Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
March 22 — Connecticut hedge fund manager Marlon Quan lost his bid March 22 to overturn a “contradictory” jury verdict and subsequent district court judgment ordering him to disgorge almost $81 million dollars based on his role in Minnesota businessman Thomas Petters' $3.7 billion Ponzi scheme.
Quan argued that the jury verdict was inconsistent because it held him liable under 1934 Securities Exchange Act Rule 10b-5, but not under 1933 Securities Act Section 17(a)(1). The U.S. Court of Appeals for the Eighth Circuit didn't agree. The verdict was consistent with the jury instructions that a higher degree of scienter—or culpable intent—is required to find liability under Section 17(a)(1), Judge William Jay Riley said.
In March 2011, the SEC alleged that Quan and his firms invested more than half of their investors' funds in Petters' scam, pocketing more than $90 million in fees . According to the complaint, Quan and his firms falsely assured investors that their funds would be safeguarded by “lock box accounts” to protect them against defaults.
A jury returned a mixed verdict in February 2014 finding Quan and his firms liable for securities fraud and absolving him of liability under 1933 Act Section 17(a)(1).
The district court denied Quan's motion for a new trial and ordered him to pay approximately $80.6 million in disgorgement and prejudgment interest. The court didn't impose civil monetary penalties.
On appeal, Quan also argued that the district court couldn't order disgorgement because it was only authorized to grant equitable relief. He contended that disgorgement is a legal remedy unless it is limited to specific assets traced back to a violation.
“Quan's position finds no support in our precedent or elsewhere in the extensive body of case law on securities fraud,” the Eighth Circuit said. The appeals court upheld the judgment and sent the case back to district court for further proceedings.
To contact the reporter on this story: Cameron Finch in Washington at email@example.com.
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org.
To view the court's opinion, visit: http://www.bloomberglaw.com/public/document/United_States_Securities_and_Exchange_Commission_Plaintiff__Appel.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)