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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Before the Court are the Securities and Exchange Commission’s (“SEC”) Motion 

for Summary Judgment as to Liability and Non-Monetary Relief (the “Motion”) (Doc. 99-

1) and defendant Hinkeldey’s Response to the Motion (Doc. 105). Defendants Mogler, 

Polanchek, and Stevens have not filed a response to the Motion.

I. Background1

On September 10, 2015, a criminal indictment (the “Indictment”) was unsealed. See 

United States v. Mogler at al., Case No. 2:15-CR-01118-PHX-SPL (D. Ariz.) The 

Indictment charged defendants Mogler, Stevens, Hinkeldey, and Polanchek (the 

“Defendants”) with a conspiracy to violate and violations of the federal mail fraud, wire 

fraud, identity theft, and money laundering statutes. (Doc. 99-2, Ex. 1) 

On September 11, 2015, the SEC filed a civil complaint (the “Complaint”) against 

1 For purposes of resolving the Motion for Summary Judgment, the following background 

is offered for context and based only on undisputed facts or, where there is a dispute, the nonmoving party’s version of events if such version is available. 

Securities and Exchange Commission,

 

Plaintiff, 

vs. 

Mogler et al.,

Defendants. 

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No. CV-15-01814-PHX-SPL

ORDER
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the Defendants alleging violations of various provisions of federal securities laws. (Doc. 

1) The Complaint alleges that Defendants have violated the antifraud provisions of the 

Securities Act of 1933 (the “Securities Act) and the Securities Act of 1934 (the “Exchange 

Act”), the securities registration provisions of Section 5 of the Securities Act, and that 

Defendants Polanchek and Buckley have violated the broker-dealer registration provisions 

of Section 15 of the Exchange Act. (Doc. 1 at 2–3) It further alleges that those violations 

took place when the Defendants engaged in a fraudulent unregistered securities offering in 

which they promoted and sold $18 million in high-yield promissory notes, claiming that 

funds raised through the sale of the notes would be used to acquire and develop beachfront 

property in Mexico, operate recycling facilities, and purchase foreclosed residential 

properties for later resale at a profit. (Doc. 1 at 6–7) The Complaint and the Indictment 

concerned the same victims and the same allegedly fraudulent scheme. (Docs. 1 at 3, 27–

32; 99-2, Ex. 1 at ¶ 11)

Defendant Mogler pleaded guilty to one count of conspiracy, 18 U.S.C. § 371, one 

count of wire fraud, 18 U.S.C. § 1343, and one count of money laundering, 18 U.S.C. § 

1957. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 

113. He was sentenced to a 292-month prison term and ordered to pay restitution in the 

amount of $14,019,815.56. United States v. Mogler et al., Case No. 2:15-CR-0118-PHXSPL (D. Ariz.), doc. 439. In his plea agreement, Defendant Mogler admitted the following 

facts: he and Defendant James Hinkeldey orchestrated and directed a scheme to promote 

and sell fraudulent high-yield investment products, primarily involving: real estate 

development projects in Sonora, Mexico; waste management companies in Nevada and 

Illinois; and distressed residential real estate in Arizona. (Doc. 99-2, Ex. 2 at 12) Defendant 

Mogler admitted that, acting in concert with his co-defendants, he defrauded investors to 

obtain funds by making materially false promises, representations, and omissions to them 

either orally, in-person and over the radio, or in writing in offering materials. (Doc. 99-2, 

Ex. 2 at 12) The Court notes that Defendant Mogler has filed a petition to vacate his 

sentence under 28 U.S.C. § 2255 arguing ineffective assistance of counsel. See Mogler v. 
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United States, Case No. 2:20-CV-00173-SPL-DMF, doc. 1.

Defendant Stevens pleaded guilty to one count of conspiracy to commit wire fraud, 

18 U.S.C. § 371. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. 

Ariz.), doc. 132. He was sentenced to 36 months of probation and ordered to pay $8.2 

million in restitution. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL 

(D. Ariz.), doc. 602. In his plea agreement, Defendant Stevens admitted the following facts: 

he participated in a fraudulent scheme to promote and sell fraudulent high-yield investment 

products involving real estate development projects in Sonora, Mexico; he conspired and 

acted with other who were knowingly involved in the fraudulent scheme which was 

designed to obtain funds from investors by means of materially false promises, 

representations, and omissions made orally and in writing related to the purported projects. 

(Doc. 99-2, Ex. 3 at 11) 

Defendant Hinkeldey proceeded to trial and a jury returned a verdict finding him

guilty of conspiracy, 18 U.S.C. § 371, wire fraud, 18 U.S.C. § 1343, money laundering, 18 

U.S.C. § 1957, mail fraud, 18 U.S.C. § 1341, aggravated identity theft, 18 U.S.C. § 1028A, 

and transactional money laundering, 18 U.S.C. § 1957. See United States v. Mogler et al., 

Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), docs. 488–89, 491, 493, 495, 497–99, 501–

502, 505, 512, and 520. He was sentenced to a 365-month prison term and ordered to pay 

$14,019,818.56 in restitution. United States v. Hinkeldey, Case No. 2:15-CR-01118-002-

PHX-SPL (D. Ariz.), doc. 678. Defendant Hinkeldey has appealed the jury verdict and 

sentence, and the appeal is pending as of the date of this Order. (Doc. 105 at 2) 

Defendant Polanchek pleaded guilty to observing grand jury proceedings, a class A 

misdemeanor offense, in violation of 18 U.S.C. § 1508. See United States v. Mogler et al., 

Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 720. All other counts in the Indictment 

were dismissed. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. 

Ariz.), doc. 714 at 1–2. 

The SEC filed its Motion on November 12, 2019. (Doc. 99-1) Defendant Buckley

consented to entry of judgment against him. (Doc. 104) Judgment was entered accordingly 
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by the Court. (Doc. 110) Defendant Hinkeldey filed a response to the Motion, objecting in 

part to the SEC’s statement of facts in support of its Motion, but agreeing to the entry of 

judgment for summary judgment and non-monetary relief proposed by the SEC although 

he has appealed the jury verdict and sentence from the criminal case. (Doc. 105) The 

Court’s ruling on the Motion is as follows.2

II. Legal Standard

A. Summary Judgment

A court must grant summary judgment if the pleadings and supporting documents, 

viewed in the light most favorable to the non-moving party, “show[] that there is no genuine 

dispute as to any material fact and that the movant is entitled to judgment as a matter of 

law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). 

A fact is “material” when, under the governing substantive law, it could affect the outcome 

of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute 

of material fact arises “if the evidence is such that a reasonable jury could return a verdict 

for the nonmoving party.” Id. “If the evidence is merely colorable, . . . or is not significantly 

probative, . . . summary judgment may be granted.” Id. at 249–50 (citations omitted).

The party seeking summary judgment bears the initial burden of informing the court 

of the basis for its motion and identifying those portions of the “pleadings, depositions, 

answers to interrogatories, and admissions on file, together with the affidavits, if any,”

which it believes demonstrate the absence of any genuine issue of material fact. Celotex, 

477 U.S. at 323 (citations omitted). The moving party need not disprove matters on which 

the opponent has the burden of proof at trial. Id. Summary judgment is, therefore, proper 

if the nonmoving party fails to make a showing sufficient to establish the existence of an 

essential element of his case on which he will bear the burden of proof at trial. Id.

2 Because it would not assist in resolution of the instant issues, the Court finds the pending 

motion is suitable for decision without oral argument. See LRCiv. 7.2(f); Fed. R. Civ. P. 78(b); 

Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).
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B. Collateral Estoppel

The doctrine of collateral estoppel or issue preclusion prohibits relitigation of an 

issue of fact or law that has been decided in earlier litigation. Parklane Hosiery Co. v. 

Shore, 439 U.S. 322, 326, n.5 (1979). Additionally, it is “well-established that a prior 

criminal conviction may work an estoppel in favor of the Government in a subsequent civil 

proceeding.” Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568 (1951). 

“Such estoppel only extends to questions distinctly put in issue and directly determined in 

the criminal prosecutions.” Id. at 569 (quoting Frank v. Mangum, 237 U.S. 309, 334 

(1915)). Furthermore, in a case of criminal conviction based on a jury verdict of guilty, 

issues which were essential to the verdict must be regarded as having been determined by 

the judgment. Id.; see also United States v. Podell, 572 F.2d 31, 35 (2d Cir. 1978) (“a 

criminal conviction, whether by a jury verdict or guilty plea, constitutes estoppel in favor 

of the United States in a subsequent civil proceeding as to those matters determined by the 

judgment in the criminal case.”). “Although it is settled law in this Circuit that a guilty plea 

may be used to establish issue preclusion in a subsequent civil suit, preclusion has only 

been allowed where an element of the crime to which the defendant pled guilty or of which 

he was convicted was at issue in the second suit.” United States v. Real Property Located 

at Section 18, 976 F.2d 515, 519 (9th Cir. 1992); see also United States v. $31,697.59 Cash, 

665 F.2d 903, 906 (9th Cir. 1982). Courts have not hesitated to apply the doctrine to civil 

securities fraud violations in civil suits when similar issues of facts arose and were 

necessarily decided in the criminal case. SEC v. Braslau, 2016 WL 5922666, at *3 (C.D. 

Cal. May 13, 2016) (citing SEC v. Alexander, 2015 U.S. Dist. LEXIS 93476, *10 (N.D. 

Cal. July 17, 2015)); see also SEC v. Reyes, 2008 U.S. Dist. LEXIS 65895, at *2 (N.D. 

Cal. Aug. 25, 2008); SEC v. Bilzerian, 29 F.3d 689, 694 (D.C. Cir. 1994); SEC v. 

Gruenberg, 989 F.2d 977, 978 (8th Cir. 1993); SEC v. McCaskey, 2001 U.S. Dist. LEXIS 

13571, at *11–12 (S.D.N.Y. Sept. 6, 2001); In re Towers Fin. Corp. Noteholders Litig., 75 

F. Supp. 2d 178, 181 (S.D.N.Y. 1999); SEC v. Everest Mgmt. Corp., 466 F. Supp. 167, 172 

(S.D.N.Y. 1979).
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In the Ninth Circuit, to find that collateral estoppel applies based on a prior criminal 

conviction, a court must conclude that

(1) the prior conviction must have been for a serious offense so 

that the defendant was motivated to fully litigate the charges; 

(2) there must have been a full and fair trial to prevent 

convictions of doubtful validity from being used; (3) the issue 

on which the prior conviction is offered must of necessity [sic]

have been decided at the criminal trial; and (4) the party against 

whom the collateral estoppel is asserted was a party or in 

privity with a party to the prior trial.

Real Property Located at Section 18, 976 F.2d at 518 (quoting Ayers v. City of Richmond, 

895 F.2d 1267, 1271 (9th Cir. 1990)).

Furthermore, with regards to the third prong, the doctrine will apply even where the 

statutes charged in the criminal action and those charged in the subsequent civil action are 

not identical so long as the factual bases of the two actions are the same. Ivers. v. United 

States, 581 F.2d 1362, 1367 (9th Cir. 1978); see also SEC v. Pace, 173 F. Supp. 2d 30, 33 

(D.D.C. 2001) (conviction for two counts of wire fraud collaterally estopped defendant 

from contesting element of scienter under all the securities laws he was charged with civilly 

violating).

III. Discussion

At the outset, the Court notes that judgment was already entered against Defendant 

Buckley in this case based on his consent. (Docs. 104, 110) Additionally, Defendant 

Hinkeldey has agreed to the entry of summary judgment and non-monetary relief proposed 

by the SEC (Doc. 105) and judgment will be entered against him accordingly. This leaves 

the Court with analyzing the SEC’s Motion as to Defendants Mogler, Polanchek, and 

Stevens only.

A. The Definition of a Security

One common issue as to each of the remaining Defendants is whether the fraudulent 
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scheme involved securities as that term is defined under securities laws and case law. 

Section 2(a)(1) of the Securities Act defines a security as, among a long list of terms, “an 

investment contract.” 15 U.S.C. § 77b(a)(1). Section 3(a)(10) of the Exchange Act also 

defines a security as, among other terms, an “investment contract.” 15 U.S.C. § 78c(a)(10). 

None of the other definitions in those two statutes appear to apply to the scheme which is 

the basis for the criminal and the civil cases against the Defendants.

The Supreme Court has defined an “investment contract” as “a contract, transaction 

or scheme whereby a person invests his money in a common enterprise and is led to expect 

profits solely from the efforts of the promoter or a third party.” SEC v. W.J. Howey Co., 

328 U.S. 293, 298–99 (1946). To determine whether a particular scheme fits the definition 

of an investment contract, the Ninth Circuit uses a three-part test assessing if there was: 

“(1) an investment of money; (2) in a common enterprise, evidenced by either horizontal 

or vertical pooling; (3) with an expectation of income or profits to be derived solely from 

the efforts of a promoter or a third party.” SEC v. Rubera, 350 F.3d 1084, 1090 (9th Cir. 

2003) (quoting SEC v. R.G. Reynolds Enters., Inc., 952 F.2d 1125, 1130 (9th Cir. 1991)).

Commonality of enterprise is further defined as “an enterprise common to an investor and 

the seller, promoter, or some third party (vertical commonality) or an enterprise common 

to a group of investors (horizontal commonality).” R.G. Reynolds, 952 F.2d at 1130 (citing 

Hocking. v. Dubois, 885 F.2d 1449, 1455 (9th Cir. 1989)). 

In this case, no reasonable juror could conclude that the allegedly fraudulent scheme 

the Defendants engaged in did not require the investment of money from investors and the 

first prong of the test is satisfied. Additionally, the investors were asked to invest in the 

promissory notes and the Defendants represented that they were in charge of purchasing 

and developing property in Mexico as well as recycling facilities, and distressed residential 

properties with the funds. (Doc. 1 at 6–7) Accordingly, the Court finds that no reasonable 

juror could find that there was no common enterprise in the scheme. Finally, the investors 

clearly expected profits and revenue from the promissory notes and they were not required 

to do anything besides investing their money. (Doc. 1 at 6–7) Accordingly, the Court finds 
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that no reasonable juror could find that the third prong of the test for an investment contract 

is not met. 

Accordingly, the Court finds that the investments offered in the scheme which gave 

rise to this civil action were securities under both the Securities and the Exchange Acts and 

that all of the Defendants’ relevant conduct took place in connection with the sale or 

purchase of securities.

B. Summary Judgment as to Defendant Mogler

As to the first of the four requirements for the application of collateral estoppel to 

Mogler set forth in Real Property Located at Section 18, it is clear that the prior conviction 

was for a serious offense. Although Mogler pleaded guilty and was not tried in front of a 

jury, he pleaded guilty to one count of conspiracy, 18 U.S.C. § 371, one count of wire 

fraud, 18 U.S.C. § 1343, and one count of money laundering, 18 U.S.C. § 1957. United 

States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 113. He was 

sentenced to a 292-month prison term and ordered to pay restitution in the amount of 

$14,019,815.56. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. 

Ariz.), doc. 439. Accordingly, the Court finds that, with respect to Mogler, the first 

requirement for application of collateral estoppel is met.

The second requirement for the application of collateral estoppel is more puzzling

on its face. Indeed, Mogler has filed a petition to vacate his sentence under 28 U.S.C. § 

2255 arguing ineffective assistance of counsel. See Mogler v. United States, Case No. 2:20-

CV-00173-SPL-DMF, doc. 1. He is clearly challenging the validity of his conviction and 

sentence through that proceeding, which would appear to prevent the Court from finding 

that the second requirement for the application of collateral estoppel is met. Nevertheless, 

it is well-settled that “the preclusive effects of a lower court judgment simply cannot be 

suspended by taking an appeal that remains undecided.” Hawkins v. Risley, 984 F.2d 321, 

324 (9th Cir. 1993) (quoting Robi v. Five Platters, Inc., 838 F.2d 318, 327 (9th Cir. 1988)); 

see also United States v. Int’l Bhd. of Teamsters, 905 F.2d 610, 621 (2d Cir. 1990) 

(pendency of criminal appeal does not deprive judgment of preclusive effect); Erebia v. 
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Chrysler Plastic Prods. Corp., 891 F.2d 1212, 1215 n. 1 (6th Cir. 1989); Jaffree v. Wallace, 

837 F.2d 1461, 1466–67 (11th Cir. 1988); SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 

718 F.2d 365, 370 (Fed. Cir. 1983). Accordingly, although it is possible that the court in 

the other pending civil case would find that Mogler’s conviction and sentencing need to be 

vacated, as of the date of this Order, the Court finds that the second requirement for the 

application of collateral estoppel to Mogler in this case is met.

The third requirement for the application of collateral estoppel is easily disposed of. 

Mogler pleaded guilty to one count of conspiracy, 18 U.S.C. § 371, one count of wire fraud, 

18 U.S.C. § 1343, and one count of money laundering, 18 U.S.C. § 1957. United States v. 

Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 113. The factual basis 

which served as the basis for his plea, conviction, and sentencing is the same as the factual 

basis used by the SEC in this civil case. The two actions were predicated on the exact same 

fraudulent scheme. (Docs. 1 at 12; 99-2, Ex. 2 at 12) Accordingly, because Mogler, in his 

guilty plea, admitted the same facts which are the basis for the SEC’s civil case here, the 

Court finds that the third requirement for application of collateral estoppel is met.

Regarding the fourth and final requirement, Mogler was the party who pleaded 

guilty in the criminal case and the SEC is seeking the application of collateral estoppel 

against him in this case. Accordingly, the Court also finds that Mogler’s guilty plea satisfies 

the fourth requirement for application of collateral estoppel.

Having established that Mogler is collaterally estopped from relitigating the issues 

decided through his guilty plea, the Court must now determine whether it should grant the 

SEC’s Motion against Mogler. To do so, the Court must compare the elements the SEC 

has to prove in this civil case with the elements of Mogler’s guilty plea and conviction for 

mail and wire fraud.

In the Complaint, the SEC alleged: (1) violations of Section 10(b) of the Exchange 

Act and Rule 10b-5; (2) violations of Section 17(a) of the Securities Act; (3) violations of 

Sections 5(a) and (c) of the Securities Act, and (4) violations of Section 15(a)(1) of the 

Exchange Act (this last claim only against Defendants Polanchek and Buckley). The Court 
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looks at each of those violations in turn.

a. Mogler’s Violations of Section 10(b) and Rule 10b-5

Section 10(b) of the Exchange Act prohibits anyone from 

directly or indirectly, by the use of any means or 

instrumentality of interstate commerce or of the mails, or of 

any facility of any national securities exchange . . . . us[ing] or 

employ[ing], in connection with the purchase or sale of any 

security registered on a national securities exchange or any 

security not so registered, or any securities-based swap 

agreement any manipulative or deceptive device. 

15 U.S.C. § 78j(b). Rule 10b-5 makes it unlawful for any person

(a) [t]o employ any device, scheme, or artifice to defraud,

(b) [t]o make any untrue statement of a material fact or to omit 

to state a material fact necessary in order to make the 

statements made, in the light of the circumstances under which 

they were made, not misleading, or

(c) [t]o engage in any act, practice, or course of business which 

operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5. Violations of Section 10(b) and Rule 10b-5 require a showing of 

scienter on the part of the Defendant. Aaron v. SEC, 446 U.S. 680, 691 (1980). Scienter is 

defined as a “mental state embracing intent to deceive, manipulate or defraud.” Ernst & 

Ernst v. Hochfelder, 425 U.S. 185, 193 (1976), abrogated on other grounds. Scienter may 

be established by a showing of either actual knowledge or recklessness. Gebhart v. SEC, 

595 F.3d 1034, 1040 (9th Cir. 2010); In re Software Toolworks, Inc., 50 F.3d 615, 626 (9th

Cir. 1994). Scienter may be established therefore by showing that the defendants knew 

their statements were false, or that defendants were reckless as to the truth or falsity of their 

statements. Gebhart, 595 F.3d at 1041. The misstatements or omissions, if applicable, must 
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concern material facts. Basic Inc. v. Levinson, 485 U.S. 224, 331–32 (1988). A fact is 

material if there is a substantial likelihood that a reasonable investor would consider it 

important in making an investment decision. See TSC Indus. V. Northway, 426 U.S. 438, 

449 (1976).

Mogler pleaded guilty to one count of conspiracy, 18 U.S.C. § 371, one count of 

wire fraud, 18 U.S.C. § 1343, and one count of money laundering, 18 U.S.C. § 1957. See 

United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 113. The 

elements of a wire fraud are “a scheme to defraud, use of the wires in furtherance of the 

scheme, and the specific intent to defraud.” United States v. McNeil, 320 F.3d 1034, 1040 

(9th Cir. 2003). Additionally, the scheme to defraud includes misrepresentations, false 

pretenses, or promises, and those statements must be of a material fact. 18 U.S.C. § 1343; 

see also Neder v. United States, 527 U.S. 1, 25 (1999). By agreeing to plead guilty to the 

wire fraud, Mogler admitted that all those elements were present. 

It is easy to see that those elements also satisfy the elements necessary for violations 

of Section 10(b) of the Exchange Act and Rule 10b-5. Mogler admitted to: having engaged 

in a scheme to defraud (Section 10(b) and Rule 10b-5(a)), having the specific intent to 

defraud (the scienter requirement under Section 10(b) and Rule 10b-5), making materially 

false or misleading statements (Section 10(b) and Rule 10b-5(b)), and using the means of 

interstate communication (Section 10(b) and Rule 10b-5 in general).

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Mogler’s alleged violations of Section 10(b) of the Exchange Act and Rule 10b5 and will grant the SEC’s Motion as to Count I of the Complaint against Mogler.

b. Mogler’s Violations of Section 17(a)

Section 17(a) of the Securities Act makes it 

unlawful for any person in the offer or sale of any securities . . 

. by the use of any means or instruments of transportation or 

communication in interstate commerce or by use of the mails, 

directly or indirectly
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(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue 

statement of a material fact or any omission to state a material 

fact necessary in order to make the statements made, in light of 

the circumstances under which they were made, not 

misleading; or

(3) to engage in any transaction, practice, or course of business 

which operates or would operate as a fraud or deceit upon the 

purchaser.

15 U.S.C. § 77q(a). Although a violation of Section 17(a)(1) requires a showing of scienter, 

violations of Section 17(a)(2)–(3) require a showing of either scienter or simple negligence. 

Aaron, 446 U.S. at 697. Negligence is the failure to act with reasonable prudence. See SEC 

v. Dain Rauscher, Inc., 254 F.3d 852, 856 (9th Cir. 2001). 

To prove a violation of Section 17(a)(2), the SEC must prove that, in connection 

with the offer or sale of a security, the defendant: (1) by means of interstate commerce; (2) 

obtained money or property; (3) by means of a material false statement or omission; and 

(4) that the defendant acted at least negligently. See, e.g., id.

It is again easy to see that Mogler’s guilty plea to wire fraud satisfy the elements for 

violations of Section 17(a) of the Securities Act. Mogler admitted to: having engaged in a 

scheme to defraud (Section 17(a)(1)), having the specific intent to defraud (the scienter 

requirement for Section 17(a)(1) and more than the mere negligence required under Section 

17(a)(2) and (3)), making materially false or misleading statements (Section 17(a)(2)), and 

using the means of interstate communication (Section 17(a) in general). 

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Mogler’s alleged violations of Section 17(a) of the Securities Act and will grant 

the SEC’s Motion as to Count II of the Complaint against Mogler.

c. Mogler’s Violations of Sections 5(a) and 5(c)

Section 5(a)(1) of the Securities Act prohibits the direct or indirect sale of securities 
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unless a registration statement is in effect. 15 U.S.C. § 77e(a). Section 5(c) of the Securities 

Act prohibits the offer or sale of securities unless a registration statement is effective. Id. § 

77e(c). To establish a violation of Section 5, the SEC must show that “(1) no registration 

statement was in effect as to the securities; (2) the defendant directly or indirectly sold or 

offered to sell securities; and (3) the sale or offer was made through interstate commerce.” 

SEC v. CMKM Diamonds, Inc., 729 F.3d 1248, 1255 (9th Cir. 2013). “Once the SEC 

introduces evidence that a defendant has violated the registration provisions, the defendant 

then has the burden of proof in showing entitlement to an exemption.” Id. (quoting SEC v. 

Murphy, 626 F.2d 633, 641 (9th Cir. 1980)). Section 5 imposes strict liability for violations 

of its registration requirements. Id. at 1257. 

In his guilty plea for wire fraud, Mogler admitted that he participated in a scheme 

to sell fraudulent investment products, which the Court has already found to be securities, 

and that he made false or misleading statements in writing and orally over the radio or inperson. (Doc. 99-2, Ex. 2 at 12) Mogler does not appear to have challenged the fact that no 

registration statement was effective when he engaged in the scheme. He clearly has not 

argued that the scheme was entitled to an exemption from registration or offered any fact 

which would support such argument. The Court finds that all the elements of a claim under 

Sections 5(a) and 5(c) of the Securities Act are present and that the SEC met its burden of 

proof.

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Mogler’s alleged violations of Sections 5(a) and 5(c) of the Securities Act and 

will grant the SEC’s Motion as to Count III of the Complaint against Mogler.

C. Summary Judgment as to Defendant Stevens

Defendant Stevens pleaded guilty to one count of conspiracy to commit wire fraud, 

18 U.S.C. § 371. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D.

Ariz.), doc. 132. In his plea agreement, Defendant Stevens admitted the following facts: he 

participated in a fraudulent scheme to promote and sell fraudulent high-yield investment 

products involving real estate development projects in Sonora, Mexico; he conspired and 
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acted with other who were knowingly involved in the fraudulent scheme which was 

designed to obtain funds from investors by means of materially false promises, 

representations, and omissions made orally and in writing related to the purported projects. 

(Doc. 99-2, Ex. 3 at 11)

The Court must first determine if collateral estoppel based on Stevens’s guilty plea 

is applicable in this case. The Court finds that all four criteria are easily met as to Defendant 

Stevens. Stevens did not answer the Motion. His guilty plea and resulting conviction clearly 

were for a serious offense, conspiracy to commit wire fraud. The Court did not find any 

filings where Stevens challenges his guilty plea or calls into question the fairness of the 

plea agreement. Furthermore, by pleading guilty to the count of conspiracy to commit wire 

fraud, Stevens admitted the factual basis set forth above and those facts are the same the 

SEC is now raising in the Complaint. Those facts were necessarily decided through the 

guilty plea. Stevens was clearly the party in the criminal trial against whom collateral 

estoppel is invoked in this case. Accordingly, Stevens is collaterally estopped from 

relitigating the issues which were decided through his guilty plea.

Having established that collateral estoppel applies to Stevens, the Court must now 

determine whether it should grant the SEC’s Motion against Stevens. To do so, the Court 

must compare the elements the SEC has to prove in this civil case with the elements of 

Stevens’s guilty plea and conviction for conspiracy to commit wire fraud.

a. Stevens’s Violations of Section 10(b) and Rule 10b-5

At the outset, the Court notes that although Stevens did not respond to the Motion, 

he asserted his privilege against self-incrimination under the Fifth Amendment in his 

answer to the Complaint. (Doc. 55 at 2). His answer was filed before the criminal 

proceedings took place and before he pleaded guilty and was convicted of conspiracy to 

commit wire fraud.

Stevens’s guilty plea to one count of conspiracy to commit wire fraud admitted that

[b]etween about January 1, 2006, and June 30, 2014, in the 

District of Arizona and elsewhere: 
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1. There was an agreement between two or more persons to 

commit the crime of wire fraud, in violation of 18 U.S.C. § 

1343;

2. [Stevens] became a member of the conspiracy knowing of at 

least one of its objects and intending to help accomplish it; and

3. [o]ne of the members of the conspiracy performed at least one 

overt act in furtherance of the conspiracy between September 

8, 2010, and June 30, 2014.

(Doc. 99-2, Ex. 3 at 10) Stevens also admitted that he participated in a fraudulent scheme 

to promote and sell fraudulent high-yield investment products involving real estate 

development projects in Sonora, Mexico; he conspired and acted with other who were 

knowingly involved in the fraudulent scheme which was designed to obtain funds from 

investors by means of materially false promises, representations, and omissions made 

orally and in writing related to the purported projects. (Doc. 99-2, Ex. 3 at 11)

Stevens’s guilty plea satisfies the elements the SEC needs to prove in this case for 

a violation of Section 10 of the Exchange Act and Rule 10b-5. Indeed, Stevens admitted 

that he participated in a fraudulent scheme, knowing of at least one of its fraudulent 

purposes, the scheme took place over interstate, in-person, and in-writing communications, 

and he admitted the scheme involved materially false promises, representations, and 

omissions. The Court has also found that no reasonable juror could find that the scheme 

did not involve securities. 

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Stevens’s alleged violations of Section 10(b) of the Exchange Act and Rule 10b5 and will grant the SEC’s Motion as to Count I of the Complaint against Stevens.

b. Stevens’s Violations of Section 17(a)

With regards to Stevens’s alleged violations of Section 17(a), the Court finds that 

summary judgment in favor of the SEC is appropriate for the reasons stated above for the 

alleged violations of Section 10(a) of the Exchange Act and Rule 10b-5. Indeed, the sub-
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sections of Section 17(a) of the Securities Act are not very different from Section 10(a) of 

the Exchange Act and Rule 10b-5. Although the state of mind requirements varies between 

the sections, based on Stevens’s guilty plea, the elements for any of the sub-sections of 

Section 17(a) are met. Stevens admitted to: having participated in a scheme to defraud 

(Section 17(a)(1)), having the specific intent to defraud by knowing of at least one of the 

fraudulent goals of the scheme (the scienter requirement for Section 17(a)(1) and more than 

the mere negligence required under Section 17(a)(2) and (3)), making materially false or 

misleading statements (Section 17(a)(2)), and using the means of interstate communication 

(Section 17(a) in general).

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Stevens’s alleged violations of Section 17(a) of the Securities Act and will grant 

the SEC’s Motion as to Count II of the Complaint against Stevens.

c. Stevens’s Violations of Section 5(a) and (c)

Stevens has not answered the Motion and has not offered any contradictory facts to 

the SEC’s position that no registration statement was effective at the time the Defendants 

engaged in the fraudulent scheme. He also offered no evidence that an exemption for 

registration of the offering was available. Accordingly, the Court finds that the elements of 

a violation of Sections 5(a) and 5(c) of the Securities Act are present because the 

Defendants offered and sold securities, no registration statement was effective at the time

of such sales or offers, and they used the means of interstate commerce to do so. 

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Stevens’s alleged violations of Sections 5(a) and 5(c) of the Securities Act and 

will grant the SEC’s Motion as to Count III of the Complaint against Stevens.

D. Polanchek’s Violations of Sections 5 and 15(a)

With regards to Polanchek, the Motion requests the entry of summary judgment on 

his liability for violating Section 15(a) of the Exchange Act and Section 5 of the Securities 

Act. (Doc. 99-1 at 15) Polanchek answered the Complaint, invoking his privilege against 

self-incrimination under the Fifth Amendment (Doc. 56 at 1), but did not answer the 
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Motion.

Section 15(a)(1) of the Exchange Act makes it unlawful 

for any broker or dealer . . . to make use of the mails or any 

means or instrumentality of interstate commerce to effect any 

transactions in, or to induce or attempt to induce the purchase 

or sale of, any security (other than an exempted security or 

commercial paper, bankers’ acceptances, or commercial bills) 

unless such broker or dealer is registered in accordance with 

subsection (b) of this section.

15 U.S.C. § 78o(a)(1). The SEC is not required to show scienter to establish a violation of 

Section 15(a)(1). See, e.g., SEC v. Alliance Leasing Corp., 2000 WL 35612001, at *6 (S.D. 

Cal. March 20, 2000) (citing SEC v. Interlink Data Network of Los Angeles, Inc., 1993 WL 

603274 (C.D. Cal. 1993)); SEC v. National Executive Planners, Ltd., 503 F. Supp. 1066, 

1073 (M.D.N.C. 1980). A broker is defined as “any person engaged in the business of 

effecting transactions in securities for the account of others.” 15 U.S.C. § 78c(a)(4)(A).

“Engaged in the business” is not defined by statute but cases and SEC No–Action letters 

interpreting the phrase have indicated that regularity of participation in the trading of 

securities on behalf of someone else is the primary indicia of being “engaged in the 

business.” See, e.g., SEC v. Kenton Capital, Ltd., 69 F. Supp. 2d 1, 12–13 (D.D.C. 1998); 

SEC v. Margolin, 1992 WL 279735, at *5 (S.D.N.Y. September 30, 1992) (citing 

Massachusetts Fin. Servs., Inc. v. Securities Investor Protection Corp., 411 F. Supp. 411, 

415 (D. Mass. 1976)). “In determining whether a particular individual or entity falls within 

th[e] definition [of a broker-dealer], courts consider whether the individual may be 

characterized by a certain regularity of participation in securities transactions at key points 

in the chain of distribution.” SEC v. Martino, 255 F. Supp. 2d 268, 283 (S.D.N.Y. 2003) 

(quoting SEC v. Hansen, 1984 WL 2413, at *10 (S.D.N.Y. April 6, 1984)) (internal 

quotations omitted). 

In sworn testimony in front of the Arizona Corporation Commission, Polanchek 
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admitted that he received at least $400,000 in referral compensation for marketing the 

fraudulent offerings. (Doc. 99-2, ex. 6 at 757:24–760:8) “A receipt of transaction-based 

compensation . . . is a hallmark of broker-dealer activity.” Brumberg, Mackey & Wall, 

P.L.C., SEC No–Act at 1–2 (May 17, 2010), https://www.sec.gov/divisions/marketreg/mrnoaction/2010/brumbergmackey051710.pdf (citing Order Exempting the Federal Reserve 

Bank of New York, Maiden Lane LLC and the Maiden Lane Commercial Mortgage Backed 

Securities Trust 2008-1 from Broker-Dealer Registration, Securities Exchange Act Release 

No. 61884 (April 9, 2010)).

Furthermore, “[p]arties are free to invoke the Fifth Amendment in civil cases, but 

the court is equally free to draw adverse inferences from their failure of proof.” See SEC v. 

Colello, 139 F.3d 674, 677 (9th Cir. 1998) (citing Baxter v. Palmigiano, 425 U.S. 308, 318

(1976)). The penalties a court can impose based on the invocation of the privilege against 

self-incrimination are wide-ranging. See, e.g., United States v. One Parcel of Real 

Property, 780 F. Supp. 715, 722 (D. Or. 1991) (striking counterclaim and affirmative 

defense in their entirety because of defendant’s use of the privilege); SEC v. Benson, 657 

F. Supp. 1122, 1129 (S.D.N.Y. 1987) (granting summary judgment against the silent 

party). The Supreme Court has “consistently recognized that in proper circumstances 

silence in the face of accusation is a relevant fact not barred from evidence by the Due 

Process Clause.” Palmigiano, 425 U.S. at 319 (citing several other cases from the Supreme 

Court holding the same). 

Polanchek invoked the privilege against self-incrimination in his answer to the 

Complaint but did not answer the Motion. He had the opportunity to present facts 

contradictory to those presented by the SEC in the Motion but he chose not to do so. There 

is nothing in the record which prevents the Court from drawing an adverse inference 

against Polanchek based on his invocation of his privilege against self-incrimination in this 

civil case. The Court finds that no reasonable juror could find that Polanchek was not acting 

as a broker when he participated in the fraudulent scheme, receiving several hundred 

thousand dollars in transaction-based compensation, and accordingly, he violated the 
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registration requirement of Section 15(a) of the Exchange Act. Furthermore, the Court 

finds that the elements of a violation of Sections 5(a) and 5(c) of the Securities Act are 

present because Polanchek conspired to offer and sell securities, no registration statement 

was effective at the time of such sales or offers, and those sales took place through the use 

of the means of interstate commerce.

Accordingly, the Court finds that there are no genuine issues as to any material fact 

regarding Polanchek’s alleged violations of Section 15(a) of the Exchange Act and Section 

5 of the Securities Act and will grant the SEC’s Motion as to Count III and IV of the 

Complaint against Polanchek.

E. Permanent Injunctions as to All Defendants

The SEC requested in the Motion that the Court permanently enjoin: (1) Defendants 

Mogler, Stevens, and Hinkeldey from violating Section 10(b) of the Exchange Act and 

Sections 5 and 17(a) of the Securities Act; and (2) Defendants Polanchek and Buckley from 

violating Section 15(a) of the Exchange Act and Section 5 of the Securities Act.3

Permanent injunctions may be granted on summary judgment, given the proper 

record. Murphy, 626 F.2d at 655 (9th Cir. 1980); see also SEC v. Spence & Green Chemical 

Co., 612 F.2d 896, 903 (5th Cir. 1980), as amended, Fed. Sec. L. Rep. (CCH) P 97, 301; 

Latta v. SEC, 356 F.2d 103, 103 (9th Cir. 1965), cert. denied, 384 U.S. 940 (1966). In order 

to obtain a permanent injunction against the Defendants on summary judgment, the SEC 

bears the burden of showing there is a reasonable likelihood of future violations of the 

securities laws. Murphy, 626 F.2d at 655. The existence of past violations may give rise to 

an inference that there will be future violations. Id. In predicting the likelihood of future 

violations, the Court must “assess the totality of the circumstances surrounding the 

defendant and his violations.” Id.; see also SEC v. Koracorp Industries, Inc., 575 F.2d 692, 

699 (9th Cir. 1978). In assessing the totality of circumstances, the Court considers factors 

3 Because judgment was already entered against Buckley, including the requested injunction 

(Doc. 110), and Hinkeldey agreed to the entry of the proposed judgment by the SEC against him 

(Doc. 105), which also contains the permanent injunction, the Court only analyzes whether a 

permanent injunction is appropriate against Defendants Mogler, Stevens, and Polanchek.
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such as “the degree of scienter involved; the isolated or recurrent nature of the infraction; 

the defendant's recognition of the wrongful nature of his conduct; the likelihood, because 

of defendant’s professional occupation, that future violations might occur; and the sincerity 

of his assurances against future violations.” Murphy, 626 F.2d at 655; see also, e.g., SEC 

v. Bonastia, 614 F.2d 908, 912 (3d Cir. 1980), as amended, Fed. Sec. L. Rep. (CCH) P 97, 

276; SEC v. Universal Major Industries Corp., 546 F.2d 1044, 1048 (2d Cir. 1976). Those 

factors are not a binding and exclusive list of what the Court must consider before granting 

a permanent injunction. The Court now examines whether it should grant a permanent 

injunction against each Defendant in turn.

a. Defendant Mogler

With regards to Defendant Mogler, the Court finds that a permanent injunction is 

appropriate. Indeed, Mogler pleaded guilty and admitted to knowingly engaging in the 

fraudulent scheme, clearly admitting that a high level of scienter was involved on his part;

the violations were not a single, small occurrence, given that the scheme lasted several 

years and involved approximately $18 million in funds; by pleading guilty, Mogler did 

recognize and admit his guilty conduct, which is a factor that works against granting an 

injunction; finally, Mogler has given no assurance of any kind that he will not engage in 

similar conduct, indeed, he has challenged his conviction and resulting sentence.

Accordingly, the Court finds that granting an injunction against Mogler to 

permanently enjoin him from violating Section 10(b) of the Exchange Act and Sections 5 

and 17(a) of the Securities Act is appropriate in this case.

b. Defendant Stevens

With regards to Defendant Stevens, the Court finds that a permanent injunction is

appropriate as well. Indeed, Stevens pleaded guilty and admitted to having conspired and 

helped with the fraudulent scheme; he admitted that he knew of at least one aim of the 

fraudulent scheme, establishing a fairly high level of scienter or recklessness; the violations 

at issue were not an isolated incident; and finally, Stevens has given no assurance that he 

will not engage in a similar violation in the future.
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Accordingly, the Court finds that granting an injunction against Stevens to 

permanently enjoin him from violating Section 10(b) of the Exchange Act and Sections 5 

and 17(a) of the Securities Act is appropriate in this case.

c. Defendant Polanchek

With regards to Polanchek, the Court finds that a permanent injunction is also 

appropriate. The Court has already drawn an adverse inference from his assertion of the 

privilege against self-incrimination. Furthermore, as also discussed previously, Polanchek 

has offered no facts to challenge the SEC’s statement of facts in support of its Motion. 

Having found that Polanchek failed to register as a broker and violated the registration 

provisions of the securities laws, the Court finds that the totality of circumstances shows 

that Polanchek is likely to engage in similar fraudulent conduct if he is not enjoined from 

doing so. He likely knew or was reckless in not knowing that he was not registered as a 

broker and was participating in the offer and sale of securities; he has not pleaded guilty to 

any charge and admitted the wrongful character of his conduct; and finally, based on his 

occupation, future violations are likely.

Accordingly, the Court finds that granting an injunction against Stevens to 

permanently enjoin him from violating Section 15(a) of the Exchange Act and Section 5 of 

the Securities Act is appropriate in this case.

Accordingly,

IT IS ORDERED that the Plaintiff’s Motion for Summary Judgment as to Liability 

and Non-Monetary Relief (Doc. 99) is granted in full.

IT IS FURTHER ORDERED that the Clerk of Court shall terminate this action 

and enter judgment accordingly.

Dated this 5th day of March, 2020.

Honorable Steven P. Logan

United States District Judge