Securities & Exchange Commission v. Banner Fund International

                  United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

       Argued September 24, 1999    Decided April 4, 2000 

                           No. 98-5235

               Securities and Exchange Commission, 
                             Appellee

                                v.

                Banner Fund International, et al.,

                       Eddie R. Blackwell, 
                            Appellant

          Appeal from the United States District Court 
                  for the District of Columbia 
                         (No. 94cv00342)

     Afton Jane Izen argued the cause and filed the briefs for 
appellant.

     Mark R. Pennington, Counsel, Securities & Exchange 
Commission, argued the cause for appellee.  With him on the 
brief were David M. Becker, Deputy General Counsel, Eric 

Summergrad, Assistant General Counsel, and Nathan A. 
Forrester, Attorney.  Jacob H. Stillman, Solicitor, entered an 
appearance.

     Before:  Ginsburg and Randolph, Circuit Judges and 
Buckley, Senior Circuit Judge.

     Opinion for the court filed by Circuit Judge Ginsburg.

     Ginsburg, Circuit Judge:  The district court entered a 
summary judgment against the appellant, Eddie R. Blackwell, 
and against Lloyd R. Winburn and Swiss Trade & Commerce 
Trust, Ltd., on the complaint of the Securities and Exchange 
Commission that the defendants violated the anti-fraud and 
registration provisions of the securities laws of the United 
States.  The district court enjoined the defendants from 
committing further violations, and ordered them to disgorge 
$6.5 million plus prejudgment interest, to provide a sworn 
accounting of their assets and of financial activities related to 
the Banner Fund Program, and to repatriate assets received 
from investors.

     On appeal Blackwell argues that:  the district court lacks 
subject matter jurisdiction over the case and personal juris-
diction over him;  the district court should have abstained 
under principles of international comity;  he did not violate 
the securities laws of the United States because the interests 
Swiss Trade sold were not securities;  and neither summary 
judgment nor the relief granted the SEC are warranted.  
Some of Blackwell's arguments are not properly before this 
court;  the others are without merit.  We therefore affirm the 
judgment of the district court.

                          I. Background

     Blackwell and Winburn created Banner Fund International 
as a unit trust under the laws of the Jersey Islands in 1992.  
At about the same time, they began actively operating Swiss 
Trade, a limited liability company they had organized under 
the laws of Aruba.  In 1993 they moved Swiss Trade to Belize 
City, where they established it as a Belizean International 
Business Company.  Winburn served as Chairman of the 

Board and President of Swiss Trade and managed its daily 
operations, while Blackwell oversaw operations at several of 
Banner Fund's investments, including a shrimp farm located 
in southern Belize, where he spent most of his time.

     Swiss Trade solicited funds from investors in the United 
States by means of a brochure and a one-page application 
form touting the "Off Shore Banner Fund International Arbi-
trage Program."  Upon receiving an application and a check 
representing funds for investment, Swiss Trade exchanged 
the investor's money for a beneficial interest in Banner Fund.  
Instead of issuing the beneficial interest to the investor 
directly, however, Swiss Trade placed it in an irrevocable 
individual trust created under Belizean law (which Swiss 
Trade branded an "Endeavor Trust") naming Swiss Trade as 
the Trustee, Banner Fund as the settlor, and the investor as 
the beneficiary.  The individual investor was not a party to 
the Endeavor Trust agreement and was not ordinarily ap-
prised of the terms of the trust arrangement prior to invest-
ing.  Swiss Trade had absolute control over the trust assets, 
including the right to refuse to return the investor's money.  
Swiss Trade did not register the beneficial interests in Ban-
ner Fund with the SEC.

     The brochure advertising Banner Fund, drafted by Win-
burn and reviewed by Blackwell, was directed at low income 
individuals to whom Blackwell privately referred as "Joe 
lunch bag[s]."  Their brochure represents that the Banner 
Fund Program will use leverage, which it describes as "bor-
rowing against your assets at good multiples on favorable 
terms and [at] low interest," and arbitrage, which it describes 
as "the art of purchasing in one market for the [sic] immedi-
ate resale in another market," to "allow[ ] the little guy to 
take advantage of" deals previously available only to "insid-
er[s]."  Claiming that Banner Fund is an independent invest-
ment fund with "strong bank connections, knowledge of the 
market and the workings of the insider's [sic] deals," the 
brochure promises to "put[ ] individual small investors togeth-
er with others to leverage their funds to a point where they 
can participate."  The brochure ends with a catalogue of the 
purported benefits of the Banner Fund Program, including a 

promise that Banner Fund would return any investment 
"[a]ny time after the first 180 days," and a hypothetical 
demonstration of how $5,000 invested in Banner Fund could 
grow to more than $25,000 in one year.

     Initially Swiss Trade disseminated the brochure through 
Opportunity Seekers, an organization whose members are 
engaged in multilevel marketing in the United States.  Later 
Winburn established the Fulfillment Center in Beaumont, 
Texas, which was organized as a trust under the laws of 
Delaware, to distribute brochures and other information re-
lated to Banner Fund.  An investor in Banner Fund received 
$50 for each new participant he recruited, plus 20% of the 
new recruit's earnings from Banner Fund.  Swiss Trade, 
which received 10% of each new recruit's earnings, sold 
packets of brochures and applications to investors who were 
interested in soliciting new members for the Banner Fund 
Program.

     In order to help launch the referral system, Blackwell 
signed a letter (which he says Winburn wrote) urging each 
investor in Banner Fund to recruit ten new participants;  he 
also aided the marketing team by giving them a chart show-
ing how a $200 investment in Banner Fund could grow to 
$1,741 in one year.  The marketing efforts reached people in 
48 states, the District of Columbia, and several foreign coun-
tries.  Eventually, Banner Fund attracted approximately 
10,000 investors, mostly from the United States, and raised 
about $6.5 million dollars.

     Swiss Trade sent monthly newsletters and account state-
ments to investors.  In the newsletters it emphasized Banner 
Fund's liquidity, stating, for example, that "[t]he investment 
staff know that they must have funds in easily liquidated 
instruments in anticipation of any needs [an investor] might 
have to withdraw."  Swiss Trade also used the newsletters to 
reassure investors that the Fund would be "leveraging to the 
maximum" by the end of 1993.

     Swiss Trade deposited funds received from investors in the 
Banner Fund Program into its bank accounts in California, 
where they were commingled with Swiss Trade's general 

operating funds;  that is, Swiss Trade used the same accounts 
to pay creditors and investors.  Although Blackwell, Win-
burn, and Swiss Trade have refused on the basis of Belizean 
trust law to provide an accounting of the investors' funds, the 
SEC has traced more than $4.7 million of those funds.  Three 
examples of its findings are particularly relevant to this 
appeal because they demonstrate Blackwell's involvement in 
the Banner Fund scheme.

     First, Swiss Trade lent investors' money to Commonwealth 
Overseas, Ltd., a Belizean company, which in turn purchased 
the shrimp farm.  After Blackwell had moved to the farm and 
well after the district court had ordered Swiss Trade to freeze 
its assets, Winburn and Blackwell caused Commonwealth 
Overseas to sell the farm to Sweetwater Investments, A.V.V., 
a company owned by Blackwell, for $3.2 million payable to 
Swiss Trade over five years.  Second, a trust in which Swiss 
Trade had invested money intended for the Banner Fund 
Program lent $4,500 to Blackwell's daughter for college tu-
ition;  neither Blackwell nor his daughter ever repaid the 
loan.  Finally, Swiss Trade put $120,000 into a trust that 
Blackwell controlled and that he used to purchase the house 
in which his family resides in Texas.  Although Blackwell 
signed a note for the $120,000, he has not made any pay-
ments.

     In February 1994 the SEC brought suit in the district 
court against Blackwell, Winburn, Swiss Trade, and several 
other defendants involved in the Banner Fund venture.  The 
district court entered a temporary restraining order directing 
the defendants to freeze their assets, to account for and to 
repatriate funds received as part of the Banner Fund Pro-
gram, and to stop soliciting or accepting new investors.  One 
day later the SEC obtained from the district court a Letter of 
Request asking the courts of Belize to help in getting discov-
ery of documents and of witnesses.  On March 2, 1994 the 
SEC's attorney in Belize obtained an ex parte order from a 
Belizean court implementing the Letter of Request, as a 
result of which many documents relating to Banner Fund 
were placed in the custody of the Belizean court.  On March 
7 the district court issued a preliminary injunction extending 

the relief granted in the temporary restraining order.  Con-
trary to the orders of the district court, Swiss Trade contin-
ued to solicit investors and to pay creditors, clients, and 
employees.

     Blackwell and his co-defendants challenged the ex parte 
order of the Belizean court and in January 1995 the court 
reversed its decision implementing the Letter of Request.  
The Belizean court ordered that the documents remain in its 
custody, however, pending the outcome of the SEC's appeal.  
In December 1995, Blackwell and Winburn obtained a Belize-
an court order appointing Unicorn Trust, Ltd., a Belizean 
company, the successor to Swiss Trade as trustee for all the 
Endeavor Trusts, and directing Unicorn Trust to dissolve the 
trust of any beneficiary who so desired.

     Meanwhile back in district court the SEC and Blackwell 
filed cross motions for summary judgment.  The district 
court held that Blackwell and his co-defendants had violated 
s 10(b), the antifraud provision of the Securities Exchange 
Act of 1934, 15 U.S.C. s 78j(b), and Rule 10b-5, 17 C.F.R. 
s 240.10b-5, promulgated thereunder;  ss 5(a), 5(c), and 
17(a), the antifraud and registration provisions of the Securi-
ties Act of 1933, 15 U.S.C. ss 77e(a), 77e(c), 77q(a);  and 
s 7(d), the prohibition of unregistered foreign public offer-
ings, of the Investment Company Act of 1940, 15 U.S.C. 
s 80a-7(d).  Accordingly, the district court granted summary 
judgment in favor of the SEC and enjoined Blackwell and his 
co-defendants from further violations.  The court also or-
dered the defendants to disgorge $6.5 million plus prejudg-
ment interest, provide an accounting of their assets, repatri-
ate any assets belonging to investors in Banner Fund, and 
refrain from disposing of or otherwise transferring their 
assets.  Blackwell and Winburn appealed but we dismissed 
Winburn's appeal when, after having been convicted of con-
spiracy to defraud the United States, he became a fugitive.

                           II. Analysis

     Blackwell raises a plethora of objections, none of which 
need long detain us.  He contends that the district court lacks 

subject matter and personal jurisdiction and that, in any 
event, the court should have abstained under principles of 
international comity.  Additionally, Blackwell attacks the sub-
stance of the district court's order on the grounds that he did 
not violate the securities laws of the United States because 
neither he nor his co-defendants sold securities;  the SEC was 
not entitled to summary judgment upon the issue of his 
intent;  and the court should not have entered an injunction 
against him because he was not an active participant in the 
Banner Fund scheme.  He also maintains that this court 
should set aside the disgorgement order insofar as it applies 
to him because he no longer has access to assets related to 
Banner Fund.  We begin, of course, with Blackwell's chal-
lenge to the subject matter jurisdiction of the district court.

A.   Subject Matter Jurisdiction

     Blackwell contests the court's jurisdiction upon two 
grounds.  First, he contends that the securities laws of the 
United States do not apply to his activities because they took 
place primarily in Belize.  Second, he argues that the district 
court cannot adjudicate the SEC's claim because the Belizean 
courts have exclusive jurisdiction over the res of the Banner 
Fund.

     1.   Connection to the United States
          
     Whether a federal district court has subject matter juris-
diction over an action arising under the securities laws of the 
United States is a question of congressional intent, subject 
only to "the broad limits set by the due process clause."  
Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 29 (D.C. Cir. 
1987).  In the absence of evidence to the contrary, however, 
we presume that congressional "legislation ... is meant to 
apply only within the territorial jurisdiction of the United 
States" because the "Congress is primarily concerned with 
domestic conditions."  Id. at 31 (in part quoting Foley Bros v. 
Filardo, 336 U.S. 281, 285 (1949)).  With these principles in 
mind, we conclude that the district court's exercise of jurisdic-
tion in this case was fully justified and consistent with the 
intent of the Congress.

     (a) 1934 Act.  The Congress has not indicated clearly 
whether s 10 of the Securities Exchange Act of 1934 is 
applicable to cases involving predominantly foreign securities 
transactions effected to some degree from outside the United 
States.*  See Zoelsch, 824 F.2d at 29-30.  We have previously 
indicated (in a dictum) that a United States court would have 
jurisdiction under the 1934 Act "whenever any individual is 
defrauded in this country, regardless of whether the offer 
originates somewhere else."  Id. at 33 n.4.  The Second 
Circuit has gone further, unambiguously holding that "the 
anti-fraud provisions of the federal securities laws ... [a]pply 
__________
     * Section 10 of the Exchange Act provides in pertinent part as 
follows:

     It shall be unlawful for any person, directly or indirectly, by 
     the use of any means or instrumentality of interstate commerce 
     or of the mails, or of any facility of any national securities 
     exchange--
               * * *
               (b) To use or employ, in connection with the purchase or sale 
     of any security registered on a national securities exchange or 
     any security not so registered, any manipulative or deceptive 
     device or contrivance in contravention of such rules and regula-
     tions as the Commission may prescribe as necessary or appro-
     priate in the public interest or for the protection of investors.
15 U.S.C. s 78j.  Rule 10b-5, in turn, provides:

     It shall be unlawful for any person, directly or indirectly, by 
     the use of any means or instrumentality of interstate com-
     merce, or of the mails or of any facility of any national 
     securities exchange,
     
          (a) To employ any device, scheme, or artifice to defraud,
     
          (b) To make any untrue statement of a material fact or to 
     omit to state a material fact necessary in order to make the 
     statements made, in the light of the circumstances under which 
     they were made, not misleading, or
          (c) To engage in any act, practice, or course of business 
     which operates or would operate as a fraud or deceit upon any 
     person,  
           in connection with the purchase or sale of any security.
          
17 C.F.R. s 240.10b-5.

to losses from sales of securities to Americans resident in the 
United States whether or not acts (or culpable failures to act) 
of material importance occurred in this country...." Bersch 
v. Drexel Firestone, Inc., 519 F.2d 974, 993 (1975);  see also 
Europe & Overseas Commodity Traders, S.A. v. Banque 
Paribas London, 147 F.3d 118, 128 n.12 (2d Cir. 1998) (reaf-
firming test announced in Bersch but stating "U.S. residence 
of individual investors--not American nationality--must be 
the focus of the ... test").  Because Blackwell and his co-
defendants operated to a significant degree from within the 
United States, however, when they defrauded United States 
investors, we need not decide today whether to adopt the 
Bersch test for extraterritorial jurisdiction.  Instead, we hold 
only that when a resident of the United States is allegedly 
defrauded in the United States in connection with the sale of 
securities, the courts of the United States have jurisdiction 
under the 1934 Act.

     Under this test, the district court properly asserted juris-
diction over the claims arising under s 10(b) of the Exchange 
Act and Rule 10b-5.  The allegations of the SEC clearly 
make out a case in which Blackwell and his co-defendants 
defrauded investors who resided in the United States.  Swiss 
Trade mailed brochures advertising Banner Fund to those 
investors, first through members of Opportunity Seekers 
operating as Swiss Trade's agents in the United States, and 
later from Swiss Trade's own affiliate in the United States, 
the Fulfillment Center.  Swiss Trade's agents in the United 
States deposited investors' funds in banks located in the 
United States.  In short, doing little more offshore than 
composing solicitations to be mailed to United States resi-
dents from locations in the United States, Blackwell and 
company defrauded thousands of investors resident in the 
United States.  It requires no stretch of the imagination to 
conclude, as we do, that the Congress intended s 10(b) of the 
1934 Act to apply to a case such as this, in which domestic 
investors were defrauded in large part by means of culpable 
acts committed in this country.

     (b) 1933 Act.  The district court's exercise of jurisdiction 
over the claim of fraud in violation of s 17(a) of the Securities 
Act of 1933 was also proper.*  Section 17(a) is in substance 
almost identical to s 10(b) of the 1934 Act and to Rule 10b-5, 
and we see no reason to think--in light of our conclusion that 
the district court properly asserted jurisdiction over the 
claims arising under those sections--that subject matter jur-
isdiction over the s 17(a) claim is any less proper, again, 
considering the domestic locus of the offer and sale of the 
securities and of the purchasers.

     The range of transactions to which the registration require-
ments of s 5 of the 1933 Act apply is, however, more circum-
scribed.  The SEC has limited the reach of that section as 
follows:

     For the purposes only of section 5 of the Act ... the 
     terms offer, offer to sell, sell, sale, and offer to buy ... 
     shall be deemed not to include offers and sales that occur 
     outside the United States.
     
17 C.F.R. s 230.901.  Reasoning that the Congress passed 
the registration requirements to "assure full and fair disclo-
sure in connection with the public distribution of securities," 
the Second Circuit has interpreted this regulation to permit 
__________
     * Section 17(a) reads:

     It shall be unlawful for any person in the offer or sale of any 
     securities by the use of any means or instruments of transpor-
     tation or communication in interstate commerce or by the use 
     of the mails, directly or indirectly--
     
          (1) to employ any device, scheme, or artifice to defraud, or
     
          (2) to obtain money or property by means of any untrue 
     statement of a material fact or any omission to state a material 
     fact necessary in order to make the statements made, in the 
     light of the circumstances under which they were made, not 
     misleading, or
     
          (3) to engage in any transaction, practice, or course of 
     business which operates or would operate as a fraud or deceit 
     upon the purchaser.   
15 U.S.C. s 77q(a).

the exercise of subject matter jurisdiction over actions based 
upon "offers of unregistered securities that tend to have the 
effect of creating a market for unregistered securities in the 
United States."  Europe & Overseas Commodity Traders, 
147 F.3d at 126.

     Through their extensive advertising and recruiting efforts, 
the defendants clearly created a market in the United States 
for beneficial interests in Banner Fund.  Not only, as we have 
seen, did thousands of investors throughout 48 states and the 
District of Columbia purchase these interests, but many of 
those investors were recruited to sell interests to others.  
The result can fairly be described, for the purposes of the 
1933 Act, as "tend[ing] to have the effect of creating a 
market" for interests in Banner Fund.  We hold in part II.D, 
below, that those interests are securities, and Blackwell does 
not dispute that they are not registered with the SEC.  The 
district court therefore properly exercised jurisdiction over 
the claims arising under s 5 of the Securities Act.

     (c) 1940 Act.  The district court's exercise of jurisdiction 
over that portion of the SEC's claim arising under s 7(d) of 
the Investment Company Act of 1940 was also proper.  By its 
terms, s 7(d) regulates the activities of foreign investment 
companies operating in the United States.*  Here, the SEC 

__________
     * Section 7(d) reads:

     No investment company, unless organized or otherwise created 
     under the laws of the United States or of a State, and no 
     depositor or trustee of or underwriter for such a company not 
     so organized or created, shall make use of the mails or any 
     means or instrumentality of interstate commerce, directly or 
     indirectly, to offer for sale, sell, or deliver after sale, in 
     connection with a public offering, any security of which such 
     company is the issuer.  Notwithstanding the provisions of this 
     subsection ... the Commission is authorized, upon application 
     by an investment company organized or otherwise created 
     under the laws of a foreign country, to issue a conditional or 
     unconditional order permitting such company to register under 
     this title and to make a public offering of its securities ....
     
15 U.S.C. s 80a-7(d).

alleges, and Blackwell does not dispute, that Blackwell and 
his co-defendants used the mails to offer to sell unregistered 
interests in Banner Fund, a foreign entity, without having 
gotten an order from the SEC permitting such offers.  The 
actions as alleged clearly come within the condemnation of 
s 7(d) of the 1940 Act and the district court correctly assert-
ed subject matter jurisdiction over those aspects of the SEC's 
complaint arising under that Act.

     2.   In Rem and Quasi In Rem Jurisdiction
          
     Various proceedings concerning the res of the Banner Fund 
trust have been going on in Belize almost since the SEC filed 
this suit in the district court.  Because of the potential for the 
two court systems to issue conflicting orders, Blackwell 
claims that the district court lacks jurisdiction until the 
Belizean proceedings are concluded.  The SEC responds 
tersely to this argument, stating only that this "is not an in 
rem proceeding.  It is [an] enforcement action" directed at 
Blackwell and his co-defendants.  We reject Blackwell's chal-
lenge in part for that reason and in part because, to the 
extent that there may be a conflict between the courts of 
Belize and those of the United States, the district court 
asserted jurisdiction first and was therefore justified in adju-
dicating the case to its conclusion.

     To a large extent, the SEC is correct that the suit in the 
district court is an enforcement action directed at Blackwell 
and his co-defendants rather than at the res of Banner Fund.  
Much of the relief the district court granted the SEC does 
not affect the res and, therefore, does not even potentially 
interfere with any orders the courts of Belize might issue 
concerning that res.  Certain aspects of the district court's 
order do, however, concern the res.  Specifically, the district 
court ordered Blackwell and his co-defendants:  (1) not to 
dispose of any of their assets, including assets related to 
Banner Fund;  (2) to repatriate all funds solicited for invest-
ment in Banner Fund;  and, of less certain but arguable 
relevance to the res, (3) not to alter or otherwise dispose of 
any documents relating to transactions involving Banner 
Fund or the defendants' communications with each other.

     Insofar as these aspects of the relief implicate the res, we 
observe that, according to longstanding precedent and prac-
tice, the first court seized of jurisdiction over property, or 
asserting jurisdiction in a case requiring control over proper-
ty, may exercise that jurisdiction to the exclusion of any other 
court.  This doctrine arose first in the context of Our Feder-
alism, with its dual court system:

          Where the judgment sought is strictly in personam, 
     for the recovery of money or for an injunction compelling 
     or restraining action by the defendant, both a state court 
     and a federal court having concurrent jurisdiction may 
     proceed with the litigation, at least until judgment is 
     obtained in one court which may be set up as res 
     adjudicata in the other.  But if the two suits are in rem 
     or quasi in rem, requiring that the court or its officer 
     have possession or control of the property which is the 
     subject of the suit in order to proceed with the cause and 
     to grant the relief sought, the jurisdiction of one court 
     must of necessity yield to that of the other.  To avoid 
     unseemly and disastrous conflicts in the administration of 
     our dual judicial system, and to protect the judicial 
     processes of the court first assuming jurisdiction, the 
     principle, applicable to both federal and state courts, is 
     established that the court first assuming jurisdiction over 
     the property may maintain and exercise that jurisdiction 
     to the exclusion of the other.
     
Penn General Casualty Co. v. Pennsylvania, 294 U.S. 189, 
195 (1935) (citations omitted);  see Colorado River Water 
Conservation Dist. v. United States, 424 U.S. 800, 818 (1976);  
see also Princess Lida v. Thompson, 305 U.S. 456, 466 (1939).  
This first-in-time rule has since been applied to federal cases 
as to which there were cognate proceedings in the courts of 
another country.  See Dailey v. NHL, 987 F.2d 172, 175-78 
(3d Cir. 1993) (district court must yield to Canadian court, 
which was first to assert quasi in rem jurisdiction);  Chesley 
v. Union Carbide Corp., 927 F.2d 60, 66 (2d Cir. 1991) ("[T]he 
rule [is] equally applicable to requested interference by 
American courts with a res under the jurisdiction of a foreign 
court").

     In the cited cases the courts of the United Stated yielded to 
the earlier asserted in rem jurisdiction of a foreign court, but 
we are aware of no reason for applying the rule asymmetri-
cally, that is, only in cases where the foreign court is first to 
assume jurisdiction over the property.  True, we cannot 
require a foreign court to yield when the United States court 
was the first to assume jurisdiction, but neither can we 
acquiesce in a rule under which the United States court 
recedes regardless of its priority in time.  That rule would 
empower a defendant in the United States to oust our courts 
of in rem jurisdiction merely by filing its own action in the 
courts of any hospitable country--of which there would be no 
shortage if that were our rule.

     Even to the extent that this case is in rem, however, the 
first-in-time rule of jurisdiction offers Blackwell no comfort:  
The record reveals that the district court was the first to 
assert jurisdiction.  The SEC filed this suit on February 24, 
1994 and the next day the district court issued a temporary 
restraining order granting much of the relief that the court 
made permanent when it entered summary judgment for the 
SEC.  By Blackwell's own account of events, the courts of 
Belize did not begin any proceeding related to Banner Fund's 
assets until, at the earliest, March 2, 1994--and that was at 
the instance of the SEC, which asked the Supreme Court of 
Belize to implement the Letter of Request issued by the 
district court.  We therefore reject Blackwell's challenge to 
the subject matter jurisdiction of the district court.

B.   Comity

     Although the international aspect of this case does not 
deprive the district court of jurisdiction, it does raise a 
concern with comity among nations.  For that reason, Black-
well argues that the district court should have stayed its hand 
pending the conclusion of proceedings in the courts of Belize, 
and that certain aspects of the district court's order offend 
the notion of comity by requiring the defendants to take 
actions that violate the laws of Belize.  The SEC urges us to 
reject both arguments because, it asserts, accepting either 
argument "would allow fraudfeasors effectively to nullify 

United States [securities] law by conducting some part of 
their scheme overseas."  We do reject Blackwell's comity 
arguments but upon grounds significantly more narrow than 
that urged by the SEC.

     As we have explained before, comity "summarizes in a brief 
word a complex and elusive concept--the degree of deference 
that a domestic forum must pay to the act of a foreign 
government not otherwise binding on the forum."  Laker 
Airways, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 
909, 937 (1984).  "Comity ordinarily requires that courts of a 
separate sovereign not interfere with concurrent proceedings 
based on the same transitory claim, at least until a judgment 
is reached in one action, allowing res judicata to be pled in 
defense."  Id. at 939.  Whether a case raises a concern with 
comity is inherently fact-dependant.  Nonetheless, there are 
some general guidelines available to structure and to cabin 
the inquiry, including this one:  "[A] domestic forum is not 
compelled to acquiesce in pre- or postjudgment conduct by 
litigants which frustrates the significant policies of the domes-
tic forum."  Id. at 915.  With these principles in mind, we 
turn first to Blackwell's contention that the district court 
should have abstained pending the outcome of proceedings in 
the courts of Belize.

     The record discloses two such proceedings, the first of 
which, as we have said, was begun by the SEC on March 2, 
1994 as part of its effort to obtain discovery.  Through local 
counsel the SEC asked a Belizean court for assistance pursu-
ant to the Letter of Request issued by the district court, 
which sought production and examination of documents and 
witnesses.  Ultimately the Belizean court declined to help 
with the discovery request, from which order the appeal of 
the SEC is pending.  Even if the SEC succeeds on appeal, 
however, its application for judicial assistance from the courts 
of Belize is not a ground for abstention by the district court 
because there is no potential for conflict between any orders 
the two courts might issue.

     The second proceeding, which Blackwell and Winburn insti-
tuted in Belize, resulted in the substitution of Unicorn for 

Swiss Trade as the trustee of the Endeavor Trusts.  While 
this proceeding does conflict with the action in the district 
court, it does not require the district court to abstain.  As 
stated above, conduct by a litigant designed to frustrate a 
significant policy of the United States is not a ground for 
abstention on the basis of comity.  Here, Blackwell and 
Winburn acted specifically to defeat the orders of the district 
court, which were issued in order to remedy the massive 
fraud that Blackwell and Winburn perpetrated against thou-
sands of investors in the United States.  If comity required 
the district court to defer to the Belizean court proceeding 
that Blackwell and Winburn initiated solely for the purpose of 
avoiding justice in the courts of the United States, then it 
would be a vicious doctrine indeed.

     Blackwell also complains that some of the relief ordered by 
the district court conflicts with the Trusts Act, 1992 of Belize.  
He asserts, for example, that the accounting requirement in 
the orders of the district court conflicts with the confidentiali-
ty requirement of the Trusts Act.  We have been quite clear, 
however, that "one who relies on foreign law assumes the 
burden of showing that such law prevents compliance with 
the court's order," In re Sealed Case, 825 F.2d 494, 498 (1987) 
(citing Ohio v. Arthur Andersen & Co., 570 F.2d 1370, 1374 
(10th Cir. 1978)), and this Blackwell has failed utterly to do.  
Indeed, to the extent there is anything in the record relating 
to this issue, it appears that it is Blackwell and his co-
defendants, not the laws of Belize, who prevent compliance 
with the orders of the district court.  Section 4(4) of the 
Trusts Act provides that a trust agreement may allow the 
trustee to change the governing law from that of Belize to 
that of another jurisdiction, and the Endeavor Trust agree-
ment contains just such a permissive clause.  Therefore, 
Blackwell and his co-defendant Winburn, who together owned 
and controlled Swiss Trade, which was the trustee for the 
Endeavor Trusts, could have changed the governing law to 
that of the United States and thus avoided any conflict with 
Belizean law.  That is not to say that Blackwell had a legal 
duty to prevent a potential conflict between the Trusts Act 
and the orders of the district court;  our point is simply that 

because he could have avoided any such conflict but chose not 
to do so, comity does not require the district court to stay its 
hand.

C.   Personal Jurisdiction

     In a fleeting passage in his opening brief, Blackwell asserts 
his affirmative defense that the district court lacks personal 
jurisdiction over him because he was never properly served 
with papers.  His specific objection is that the "SEC was 
bound by the dictates of the Hague Convention in its efforts 
to serve Swiss Trade in Belize, as well as himself, in Belize, 
which it did not."  This argument concerning personal juris-
diction is not burdened by any explanation of or citations to 
the relevant provisions of the Hague Convention.  Any doubt 
about the considered nature of Blackwell's failure to develop 
the argument more fully is dispelled by his silence, both in his 
reply brief and at oral argument, in response to the SEC's 
detailed arguments demonstrating that Belize is not a signa-
tory to the Hague Convention, and that the service of process 
upon Blackwell did in any event comply with the require-
ments of that Convention.

     Federal Rule of Appellate Procedure 28(a)(9)(A) requires 
that the appellant's argument "contain [his] contentions and 
the reasons for them, with citations to the authorities and 
parts of the record on which the appellant relies."  We have 
repeatedly held that we will not address an "asserted but 
unanalyzed" argument because "appellate courts do not sit as 
self-directed boards of legal inquiry and research, but essen-
tially as arbiters of legal questions presented and argued by 
the parties before them."  Carducci v. Regan, 714 F.2d 171, 
177 (D.C. Cir. 1983);  see United States v. Watson, 171 F.3d 
695, 699 n.2 (D.C. Cir. 1999) (declining to address "asserted 
but unanalyzed" argument);  United States v. Clarke, 24 F.3d 
257, 262 (D.C. Cir. 1994) (same);  International Bhd. of 
Teamsters v. PeNa, 17 F.3d 1478, 1487 (D.C. Cir. 1994) 
(same).

     Blackwell's less than half-hearted effort upon the issue of 
personal jurisdiction is insufficient to put his objection before 

this court.  We therefore decline to address Blackwell's argu-
ment concerning personal jurisdiction.

D.   Sale of Securities

     The sections of the 1933, 1934, and 1940 Acts that the 
district court found Blackwell to have violated apply only to 
transactions involving "securities."  See 15 U.S.C. s 77e(a) 
(1933 Act, regulating "[s]ale or delivery after sale of unregis-
tered securities");  15 U.S.C. s 77e(c) (1933 Act, prohibiting 
offers to sell or to buy unregistered security);  15 U.S.C. 
s 77q(a) (1933 Act, outlawing fraudulent practices in connec-
tion with sale of any security);  15 U.S.C. 78j(b) (1934 Act, 
prohibiting manipulative or deceptive practices in connection 
with sale of any security);  15 U.S.C. s 80a-7(d) (1940 Act, 
prohibiting investment company from offering for sale "any 
security of which such company is the issuer").  All three 
statutes define "security" to include an "investment contract," 
see 15 U.S.C. s 77b(a)(1);  15 U.S.C. s 78c(a)(10);  15 U.S.C. 
s 80a-2(a)(36).  An investment contract is, for these pur-
poses, anything that investors purchase with "(1) an expecta-
tion of profits arising from (2) a common enterprise that (3) 
depends upon the efforts of others."  SEC v. Life Partners, 
Inc., 87 F.3d 536, 542 (D.C. Cir. 1996) (citing SEC v. W.J. 
Howey Co., 328 U.S. 293, 298-99 (1946)).*  The SEC main-
tains, and Blackwell denies, that the beneficial interests in 
Banner Fund, which Swiss Trade sold, are investment con-
tracts.

     1.   Expectation of Profits
          
     The first element in the definition of an investment contract 
requires only that "the expected profits must, in conformity 

__________
     * Howey arose under the 1933 Act.  Because the definition of 
"security" is "virtually identical" in the 1934 Act, the Supreme 
Court has held that "the coverage of the two Acts may be consid-
ered the same."  Reves v. Ernst & Young, 494 U.S. 56, 61 n.1 (1990) 
(citation omitted).  Inasmuch as the definition of "security" in the 
1940 Act, see 15 U.S.C. s 80a-2(a)(36), is in turn virtually identical 
to the cognate definitions in the two earlier Acts, we hold that the 
elements of Howey are also applicable to the 1940 Act.

with ordinary usage, be in the form of a financial return on 
the investment, not in the form of consumption."  Life Part-
ners, Inc., 87 F.3d at 543.  Advertisements for Banner Fund 
clearly led potential investors to expect a "financial return" 
on their capital outlays.  For example, the brochure distribut-
ed to potential investors gave, as one of the main reasons to 
invest, that Banner Fund offered "major returns and multi-
ples in profits."  Furthermore, Banner Fund's referral sys-
tem induced others to recruit investors by promising recruit-
ers 20% of any new investor's earnings from the Banner 
Fund Program.  We think it obvious, therefore, that investors 
were induced to purchase beneficial interests in Banner Fund 
with the expectation of a financial return on their invest-
ments.

     2.   Common Enterprise
          
     The second element of the definition, that the investment 
be in a "common enterprise," is ordinarily met by a showing 
of horizontal commonality, see Life Partners, Inc., 87 F.3d at 
543 (citing Revak v. SEC Realty Corp., 18 F.3d 81, 87 (2d Cir. 
1994)), which requires that there be a "pooling of investment 
funds, shared profits, and shared losses."  Id.  The Banner 
Fund Program putatively pooled investment funds by, in its 
own words, "put[ting] individual small investors together with 
others to leverage their funds to a point where they can 
participate."  The very premise upon which Swiss Trade 
marketed the program was that Banner Fund would combine 
funds from small investors so that they could participate in 
deals requiring large capital outlays.  Indeed, the brochure 
advertising the program ends by stating:

     Perhaps the only thing that keeps you out of the market 
     is money ... money in sufficient amounts to be "respect-
     able" in the market place.  In Banner Fund Internation-
     al you can, working with others, with an accumulative 
     amount sufficient to do the job.
     
Simply placing investors' funds into individual trusts before 
pooling them did not, as Blackwell contends, change the 
pooled nature of the Banner Fund Program.

     Equally apparent are the profit and loss sharing aspects of 
the Banner Fund Program.  Each investor received a portion 
of Banner Fund's monthly earnings based upon the amount of 
his investment.  In addition, the referral program allocated 
10% of each investor's earnings to Swiss Trade and 20% of 
those earnings to whomever recruited the investor for Banner 
Fund.  Banner Fund's pooling of investors' money and its 
spreading of profits and losses among investors, recruiters, 
and Swiss Trade demonstrate horizontal commonality suffi-
cient to meet the second element of the definition of an 
investment contract.

     3.   Efforts of Others
          
     The third element of the definition requires that "profits be 
generated ... 'predominantly' from the efforts of others," not 
counting purely "ministerial or clerical" efforts.  Life Part-
ners, Inc., 87 F.3d at 545 (citing SEC v. International Loan 
Network, Inc., 968 F.2d 1304, 1308 (D.C. Cir. 1992)).  Again, 
the Banner Fund Program meets this requirement.  An 
individual investor in Banner Fund was supposed to receive 
returns without exerting any effort himself.  According to the 
brochure advertising the program, Swiss Trade was to man-
age all funds in its capacity as trustee.  Although an investor 
separately could earn $50 for each new person he recruited 
into the program, the return from his financial investment 
was to come from the "arbitrage and leveraging" transactions 
Banner Fund was supposedly conducting.

     In sum, the Banner Fund Program has all the elements of 
an "investment contract."  Accordingly, we hold that benefi-
cial interests in Banner Fund are securities.

E.   Summary Judgment

     Blackwell argues that because he denied the SEC's allega-
tions that he made false and misleading statements in connec-
tion with the sale of securities, the district court should not 
have disposed of the securities fraud claims on summary 
judgment.  We review de novo the district court's grant of 
summary judgment, see Jackson v. Finnegan, Henderson, 
Farabow, Garrett & Dunner, 101 F.3d 145, 150 (D.C. Cir. 

1996), but because Blackwell did not properly controvert the 
SEC's statement of undisputed facts before the district court 
we will not now consider his arguments predicated upon there 
being a dispute over those facts.  After reviewing the evi-
dence properly presented to the district court, we conclude 
that the SEC was entitled to summary judgment.

     Under Federal Rule of Civil Procedure 56(c), the district 
court is to grant a motion for summary judgment "if the 
pleadings, depositions, answers to interrogatories, and admis-
sions on file, together with the affidavits ...  show that there 
is no genuine issue as to any material fact and that the 
moving party is entitled to a judgment as a matter of law."  A 
party opposing such a motion on the ground that there are 
material facts in dispute must "set forth [the] specific facts 
showing that there is a genuine issue for trial."  Fed. R. Civ. 
P. 56(e).  In the United States District Court for the District 
of Columbia, a party opposing a motion for summary judg-
ment must also comply with Local Rule LCvR 7.1(h), which 
provides in relevant part:

     An opposition to ... a motion [for summary judgment] 
     shall be accompanied by a separate concise statement of 
     genuine issues setting forth all material facts as to which 
     it is contended there exists a genuine issue necessary to 
     be litigated, which shall include references to the parts of 
     the record relied on to support the statement ....  In 
     determining a motion for summary judgment, the court 
     may assume that facts identified by the moving party in 
     its statement of material facts are admitted, unless such 
     a fact is controverted in the statement of genuine issues 
     filed in opposition to the motion.
     
If the party opposing the motion fails to comply with this 
local rule, then "the district court is under no obligation to sift 
through the record" and should "[i]nstead ... deem as admit-
ted the moving party's facts that are uncontroverted by the 
nonmoving party's Rule [LCvR 7.1(h)] statement."  Jackson, 
101 F.3d at 154.

     Although he filed a statement pursuant to Rule LCvR 
7.1(h) in support of his own motion for summary judgment, 

Blackwell did not follow the rule in opposing the SEC's 
motion for summary judgment;  instead he filed a response 
and an affidavit, neither of which pointed to specific parts of 
the record controverting the SEC's lengthy statement of 
undisputed facts.  The district court was therefore fully justi-
fied in treating as admitted the SEC's statement of material 
facts.  Those facts, only some of which we have recounted 
above, detail at length Blackwell's role in preparing state-
ments, which he knew were false and misleading, and in 
sending them to investors and potential investors.  We there-
fore affirm the district court's grant of summary judgment.  
Cf. Jackson, 101 F.3d at 154 ("It was irrelevant [once the 
court struck the opposing party's Rule 7.1(h) statement] 
whether the record could have supported a finding of a 
genuine issue of material fact").

F.   Injunctive Relief

     Blackwell argues that because he was not an "active partic-
ipant" in Banner Fund's "financial dealings," the district court 
committed reversible error by entering an injunction against 
him.  We review the district court's grant of an injunction 
only for abuse of discretion;  that is we will not "disturb [its] 
remedial choice unless there is no reasonable basis for the 
decision."  SEC v. First City Financial Corp., Ltd., 890 F.2d 
1215, 1228 (D.C. Cir. 1989).

     The essence of Blackwell's argument is that Winburn man-
aged Swiss Trade's daily operations and Winburn did not 
provide Blackwell with access to client account records.  
Even if this be true, it does nothing to undermine the district 
court's grant of injunctive relief against Blackwell.  There is 
abundant evidence in the record documenting Blackwell's 
extensive involvement with the Banner Fund scheme.  He 
reviewed the brochure advertising the Banner Fund Pro-
gram.  He signed a letter urging investors to recruit new 
members.  He used investors' funds to purchase a house for 
his family and to pay his daughter's college tuition.  He 
helped Winburn substitute Unicorn for Swiss Trade as the 
trustee for the Endeavor Trusts, thereby flouting the district 
court's order directing him to freeze Swiss Trade's assets.  

Although Blackwell may have played Cassius to Winburn's 
Brutus--the record does not reveal whether he has a lean 
and hungry look--he was far from a passive bystander in the 
securities law violations committed in connection with the 
Banner Fund Program.  Therefore, the district court did not 
abuse its discretion in entering injunctive relief against Black-
well.

G.   Disgorgement

     The final dispute before us concerns the district court's 
order requiring Blackwell and his co-defendants to "disgorge 
$6.5 million, plus prejudgment interest in the amount of 
$2,697,303.84 representing their unjust enrichment from their 
violations of the statutes set forth above."  Blackwell main-
tains that he cannot comply with the order because he does 
not have access to any assets related to Swiss Trade or to 
Banner Fund.  The SEC in turn contends that Blackwell 
does control some of Banner Fund's assets and that, in any 
event, the disgorgement order imposes an obligation upon 
Blackwell personally, which he may satisfy using his own 
assets.  Because disgorgement is an equitable obligation to 
return a sum equal to the amount wrongfully obtained, rather 
than a requirement to replevy a specific asset, we reject 
Blackwell's challenge and affirm the district court.

     An order to disgorge is not a punitive measure;  it is 
intended primarily to prevent unjust enrichment.  See, e.g., 
First City Financial Corp., Ltd., 890 F.2d at 1231.  Accord-
ingly, a court "may exercise its equitable power [of disgorge-
ment] only over property causally related to the wrongdoing."  
Id. As the SEC points out, the requirement of a causal 
relationship between a wrongful act and the property to be 
disgorged does not imply that a court may order a malefactor 
to disgorge only the actual property obtained by means of his 
wrongful act.  Rather, the causal connection required is 
between the amount by which the defendant was unjustly 
enriched and the amount he can be required to disgorge.  To 
hold, as Blackwell maintains, that a court may order a 
defendant to disgorge only the actual assets unjustly received 
would lead to absurd results.  Under Blackwell's approach, 

for example, a defendant who was careful to spend all the 
proceeds of his fraudulent scheme, while husbanding his other 
assets, would be immune from an order of disgorgement.  
Blackwell's would be a monstrous doctrine for it would per-
petuate rather than correct an inequity.

     Blackwell's approach also conflicts with longstanding prece-
dent.  In a securities fraud case dealing with disgorgement, 
the Second Circuit upheld an order directing the defendant to 
disgorge his "paper profits."  See SEC v. Shapiro, 494 F.2d 
1301, 1309 (1974).  The defendant in that case had purchased 
stock without disclosing material, non-public information, in 
violation of s 10(b) of the 1934 Act and of SEC Rule 10b-5.  
Id. at 1307.  Had the defendant sold the stock promptly after 
the information became public, he would have made a hand-
some profit;  in the event, however, he held the stock too long 
and sold it at a lesser gain.  Id. at 1309.  The district court 
nevertheless ordered him to disgorge all the profits he would 
have made had he sold the stock at the higher price.  The 
court of appeals affirmed, stating:

     The district court's approach was reasonable.  A violator 
     of the securities laws should disgorge profits earned by 
     trading on non-public information.  Once public disclo-
     sure is made and all investors are trading on an equal 
     footing, the violator should take the risks of the market 
     himself.
     
Id.;  see also SEC v. UNIOIL, 951 F.2d 1304, 1306 (D.C. Cir. 
1991) (Edwards, J., concurring).  As the Second Circuit deci-
sion makes clear, an order to disgorge establishes a personal 
liability, which the defendant must satisfy regardless whether 
he retains the selfsame proceeds of his wrongdoing.  We 
therefore reject Blackwell's challenge to the disgorgement 
order.

                         III. Conclusion

     For the forgoing reasons the judgment of the district court 
is in all respects

                                                        Affirmed.