Securities and Exchange Comm. v. Lee Farka

Filing

UNPUBLISHED PER CURIAM OPINION filed. Motion disposition in opinion--denying Motion for abeyance (Local Rule 12(d)) [999281684-2] Originating case number: 1:10-cv-00667-LMB-TRJ Copies to all parties and the district court/agency. [999295031]. Mailed to: Lee Bentley Farkas. [13-1757]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1757

SECURITIES AND EXCHANGE COMMISSION,
Plaintiff – Appellee,
v.
LEE BENTLEY FARKAS,
Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
Leonie M. Brinkema,
District Judge. (1:10-cv-00667-LMB-TRJ)

Submitted:

January 31, 2014

Decided:

February 11, 2014

Before MOTZ, DAVIS, and WYNN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Lee Bentley Farkas, Appellant Pro Se. Catherine Anne Broderick,
David Lisitza, UNITED STATES SECURITIES & EXCHANGE COMMISSION,
Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
Lee Bentley Farkas was convicted in 2011 of one count
of conspiracy to commit bank, wire, and securities fraud; six
counts

of

bank

counts

of

fraud;

four

securities

prosecution,

the

counts

fraud.

Securities

of

wire

fraud;

Concomitant
and

Exchange

to

and

his

three

criminal

Commission

(“SEC”)

filed a civil enforcement action alleging that Farkas violated
the Securities Act of 1933, see 15 U.S.C. § 77q(a) (2012), the
Securities

Exchange

Act

of

1934,

see

15

U.S.C.

§§ 78j(b),

78m(b)(2), (b)(5) (2012), and the Exchange Act Rules, see 17
C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-11, 240.13a13, 240.13b2-1 (2013).
permanent

injunction

The SEC sought, among other relief, a
barring

Farkas

from

committing

future

violations of the securities laws and an order prohibiting him
from

acting

as

officer

or

director

of

a

company

that

had

registered securities or was required to make financial reports
to the SEC, or from serving in a senior management or control
position

at

any

mortgage-related

company

or

financial

institution or holding a position involving financial reporting
at a public company.
The
resolution

of

court

stayed

Farkas’

the

civil

criminal

case.

action

pending

Following

the

Farkas’

unsuccessful direct appeal of his conviction and sentence, see
United

States

v.

Farkas,

474

F.
2

App’x

349

(4th

Cir.

2012)

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(unpublished), the SEC moved for summary judgment in the civil
action, arguing that, under the doctrine of collateral estoppel,
Farkas’ conviction conclusively established his violation of the
securities
support

laws

the

and

provided

imposition

of

undisputed

the

facts

requested

sufficient

injunctive

to

relief.

Following a response from Farkas, in which he raised certain
challenges to the application of collateral estoppel, the court
concluded

that

collateral

estoppel

was

appropriate,

granted

summary judgment as to all claims, and imposed all requested
injunctive relief.

Farkas appeals this order.

I.
Farkas
court’s

first

collateral

raises

estoppel

two

challenges

analysis.

To

to

the

apply

district

collateral

estoppel, a party must show that
(1) the issue or fact is identical to the one
previously litigated; (2) the issue or fact was
actually resolved in the prior proceeding; (3) the
issue or fact was critical and necessary to the
judgment in the prior proceeding; (4) the judgment in
the prior proceeding is final and valid; and (5) the
party to be foreclosed by the prior resolution of the
issue or fact had a full and fair opportunity to
litigate the issue or fact in the prior proceeding.
In re Microsoft Corp. Antitrust Litig., 355 F.3d 322, 326 (4th
Cir.

2004).

We

review

the

district

court’s

application

of

collateral estoppel de novo, United States v. Fiel, 35 F.3d 997,
1005 (4th Cir. 1994), but we review all factual findings made in
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connection with that ruling for clear error, Sedlack v. Braswell
Servs.

Grp.,

Inc.,

134

F.3d

219,

223

(4th

Cir.

1998).

We

confine our review on appeal to the narrow issues Farkas raises
in

his

informal

brief.

See

4th

Cir.

R.

34(b)

(limiting

appellate review to issues raised in informal brief).
Farkas

first

asserts

that

the

jury

was

improperly

instructed on the definition of a “security” during his criminal
trial and therefore that the district court in this case erred
in relying on the jury’s finding that Farkas committed fraud in
connection with “securities.”

Because Farkas challenges this

jury instruction for the first time on appeal, and the district
court had no opportunity to pass on the merits of this issue, we
review it for plain error.

See United States v. Lynn, 592 F.3d

572, 577 (4th Cir. 2010).
The district court did not plainly err in concluding
that collateral estoppel barred relitigation of whether Farkas
committed fraud in connection with “securities.”

This question

was actually and necessarily resolved in Farkas’ criminal trial.
At the close of the trial, the jury was instructed that, to
convict
beyond
fraud

Farkas
a
in

of

securities

reasonable
connection

doubt
with

fraud,

that

it

Farkas

securities

was

required

committed
of

Colonial

the

to

find

alleged

BancGroup.

Additionally, Farkas’ indictment alleged that Farkas and his coconspirators

made

repeated

fraudulent
4

misrepresentations

with

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regard

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to

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mortgage

pools

in

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which

Colonial

Bank

purchased

a

participation interest pending resale to third-party investors.
These allegations similarly implicated the sale of securities.
See Zolfaghari v. Sheikholeslami, 943 F.2d 451, 455 (4th Cir.
1991)

(recognizing

that

“securities”

include

“participation

interests in a managed pool of mortgage notes”).
question

whether

litigated,

and

the

the

fraud

jury

involved

could

not

“securities”
have

Thus, the
was

convicted

clearly

Farkas

of

securities fraud or conspiracy to commit securities fraud absent
such a finding.
Farkas’ argument that he lacked ample opportunity or
incentive

to

challenge

this

essential

criminal proceedings is unavailing.

element

during

his

Farkas provides no reason

to suggest that he lacked an incentive to challenge the jury
instruction

defining

“security”

during

his

criminal

trial.

Instead, he simply argues that the jury instruction was wrong.
Given that he could have, but did not, raise this objection at
trial, “[i]t is just this type of argument . . . that collateral
estoppel bars [him] from making.”
Polaroid
cannot

Corp.,

overcome

rely

on

701
“new

collateral

opportunity

to

make

F.2d

1,

2

(1st

theories,
estoppel
these

evidence the first time”).

Pignons S.A. de Mecanique v.
Cir.

evidence,

where

arguments

1983)
and

plaintiff
and

to

(a

plaintiff

arguments”
“had

to

a

fair

introduce

this

See also Astoria Fed. Sav. & Loan
5

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Ass’n

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v.

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Solimino,

501

U.S.

Pg: 6 of 9

104,

107

(1991).

(“[A]

losing

litigant deserves no rematch after a defeat fairly suffered, in
adversarial proceedings, on an issue identical in substance to
the one he subsequently seeks to raise.”); Liberty Mut. Ins. Co.
v.

FAG

Bearings

(“[M]ost

courts

Corp.,
require

335

F.3d

more

to

752,
avoid

763

(8th

issue

Cir.

2003)

preclusion

than

simply an assertion that the previous decision was wrong.”).
Farkas’ second argument regarding collateral estoppel
fares no better.
fair

opportunity

misstatements
because

the

and
court

He contends that he did not have a full and
to

litigate

omissions
in

his

the

materiality

underlying
criminal

his

fraud

prosecution

of

the

convictions
limited

his

counsel’s ability to question two witnesses as to the precise
monetary amount of the fraud.

We have already rejected Farkas’

challenge to the court’s evidentiary ruling regarding one of
these witnesses, who Farkas sought to cross-examine to show that
his salary and costs “reduced the amount of TBW assets available
to pay its creditors.”

Farkas, 474 F. App’x at 357.

As the

district court concluded, this inquiry was irrelevant to the
materiality of Farkas’ misstatements and omissions.

Id.

And

the record clearly belies Farkas’ assertion that his counsel was
prevented from questioning the second witness as to the amount
of collateral available to Colonial Bank.

Thus, Farkas fails to

establish error in the application of collateral estoppel.
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II.
Farkas

finally

asserts

that

the

district

court

committed reversible error by failing to explain the findings
supporting

its

imposition

of

injunctive

meaningful appellate review of that issue.

relief,

precluding

The SEC asserts that

the record is so clear as to make remand unnecessary.

We agree

with the SEC.
In moving for summary judgment, the SEC again relied
on facts addressed in Farkas’ criminal prosecution to support
its request for summary judgment as to the injunctive relief.
Farkas does not assert that injunctive relief is improper in his
case, and, importantly, he did not raise such an argument in
opposing the SEC’s motion for summary judgment in the district
court.

Where a party “fails to properly support an assertion of

fact or fails to properly address another party’s assertion of
fact” in responding to a summary judgment motion, the court is
permitted to “consider the fact undisputed for purposes of the
motion,”

and

supporting

to

“grant

materials

summary
--

judgment

including

the

if

the

facts

motion

considered

undisputed -- show that the movant is entitled to it.”
Civ.

P.

56(e)(2)-(3).

Because

Farkas

did

not

and

Fed. R.

challenge

the

facts identified by the SEC in support of injunctive relief, the
court was entitled to treat them as undisputed in considering
the motion.
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find

that

those

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facts,

as

well

as

our

prior

findings in Farkas’ direct appeal, see Farkas, 474 F. App’x at
351-52,

amply

support

requested relief.
(2d

Cir.

2013)

“unfitness”

to

the

court’s

decision

to

impose

the

See, e.g., SEC v. Bankosky, 716 F.3d 45, 48
(listing

serve

as

factors
officer

to

or

consider

director,

in

as

analyzing

required

to

impose officer and director bar); SEC v. Pros Int’l, Inc., 994
F.2d 767, 769 (10th Cir. 1993) (addressing factors to consider
in evaluating likelihood of repetition of securities fraud, as
required for injunction); SEC v. Bonastia, 614 F.2d 908, 912 (3d
Cir. 1980) (listing factors to consider in imposing permanent
injunction); see also 15 U.S.C. § 78u(d)(5) (2012) (authorizing
district court, in action under securities laws, to impose “any
equitable relief that may be appropriate or necessary for the
benefit of investors”).

III.
Farkas

also

requests

that

we

place

his

appeal

in

abeyance pending the resolution of his ongoing 28 U.S.C. § 2255
(2012)

proceeding.

We

find

such

relief

unwarranted

in

this

case, given the indisputable finality of his criminal judgment
and the extended delay that would likely result from such a
stay.

Should

convictions

under

Farkas
§ 2255,

prove
he

successful

may
8

seek

in

relief

vacating
from

the

his
civil

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judgment in the district court pursuant to Rule 60(b) of the
Federal Rules of Civil Procedure.
Accordingly, we deny Farkas’ motion for abeyance and
affirm the district court’s judgment.

We dispense with oral

argument because the facts and legal contentions are adequately
presented in the materials before this court and argument would
not aid in the decisional process.

AFFIRMED

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