SDNY Grants SEC’s Final Summary Judgment Claim in Securities and Investment Advisor Fraud Case

The US District Court for the Southern District of New York granted the Securities and Exchange Commission summary judgment on its one outstanding securities fraud claim against Alberto Vilar and Gary Tanaka, co-founders of Amerindo Investment Advisors, Inc., after the US Court of Appeals for the Second Circuit clarified the meaning of a “domestic transaction in any security.”

The SEC alleged that Vilar and Tanaka diverted millions from investors to their own businesses. In a related criminal proceeding, a jury found the pair guilty of securities fraud and investment advisor fraud in 2008. While the criminal case was pending on appeal, the district court granted the SEC’s motion for summary judgment on all claims except one, finding that the criminal convictions had conclusively established three out of four elements for securities fraud, and thus the doctrine of issue preclusion barred Vilar and Tanaka from disputing those elements in the SEC’s case. The court held that the final element—a “domestic transaction”—had not been conclusively established in the criminal case, and conducted its own analysis, ultimately concluding that all investors except one (the Mayer Family) had engaged in a “domestic transaction.”  

After the summary judgment decision, the Second Circuit issued its judgment and opinion for the appeal in the criminal case. In a footnote, the Second Circuit expressly disagreed with the district court’s interpretation of “domestic transaction” as applied to the Mayer Family, and explained that the domestic nature of a transaction “concerns where, physically, the purchaser or seller” committed to buying or selling a security. 

In light of the Second Circuit’s opinion, both the SEC and Vilar and Tanaka moved for reconsideration of the district court’s summary judgment decision. On that motion, the district court found that the Second Circuit’s ruling in the criminal case was controlling, intervening law, and thus the court was required to reconsider its prior decision. Analyzing each of the investors, including the Mayer Family, the court concluded that all had engaged in domestic transactions because a preponderance of the evidence showed that each was physically present in the United States. Thus, the court reaffirmed its grant of summary judgment for earlier investors and granted summary judgment for the Mayer Family claims.       

SEC v. Amerindo Inv. Advisors, Inc. et al., Case No. 05-cv-5231 (RJS) (S.D.N.Y. Jan. 31, 2014).

Topics:  Enforcement Actions, Fraud, Investment Adviser, SEC, Securities Fraud, Summary Judgment

Published In: Business Torts Updates, Civil Procedure Updates, Criminal Law Updates, Finance & Banking Updates, Securities Updates

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.

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