Opinion ID: 766492
Heading Depth: 2
Heading Rank: 2

Heading: SEC Investigation of Capital General and Yeaman between 1987-1990

Text: 25 The anti-fraud provisions of the securities laws impose a duty to disclose material facts that are necessary to make disclosed statements, whether or not mandatory, not misleading. See 15 U.S.C. SS 77q(a), 77x. The District Court held that Yeaman violated this duty by failing to disclose, in the Form 10-K reports filed by Omega and U.S. Card in March 1990, that he and Capital General had been the subject of an SEC investigation since 1987. 4 26 The 10-K reports of these companies made no reference to this investigation and affirmatively asserted the following: 27 Other than described above, neither the Registrant nor any of its officers or directors, to their best knowledge, is a party to any material legal proceeding or litigation which would impact the operations or the Registrant, and such persons know of no material legal proceedings, judgments entered, legal actions or litigation contemplated, or threatened which would impair operation of the Registrant in the future. 28 (A.152 (quoting 10-K reports)). The Court found that disclosure of the investigation was necessary in order to make not misleading the disavowal of knowledge of threatened proceedings that would impair the operations of the corporation. As a result of its holding, the Court allowed evidence of the investigation to be admitted at trial. While the Court's opinion stated that it found the relevant statements to be material and misleading, and thus violative of the securities laws, the jury instructions indicate that the jury was properly charged to make its own determinations in these respects. 29 On appeal, Yeaman insists that he did not know at the time of filing the 10-K reports that the SEC planned to commence litigation. He notes that the administrative proceeding that resulted from this investigation was not instituted until June 22, 1992, and did not result in a cease and desist order until July 23, 1993. He insists that, while he knew of the investigation at the time of filing the March 1990 reports, he did not know that the investigation was focused on or might impact U.S. Card or Omega. As a result, he disagrees that a duty to disclose the investigation existed or that the affirmative statements contained in the 10-K reports were misleading in any respect. In response, the government points out, inter alia, that the investigation had been ongoing since 1987, that it instituted suit against Yeaman and Capital General in June of 1990 to enforce a subpoena duces tecum theretofore issued to them, and that the Court ordered compliance in July of 1990. Taken as a whole, the government argues, the evidence compelled the conclusion that Yeaman must have been aware of the scope and gravity of the investigation prior to March of 1990 and, given his knowledge of his own activities prior to March 1990, he must have known of the probability of a proceeding that would implicate U.S. Card or Omega. 30 We conclude that the government's evidence regarding the investigation was properly submitted to the jury for consideration as to whether the 10-K reports were materially misleading in light of the affirmative statement quoted above. While Yeaman argues that the District Court committed a legal error, his claim properly characterized is that the evidence was insufficient to support a conviction on the theory that the reports were materially misleading. When reviewing the sufficiency of the evidence, we view the evidence in the light most favorable to the government and ask whether a rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. United States v. Dent, 149 F.3d 180, 187 (3d Cir. 1998) (internal citations omitted). Under this standard, we believe the government has tendered sufficient evidence to support this theory. We need not base our rejection of Yeaman's argument on this ground, however. 31 We have concluded that 15 U.S.C. SS 77q(a) and 77x provide a solid legal foundation for the government's theory of liability based on failure to disclose the SEC investigation. Assuming that there were insufficient evidence to support this theory, Yeaman nevertheless would not be entitled to a new trial because the government advanced other alternative, legally valid theories at trial that were supported by sufficient evidence. Under the teachings of Griffin v. United States, 502 U.S. 46 (1991), we are required in such circumstances to presume that the jury found the defendant guilty beyond a reasonable doubt on a theory supported by the evidence.