Fourth Circuit Declines to Extend Janus to Criminal Cases

A three-judge panel of the US Court of Appeals for the Fourth Circuit recently affirmed the dismissal of a lawyer’s habeas petition, finding that Janus Capital Group Inc. v. First Derivative Traders, a US Supreme Court case that exempts investment advisers from securities fraud liability for funds’ false statements, did not apply to criminal cases. The appellant Thomas Prousalis Jr. pled guilty to three counts of securities fraud arising from his representation of (Company) for its initial public offering. In preparing the Company’s registration materials, Prousalis failed to provide all necessary details concerning his compensation. After the Company’s underwriter pulled out of the deal, thereby resulting in a $2.5 million shortfall, Prousalis devised a scheme to “recycle” proceeds to purchase shares and compensate him and Company officers. After several unsuccessful appeals, Prousalis filed a habeas petition in the Eastern District of Virginia. The US District Court for the Eastern District of Virginia denied his petition, and the Fourth Circuit affirmed. Although Prousalis argued that the Janus definition of the “maker” of a false statement for securities fraud purposes meant that his conduct was no longer criminal, the Fourth Circuit found the Supreme Court’s decision inapplicable. Noting that both the facts and reasoning in Janus were limited to the private right of action for securities fraud, the Fourth Circuit declined to apply it in the criminal context, citing “considerations of judicial restraint and legislative primacy.”  

Prousalis v. Moore, No. 13-6814 (4th Cir. 2014).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Written by:


Katten Muchin Rosenman LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.