Court

10 for the Southern District of New York (Sullivan, J.),

11 granting summary judgment, in favor of plaintiff-appellee

12 Securities & Exchange Commission (“SEC”), and ordering

13 various remedies. We assume the parties’ familiarity with

14 the underlying facts, the procedural history, and the issues

15 presented for review. 

16

17 1. Appellants contend that Section 30(b) of the

18 Securities Exchange Act barred the SEC enforcement

19 proceeding. But Section 30(b) is inapplicable because the

20 transactions at issue were domestic in character, i.e., “the

21 purchaser incurred irrevocable liability within the United

22 States to take and pay for a security, or . . . the seller

23 incurred irrevocable liability within the United States to

24 deliver a security.” Absolute Activist Value Master Fund

25 Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012). For similar

26 reasons, appellants’ argument based on Morrison v. Nat’l

27 Austl. Bank Ltd., 561 U.S. 247 (2010), must be rejected;

28 Absolute Activist clearly defined “domestic transactions” in

29 the wake of Morrison; and appellants fail to deal with the

30 evidence showing that the victims of the fraud incurred

31 irrevocable liability in the United States. Absolute

32 Activist, 677 F.3d at 67. We acknowledged as much in the

33 related criminal appeal. See United States v. Vilar, 729

34 F.3d 62, 77 (2d Cir. 2013) (“In light of these domestic

35 transactions, we are persuaded that, based on the record

36 evidence, a jury would have found that Vilar and Tanaka

37 engaged in fraud in connection with a domestic purchase or

38 sale of securities . . . .”). There is no basis for us to

39 reconsider our decision in Absolute Activist.

40

41 2. Appellants claim that the district court lacked

42 subject matter jurisdiction based on the applicable statute

43 of limitations. See 28 U.S.C. § 2462. However, “most time

44 bars are nonjurisdictional,” and appellants “must clear a

2
1 high bar to establish that a statute of limitations is

2 jurisdictional.” United States v. Wong, 135 S.Ct. 1625,

3 1632 (2015). Appellants have not met this burden.

4

5 In any event, Vilar and Tanaka waived their statute of

6 limitations defense by not raising it in their motion to

7 dismiss the amended complaint. “A claim that a statute of

8 limitations bars a suit is an affirmative defense, and, as

9 such, it is waived if not raised in the answer to the

10 complaint.” Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb

11 Inc., 967 F.2d 742, 751-52 (2d Cir. 1992), as amended (Sept.

12 23, 1992) (citing Fed. R. Civ. P. 8(c)). In their motion to

13 dismiss, Vilar and Tanaka only opposed the imposition of

14 civil monetary penalties. As to the Entity Defendants, the

15 statute of limitations defense was abandoned by their

16 failure to appear and assert that defense. See Doe v.

17 Constant, 354 F. App’x 543, 545 (2d Cir. 2009) (affirming

18 entry of default judgment and noting that “timeliness . . .

19 is an affirmative defense that may be forfeited or waived.”

20 (internal citation omitted)). The district court properly

21 imposed disgorgement and injunctive relief and correctly

22 limited civil penalties to “gains only from frauds occurring

23 within the five-year statute of limitations for civil

24 penalties.” S.E.C. v. Amerindo Inv. Advisors, Inc., No. 05

25 Civ. 5231 (RJS), 2014 WL 2112032, at *11 (S.D.N.Y. May 6,

26 2014).

27

28 3. Appellants challenge the use of collateral estoppel

29 based on their prior criminal convictions. “It is well30 settled that a criminal conviction . . . constitutes

31 estoppel in favor of the United States in a subsequent civil

32 proceeding as to those matters determined by the judgment in

33 the criminal case.” United States v. Podell, 572 F.2d 31,

34 35 (2d Cir. 1978). Appellants proffer no persuasive reason

35 to depart from this principle; they simply recite a string

36 of unsubstantiated assertions that they failed to raise

37 below–-thus waiving these arguments--which do not, in any

38 event, provide any reason to doubt the fairness of the prior

39 criminal proceedings.

40

41 4. Appellants argue that the entry of default judgment

42 against the Entity Defendants was inappropriate. “It is

43 settled law that a corporation may not appear in a lawsuit

44 against it except through an attorney, and that, where a

3
1 corporation repeatedly fails to appear by counsel, a default

2 judgment may be entered against it . . . .” S.E.C. v.

3 Research Automation Corp., 521 F.2d 585, 589 (2d Cir. 1975)

4 (citations omitted). The district court ordered the Entity

5 Defendants to appear at a hearing and show cause why default

6 judgment should not be entered against them; they did not

7 appear. Appellants nevertheless challenge a number of facts

8 in the complaint, something the Entity Defendants cannot do

9 because “a default is an admission of all well-pleaded

10 allegations against the defaulting party.” Vermont Teddy

11 Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d

12 Cir. 2004). Appellants also contend that the complaints

13 were not properly served on the Entity Defendants; this,

14 however, does not explain why they failed to appear at the

15 show-cause hearing. In any event, the Entity Defendants did

16 not make this argument below; it is waived. See In re

17 Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d

18 Cir. 2008). 

19

20 5. Appellants take issue with each of the remedies

21 imposed by the district court. “Once the district court has

22 found federal securities law violations, it has broad

23 equitable power to fashion appropriate remedies, including

24 ordering that culpable defendants disgorge their profits.” 

25 S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 1474 (2d

26 Cir. 1996). Regarding disgorgement, appellants provide no

27 basis to disturb the district court’s conclusion that the

28 SEC reasonably approximated the pertinent gains; at most,

29 they point to some uncertainty in the calculations, but “the

30 burden of that uncertainty must be borne” by appellants. 

31 S.E.C. v. Razmilovic, 738 F.3d 14, 35 (2d Cir. 2013). As to

32 the award of prejudgment interest, “[a] decision to grant

33 prejudgment interest is ‘confided to the district court’s

34 broad discretion, and will not be overturned on appeal

35 absent an abuse of that discretion.’” S.E.C. v. Contorinis,

36 743 F.3d 296, 307 (2d Cir. 2014) (quoting Endico Potatoes,

37 Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071-72 (2d

38 Cir. 1995)). “Prejudgment interest on a disgorgement amount

39 is intended to deprive the wrongdoer of the benefit of

40 holding the illicit gains over time by reasonably

41 approximating the cost of borrowing such gain from the

42 government.” Id. at 308. The district court’s imposition

43 of prejudgment interest furthered this aim, and “we detect

44 no abuse of discretion by the district court in ordering

4
1 [appellants] to pay prejudgment interest.” Id. Appellants

2 further argue that the SEC was required to trace the ill3 gotten gains, an argument that has been unambiguously

4 rejected by this Court. See F.T.C. v. Bronson Partners,

5 LLC, 654 F.3d 359, 374 (2d Cir. 2011) (“Indeed, it is by now

6 so uncontroversial that tracing is not required in

7 disgorgement cases that we recently rejected an argument to

8 the contrary via summary order.”).

9

10 Appellants challenge the civil penalties levied by the

11 district court. “Beyond setting maximum penalties, the

12 statutes leave ‘the actual amount of the penalty . . . up to

13 the discretion of the district court.’” Razmilovic, 738 F.3d

14 at 38 (quoting S.E.C. v. Kern, 425 F.3d 143, 153 (2d Cir.

15 2005) (alterations in original)). The district court

16 properly exercised its discretion in determining that Tier

17 III penalties were appropriate, given appellants’ egregious

18 conduct, and in imposing civil penalties of $10,000,000

19 against both individual defendants and $17,969,803.27

20 against the Entity Defendants.

21

22 Appellants argue that the district court erred in its

23 appointment of a receiver and in its approval of a plan for

24 interim distributions. “There is no question that district

25 courts may appoint receivers as part of their broad power to

26 remedy violations of federal securities laws.” S.E.C. v.

27 Byers, 609 F.3d 87, 92 (2d Cir. 2010). And “once the

28 district court satisfies itself that the distribution of

29 proceeds in a proposed SEC disgorgement plan is fair and

30 reasonable, its review is at an end.” S.E.C. v. Wang, 944

31 F.2d 80, 85 (2d Cir. 1991). The district court conducted

32 such a review in reaching its conclusion that pro rata

33 distribution was fair and reasonable.

34

35 6. Appellants contend that the remedies violate the

36 prohibition against Double Jeopardy in the Fifth Amendment

37 and the Excessive Fines Clause in the Eighth Amendment. 

38 Because none of the remedies is criminal in nature, the

39 “Double Jeopardy Clause is therefore inapplicable.” S.E.C.

40 v. Palmisano, 135 F.3d 860, 866 (2d Cir. 1998). As for the

41 Eighth Amendment, “we determine whether the forfeiture is

42 ‘grossly disproportional to the gravity of a defendant’s

43 offense.’” United States v. Sabhnani, 599 F.3d 215, 262 (2d

44 Cir. 2010) (quoting United States v. Bajakajian, 524 U.S.

5
1 321, 334 (1998)). The indicia of disproportionality are

2 virtually identical to the factors the district court

3 evaluated in fashioning the appropriate remedies; hence, no

4 Eighth Amendment violation appears on this record. 

5

6 For the foregoing reasons, and finding no merit in

7 appellants’ other arguments, we hereby AFFIRM the judgment

8 of the district court.

9

10 FOR THE COURT:

11 CATHERINE O’HAGAN WOLFE, CLERK

12

6