Securities and Exchange Commission v. CalPacific Equity Group, LLC et al

Filing 11

FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF AS TO DEFENDANT CALPACIFIC EQUITY GROUP, LLC by Judge John F. Walter. IT IS HEREBY ORDERED AND ADJUDGED that CalPacific and its agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Final Judgment by personal service or otherwise are permanently restrained and enjoined. FURTHER ORDERED AND ADJUDGED that CalPacific is liable for disgorgement of $306,013 re presenting profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest of $10,890.74, and a civil penalty of $306,013 pursuant to Section 20(d) of the Securities Act [15 USC section 77t(d)] and Sec tion 21(d)(3) of the Exchange Act [15 USC section 78u(d)]. CalPacific shall satisfy this obligation by paying $622,916.74 to the Securities and Exchange Commission within 14 days after entry of this Final Judgment. FURTHER ORDERED AND ADJUDGED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. (jp)

1
2
3
4
5
6
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

7
8
9

SECURITIES AND EXCHANGE
COMMISSION,

10

Plaintiff,

11
12

Case No. 14-5754 JFW (AGRx)

vs.
CALPACIFIC EQUITY GROUP, LLC,

13

Defendant.

14
15
16

FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER
RELIEF AS TO DEFENDANT CALPACIFIC EQUITY GROUP, LLC
The Securities and Exchange Commission having filed a Complaint, and

17
18
19
20

Defendant CalPacific Equity Group, LLC (“CalPacific”) having entered a general
appearance; consented to the Court’s jurisdiction over it and over the subject matter
of this action; consented to entry of this Final Judgment without admitting or

21
22
23
24

denying the allegations of the Complaint (except as to subject matter and personal
jurisdiction and except as otherwise provided herein in Section VI); waived findings
of fact and conclusions of law; and waived any right to appeal from this Final

25
26
27
28

Judgment:
I.
SECTION 10(b) AND RULE 10b-5 OF THE
1

SECURITIES EXCHANGE ACT OF 1934

1
2
3

IT IS HEREBY ORDERED AND ADJUDGED that CalPacific and its
agents, servants, employees, attorneys, and all persons in active concert or

4
5

participation with them who receive actual notice of this Final Judgment by personal

6

service or otherwise are permanently restrained and enjoined from violating, directly

7

or indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange

8
9

Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. §

10

240.10b-5], by using any means or instrumentality of interstate commerce, or of the

11

mails, or of any facility of any national securities exchange, in connection

12
13
14
15
16

with the purchase or sale of any security:
(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

17

material fact necessary in order to make the statements made, in the

18

light of the circumstances under which they were made, not misleading;

19

or

20
21
22

(c)

to engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.

23
24
25
26

II.
SECTION 17(a) OF THE SECURITIES ACT OF 1933
IT IS FURTHER ORDERED AND ADJUDGED that CalPacific and its

27
28

agents, servants, employees, attorneys, and all persons in active concert or
2

1

participation with them who receive actual notice of this Final Judgment by personal

2

service or otherwise are permanently restrained and enjoined from violating Section

3

17(a) of the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)] in the

4
5

offer or sale of any security by the use of any means or instruments of transportation

6

or communication in interstate commerce or by use of the mails, directly or

7

indirectly:

8
9

(a)

to employ any device, scheme, or artifice to defraud;

10

(b)

to obtain money or property by means of any untrue statement of a

11

material fact or any omission of a material fact necessary in order to

12
13

make the statements made, in light of the circumstances under which

14

they were made, not misleading; or

15
16
17
18

(c)

to engage in any transaction, practice, or course of business which
operates or would operate as a fraud or deceit upon the purchaser.
III.

19
20

SECTION 15(a) OF THE EXCHANGE ACT

21

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that

22

CalPacific and its agents, servants, employees, attorneys, representatives, and those

23
24

persons in active concert or participation with them, and each of them, are hereby

25

retrained and enjoined from violating, directly or indirectly, Section 15(a) of the

26

Exchange Act [15 U.S.C. § 78o] by making use of the mails or any means or

27
28
3

1

instrumentality of interstate commerce to effect any transactions in, or to induce or

2

attempt to induce the purchase or sale of, any security (other than an exempted

3

security or commercial paper, bankers' acceptances, or commercial bills) unless such

4
5

broker or dealer is registered with the Commission.

6
7

IV.

8
SECTION 5(a) AND 5(c) OF THE SECURITIES ACT

9
10
11

IT IS FURTHER ORDERED AND ADJUDGED that CalPacific and its
agents, servants, employees, attorneys, representatives and all persons in active

12
13

concert or participation with them who receive actual notice of this Final Judgment

14

by personal service or otherwise are permanently restrained and enjoined from

15
16
17
18

violating Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e] by, directly
or indirectly, in the absence of any applicable exemption:
(a)

19

Unless a registration statement is in effect as to a security, making use
of any means or instruments of transportation or communication in

20
21

interstate commerce or of the mails to sell such security through the use

22

or medium of any prospectus or otherwise;

23
24

(b)

Unless a registration statement is in effect as to a security, carrying or

25

causing to be carried through the mails or in interstate commerce, by

26

any means or instruments of transportation, any such security for the

27
28

purpose of sale or for delivery after sale; or
4

1
2
3

(c)

Making use of any means or instruments of transportation or
communication in interstate commerce or of the mails to offer to sell or
offer to buy through the use or medium of any prospectus or otherwise

4
5

any security, unless a registration statement has been filed with the

6

Commission as to such security, or while the registration statement is

7

the subject of a refusal order or stop order or (prior to the effective date

8
9
10
11
12
13
14

of the registration statement) any public proceeding or examination
under Section 8 of the Securities Act [15 U.S.C. § 77h].
V.
PAYMENT OF DISGORGEMENT, PREJUDGMENT INTEREST AND
A CIVIL PENALTY
IT IS FURTHER ORDERED AND ADJUDGED that CalPacific is liable

15
16
17
18

for disgorgement of $306,013 representing profits gained as a result of the conduct
alleged in the Complaint, together with prejudgment interest of $10,890.74, and a
civil penalty of $306,013 pursuant to Section 20(d) of the Securities Act [15 U.S.C.

19
20
21
22

§ 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)]. CalPacific
shall satisfy this obligation by paying $622,916.74 to the Securities and Exchange
Commission within 14 days after entry of this Final Judgment.

23
24
25
26

CalPacific may transmit payment electronically to the Commission, which
will provide detailed ACH transfer/Fedwire instructions upon request.

Payment

may also be made directly from a bank account via Pay.gov through the SEC website

27
28

at http://www.sec.gov/about/offices/ofm.htm. CalPacific may also pay by certified
5

1

check, bank cashier’s check, or United States postal money order payable to the

2

Securities and Exchange Commission, which shall be delivered or mailed to

3

5

Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

6

and shall be accompanied by a letter identifying the case title, civil action number,

7

and name of this Court; CalPacific Equity Group, LLC as a defendant in this action;

4

8
9

and specifying that payment is made pursuant to this Final Judgment.

10

CalPacific shall simultaneously transmit photocopies of evidence of payment

11

and case identifying information to Robert K. Levenson, Miami Regional Office,

12
13
14
15

801 Brickell Ave., Suite 1800, Miami, FL, 33131, the Commission’s counsel in this
action. By making this payment, CalPacific relinquishes all legal and equitable
right, title, and interest in such funds and no part of the funds shall be returned to

16
17
18
19

CalPacific.
The Commission may enforce the Court’s judgment for disgorgement and
prejudgment interest by moving for civil contempt (and/or through other collection

20
21
22
23

procedures authorized by law) at any time after 14 days following entry of this Final
Judgment. CalPacific shall pay post judgment interest on any delinquent amounts
pursuant to 28 U.S.C. § 1961. The Commission shall hold the funds, together with

24
25
26

any interest and income earned thereon (collectively, the “Fund”), pending further
order of the Court.

27
28
6

1
2
3

The Commission may propose a plan to distribute the Fund subject to the
Court’s approval.

Such a plan may provide that the Fund shall be distributed

pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of

4
5

2002. The Court shall retain jurisdiction over the administration of any distribution

6

of the Fund.

7

If the Commission staff determines that the Fund will not be

distributed, the Commission shall send the funds paid pursuant to this Final

8
9
10
11

Judgment to the United States Treasury.
Regardless of whether any such Fair Fund distribution is made, amounts
ordered to be paid as civil penalties pursuant to this Judgment shall be treated as

12
13

penalties paid to the government for all purposes, including all tax purposes. To

14

preserve the deterrent effect of the civil penalty, CalPacific shall not, after offset or

15
16

reduction of any award of compensatory damages in any Related Investor Action

17

based on CalPacific’s payment of disgorgement in this action, argue that it is entitled

18

to, nor shall it further benefit by, offset or reduction of such compensatory damages

19
20

award by the amount of any part CalPacific’s payment of a civil penalty in this

21

action (“Penalty Offset”). If the court in any Related Investor Action grants such a

22

Penalty Offset, CalPacific shall, within 30 days after entry of a final order granting

23
24

the Penalty Offset, notify the Commission’s counsel in this action and pay the

25

amount of the Penalty Offset to the United States Treasury or to a Fair Fund, as the

26

Commission directs. Such a payment shall not be deemed an additional civil penalty

27
28

and shall not be deemed to change the amount of the civil penalty imposed in this
7

1

Judgment. For purposes of this paragraph, a “Related Investor Action” means a

2

private damages action brought against CalPacific by or on behalf of one or more

3

investors based on substantially the same facts as alleged in the Complaint in this

4
5
6
7

action.
CalPacific shall not seek or accept, directly or indirectly, reimbursement or
indemnification from any source, including but not limited to payment made

8
9

pursuant to any insurance policy, with regard to any civil penalty amounts that

10

CalPacific pays pursuant to the Final Judgment, regardless of whether such penalty

11

amounts or any part thereof are added to a distribution fund or otherwise used for the

12
13

benefit of investors. CalPacific shall not claim, assert, or apply for a tax deduction

14

or tax credit with regard to any federal, state, or local tax for any penalty amounts

15
16

that CalPacific pays pursuant to the Final Judgment, regardless of whether such

17

penalty amounts or any part thereof are added to a distribution fund or otherwise

18

used for the benefit of investors.

19
20
21
22

VI.
BANKRUPTCY NONDISCHARGEABILITY
IT IS FURTHER ORDERED AND ADJUDGED that, solely for purposes

23

of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11

24

U.S.C. §523, the allegations in the complaint are true and admitted by CalPacific,

25
26
27

and further, any debt for disgorgement, prejudgment interest, civil penalty or other
amounts due by CalPacific under this Final Judgment or any other judgment, order,

28
8

1

consent order, decree or settlement agreement entered in connection with this

2

proceeding, is a debt for the violation by CalPacific of the federal securities laws or

3

any regulation or order issued under such laws, as set forth in Section 523(a)(19) of

4
5

the Bankruptcy Code, 11 U.S.C. §523(a)(19).

6
VII.

7
8

RETENTION OF JURISDICTION

9
10

IT IS FURTHER ORDERED AND ADJUDGED that this Court shall retain

11

jurisdiction of this matter for the purposes of enforcing the terms of this Final

12

Judgment.

13

VIII.

14

RULE 54(b)

15
16
17
18

There being no just reason for delay, pursuant to Rule 54(b) of the Federal
Rules of Civil Procedure, the Clerk is ordered to enter this Final Judgment forthwith
and without further notice.

19
20

DONE AND ORDERED this 25th day of July, 2014.

21
UNITED STATES DISTRICT JUDGE

22
23
24

Copies:
All Counsel of Record

25
26
27
28
9