14-2425 Securities & Exchange Commission v. Amerindo Investment Advisors et al.



### UNITED STATES COURT OF APPEALS **FOR THE SECOND CIRCUIT**



## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C** **ITATION TO A SUMMARY ORDER FILED**
**ON OR AFTER J** **ANUARY 1,**  **2007, IS PERMITTED AND IS GOVERNED BY**  **F EDERAL**  **R ULE OF**  **A PPELLATE**  **P ROCEDURE**  **32.1 AND THIS COURT**  **’ S**  **L OCAL**  **R ULE**  **32.1.1. W**  **HEN CITING A SUMMARY ORDER IN A**
**DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER THE F** **EDERAL A** **PPENDIX 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 .** 
**At a stated term of the United States Court of Appeals** 1 **for the Second Circuit, held at the Thurgood Marshall United** 2 **States Courthouse, 40 Foley Square, in the City of New York,** 3 **on the 26 th** **day of February, two thousand sixteen.** 4 5 **PRESENT: DENNIS JACOBS,** 6 **DENNY CHIN,** 7 **CHRISTOPHER F. DRONEY,** 8 **Circuit Judges**

**.** 9 10
- - - - - - - - - - - - - - - - - - - -X 11 **SECURITIES & EXCHANGE COMMISSION,** 12 **Plaintiff-Appellee ,**  13 14 **-v.- 14-2425** 15 16 **AMERINDO INVESTMENT ADVISORS et al.,** 17 **Defendants-Appellants**

**.** 18
- - - - - - - - - - - - - - - - - - - -X 19 20 **FOR APPELLANTS:** VIVIAN SHEVITZ, South Salem, New 21 York. 22 23 **FOR APPELLEE:** EMILY T.P. ROSEN (with Anne K. 24 Small, Michael A. Conley, John 25 W. Avery & Stephen G. Yoder on 26 the brief ), UNITED STATES 27 SECURITIES & EXCHANGE 28 COMMISSION, Washington, D.C. 29

1Appeal from a judgment of the United States District 1 Court for the Southern District of New York (Sullivan, J. ). 2 3 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 4 **AND DECREED**that the judgment of the district court be 5
**AFFIRMED**

. 6 7 Appellants Amerindo Investment Advisors Inc. et al. 8 appeal from the judgment of the United States District Court 9 for the Southern District of New York (Sullivan, J. ), 10 granting summary judgment, in favor of plaintiff-appellee 11 Securities & Exchange Commission(“SEC”) , and ordering 12 various remedies

. We assume the parties’ familiarity with 13 the underlying facts, the procedural history, and the issues 14 presented for review. 15 16 **1.** Appellants contend that Section 30(b) of the 17 Securities Exchange Act barred the SEC enforcement 18 proceeding. But Section 30(b) is inapplicable because the 19 transactions at issue were domestic in character, i.e., “the 20 purchaser incurred irrevocable liability within the United 21 States to take and pay for a security, or . . . the seller 22 incurred irrevocable liability within the United States to 23 deliver a security.” Absolute Activist Value Master Fund 24 Ltd. v. Ficeto , 677 F.3d 60, 68 (2d Cir. 2012). For similar 25 reasons, appellants’ argument based on Morrison v. Nat’l 26 Austl. Bank Ltd. , 561 U.S. 247 (2010), must be rejected; 27 Absolute Activistclearly defined “domestic transactions” in 28 the wake of Morrison ; and appellants fail to deal with the 29 evidence showing that the victims of the fraud incurred 30 irrevocable liability in the United States. Absolute 31 Activist , 677 F.3d at 67. We acknowledged as much in the 32 related criminal appeal. See United States v. Vilar , 729 33 F.3d 62, 77 (2d Cir. 2013) (“In light of these domestic 34 transactions, we are persuaded that, based on the record 35 evidence, a jury would have found that Vilar and Tanaka 36 engaged in fraud in connection with a domesticpurchase or 37 sale of securities . . . .”). There is no basis for us to 38 reconsider our decision in Absolute Activist

. 39 40 **2.**Appellants claim that the district court lacked 41 subject matter jurisdiction based on the applicable statute 42 of limitations. See28 U.S.C. § 2462. However, “most time 43 bars are nonjurisdictional,” and appellants “must clear a 44

2high bar to establish that a statute of limitations is 1 jurisdictional.” United States v. Wong , 135 S.Ct. 1625, 2 1632 (2015). Appellants have not met this burden. 3 4 In any event, Vilar and Tanaka waived their statute of 5 limitations defense by not raising it in their motion to 6 dismiss the amended complaint. “A claim that a statute of 7 limitations bars a suit is an affirmative defense, and, as 8 such, it is waived if not raised in the answer to the 9 complaint.” Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb 10 Inc. , 967 F.2d 742, 751-52 (2d Cir. 1992), as amended(Sept. 11 23, 1992) (citing Fed. R. Civ. P. 8(c)). In their motion to 12 dismiss, Vilar and Tanaka only opposed the imposition of 13 civil monetary penalties. As to the Entity Defendants, the 14 statute of limitations defense was abandoned by their 15 failure to appear and assert that defense. SeeDoe v. 16 Constant , 354 F. App’x 543, 545 (2d Cir. 2009) (affirming 17 entry of default judgment and noting that “timeliness . . . 18 is an affirmative defense that may be forfeited or waived.” 19 (internal citation omitted)). The district court properly 20 imposed disgorgement and injunctive relief and correctly 21 limited civil penalties to “gains only from frauds occurring 22 within the five-year statute of limitations for civil 23 penalties.” S.E.C. v. Amerindo Inv. Advisors, Inc. , No. 05 24 Civ. 5231 (RJS), 2014 WL 2112032, at *11 (S.D.N.Y. May 6, 25 2014). 26 27 **3.** Appellants challenge the use of collateral estoppel 28 based on their prior criminal convictions. “It is well29 settled that a criminal conviction . . . constitutes 30 estoppel in favor of the United States in a subsequent civil 31 proceeding as to those matters determined by the judgment in 32 the criminal case.” United States v. Podell , 572 F.2d 31, 33 35 (2d Cir. 1978). Appellants proffer no persuasive reason 34 to depart from this principle; they simply recite a string 35 of unsubstantiated assertions that they failed to raise 36 below–-thus waiving these arguments--which do not, in any 37 event, provide any reason to doubt the fairness of the prior 38 criminal proceedings. 39 40 **4.**Appellants argue that the entry of default judgment 41 against the Entity Defendants was inappropriate. “It is 42 settled law that a corporation may not appear in a lawsuit 43 against it except through an attorney, and that, where a 44

3corporation repeatedly fails to appear by counsel, a default 1 judgment may be entered against it . . . .” S.E.C. v. 2 Research Automation Corp. , 521 F.2d 585, 589 (2d Cir. 1975) 3 (citations omitted). The district court ordered the Entity 4 Defendants to appear at a hearing and show cause why default 5 judgment should not be entered against them; they did not 6 appear. Appellants nevertheless challenge a number of facts 7 in the complaint, something the Entity Defendants cannot do 8 because “a default is an admission of all well-pleaded 9 allegations against the defaulting party.” Vermont Teddy 10 Bear Co., Inc. v. 1-800 Beargram Co. , 373 F.3d 241, 246 (2d 11 Cir. 2004). Appellants also contend that the complaints 12 were not properly served on the Entity Defendants; this, 13 however, does not explain why they failed to appear at the 14 show-cause hearing. In any event, the Entity Defendants did 15 not make this argument below; it is waived. SeeIn re 16 Nortel Networks Corp. Sec. Litig. , 539 F.3d 129, 132 (2d 17 Cir. 2008). 18 19 **5.**Appellants take issue with each of the remedies 20 imposed by the district court. “Once the district court has 21 found federal securities law violations, it has broad 22 equitable power to fashion appropriate remedies, including 23 ordering that culpable defendants disgorge their profits.” 24 S.E.C. v. First Jersey Sec., Inc. , 101 F.3d 1450, 1474 (2d 25 Cir. 1996). Regarding disgorgement, appellants provide no 26 basis to disturb the district court’s conclusion that the 27 SEC reasonably approximated the pertinent gains; at most, 28 they point to some uncertainty in the calculations, but “the 29 burden of that uncertainty must be borne” by appellants. 30 S.E.C. v. Razmilovic , 738 F.3d 14, 35 (2d Cir. 2013). As to 31 the award of prejudgment interest, “[a] decision to grant 32 prejudgment interest is ‘confided to the district court’s 33 broad discretion, and will not be overturned on appeal 34 absent an abuse of that discretion.’” S.E.C. v. Contorinis

, 35 743 F.3d 296, 307 (2d Cir. 2014) (quoting Endico Potatoes, 36 Inc. v. CIT Grp./Factoring, Inc. , 67 F.3d 1063, 1071-72 (2d 37 Cir. 1995)). “Prejudgment interest on a disgorgement amount 38 is intended to deprive the wrongdoer of the benefit of 39 holding the illicit gains over time by reasonably 40 approximating the cost of borrowing such gain from the 41 government.” Id. at 308. The district court’s imposition 42 of prejudgment interest furthered this aim, and “we detect 43 no abuse of discretion by the district court in ordering 44

4[appellants] to pay prejudgment interest.” Id. Appellants 1 further argue that the SEC was required to trace the ill2 gotten gains, an argument that has been unambiguously 3 rejected by this Court. SeeF.T.C. v. Bronson Partners, 4 LLC , 654 F.3d 359, 374 (2d Cir. 2011) (“Indeed, it is by now 5 so uncontroversial that tracing is not required in 6 disgorgement cases that we recently rejected an argument to 7 the contrary via summary order.”). 8 9 Appellants challenge the civil penalties levied by the 10 district court. “Beyond setting maximum penalties, the 11 statutes leave ‘the actual amount of the penalty . . . up to 12 the discretion of the district court.’” Razmilovic , 738 F.3d 13 at 38 (quoting S.E.C. v. Kern , 425 F.3d 143, 153 (2d Cir. 14 2005) (alterations in original)). The district court 15 properly exercised its discretion in determining that Tier 16 III penalties were appropriate, given appellants’ egregious 17 conduct, and in imposing civil penalties of $10,000,000 18 against both individual defendants and $17,969,803.27 19 against the Entity Defendants. 20 21 Appellants argue that the district court erred in its 22 appointment of a receiver and in its approval of a plan for 23 interim distributions. “There is no question that district 24 courts may appoint receivers as part of their broad power to 25 remedy violations of federal securities laws.” S.E.C. v. 26 Byers , 609 F.3d 87, 92 (2d Cir. 2010). And “once the 27 district court satisfies itself that the distribution of 28 proceeds in a proposed SEC disgorgement plan is fair and 29 reasonable, its review is at an end.” S.E.C. v. Wang , 944 30 F.2d 80, 85 (2d Cir. 1991). The district court conducted 31 such a review in reaching its conclusion that pro rata 32 distribution was fair and reasonable. 33 34 **6.** Appellants contend that the remedies violate the 35 prohibition against Double Jeopardy in the Fifth Amendment 36 and the Excessive Fines Clause in the Eighth Amendment. 37 Because none of the remedies is criminal in nature, the 38 “Double Jeopardy Clause is therefore inapplicable.” S.E.C. 39 v. Palmisano , 135 F.3d 860, 866 (2d Cir. 1998). As for the 40 Eighth Amendment, “we determine whether the forfeiture is 41 ‘grossly disproportional to the gravity of a defendant’s 42 offense.’” United States v. Sabhnani , 599 F.3d 215, 262 (2d 43 Cir. 2010) (quoting United States v. Bajakajian , 524 U.S. 44

5321, 334 (1998)). The indicia of disproportionality are 1 virtually identical to the factors the district court 2 evaluated in fashioning the appropriate remedies; hence, no 3 Eighth Amendment violation appears on this record. 4 5 For the foregoing reasons, and finding no merit in 6 appellants’ other arguments, we hereby **AFFIRM** the judgment 7 of the district court. 8 9 FOR THE COURT: 10 CATHERINE O’HAGAN WOLFE, CLERK 11 12

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