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
6