Securities And Exchange Commission v. Charles Schwab Investment Management Inc. et al

Filing 39

ORDER TO DISBURSE FUNDS TO PAY ESTIMATED TAX LIABILITY FOR THE THIRD QUARTER OF 2011 by Hon. William Alsup granting 38 Motion for Disbursement of Funds.(whalc2, COURT STAFF) (Filed on 9/14/2011)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
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Plaintiff,
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v.
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CHARLES SCHWAB INVESTMENT MANAGEMENT, )
CHARLES SCHWAB & CO., INC., and
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SCHWAB INVESTMENTS
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Defendants.
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)
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SECURITIES AND EXCHANGE COMMISSION,

Case No. C 11-00136 WHA

MOTION TO DISBURSE FUNDS TO PAY ESTIMATED
TAX LIABILITY FOR THE THIRD QUARTER OF 2011
The Securities and Exchange Commission respectfully requests that the Court enter an Order for
the Clerk of the Court to disburse funds on deposit with the registry of the Court to pay certain tax
obligations in this case.
By consent of the defendants and stipulation of the parties, the Court entered a Final Judgment
against defendants Charles Schwab Investment Management (“CSIM”), Charles Schwab & Co., Inc.
(“CS&Co.”), and Schwab Investments on February 16, 2011. Pursuant to the Final Judgment, CSIM
and CS&Co. have paid a total of $110 million to the Clerk of this Court (the “Distribution Fund”).
These payments include $57,327,149 in penalties, $34,672,851 in disgorgement and prejudgment
interest, and an additional payment of $18 million. The additional payment represented settlement of a
related proceeding brought by the Financial Industry Regulatory Authority (“FINRA”), and in which
FINRA consented to payment of the settlement amount into the Distribution Fund. The Distribution

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Fund was thereafter deposited in an interest bearing account, account number 11-cv-00136, under the
case name designation “SEC v. Charles Schwab Investment Management, et al.” and constitutes a
Qualified Settlement Fund (QSF) under section 468B(g) of the Internal Revenue Code (IRC), 26 U.S.C.
§ 468B(g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5.
By order dated March 8, 2011, the Court entered an order appointing Damasco & Associates to
fulfill the tax obligations of the Distribution Fund. Pursuant to that Order, the Tax Administrator is
required to pay taxes in a manner consistent with treatment of the Distribution Fund as a QSF.
The Tax Administrator has determined that the Distribution Fund owes $600 in estimated tax
liability for the third quarter of 2011. This tax payment is due September 15, 2011. See Declaration of
Jude P. Damasco in Support of Request to Make Tax Payment attached as Exhibit 1.
The Declaration has been reviewed by the undersigned Commission counsel who has no
objections.
WHEREFORE, for all the foregoing reasons, the Commission respectfully requests that this
Court enter the attached proposed Order and grant such other relief as it deems just and proper.
Dated: September 1, 2011

Respectfully submitted,
/s/ Nichola L. Timmons_____
Nichola L. Timmons (NY Bar #2954774)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
100 F Street, N.E.
Washington, D.C. 20549-6030
202-551-4456
202-772-9223 (fax)
Email: [e-mail]

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
---------------------------------------------------------------------x
)
)
)
Plaintiff,
)
)
v.
)
)
CHARLES SCHWAB INVESTMENT MANAGEMENT, )
CHARLES SCHWAB & CO., INC., and
)
SCHWAB INVESTMENTS
)
)
Defendants.
)
)
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SECURITIES AND EXCHANGE COMMISSION,

Case No. C 11-00136 WHA

[PROPOSED] ORDER TO DISBURSE FUNDS TO PAY ESTIMATED
TAX LIABILITY FOR THE THIRD QUARTER OF 2011
The Court, having reviewed the Securities and Exchange Commission’s Motion to Disburse
Funds to Pay Estimated Tax Liability for the Third Quarter of 2011, and the supporting Declaration of
Jude P. Damasco in Support of Request to Make Tax Payment (the “Declaration”), and for good cause
shown,
IT IS HEREBY ORDERED:
1. The Clerk of the Court shall issue a check on CRIS account number 11-cv-00136 under the
case name designation “SEC v. Charles Schwab Investment Management, et al.,” for the amount of $600
payable to “Damasco & Associates, Trust Account”, for the payment of the estimated tax liability for the
third quarter of 2011, as provided in the Declaration. The check shall contain the notation “SEC v.
Charles Schwab Investment Management, et al., case number 11-cv-00136 (WHA), FEIN XXXXX4010, Tax Liability 3Q 2011.”

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2. The Clerk shall send the check by overnight mail to:
Damasco & Associates
700 Monte Vista Lane
Half Moon Bay, CA 94019
Phone: [phone]
The Commission’s counsel shall provide the Court Registry with the necessary overnight shipping
information and the SEC’s billing number.
September 14, 2011 .
Dated: ___________________
_______________________________
United States District Judge