Opinion ID: 750081
Heading Depth: 2
Heading Rank: 2

Heading: Fischbach's Equitable Claim

Text: 32 Even if victims of securities fraud were normally entitled to be compensated out of disgorged funds, we see no abuse of discretion in the rejection of Fischbach's claim in the present case, in light of the fact and circumstances of the change in Fischbach's ownership. 33 Although theoretically the looting of a corporation injures the corporation itself, there can be little doubt that the corporation's financial circumstances, to the extent they are known, normally affect the market value of its securities. Here, during the period in which the Posners controlled the company and drew their excessive salaries, the price of a share of Fischbach stock plummeted from approximately $35 to under $11. Thus, as the company itself acknowledges, [t]he harm inflicted by the Posners on Fischbach was reflected in Fischbach's per-share price. (Fischbach brief on appeal at 34.) 34 Accordingly, as indicated in its tender offer, AIG considered Fischbach to be in financial distress. (AIG Tender Offer at 8.) And just as AIG bought from the Posners at the distress price of $11 per share, the individual shareholders from whom AIG bought at $11 sold at a distress price. The price AIG paid reflected the looted state of the company, and it is thus plain that the loss resulting from the Posners' looting of Fischbach was ultimately borne by the Posners' fellow Fischbach shareholders. Directing payment of the disgorgement fund to Fischbach would not compensate the company's former minority shareholders for their losses. Such a payment would redound solely to the benefit of Fischbach's current owner, AIG. 35 We conclude that it was well within the discretion of the district court to conclude that AIG, which sought to, and did, buy Fischbach at a distress price, would receive a windfall if it were now given the funds whose loss had contributed to Fischbach's distress. 36 We reject Fischbach's contention that payment to it would not result in a windfall for AIG on the theory that, by purchasing Fischbach, AIG acquired the right to benefit from any recovery from the Posners. The premise of that contention is that under the law of Delaware, the state in which both Fischbach and AIG are incorporated, any claim against the Posners for waste of corporate assets belonged not to the minority shareholders but to Fischbach itself. This argument misses the mark, for the company's right to bring its own action against the Posners at law has no bearing on its equitable claim for restitution in a suit brought by the SEC. In determining an equitable distribution of the disgorgement fund, the district court was not restricted by the legal fictions on which Fischbach relies.