Case: 15-14375 Date Filed: 02/23/2017 Page: 1 of 26
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-14375
________________________
D.C. Docket No. 1:12-cv-21917-UU
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff – Appellee,
versus
GEORGE G. LEVIN,
Defendant – Appellant,
FRANK PREVE,
Defendant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(February 23, 2017)
Case: 15-14375 Date Filed: 02/23/2017 Page: 2 of 26
Before MARCUS and DUBINA, Circuit Judges, and GOLDBERG, * Judge.
DUBINA, Circuit Judge:
Defendant-Appellant George G. Levin (“Levin”) appeals the district court’s
judgment in favor of the Plaintiff-Appellee Securities and Exchange Commission
(“SEC”) on its action charging Levin with securities violations. The action centers
on Levin’s sales of securities in connection with a large Ponzi scheme. The SEC
brought suit against Levin alleging violations of the registration provisions of the
Securities Act and fraud in the sale of securities in violation of the Securities and
Exchange Act (“Acts”). Levin asserted affirmative defenses that the sales were
exempt from the registration provisions. The district court awarded summary
judgment to the SEC, finding no merit to Levin’s affirmative defenses, and a jury
found Levin liable on the fraud claims. Levin appeals the district court’s grant of
summary judgment to the SEC on Count I, the failure to register securities
pursuant to Section 5 of the Securities Act, and he also challenges claimed errors
that occurred during trial. Based on our review of the record, reading the parties’
briefs, and having the benefit of oral argument, we affirm in part, and reverse in
part; specifically, we reverse the grant of summary judgment on Count I and
remand this case for further proceedings consistent with this opinion.
*
Honorable Richard W. Goldberg, Judge of the United States Court of International
Trade, sitting by designation.
2
Case: 15-14375 Date Filed: 02/23/2017 Page: 3 of 26
I. BACKGROUND
A. Facts
The controversy in this case arises from the operation and eventual collapse
of Scott Rothstein’s (“Rothstein”) Ponzi scheme. Rothstein used his law firm,
Rothstein, Rosenfeldt and Adler P.A. (“law firm”), to operate his scheme by
soliciting investors to purchase purported confidential settlement agreements
supposedly reached in sexual harassment or whistleblower lawsuits. No such
agreements existed, and the investors were paid with funds from other investors.
The scheme collapsed in October 2009, and Rothstein pled guilty to a five-count
information charging one count each of racketeering conspiracy, conspiracy to
commit money laundering, conspiracy to commit mail and wire fraud, and two
counts of wire fraud.
Levin’s involvement in the Ponzi scheme began in 2007 when he invested in
the purported settlements. Initially, Levin used his personal funds to invest in the
scheme, but he soon began using funds from his dormant legal entity, Banyon
1030-32 (“Banyon”). Frank Preve (“Preve”) was the daily operations manager of
Banyon, and he handled the paperwork for the investments. Rothstein would email
Banyon details regarding the bogus settlements that Banyon could purchase, and
Levin determined the parameters of the settlements that Banyon would purchase.
3
Case: 15-14375 Date Filed: 02/23/2017 Page: 4 of 26
In order to purchase more of the purported settlements, Banyon offered investors
promissory notes, and Banyon used funds from the notes to purchase additional
settlements. Banyon repaid the notes with the returns from those settlements.
Levin personally guaranteed the notes. Levin and Preve initially marketed the
notes to their friends and family but soon began to solicit other potential investors.
Ultimately, Banyon issued notes to approximately 90 investors, for an approximate
total amount of $50 to $58 million. The SEC did not receive a registration
statement with respect to these promissory notes.
To obtain additional funding, Banyon established lines of credit with New
York-based hedge funds to finance settlement purchases. These hedge funds set up
separate accounts with Rothstein, and the hedge fund managers independently
decided whether they would fund certain settlement purchases. Banyon also
utilized the Banyon Income Fund, a limited partnership with Banyon as the general
manager, to raise approximately $100 million from an estimated 83 investors to
purchase purported settlement agreements. The law firm established a dedicated
trust account for the Banyon Income Fund at the TD Bank (“TD Bank”).
Eventually, the scheme collapsed.
4
Case: 15-14375 Date Filed: 02/23/2017 Page: 5 of 26
B. Procedural History
The SEC filed suit against Levin in May 2012, and later amended its
complaint.1 In the amended complaint, the SEC alleged that Levin sold
unregistered securities in violation of Sections 5(a) and 5(c) of the Securities Act,
and that Levin engaged in fraud in violation of Section 17(a) of the Securities Act,
Section 10(b) of the Exchange Act, and Rule 10b-5. In his answer, Levin asserted
that the Banyon promissory notes were exempt from registration under Section
4(a)(2) either because they did not involve any public offering as demonstrated by
compliance with Rule 506(b) of Regulation D, or because they were protected by
the safe harbor provision of Rule 508 of Regulation D. Levin also asserted that he
did not profit from any of the purported conduct and, therefore, disgorgement was
not a proper remedy.
The parties both moved for summary judgment, and the district court denied
Levin’s motion in full and denied portions of the SEC’s motion as well. The
district court, however, did partially grant the SEC’s motion, finding that the
Banyon notes were not exempt under Rule 506, but determining that there was a
triable issue of fact as to whether the notes were exempt under the safe harbor
provision of Rule 508. The SEC filed a motion for reconsideration as to whether
1
Preve was also named as a defendant, but the SEC settled its case with Preve via
consent judgment. Hence, Preve is not a party to this appeal.
5
Case: 15-14375 Date Filed: 02/23/2017 Page: 6 of 26
the notes were exempt, and the district court granted the motion, finding that the
safe harbor provision in Rule 508 did not protect defendants against enforcement
actions brought by the SEC.
The district court began a trial on the securities fraud claim without Levin’s
presence because, that morning, Levin’s counsel notified the court that Levin had
been admitted to the hospital in Panama where he had traveled for business. Levin
was unable to return by the start of the trial, and his counsel moved for a one-week
continuance. The SEC objected, mainly on fiscal grounds, but also because a
continuance would create problems with witness availability. The district court
denied the motion. Levin was absent for the first two days of trial, which included
jury selection, opening statements, the SEC’s presentation of its first witness, and
the beginning testimony of the SEC’s second witness.
At the end of the trial, the jury found Levin liable on all counts. The SEC
moved for a total disgorgement award of $106 million. Levin responded that any
disgorgement should be offset by payments made to investors from Banyon and
the Banyon bankruptcy trustee. The district court determined that a disgorgement
award of $40.1 million was appropriate because it reflected the amounts actually
received by Levin and his family members as a result of Levin’s wrongdoing. The
6
Case: 15-14375 Date Filed: 02/23/2017 Page: 7 of 26
district court entered final judgment against Levin on July 31, 2015, and Levin
timely filed a notice of appeal.
II. ISSUES
1. Whether the district court erred in granting summary judgment to the
SEC because it found the Banyon note offerings were not eligible for a Regulation
D exemption from the registration requirements of Section 5 of the Securities Act.
2. Whether the district court abused its discretion in denying Levin’s motion
for a continuance on the basis that he was unable to attend the first two days of trial
due to an unexpected hospitalization.
3. Whether the district court abused its discretion in including certain gains
by Levin’s family members in its $40.1 million disgorgement order, or in failing to
reduce that disgorgement based on certain prior and future payments by Banyon’s
bankruptcy trustee.
4. Whether the district court plainly erred in questioning Levin and another
witness during trial.
III. STANDARDS OF REVIEW
We review de novo a district court’s order on summary judgment. See Mais
v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110, 1119 (11th Cir. 2014). “In
7
Case: 15-14375 Date Filed: 02/23/2017 Page: 8 of 26
so doing, we draw all inferences and review all evidence in the light most
favorable to the non-moving party.” Id.
We review for abuse of discretion the district court’s ruling on a motion for
continuance. See Romero v. Drummond Co. Inc., 552 F.3d 1303, 1319–20 (11th
Cir. 2008). The denial of a request for continuance does not constitute an abuse of
discretion unless it is arbitrary and unreasonable and severely prejudices the
moving party. See Rink v. Cheminova, Inc., 400 F.3d 1286, 1296 (11th Cir. 2005).
We review for abuse of discretion a district court’s calculation of
disgorgement. See SEC v. Monterosso, 756 F.3d 1326, 1337 (11th Cir. 2014).
We also review for abuse of discretion a district court’s questioning of
witnesses under Federal Rule of Evidence 614. See generally United States v.
Wright, 392 F.3d 1269, 1274 (11th Cir. 2004). When a party fails to object at trial
to the district court’s conduct, however, we review for plain error only. See SEC v.
Big Apple Consulting USA, Inc., 783 F.3d 786, 812 (11th Cir. 2015).
IV. ANALYSIS
A. Summary Judgment
1. Statutory and Regulatory Framework
Section 5 of the Securities Act prohibits the use of any means of interstate
commerce or the mails to offer to sell or offer to buy any security without having
8
Case: 15-14375 Date Filed: 02/23/2017 Page: 9 of 26
first filed a registration statement with the SEC as to such security. 15 U.S.C.
§ 77e(a), (c) (2012). To establish a prima facie case for a Section 5 violation, the
SEC must prove three elements: “(1) no registration statement was in effect as to
the securities, (2) the defendant sold or offered to sell these securities, and (3)
interstate transportation or communication and the mails were used in connection
with the sale or offer of sale.” SEC v. Cont’l Tobacco Co. of S.C., 463 F.2d 137,
155 (5th Cir. 1972).2 The Securities Act does exempt from its application certain
types of securities and securities transactions “where there is no practical need for
its application or where the benefits are too remote.” Id. These exemptions must
be narrowly viewed because, as remedial legislation, the Securities Act is entitled
to a broad construction. Id.
The Code of Federal Regulations Rule 506 (“Rule 506”) implements the
statutory exemption involving securities that are not public offerings, such as the
ones at issue here. See 17 C.F.R. § 230.506 (2016); see also 15 U.S.C. § 77d(a)(2)
(2012) (providing that Section 4(2) of the Securities Act exempts from registration
“transactions by an issuer not involving any public offering”). The private offering
exemptions are known as Regulation D, which is a series of rules that establish
2
See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (holding that
decisions of the Fifth Circuit Court of Appeals prior to September 30, 1981, are binding on the
Eleventh Circuit Court of Appeals).
9
Case: 15-14375 Date Filed: 02/23/2017 Page: 10 of 26
three separate, distinct private offering exemptions from the registration
requirements of the Securities Act. To meet the conditions of Rule 506, an offer or
sale must satisfy the terms of Rules 501 and 502, and the issuer must reasonably
believe that there are no more than 35 purchasers of securities. 17 C.F.R. §
230.506(b)(1), (2)(i). Accredited investors are not counted toward the 35. Id. §
230.501(e). An accredited investor is any person “whose individual net worth . . .
exceeds $1,000,000.” Id. § 230.501(a)(5) & (6). Rule 502 sets out certain
requirements for offerings made under Rule 506(b), including a provision requiring
certain information be provided to investors before the sale of the securities and a
provision limiting the manner by which the issuer can sell the securities. Id. §
230.502(b), (c), and (d).
To obtain the exemption, there is another condition that must be satisfied,
and it involves the nature of the purchasers. Rule 506(b)(2)(ii) states that
Each purchaser who is not an accredited investor either alone or with
his purchaser representative(s) has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the prospective investment, or the issuer
reasonably believes immediately prior to making any sale that such
purchaser comes within this description.
17 C.F.R. § 230.506(b)(2)(ii). The issuer is to take reasonable steps to verify that a
purchaser of a security sold in an offering under section (c) is an accredited
10
Case: 15-14375 Date Filed: 02/23/2017 Page: 11 of 26
investor. Id. § 230.506(c). The offeror can verify a purchaser’s accredited status
on the basis of income or net worth. See id. § 230.506(c)(2)(ii)(A) & (B).
Rule 508 provides a safe harbor in private offering actions when there are
“insignificant deviations” from Rule 506(b). This provision states that a deviation
from a “term, condition or requirement of § 230.504, § 230.505 or § 230.506 will
not result in the loss of the exemption from the requirements of section 5 of the Act
for any offer or sale to a particular individual or entity, if the person relying on the
exemption” satisfies three factors. 17 C.F.R. § 230.508(a). The first two factors
tie the deviation to the purchasers: the failure to comply with a term, condition or
requirement of Rule 506 must not (1) “pertain to a term, condition or requirement
directly intended to protect that particular individual or entity”; and (2) must be
“insignificant with respect to the offering as a whole, provided that any failure to
comply with [certain specified terms] shall be deemed to be significant to the
offering as a whole.” Id. The third factor requires a “good faith and reasonable
attempt” to comply with all Rule 504, 505, and 506 requirements. Id.
Rule 508(b) states that “[a] transaction made in reliance on § 230.504, §
230.505, or § 230.506 shall comply with all applicable terms, conditions and
requirements of Regulation D.” Id. § 230.508(b). Significantly, it provides that
“[w]here an exemption is established only through reliance upon paragraph (a) of
11
Case: 15-14375 Date Filed: 02/23/2017 Page: 12 of 26
this section, the failure to comply shall nonetheless be actionable by the
Commission under section 20 of the Act.” Id. This regulatory language is at issue
in the present case. There is no precedent explaining what the phrase “failure to
comply” modifies in this regulation, and whether this safe harbor is available in
SEC enforcement actions.
As we explain infra, our review of the regulatory construction and
regulatory history persuades us that the safe harbor provision is available to private
note offerings in SEC enforcement actions. Levin establishes a genuine dispute of
material fact whether the Banyon note offering, as a whole, falls under the safe
harbor provision in Rule 508. Thus, we reverse the district court’s grant of
summary judgment on the registration claim and remand for further proceedings.
2. Rule 508 issue
Initially, the district court ruled that there was a genuine dispute of fact
regarding Banyon’s compliance with Rule 508. Specifically, it found a genuine
dispute as to whether Banyon made a “good faith and reasonable” effort to comply
with Rule 506 as required under Rule 508(a)(3). 17 C.F.R. § 230.508(a)(3). The
record shows that Banyon attempted to comply with Rule 506(b)(2) by requiring
investors, before purchasing the Banyon promissory notes, to submit investor
certifications certifying that they were accredited investors under Rule 501, or, if
12
Case: 15-14375 Date Filed: 02/23/2017 Page: 13 of 26
they were not, that they were either sophisticated investors or represented by a
“purchaser representative” as required by Rule 506(b)(2(ii). The district court
further found that there was a genuine issue of material fact regarding whether
Banyon failed to comply with any provision of Regulation D that was “significant
to the offering as a whole.” 17 C.F.R. § 230.508(a)(2).
After this initial ruling by the district court, the SEC filed a motion for
reconsideration, asserting that under Rule 508(b), Levin could not avail himself of
the Rule 508(a) exemption because this exemption is applicable only in private
actions, not SEC enforcement actions under the Securities Act. Thus, the SEC
argued that it was “the failure to comply” with Section 5 that was actionable.
Levin responded that “the failure to comply” referred to individual failures to
comply with Rules 504-506, leaving the protection of the exemption in place for
the Section 5 violation generally. On reconsideration, the district court agreed with
the SEC and entered judgment in its favor on the registration claim. In our view,
this was error.
In determining the meaning of a statute or regulation, “the first step is to
determine whether the statutory language has a plain and unambiguous meaning by
referring to the language itself, the specific context in which that language is used,
and the broader context of the statute as a whole.” Bautista v. Star Cruises, 396
13
Case: 15-14375 Date Filed: 02/23/2017 Page: 14 of 26
F.3d 1289, 1295 (11th Cir. 2005) (quotation omitted). “If the statute’s meaning is
plain and unambiguous, there is no need for further inquiry.” CBS Broad. Inc. v.
Echostar Commc’ns Corp., 532 F.3d 1294, 1300–1301 (11th Cir. 2008)
(quotations omitted). To determine the plain meaning of a statute or regulation, we
do not look at one word or term in isolation, but rather look to the entire statutory
or regulatory context. Id. at 1301.
Hence, we first look to the usage of the phrase “failure to comply” and note
that it appears numerous times in Rule 508. It is used at the start of (a) in reference
to the terms of Rules 504-506 and to describe the basic premise of the exemption;
it appears in (a)(1) and (a)(2) referring back to its usage in (a); and it is used again
in (a)(2) to specifically reference the terms of Rules 504-506. The word “comply”
is also used in (a)(3), separately from the phrase “failure to comply,” again in
relation to Rules 504-506. “A standard principle of statutory construction provides
that identical words and phrases within the same statute should normally be given
the same meaning.” Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224,
232, 127 S. Ct. 2411, 2417 (2007); see also Douglas v. Yates, 535 F.3d 1316,
1320–21 (11th Cir. 2008) (“Similar language contained within the same section of
a statute must be accorded a consistent meaning.”) (quotation omitted). Given
Rule 508(a)’s repeated reference to “failure to comply” in the context of
14
Case: 15-14375 Date Filed: 02/23/2017 Page: 15 of 26
compliance with the Rules of Regulation D for private offering exemptions, it
follows that the phrase “failure to comply” in Rule 508(b) must be interpreted in
the same manner: relating to compliance with Rules 504-506 of Regulation D and
not to compliance with Section 5. See Owusu-Ansah v. Coca-Cola Co., 715 F.3d
1306, 1311 (11th Cir. 2013) (stating that “a term appearing in several places in a
statutory text is generally read the same way each time it appears”) (quotation
omitted).
Second, if the SEC had intended for Rule 508(b) to address non-compliance
with Section 5 of the Act, it would have expressly stated so. This is true especially
because Rule 508(a), part of the same rule, explicitly references Section 5 of the
Securities Act. See 17 C.F.R. § 230.508(a) (stating that a “failure to comply” with
Rules 504-506 will not result “in the loss of the exemption from the requirements
of section 5 of the Act” if certain conditions are satisfied). When a deliberative
body “includes particular language in one section of a statute but omits it in
another, it is generally presumed that [it] acts intentionally and purposely in the
disparate inclusion or exclusion.” Keene Corp. v. United States, 508 U.S. 200,
208, 113 S. Ct. 2035, 2040 (1993) (quotation omitted).
Third, “statutes should be construed so that no clause, sentence, or word
shall be superfluous, void, or insignificant.” United States v. Aldrich, 566 F.3d
15
Case: 15-14375 Date Filed: 02/23/2017 Page: 16 of 26
976, 978 (11th Cir. 2009) (quotation omitted). The district court’s interpretation of
Rule 508 runs counter to this instruction. The district court’s interpretation renders
the entire first sentence of Rule 508(b)—providing that “[a] transaction made in
reliance on § 230.504, § 230.505, or § 230.506 shall comply with all applicable
terms, conditions and requirements of Regulation D”—superfluous. The inclusion
of this first sentence adds meaning to Rule 508(b) only if it is interpreted as
allowing the SEC to bring Section 20 enforcement actions for specific violations of
the rules of Regulation D, not of Section 5 of the Securities Act, even where Rule
508(a) good faith compliance applies. Otherwise, the sentence is not necessary.
In sum, the first part of the first sentence is necessary to qualify the second
part of the sentence. The first sentence provides context, and the two sentences in
Rule 508(b) explain that a transaction made in reliance upon the Regulation D
private offering exemption generally must comply with all its terms, but if a
transaction violates those terms and is saved by Rule 508’s safe harbor provision,
those specific violations are actionable even though the transaction is otherwise
exempt.
Additionally, the regulatory history lends support for this interpretation.
After requesting comment on whether a good faith compliance standard should be
instituted for Regulation D, the SEC proposed such a standard, explaining that
16
Case: 15-14375 Date Filed: 02/23/2017 Page: 17 of 26
under the proposed rule, isolated and minor deviations from the requirements of
Regulation D might eliminate the exemption with respect to a particular sale, but
not with respect to the offering as a whole. See Regulation D Revisions, 52 Fed.
Reg. 3015, 3020 (Jan. 30, 1987); 53 Fed. Reg. 7870, 7871 (Mar. 10, 1988). At this
point in the regulatory history, however, no distinction had been made between
private and SEC actions. After further comment, the SEC proposed a revised
version of Rule 508 that contains the language which currently appears in section
(b). See Regulation D; Independent Exemptions from Registration Requirements,
54 Fed. Reg. 309, 310, 312, 314 (Jan. 5, 1989). In reference to Rule 508(b), the
SEC explained that “[a] separate provision in reproposed Rule 508 provides that in
any case, failure to comply with any term, condition or requirement of Regulation
D would be actionable by the Commission regardless of the significance of the
deviation.” Id. at 312. This final clause refers back to the “failure to comply,”
suggesting that it is the minor deviations from Regulation D that are actionable,
and not the offering as a whole under Section 5.
We conclude that the district court erred in finding that the safe harbor
provision of Rule 508(a) was not available in this SEC enforcement action. Based
on the plain language of the regulation and the regulatory history, we hold that
Rule 508(a) not only preserves the safe harbor for certain insignificant deviations
17
Case: 15-14375 Date Filed: 02/23/2017 Page: 18 of 26
in private actions, but it also preserves the safe harbor in SEC enforcement actions.
Because there are disputed facts about whether the Banyon notes comply with Rule
502(b)(2)(vii) in order to be eligible for a Rule 506 exemption, and, in turn, fall
within the safe harbor provision of Rule 508, we hold that the district court erred in
granting summary judgment to the SEC on Count I, the registration claim.
Accordingly, we reverse the district court’s judgment in favor of the SEC on the
registration claim and remand for further proceedings.
B. Motion for Continuance
Levin argues that the district court abused its discretion when it denied his
motion for a continuance. He posits that the denial prejudiced his case by
preventing him from participating in jury selection, by tainting the jury against
him, and by preventing him from assessing the testimony and assisting in his
counsel’s cross-examination of the SEC’s first witness. Based on our review of the
record, we hold that the district court did not abuse its discretion in denying the
motion for continuance.
We have clearly stated that we will not reverse a district court’s ruling on a
motion for continuance unless the ruling is arbitrary, unreasonable, and severely
prejudicial. See Rink, 400 F.3d at 1296. There are four factors we generally
consider in determining whether a trial continuance is warranted. First, we
18
Case: 15-14375 Date Filed: 02/23/2017 Page: 19 of 26
examine the diligence of the party requesting the continuance to ready the case
prior to the date set for trial. See Hashwani v. Barbar, 822 F.2d 1038, 1040 (11th
Cir. 1987) (citation omitted). Second, we consider the likelihood that the need for
a continuance could have been met if a continuance was granted. Id. Third, we
examine the extent to which granting the continuance would have been an
inconvenience to the court and the opposing party. Id. Fourth, we consider the
extent to which the requesting party might have suffered harm as a result of the
district court’s denial of the continuance. Id; see also Fowler v. Jones, 899 F.2d
1088, 1094 (11th Cir. 1990). Another relevant factor we entertain is whether the
district court has granted a prior continuance in the case. See Quiet Tech. DC-8,
Inc. v. Hurel-Dubois UK Ltd., 326 F.3d 1333, 1351 (11th Cir. 2003).
In considering these factors, we conclude that the district court properly
denied the motion for a continuance. The first factor is irrelevant because the
parties do not dispute that in most respects Levin was diligent in readying his case
for trial. As to the second factor, when Levin’s counsel contacted the district court
the morning of the trial to inform the court of Levin’s illness, counsel did not know
the specific extent of Levin’s illness and asked for a week-long continuance.
Because the district court had no information regarding Levin’s prognosis at the
time, we conclude that it did not abuse its discretion in reasoning that a week-long
19
Case: 15-14375 Date Filed: 02/23/2017 Page: 20 of 26
continuance would not guarantee Levin’s return. See Romero, 552 F.3d at 1320–
21 (noting that as to the second factor “[i]t is well-settled that a district court may
deny a continuance when there is no guarantee that granting one will enable a party
to [meet the need for the continuance]”).
We conclude that the third factor weighs heavily against the continuance
because the last-minute request, if granted, would have increased the
inconvenience to the district court and the SEC. The district court had secured the
services of an extra court reporter for the trial and had summoned fifty potential
jurors. Moreover, one of the SEC’s witnesses was available only for a few days,
so a week-long continuance might have prevented his testimony. Lastly and
importantly, we conclude that Levin cannot demonstrate prejudice from the denial
of the continuance. We note that Levin voluntarily traveled to Panama several
days before his trial was scheduled to commence. Although Levin argues that his
absence at the start of the trial tainted the jury’s impression of him, the district
court minimized any prejudice by informing the jurors that Levin was absent due
to an illness. The district court reiterated the reason for Levin’s absence before
jury selection and the presentation of the SEC’s first witness.
Moreover, the district court weighed the fact that during the three years the
case had been pending, the district court had granted three continuances. This is a
20
Case: 15-14375 Date Filed: 02/23/2017 Page: 21 of 26
permissible factor to consider in evaluating whether to grant a motion for
continuance. See Quiet Tech. DC-8, Inc., 326 F.3d at 1351. Furthermore, Levin
was present to testify on his own behalf. Thus, we conclude that Levin fails to
show serious prejudice to his case from the district court’s denial of the motion for
continuance. Accordingly, we affirm the district court’s order on this challenge.
C. Disgorgement Award
Levin argues that the district court abused its discretion in entering a $40.1
million disgorgement award against him, and he proffers several reasons why we
should reverse the disgorgement award. First, Levin claims that the district court
should have reduced the disgorgement award by $30.4 million, the amount
distributed by the Banyon bankruptcy trustee to Banyon’s investors. Second, he
argues that the award failed to provide for reductions based on any future
distributions or other repayments by the Banyon trustee to Banyon’s investors.
Third, he claims that the district court erred by including in its calculation the gains
obtained by his wife and his unaffiliated companies. None of these arguments
merits relief.
“Disgorgement is an equitable remedy intended to prevent unjust
enrichment.” SEC v. Monterosso, 756 F.3d at 1337. The initial amount is
established by the SEC who “needs to produce only a reasonable approximation of
21
Case: 15-14375 Date Filed: 02/23/2017 Page: 22 of 26
the defendant’s ill-gotten gains.” Id. After the SEC has established the initial
amount, the burden shifts to the defendant “to demonstrate the SEC’s estimate is
not reasonable.” Id.
Initially, we note that for the first time on appeal, Levin challenges the
approximation of his gains based on the inclusion of gains obtained by his wife and
his companies. Because Levin failed to object to that inclusion in the district court,
we will not entertain this challenge on appeal. See Access Now, Inc. v. Sw. Airlines
Co., 385 F.3d 1324, 1331 (11th Cir. 2004) (stating that this court “has repeatedly
held that an issue not raised in the district court and raised for the first time in an
appeal will not be considered”) (quotation omitted). If we did consider the issue,
however, Levin would not prevail because he has presented no evidence that the
gains obtained by his wife and his entities did not ultimately reach him.
We conclude that the district court properly based the disgorgement upon
Levin’s gains and not the investors’ losses. The $30.4 million returned by the
Banyon trustee did not come out of Levin’s gains but instead came from a TD
Bank settlement for Banyon’s investment in the fraud. Hence, this money was not
a return of investor proceeds raised during the Banyon offering, and the district
court properly did not consider these funds to offset the disgorgement. Moreover,
there is no evidence that the $1.75 million Levin contributed from his personal
22
Case: 15-14375 Date Filed: 02/23/2017 Page: 23 of 26
bankruptcy estate has reached the hands of Banyon investors. As the district court
noted, if any investor does ultimately recover from Levin, then Levin could
petition the court for a reduction in the disgorgement award because the recovery
would constitute a partial return of Levin’s ill-gotten gains. This indicates the
district court’s clear understanding of its duty in ordering a disgorgement award.
Accordingly, we affirm the disgorgement award.
D. Judge’s questioning of witnesses
Levin contends that during the trial, the district court improperly intervened
during his testimony and Preve’s testimony by asking them both “leading, one-
sided, and tendentious questions.” Levin claims that these questions constituted an
abuse of the district court’s discretion to examine witnesses, as provided in Federal
Rule of Evidence 614. Levin acknowledges that he did not object to the district
court’s improper questioning at trial, but argues that he was not required to object
because such objection would place him in a disadvantageous position that might
create a conflict for him with the district court. Regardless of the standard of
review employed by this court—abuse of discretion or plain error—Levin
maintains that reversal is appropriate because the district court’s questioning
prejudiced his defense, affected the outcome of his trial, and seriously affected the
fairness, integrity, or public reputation of the proceeding.
23
Case: 15-14375 Date Filed: 02/23/2017 Page: 24 of 26
A district court has discretion to question witnesses. See Wright, 392 F.3d at
1274. It is within that discretion that the district court can “make inquiries of a
witness in order to clarify the evidence presented,” act to prevent any
misunderstanding of a witness’s testimony, and “maintain the pace of trial by
interrupting or limiting counsel’s questions.” Id. at 1275. A district court abuses
that discretion when it abandons its proper role and assumes the role of an
advocate. Id. at 1274. Under an abuse of discretion review, in order for Levin to
be entitled to a reversal based on alleged improper comments by the district court,
there must be a “clear effect on the jury.” United States v. Hill, 643 F.3d 807, 845
(11th Cir. 2011).
However, our review is for plain error. Regardless of the provision in Rule
614(c) that allows for parties to refrain from objecting to a judge’s questioning of a
witness in front of the jury so as to avoid prejudicing themselves, the rule “does
not entirely relieve the litigant of his duty to object in order to preserve the
exception on appeal.” Hanson v. Waller, 888 F.2d 806, 813 (11th Cir. 1989). In
order to preserve an objection, a party should lodge the objection at the next
available opportunity when the jury is not present. Id. Otherwise, the alleged error
is deemed waived unless it constitutes plain error. Id.
24
Case: 15-14375 Date Filed: 02/23/2017 Page: 25 of 26
Levin cannot prevail under a plain error review because he cannot show that
the district court’s alleged improper questioning seriously affected the fairness,
integrity, or public reputation of his trial. United States v. Vandergrift, 754 F.3d
1303, 1307 (11th Cir. 2014). Levin’s testimony lasted for all of one day and the
start of the next day. During his testimony, the district court had to instruct Levin
at least one dozen times to answer questions directly and to give clear answers. At
one time, the district court sent the jury out of the room to admonish Levin to cease
arguing with the SEC’s counsel. Upon review, it is clear that the district court’s
questions were meant to provide clarification in Levin’s testimony and to maintain
the pace of the trial.
The district court interrupted when Levin was unresponsive to the SEC’s
counsel’s questions, when the SEC’s questions confused Levin, and when the
SEC’s counsel’s questioning became repetitive. This is all within the district
court’s discretion. See Wright, 392 F.3d at 1274–75. Moreover, the district court
instructed the jury to disregard any of its questions and to arrive at its own decision
about the facts. Considering the record as a whole, we conclude that there is no
reversible error. See, e.g., United States v. Bertram, 805 F.2d 1524, 1529 (11th
Cir. 1986) (holding that, given the vigor of counsel and the cautionary instructions
to the jury, thirty-five “egregious” interruptions from the trial judge “did not
25
Case: 15-14375 Date Filed: 02/23/2017 Page: 26 of 26
intrude [] to such an extent that he showed bias in favor of the prosecution or
prejudice against the defendants or their attorneys”). Accordingly, we conclude
that Levin is not entitled to relief on this claim.
V. CONCLUSION
We hold that the district court did not abuse its discretion in denying Levin’s
motion for continuance or in questioning Levin and Preve during the trial. We
affirm the district court’s disgorgement award because the district court properly
based the award on Levin’s ill-gotten gains and not the investors’ losses.
However, we reverse the district court’s judgment on the registration count with
regard to its determination that Rule 508(a) does not apply to SEC enforcement
actions. There are disputed issues of fact whether the Banyon note offerings failed
to comply with any provision of Regulation D that was significant to the offering
as a whole. Thus, we are compelled to remand that issue to the district court for
further proceedings consistent with this opinion.
AFFIRMED in part, REVERSED in part, and REMANDED.
26