Court Opinion

ID: 3180714
Source: CourtListenerOpinion
Date Created: 2016-02-26 16:04:13.421261+00
Date Added: 2024-06-11T07:38:57.259300
License: Public Domain

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

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX 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.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 26th day of February, two thousand sixteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                DENNY CHIN,
 8                CHRISTOPHER F. DRONEY,
 9                              Circuit Judges.
10
11       - - - - - - - - - - - - - - - - - - - -X
12       SECURITIES & EXCHANGE COMMISSION,
13                Plaintiff-Appellee,
14
15                    -v.-                                               14-2425
16
17       AMERINDO INVESTMENT ADVISORS et al.,
18                Defendants-Appellants.
19       - - - - - - - - - - - - - - - - - - - -X
20
21       FOR APPELLANTS:                       VIVIAN SHEVITZ, South Salem, New
22                                             York.
23
24       FOR APPELLEE:                         EMILY T.P. ROSEN (with Anne K.
25                                             Small, Michael A. Conley, John
26                                             W. Avery & Stephen G. Yoder on
27                                             the brief), UNITED STATES
28                                             SECURITIES & EXCHANGE
29                                             COMMISSION, Washington, D.C.

                                                  1
 1        Appeal from a judgment of the United States District
 2   Court for the Southern District of New York (Sullivan, J.).
 3
 4        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
 5   AND DECREED that the judgment of the district court be
 6   AFFIRMED.
 7
 8        Appellants Amerindo Investment Advisors Inc. et al.
 9   appeal from the judgment of the United States District Court
10   for the Southern District of New York (Sullivan, J.),
11   granting summary judgment, in favor of plaintiff-appellee
12   Securities & Exchange Commission (“SEC”), and ordering
13   various remedies. We assume the parties’ familiarity with
14   the underlying facts, the procedural history, and the issues
15   presented for review.
16
17        1.  Appellants contend that Section 30(b) of the
18   Securities Exchange Act barred the SEC enforcement
19   proceeding. But Section 30(b) is inapplicable because the
20   transactions at issue were domestic in character, i.e., “the
21   purchaser incurred irrevocable liability within the United
22   States to take and pay for a security, or . . . the seller
23   incurred irrevocable liability within the United States to
24   deliver a security.” Absolute Activist Value Master Fund
25   Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012). For similar
26   reasons, appellants’ argument based on Morrison v. Nat’l
27   Austl. Bank Ltd., 561 U.S. 247 (2010), must be rejected;
28   Absolute Activist clearly defined “domestic transactions” in
29   the wake of Morrison; and appellants fail to deal with the
30   evidence showing that the victims of the fraud incurred
31   irrevocable liability in the United States. Absolute
32   Activist, 677 F.3d at 67. We acknowledged as much in the
33   related criminal appeal. See United States v. Vilar, 729
34 F.3d 62, 77 (2d Cir. 2013) (“In light of these domestic
35   transactions, we are persuaded that, based on the record
36   evidence, a jury would have found that Vilar and Tanaka
37   engaged in fraud in connection with a domestic purchase or
38   sale of securities . . . .”). There is no basis for us to
39   reconsider our decision in Absolute Activist.
40
41        2. Appellants claim that the district court lacked
42   subject matter jurisdiction based on the applicable statute
43   of limitations. See 28 U.S.C. § 2462. However, “most time
44   bars are nonjurisdictional,” and appellants “must clear a

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

                                    3
 1   corporation repeatedly fails to appear by counsel, a default
 2   judgment may be entered against it . . . .” S.E.C. v.
 3   Research Automation Corp., 521 F.2d 585, 589 (2d Cir. 1975)
 4   (citations omitted). The district court ordered the Entity
 5   Defendants to appear at a hearing and show cause why default
 6   judgment should not be entered against them; they did not
 7   appear. Appellants nevertheless challenge a number of facts
 8   in the complaint, something the Entity Defendants cannot do
 9   because “a default is an admission of all well-pleaded
10   allegations against the defaulting party.” Vermont Teddy
11   Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d
12   Cir. 2004). Appellants also contend that the complaints
13   were not properly served on the Entity Defendants; this,
14   however, does not explain why they failed to appear at the
15   show-cause hearing. In any event, the Entity Defendants did
16   not make this argument below; it is waived. See In re
17   Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d
18   Cir. 2008).
19
20        5. Appellants take issue with each of the remedies
21   imposed by the district court. “Once the district court has
22   found federal securities law violations, it has broad
23   equitable power to fashion appropriate remedies, including
24   ordering that culpable defendants disgorge their profits.”
25   S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 1474 (2d
26   Cir. 1996). Regarding disgorgement, appellants provide no
27   basis to disturb the district court’s conclusion that the
28   SEC reasonably approximated the pertinent gains; at most,
29   they point to some uncertainty in the calculations, but “the
30   burden of that uncertainty must be borne” by appellants.
31   S.E.C. v. Razmilovic, 738 F.3d 14, 35 (2d Cir. 2013). As to
32   the award of prejudgment interest, “[a] decision to grant
33   prejudgment interest is ‘confided to the district court’s
34   broad discretion, and will not be overturned on appeal
35   absent an abuse of that discretion.’” S.E.C. v. Contorinis,
36   743 F.3d 296, 307 (2d Cir. 2014) (quoting Endico Potatoes,
37   Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071-72 (2d
38   Cir. 1995)). “Prejudgment interest on a disgorgement amount
39   is intended to deprive the wrongdoer of the benefit of
40   holding the illicit gains over time by reasonably
41   approximating the cost of borrowing such gain from the
42   government.” Id. at 308. The district court’s imposition
43   of prejudgment interest furthered this aim, and “we detect
44   no abuse of discretion by the district court in ordering

                                  4
 1   [appellants] to pay prejudgment interest.” Id. Appellants
 2   further argue that the SEC was required to trace the ill-
 3   gotten gains, an argument that has been unambiguously
 4   rejected by this Court. See F.T.C. v. Bronson Partners,
 5   LLC, 654 F.3d 359, 374 (2d Cir. 2011) (“Indeed, it is by now
 6   so uncontroversial that tracing is not required in
 7   disgorgement cases that we recently rejected an argument to
 8   the contrary via summary order.”).
 9
10        Appellants challenge the civil penalties levied by the
11   district court. “Beyond setting maximum penalties, the
12   statutes leave ‘the actual amount of the penalty . . . up to
13   the discretion of the district court.’” Razmilovic, 738 F.3d
14   at 38 (quoting S.E.C. v. Kern, 425 F.3d 143, 153 (2d Cir.
15   2005) (alterations in original)). The district court
16   properly exercised its discretion in determining that Tier
17   III penalties were appropriate, given appellants’ egregious
18   conduct, and in imposing civil penalties of $10,000,000
19   against both individual defendants and $17,969,803.27
20   against the Entity Defendants.
21
22        Appellants argue that the district court erred in its
23   appointment of a receiver and in its approval of a plan for
24   interim distributions. “There is no question that district
25   courts may appoint receivers as part of their broad power to
26   remedy violations of federal securities laws.” S.E.C. v.
27   Byers, 609 F.3d 87, 92 (2d Cir. 2010). And “once the
28   district court satisfies itself that the distribution of
29   proceeds in a proposed SEC disgorgement plan is fair and
30   reasonable, its review is at an end.” S.E.C. v. Wang, 944
31 F.2d 80, 85 (2d Cir. 1991). The district court conducted
32   such a review in reaching its conclusion that pro rata
33   distribution was fair and reasonable.
34
35        6. Appellants contend that the remedies violate the
36   prohibition against Double Jeopardy in the Fifth Amendment
37   and the Excessive Fines Clause in the Eighth Amendment.
38   Because none of the remedies is criminal in nature, the
39   “Double Jeopardy Clause is therefore inapplicable.” S.E.C.
40   v. Palmisano, 135 F.3d 860, 866 (2d Cir. 1998). As for the
41   Eighth Amendment, “we determine whether the forfeiture is
42   ‘grossly disproportional to the gravity of a defendant’s
43   offense.’” United States v. Sabhnani, 599 F.3d 215, 262 (2d
44   Cir. 2010) (quoting United States v. Bajakajian, 524 U.S.
5
 1   321, 334 (1998)). The indicia of disproportionality are
 2   virtually identical to the factors the district court
 3   evaluated in fashioning the appropriate remedies; hence, no
 4   Eighth Amendment violation appears on this record.
 5
 6        For the foregoing reasons, and finding no merit in
 7   appellants’ other arguments, we hereby AFFIRM the judgment
 8   of the district court.
 9
10                              FOR THE COURT:
11                              CATHERINE O’HAGAN WOLFE, CLERK
12

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