SEC v. Curshen

Filing 266

ORDER RE: PRE-JUDGMENT INTEREST AND CIVIL PENALTY: Judgment shall enter against Defendant Curshen for pre-judgment interest of $50,718.48, and a civil penalty of $66,235. This judgment shall be nunc pro tunc to March 6, 2009, by Judge Walker D. Miller on 3/11/10. (ebs, )

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Senior Judge Walker D. Miller Civil Action No. 03-cv-00636-WDM-KLM SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. C. JONES & COMPANY, CARTER ALLEN JONES, TIMOTHY J. MILES, GAYLEN P. JOHNSON and JONATHAN CURSHEN, Defendants. __________________________________________________________________ ORDER RE: PRE-JUDGMENT INTEREST AND CIVIL PENALTY __________________________________________________________________ In accordance with my March 3, 2009 order (Doc. No. 254), Plaintiff seeks recovery of $50,718.48 pre-judgment interest and the imposition of a $110,000 "thirdtier" civil penalty against Defendant Curshen. Defendant opposes such a penalty, arguing that his involvement was minimal as compared to Defendant Jones who was subjected to such a penalty. Defendant does not respond to Plaintiff's request for interest. An award of pre-judgment interest is an equitable remedy to take into account the wrong-doer's use of disgorged funds over time. See SEC v. Hughes Capital Corp., 917 F.Supp. 1080, 1090 (D.N.J. 1996), aff'd, 124 F.3d 449 (3d Cir. 1997). Given my disgorgement order (Doc. No. 254) such a remedy is appropriate. As has been commonly determined, use of the delinquent tax rate established by the Internal Revenue Service Code 6621(a)(2) assessed on a quarterly basis approximates the benefit Defendant derived from use of money obtained by fraud. SEC v. First Jersey Sec, Inc., 101 F.3d 1450, 1476 (2nd Cir. 1996). Plaintiff submitted such a calculation as Exhibit 1 to its motion yielding $50,718.48 in prejudgment interest for a period through February 28, 2009, shortly before the judgment date of March 6, 2009 (Doc. No. 255). That amount should be awarded nunc pro tunc the judgment date. Turning to the civil penalty issue, the Securities Act and the Exchange Act provide for the same three-tier penalties. See 15 U.S.C. 77t(d)(2). The statutory maximum of the first tier is $5,000 or the gross amount of pecuniary gain for a natural person. The amount increases to $50,000 at the second tier and $100,000 at the third tier. Those amounts are increased for inflation to $5,500, $55,000 and $110,000 pursuant to legislation. Given my findings in my March 3, 2009 order, Defendant Curshen's conduct qualifies for a second-tier penalty because of his fraud, deceit, manipulation or reckless disregard of regulatory requirements. To qualify for a third-tier penalty it would be necessary to show that his actions directly or indirectly created a significant risk of loss to other persons. 15 U.S.C. 77t(d)(2)(C)(II). One might infer such losses but no concrete evidence was presented. Additionally, I agree with Defendant that imposition at that level would be inequitable when one compares Defendant Curshen's conduct to that of Defendant Jones. Jones was subjected to a $110,000 penalty and his conduct was much more wide-ranging and egregious. In these circumstances, there should be disparate penalties necessitating a second-tier 2 penalty imposed against Defendant Curshen. Remembering, however, that the second tier is the greater of $55,000 or the pecuniary gain of Defendant (15 U.S.C. 77t(d)(2)(B)(ii)), the appropriate penalty should be an amount equal to the $66,235 disgorgement judgment against the Defendant. Accordingly, it is ordered: 1. Judgment shall enter against Defendant Curshen for pre-judgment interest of $50,718.48, and a civil penalty of $66,235. 2. This judgment shall be nunc pro tunc to March 6, 2009. DATED at Denver, Colorado, on March 11, 2010. BY THE COURT: s/ Walker D. Miller United States Senior District Judge PDF FINAL 3

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