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 The defendant Jordan is now deceased and his estate has been substituted

as a defendant. 

03-1507.063 June 26, 2006

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

SECURITIES AND EXCHANGE COMMISSION, ) 

 )

Plaintiff, ) 

)

v. ) No. 03 C 1507

) 

MICHAEL J. PIETRZAK, MAURICE )

W. FURLONG and DONALD E. JORDAN, )

 )

 Defendants. )

MEMORANDUM OPINION

In this securities fraud action, plaintiff, the Securities and

Exchange Commission (“SEC”), has moved for summary judgment against

the defendants Michael J. Pietrzak and Maurice W. Furlong, and,

separately, for summary judgment against Donald E. Jordan.1 This

opinion will deal with plaintiff’s motion as to the defendants

Pietrzak and Furlong.

The defendants were officers of Hexagon Consolidated Companies

of America, Inc. (“HCCA”), a Nevada corporation whose common stock

during the relevant period was traded on the over-the-counter

market. In its public filings and press releases, which Pietrzak

and Furlong caused to be made, HCCA was represented to be a company

engaged in various businesses, including mineral mining and real
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estate investment. Plaintiff alleges, and has submitted opinion

evidence to support the allegation, that Pietrzak and Furlong

caused HCCA to make numerous public filings, press releases and

reports to shareholders that contained material misrepresentations

concerning the nature and value of its mining claims, real estate

interests, advertising credits and notes receivable. These

included many annual and quarterly reports and various filings with

the SEC. During this period of time, Pietrzak and Furlong each

sold their shares of HCCA stock, Pietrzak for $1,010,739 and

Furlong for $2,406,568. These sales were made prior to the

company’s restatement of its financial statements. The restatement

indicated a substantial reduction in the value of the company’s

assets. Plaintiff argues that the drop in the company’s stock

price that followed the press release concerning the restatement

was entirely due to the press release, which in turn indicates that

the stock price had been inflated by the false information reported

by the company before the restatement.

The parties filed their statements as to undisputed and

disputed facts pursuant to Local Rule 56.1. These materials

include numerous deposition excerpts and declarations of various

witnesses. A fair summary would be that plaintiff’s materials tend

to show a lack of any reasonable basis for the asset valuations

contained in the company’s financial reports prior to the

restatement, whereas defendants’ materials, if believed, would
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support the conclusion that the valuations were reasonable, or if

not, that the defendants at least had a good faith basis for

believing they were reasonable.

Plaintiff points out that most of its Rule 56.1 statements are

admitted by the defendants. This is true, but many of the admitted

statements are immaterial in the sense that their truth does not

establish liability. See Howland v. Kilquist, 833 F.2d 639, 642

(7th Cir. 1987). The facts that are material are principally those

that relate to defendants’ intent. Only intentional misstatements

violate the securities laws, see Ernst & Ernst v. Hochfelder, 425

U.S. 185 (1976), and recklessness demonstrates “intent” for this

purpose, see Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033,

1044-45 (7th Cir. 1977). Therefore, if there is a genuine factual

issue as to whether the defendants acted recklessly in valuing the

assets of the company, summary judgment would be inappropriate. 

We could spend considerable time discussing the opposing

opinions expressed in the depositions and declarations filed by the

parties, but we think that is unnecessary. This is one of those

situations where, even if the movant has the more persuasive

evidence, the case is not so clear that we can say with assurance

that there is no genuine issue. All doubts as to the existence of

an issue of material fact must be resolved against the movant. See

Moutoux v. Gulling Auto Elec. Inc., 295 F.2d 573, 576 (7th Cir.

1961). In order for us to hold as a matter of law that the
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defendants acted recklessly, we would have to accept the opinions

of plaintiff’s experts, reject those of defendants’ experts, and

then go on to find that defendants did not rely in good faith on

the information supplied by their accountants and others, including

Donald Jordan, the essayer who valued the mineral assets. But the

law is clear that on a motion for summary judgment the court is not

to weigh the evidence. 

On summary judgment a court may not make credibility

determinations, weigh the evidence, or decide which

inferences to draw from the facts; these are jobs for a

fact finder. Rather, [t]he court has one task and one

task only: to decide, based on the evidence of record,

whether there is any material dispute of fact that

requires a trial. Summary judgment is not appropriate if

the evidence is such that a reasonable jury could return

a verdict for the nonmoving party. We must look

therefore at the evidence as a jury might, construing the

record in the light most favorable to the nonmovant and

avoiding the temptation to decide which party’s version

of the facts is more likely true. As we have said many

times, summary judgment cannot be used to resolve

swearing contests between litigants. 

Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003) (citations and

internal quotation marks omitted). Furthermore, as we have seen,

the question is not whether Pietrzak and Furlong were negligent in

regard to the valuations. The question is whether they were

reckless. At what point negligence shades into recklessness is a

factual determination concerning state of mind. It is a kind of

factual determination the reviewing courts have taken pains to

identify as especially inappropriate for summary judgment: 

We are particularly leery of resolving issues involving

a state of mind on summary judgment. In fact, . . . we
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[previously] quoted Pfizer, Inc. v. International

Rectifier Corp., 538 F.2d 180, 185 (8th Cir. 1976), which

stated that “[s]ummary judgment is notoriously

inappropriate for determination of claims in which issues

of intent, good faith and other subjective feelings play

dominant roles.”

Ashman v. Barrows, 438 F.3d 781, 784 (7th Cir. 2006) (citations

omitted). Defendants’ motion for summary judgment essentially

calls upon this court to decide the case. Clearly, that would be

inappropriate in light of the genuine issue as to defendants’ state

of mind. 

There is another issue in regard to plaintiff’s disgorgement

request. Plaintiff assumes that if recklessness is shown it would

be entitled to judgment for the entire amounts Pietrzak and Furlong

received in the sales of their stock. Plaintiff overlooks entirely

the question of causation, apparently assuming the absence of any

question as to whether, and to what extent, the press release

concerning the restatement affected the price of the stock. We

have discussed this question in the Memorandum Opinion of this date

concerning plaintiff’s motion for summary judgment against the

Estate of Jordan, and that discussion applies to Pietrzak and

Furlong as well. Plaintiff has not proved the necessary causal

relationship and will have to prove it at trial. 

For these reasons, plaintiff’s motion for summary judgment

against the defendants Pietrzak and Furlong will be denied. 
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DATE: June 26, 2006

ENTER: ___________________________________________

John F. Grady, United States District Judge