SECURITIES AND EXCHANGE COMMISSION v. VEROS PARTNERS, INC et al
Filing
472
ORDER - Veros Partners, Inc. ("Veros") was an SEC-registered investment adviser in Indianapolis, Indiana. Pin Financial LLC ("Pin Financial") was the placement agent for certain private offerings made to Veros' advisory cli ents, and Defendant Tobin Senefeld was Pin Financial's Chief Executive Officer and a registered representative. Plaintiff United States Securities and Exchange Commission (the "SEC") filed this lawsuit against Mr. Senefeld and other s alleging that they violated securities laws in connection with soliciting investors for, and handling investments in, certain private offerings related to farm loans. The SEC alleged that portions of the loan proceeds were not used for current farming operations, as investors were told, but rather were used to cover the farms' prior, unpaid debts. On October 11, 2017, the Court granted a request from the SEC and Mr. Senefeld to approve a bifurcated settlement whereby Mr. Senefeld a greed not to contest the facts in the Amended Complaint and the parties agreed to provide the Court with information necessary to rule on the amount of disgorgement and prejudgment interest, as well as the amount of a civil penalty if the Court fi nds a penalty appropriate. The issues of disgorgement, prejudgment interest, and the appropriateness of a civil penalty are now fully briefed, and ripe for the Court's decision. For the foregoing reasons, the Court GRANTS IN PART the SEC 9;s Motion for Disgorgement, Prejudgment Interest, and Civil Penalties, 444 , to the extent that it ORDERS Mr. Senefeld to disgorge $698,818.29, pay $94,538.36 in prejudgment interest, and pay a civil penalty of $50,000. The Court DENIES Mr. Senefeld's Motion to Strike References to McShane Affidavit, 465 . Final judgment as to Mr. Senefeld shall enter accordingly. (SEE ORDER). Signed by Judge Jane Magnus-Stinson on 2/6/2018. (APD)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION ,
)
)
)
Plaintiff,
)
)
vs.
)
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VEROS FARM LOAN HOLDING LLC, TOBIN J.
)
SENEFELD, FARMG ROWCAP LLC, PINCAP LLC, )
and PIN FINANCIAL LLC,
)
)
Defendants.
)
No. 1:15-cv-00659-JMS-MJD
ORDER
Veros Partners, Inc. (“Veros”) was an SEC-registered investment adviser in Indianapolis,
Indiana. Pin Financial LLC (“Pin Financial”) was the placement agent for certain private offerings
made to Veros’ advisory clients, and Defendant Tobin Senefeld was Pin Financial’s Chief
Executive Officer and a registered representative. Plaintiff United States Securities and Exchange
Commission (the “SEC”) filed this lawsuit against Mr. Senefeld and others alleging that they
violated securities laws in connection with soliciting investors for, and handling investments in,
certain private offerings related to farm loans. The SEC alleged that portions of the loan proceeds
were not used for current farming operations, as investors were told, but rather were used to cover
the farms’ prior, unpaid debts. On October 11, 2017, the Court granted a request from the SEC
and Mr. Senefeld to approve a bifurcated settlement whereby Mr. Senefeld agreed not to contest
the facts in the Amended Complaint and the parties agreed to provide the Court with information
necessary to rule on the amount of disgorgement and prejudgment interest, as well as the amount
of a civil penalty if the Court finds a penalty appropriate. The issues of disgorgement, prejudgment
interest, and the appropriateness of a civil penalty are now fully briefed, and ripe for the Court’s
decision. 1
I.
BACKGROUND
The Court held a hearing on October 11, 2017, in which it heard argument from the SEC
and Mr. Senefeld regarding the SEC’s Motion for Approval of Bifurcated Settlement. [See Filing
No. 433.] The Court advised the parties that it would grant the SEC’s Motion for Approval by
separate order, and subsequently entered a Judgment as to Mr. Senefeld, consented to by Mr.
Senefeld, in which it permanently restrained and enjoined Mr. Senefeld from violating applicable
securities laws and adjudged that Mr. Senefeld shall pay “disgorgement of ill-gotten gains and
prejudgment interest thereon; that the amounts of the disgorgement and civil penalty shall be
determined by the Court upon motion of the [SEC]; and that prejudgment interest shall be
calculated from December 1, 2013, based on the rate of interest used by the Internal Revenue
Service for the underpayment of federal income tax as set forth in 26 U.S.C. § 6621(a)(2).” [Filing
No. 436 at 3.] The Judgement also provided that:
In connection with the [SEC’s] motion for disgorgement and/or civil penalties….:
(a) Defendant will be precluded from arguing that he did not violate the federal
securities laws as alleged in the Amended Complaint; (b) Defendant may not
challenge the validity of the Consent or this Judgment; (c) solely for the purposes
of such motion, the allegations of the Amended Complaint shall be accepted as and
deemed true by the Court; and (d) the Court may determine the issues raised in the
motion on the basis of affidavits, declarations, excerpts of sworn deposition or
investigative testimony, and documentary evidence, without regard to the standards
for summary judgment contained in Rule 56(c) of the Federal Rules of Civil
Procedure.
1
The Court vacated a hearing previously set at the parties’ request on the issues of disgorgement,
prejudgment interest, and a civil penalty after the parties advised the Court that they no longer
thought a hearing was necessary. [Filing No. 457.]
2
[Filing No. 436 at 3-4.] 2
II.
DISCUSSION
In its Motion for Disgorgement, Prejudgment Interest, and Civil Penalties, the SEC
requests disgorgement of $698,818.29, prejudgment interest of $94,538.36, and a civil penalty that
is “large enough to discourage [Mr.] Senefeld from future misconduct, as well as deter others who
are similarly-situated from engaging in comparable instances of misconduct.” [Filing No. 445 at
20-23.] Mr. Senefeld disputes the amount of disgorgement the SEC seeks, and opposes the SEC’s
request for a civil penalty. The Court discusses each component of the SEC’s request below.
A. Disgorgement Amount
In support of its request for disgorgement of $698,818.29, the SEC relies upon the
Declaration of Craig McShane. [Filing No. 443.] Mr. McShane is a Staff Accountant with the
Enforcement Division of the SEC, and sets forth the following information in his Declaration:
•
•
Mr. McShane has determined that Mr. Senefeld received payments between
January 1, 2013 and February 28, 2015 from four accounts (a PinCap LLC
account, a Veros account as agent for lenders under PinCap LLC, a Veros
account as manager for lenders under Veros Farm Loan Holding, LLC, and a
FarmGrowCap LLC account) totaling $477,855.60;
•
2
Mr. McShane reviewed bank account statements, deposit slips, wire transfer
confirmations, and electronic fund transfer details for certain bank accounts
controlled by Defendants, transcripts of testimony from Mr. Senefeld and other
individual Defendants taken during the course of the SEC’s investigation,
testimony exhibits, and other documentary evidence obtained by the SEC
during its investigation;
Mary Senefeld received payments totaling $220,962.69;
Because Mr. Senefeld has agreed that the Court should accept as true the allegations in the
Amended Complaint, the Court does not find it necessary to set forth the specific allegations that
prove Mr. Senefeld’s liability. Relevant allegations will be discussed as necessary below, and a
thorough discussion of the allegations against Mr. Senefeld can be found in the Court’s June 22,
2016 Order on Mr. Senefeld’s Motion for Summary Judgment. [Filing No. 229.]
3
•
Mr. Senefeld benefitted from payments made on behalf of PinCap LLC,
because he owns one third of the company. PinCap LLC received $389,286.87
from the four accounts identified above;
•
Mr. Senefeld received an investor-funded loan with a co-defendant which had
a balance due of $203,775.37 as of February 28, 2015;
•
PinCap also received a loan funded by investor money for $220,000, and Mr.
Senefeld did not make any payments on that loan. The loan was repaid from a
Veros Farm Loan Holding LLC account, with interest, in the amount of
$226,835.07;
•
Mr. Senefeld’s wife, Mary, had an account which transferred $30,000 to the
Veros Farm Loan Holding LLC account on January 31, 2014.
[Filing No. 443 at 3-4.]
In response, Mr. Senefeld argues that the SEC has not shown that disgorgement is
appropriate, relying heavily on SEC v. Collins, 2003 WL 21196236 (N.D. Ill. 2003). [See Filing
No. 448 at 8-10 (arguing that “[t]he SEC has simply used a staff accountant to identify payments
that went to [Mr.] Senefeld, and assumes that they represent ill-gotten gains subject to
disgorgement”).]
He also contends that certain amounts should be credited toward any
disgorgement amount the SEC seeks. Specifically, he argues that he assisted in recovering a
$310,000 fee owed to Pin Financial LLC, and that the Receiver noted that he “did a really good
job under very difficult circumstances.” [Filing No. 448 at 3.] He asserts that any disgorgement
amount should “be set off or reduce[d]….by $310,000, plus the costs of any business expenses,
plus the amount of money seized from [Mr.] Senefeld and his wife.” [Filing No. 448 at 11.]
In its reply, the SEC asserts that Mr. Senefeld cannot now argue that he did not violate
securities laws or did not obtain ill-gotten gains. [Filing No. 455 at 5.] The SEC argues that it has
shown that $698,818.29 is a reasonable approximation of the profits Mr. Senefeld received from
his wrongful conduct. [Filing No. 455 at 7-12.] It notes that the disgorgement amount it seeks
“consist[s] of the success fees and interest rate spread fees that were paid with investor funds but
4
not disclosed to investors; the amounts that PinCap received from investor funds and then
transferred to [Mr.] Senefeld as salary; and amounts [Mr.] Senefeld received from the bank
accounts of the fraudulent 2013 VFLH Offering and 2014 FarmGrowCap Offering.” [Filing No.
455 at 10.] The SEC also argues that any business expenses Mr. Senefeld incurred should not
reduce the disgorgement amount, and that the $310,000 fee paid to Pin Financial should not reduce
the amount because the fee was less than it should have been due to Mr. Senefeld’s actions and
since Mr. Senefeld already received $31,000 for his services related to that transaction. [Filing
No. 455 at 11-16.] Finally, the SEC notes that PinCap received $389,286.87 in ill-gotten gains,
and that the SEC did not seek disgorgement of any part of this amount even though Mr. Senefeld
is a one-third owner of PinCap. [Filing No. 455 at 16.]
“Disgorgement of illegal profits and unjust enrichment is an equitable remedy available
under the federal securities laws.” U.S. S.E.C. v. Church Extension of Church of Church, Inc., 429
F.Supp.2d 1045, 1050 (S.D. Ind. 2005) (citing SEC v. First City Financial Corp., 890 F.2d 1215,
1230 (D.C. Cir. 1989)). Disgorgement is a form of “[r]estitution measured by the defendant’s
wrongful gain.” Kokesh v. S.E.C., --- U.S. ----, 137 S.Ct. 1635, 1640 (2017) (quoting Restatement
(Third) of Restitution and Unjust Enrichment § 51, Comment a, p. 204 (2010)). When the SEC
seeks disgorgement, “it acts in the public interest, to remedy harm to the public at large, rather
than standing in the shoes of particular injured parties.” Kokesh, 137 S.Ct. at 1643. In cases where
restitution has already been ordered, courts generally hold that “the civil disgorgement amount
should be reduced by the amount already paid in restitution.” S.E.C. v. McCaskey, 2002 WL
850001, *14 (S.D. N.Y. 2002) (citing S.E.C. v. Palmisano, 135 F.3d 860, 863-64 (2d Cir. 1998)).
“Courts have broad discretion in determining whether to order disgorgement, and in
calculating the amount of disgorgement…. The amount ordered need only be a ‘reasonable
5
approximation’ of profits ‘causally connected’ to the wrongdoing…. Any risk of uncertainty in
calculating disgorgement falls on the defendants whose conduct created the uncertainty.” S.E.C.
v. Cook, 2015 WL 5022152, *27 (S.D. Ind. 2015) (quoting SEC v. First Jersey Sec., Inc., 101 F.3d
1450, 1474-75 (2d Cir. 1996); S.E.C. v. Patel, 61 F.3d 137, 139-40 (2d Cir. 1995)); see also U.S.
S.E.C. v. Alanar, Inc., 2008 WL 1994854, *4 (S.D. Ind. 2008) (“The SEC is required to show that
the amount of disgorgement is a ‘reasonable approximation’ of the profits the defendant reaped
from the wrongful conduct….
The burden then shifts to the defendant to show that this
approximation is inaccurate…. Any ambiguity in the calculation should be resolved against the
defrauding party”) (citations omitted).
Mr. Senefeld does not deny receiving the amounts the SEC seeks to disgorge, instead
arguing that the SEC has not met its burden of demonstrating that the amounts are ill-gotten gains
subject to disgorgement, and that he is entitled to certain credits against the disgorgement amount.
The Court rejects Mr. Senefeld’s arguments. First, Mr. Senefeld relies heavily on the Collins case
to argue that the SEC has not established that the amounts Mr. Senefeld received were as a result
of wrongdoing by him.
[Filing No. 448 at 8-10.]
The court in Collins refused to order
disgorgement because the SEC had not shown that defendants violated any securities laws.
Collins, 2003 WL 21196236 at *6 (“These facts, without more, do not show that [defendants]
violated any securities laws or committed any wrongdoing; among other things, they do not reveal
the requisite intent….
The SEC offered no evidence that [defendants] ever made any
misrepresentations…let alone that they did so knowingly”). Conversely, here Mr. Senefeld has
agreed not to contest the allegations in the Amended Complaint, which establish that he violated
securities laws. Consequently, he cannot contest the SEC’s allegations that he was an active
participant in the securities fraud scheme and knowingly and intentionally violated securities laws.
6
[See Filing No. 57.] The McShane Declaration sufficiently traces the funds received by Mr.
Senefeld – which he does not dispute receiving – to the securities fraud scheme such that
disgorgement of those funds is appropriate.
Second, Mr. Senefeld argues that he should receive credit against the disgorgement amount
for a $310,000 fee he helped to collect on behalf of Pin Financial, and for certain business
expenses. The $310,000 fee related to work performed by Pin Financial in finding a commercial
lender that would provide a multimillion dollar loan to a farming operation in South Dakota
(“Hardes”). [Filing No. 454 at 1-2.] Mr. Senefeld worked on obtaining the loan, and ultimately
found a lender for Hardes. [Filing No. 454 at 2.] When the underwriting of the loan was almost
complete, the Receiver in this matter was appointed over Pin Cap, which owns 100% of Pin
Financial. [Filing No. 454 at 2.] Certain information was needed to close the loan, and Mr.
Senefeld cooperated with the Receiver to obtain that information. [Filing No. 454 at 2.] Shortly
before the loan was to close, counsel for Hardes advised the Receiver that Hardes should not have
to pay commission to Pin Financial because “Hardes did not believe Pin Financial was
instrumental in acquiring the loan from the lender.” [Filing No. 454 at 2.] Mr. Senefeld cooperated
with the Receiver by providing documents and other information so that the Receiver could work
toward collecting the fee to which Hardes had agreed. [Filing No. 454 at 3.] Hardes ultimately
agreed to pay a reduced fee (originally 7%, reduced to 4%) of $310,000. [Filing No. 454 at 3.]
Mr. Senefeld received $31,000 “in recognition of his help in securing the Hardes loan commission
payment.” [Filing No. 454 at 4.] Mr. Senefeld argues any disgorgement amount should be reduced
by $310,000 because he was instrumental in obtaining payment of the fee. The Receiver states
that without the authority given by the Court to negotiate with Hardes and Pin Financial, no fee
would have been paid. [Filing No. 454 at 4.]
7
The Court does not find any reason presented by Mr. Senefeld that the disgorgement
amount should be reduced by the $310,000 fee. The fee was an amount owed to Pin Financial, not
to Mr. Senefeld, and Mr. Senefeld has already been paid $31,000 for his services in connection
with the loan to Hardes. There simply is no legal authority to support the notion that Mr. Senefeld
should receive credit for the entire $310,000 fee simply because he provided some assistance in
obtaining payment.
As for business expenses, Mr. Senefeld argues that he “incurred $31,719.49 of
unreimbursed expenses” and “spent $51,719.49 on business expenses,” and that those amounts
should be deducted from any disgorgement amount. [Filing No. 448 at 3.] Ordinary business
expenses generally are not deducted from the disgorgement amount. See, e.g., United States
Securities v. Benger, 2015 WL 6859168, *7 (N.D. Ill. 2015) (“[Defendants] are not entitled to
deduct from the disgorgement their obligations incurred in furtherance of the perpetration of the
fraud. ‘It would be unjust to permit the defendants to offset against investor dollars they received
the expenses of running the very business they created to defraud those investors into giving the
defendants the money in the first place’”) (quoting S.E.C. v. JT Wallenbrock & Associates, 440
F.3d 1109, 1114 (9th Cir. 2006)); F.T.C. v. Bronson Partners, LLC, 654 F.3d 359, 374 (2d Cir.
2011) (“it is well established that defendants in a disgorgement action are not entitled to deduct
costs associated with committing their illegal acts”) (citation and quotation omitted). The Court
finds that Mr. Senefeld is not entitled to a deduction of “business expenses” from the disgorgement
amount.
In sum, the Court GRANTS the SEC’s Motion for Disgorgement, Prejudgment Interest,
and Civil Penalties, [Filing No. 444], to the extent that it finds that Mr. Senefeld must disgorge
$698,818.29.
8
B. Prejudgment Interest
The SEC seeks $94,538.36 in prejudgment interest on the $698,818.29 disgorgement
amount. [Filing No. 443-3; Filing No. 445 at 20.] Mr. McShane details in his Declaration how
the prejudgment interest was calculated, stating that he “calculated this pre-judgment interest by
applying the interest rate, adjusted quarterly, used by the Internal Revenue Service for computation
of interest on underpayment of taxes. Interest was compounded quarterly, beginning on December
1, 2013 as required by the Court.” [Filing No. 443 at 4-5.] Mr. Senefeld does not dispute the
amount of prejudgment interest the SEC seeks. [See Filing No. 448.]
“Courts have ‘wide discretion’ in awarding prejudgment interest, which helps assure that
defendants do not profit from their fraud…. Prejudgment interest is appropriate on disgorgement
amounts based on the IRS underpayment rate.” Cook, 2015 WL 5022152 at *28 (citing SEC v.
Lauer, 478 Fed. Appx. 550, 557 (11th Cir. 2012); SEC v. Sargent, 329 F.3d 34, 40 (1st Cir. 2003);
SEC v. Koenig, 532 F.Supp.2d 987, 995 (N.D. Ill. 2007)). The Court finds it appropriate here to
award prejudgment interest on the $698,818.29 disgorgement amount, and GRANTS the SEC’s
Motion for Disgorgement, Prejudgment Interest, and Civil Penalties, [Filing No. 444], to the extent
that it awards prejudgment interest, calculated using the Internal Revenue Service underpayment
rate for the relevant time period, of $94,538.36.
C. Civil Penalty
In support of its request that the Court impose a civil penalty on Mr. Senefeld, the SEC
argues that Mr. Senefeld acted deliberately and recklessly, and that his actions harmed investors.
[Filing No. 445 at 22.] The SEC notes that Mr. Senefeld violated multiple anti-fraud provisions
of the federal securities laws, that when this action was filed investors were owed approximately
$9 million, and that only requiring disgorgement would return Mr. Senefeld to the status quo
9
without providing any form of punishment. [Filing No. 445 at 22-23.] The SEC contends that a
civil penalty is required “to discourage [Mr.] Senefeld from future misconduct, as well as deter
others who are similarly-situated from engaging in comparable instances of misconduct.” [Filing
No. 445 at 23.]
In response, Mr. Senefeld argues that he cooperated in terms of generating income for the
receivership estate, and that his current annual net income is $44,993.25 so a significant penalty
would not serve a deterrent purpose. [Filing No. 448 at 13.] Mr. Senefeld asserts that there are no
allegations in the Amended Complaint that he “had any contact with Veros’s investors,” and that
he “was never an owner or employee of Veros, nor did he ever know the identities of or have
contact with any of Veros’s clients.” [Filing No. 448 at 14.] Mr. Senefeld concedes that a “first
tier civil penalty is appropriate,” and notes that for each first tier violation the civil penalty is
capped at $7,500. [Filing No. 448 at 14.]
In reply, the SEC reiterates its arguments and also contends that Mr. Senefeld “has received
substantial amounts of money over the past few years,” and received $524,412.14 between
September 3, 2015 and January 18, 2017. [Filing No. 455 at 18.] In support of that contention,
the SEC submits another Declaration from Mr. McShane (the “Second McShane Declaration”)
which details amounts received by two companies established by Mr. Senefeld and his wife, and
owned by Mr. Senefeld’s wife and children. [Filing No. 453.] The SEC also filed a third
Declaration from Mr. McShane (the “Third McShane Declaration”) in which he sets forth amounts
deposited into bank accounts in the name of Mr. Senefeld’s wife and children, but then used for
family expenses that benefitted Mr. Senefeld. [Filing No. 466.]
10
1. Motion to Strike
Before discussing whether it should impose a civil penalty, the Court notes that Mr.
Senefeld filed a Motion to Strike References to McShane Affidavit in which he requests that the
Court strike any references to the Second McShane Declaration because “McShane and the SEC
are imputing income generated by [Mr.] Senefeld’s wife and children’s businesses to him
individually,” but have not argued that the two businesses owned by Mr. Senefeld’s wife and
children “are, in reality, nothing more than alter egos of [Mr.] Senefeld whose revenue should
somehow be considered in determining the amount of any civil penalty levied against [Mr.]
Senefeld.” [Filing No. 465 at 2.] The SEC responds to the Motion to Strike by re-emphasizing its
arguments regarding Mr. Senefeld’s financial situation, and also argues that there is no basis upon
which to strike references to the Second McShane Declaration. [Filing No. 467.]
Although Mr. Senefeld does not specify under which rule of civil procedure he brings his
Motion to Strike, Fed. R. Civ. P. 12(f) provides that “[t]he court may strike from a pleading an
insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
Mr.
Senefeld essentially argues that the information in the Second McShane Declaration does not show
that his income was more than what he has claimed. This is an argument regarding the weight the
Court should give the Second McShane Declaration, and does not provide a basis for striking
references to the Declaration. The parties have each set forth their positions, and the Court will
address their arguments below. The Court DENIES Mr. Senefeld’s Motion to Strike, [Filing No.
465].
2. Appropriateness of Civil Penalty
15 U.S.C. §§ 77t(d) and 78u(d)(3) authorize district courts to impose civil penalties in SEC
enforcement cases. “A civil penalty serves to punish and deter wrongdoers because disgorgement
11
‘does not result in any actual economic penalty or act as financial disincentive to engage in
securities fraud.’” Cook, 2015 WL 5022152 at *28 (quoting SEC v. Moran, 944 F.Supp. 286, 296
(S.D. N.Y. 1996)). A district court has wide discretion in setting the amount of a civil penalty.
Cook, 2015 WL 5022152 at *29. “In determining what the penalties should be, the court should
consider the seriousness of the violations, the defendant’s intent, whether the violations were
isolated or recurring, whether the defendant has admitted wrongdoing, the losses or risks of losses
caused by the conduct, and any cooperation the defendant provided to enforcement authorities.”
Alanar, 2008 WL 1994854 at *7.
15 U.S.C. § 78u(d)(3)(B) sets forth three tiers of penalties: (1) the first tier, which shall “be
determined by the court in light of the facts and circumstances,” and shall not exceed the greater
of $5,000 or the gross amount of pecuniary gain to the defendant as a result of the violation; (2)
the second tier, which shall not exceed the greater of $50,000 or the gross amount of pecuniary
gain to the defendant as a result of the violation, if the violation “involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a regulatory requirement”; and (3) the third
tier, which shall not exceed the greater of $100,000 or the gross amount of pecuniary gain to the
defendant as a result of the violation, if the violation “involved fraud, deceit, manipulation, or
deliberate or reckless disregard of a regulatory requirement,” and “directly or indirectly resulted
in substantial losses or created a significant risk of substantial losses to other persons.” Mr.
Senefeld believes that a first tier penalty is appropriate; the SEC seeks a third tier penalty, although
does not suggest a specific amount. The Court finds that a penalty which lies somewhere in the
middle is appropriate.
Mr. Senefeld’s securities law violations involved “fraud, deceit, manipulation, or deliberate
or reckless disregard of a regulatory requirement.” 15 U.S.C. § 78u(d)(3)(B)(ii). While Mr.
12
Senefeld paints himself as a small player in the scheme, arguing that former defendants Matthew
Haab and Jefferey Risinger committed most of the fraudulent acts, and that he did not have any
contact with Veros’s clients, the evidence in this case indicates otherwise. In connection with its
Order on Mr. Senefeld’s Motion for Summary Judgment, the Court outlined evidence from the
record which shows that Mr. Senefeld did have direct contact with investors, disseminated
disclosures or offering materials to investors or otherwise communicated with investors, knew
what agreements or representations Mr. Haab made to investors about repayment of investments
or any farms’ refinancing debt, and negotiated directly with farmers regarding loans, interest rates,
and origination fees. [Filing No. 229 at 15-18.] Mr. Senefeld’s assertion that he was not directly
involved with investors also contradicts allegations in the Amended Complaint, which Mr.
Senefeld has agreed not to challenge. [See Filing No. 57.] The Court finds that Mr. Senefeld’s
actions warrant imposition of at least a second tier civil penalty.
While the facts here may even warrant imposition of a third tier civil penalty, the Court
finds that a second tier penalty is more appropriate when considering Mr. Senefeld’s financial
situation and the agreements the SEC reached with Mr. Haab and Mr. Risinger. As for Mr.
Senefeld’s financial condition, the SEC has shown that Mr. Senefeld’s wife and children received
over $350,000 from the two companies owned by them. [See Filing No. 466 at 5.] The SEC has
also shown that some of that money was used for family expenses such as vacations, concert
tickets, a new dog, a canoe, a bicycle, mortgage payments, and utility payments. [Filing No. 466
at 8-9.] To be sure, this money benefitted Mr. Senefeld because it was used for the general benefit
of the family. But the fact remains that the funds were earned by companies not owned by Mr.
Senefeld and were deposited into accounts not owned by Mr. Senefeld. The SEC’s implication is
clear: that Mr. Senefeld and his wife set up the two companies as a way to hide assets. But the
13
funds also benefitted Mr. Senefeld’s wife and children, and the SEC has not shown that these
amounts should be considered part of Mr. Senefeld’s annual income.
The Court also finds it significant that the SEC entered into a consent judgment with Mr.
Haab whereby it did not seek a civil penalty, and only sought $183,640 of the total $563,121
disgorgement amount. [Filing No. 251-1 at 2.] Additionally, the consent judgment the SEC
entered into with Mr. Risinger provides that it did not seek a civil penalty and only required
payment of $100,000 of the total $967,197 disgorgement amount. [Filing No. 250-1 at 2.]
The Court does note, however, that this is not the first time Mr. Senefeld has violated
securities laws. In 1999, Mr. Senefeld was charged with engaging in a fraudulent scheme as a
registered representative of a broker-dealer. [Filing No. 57 at 5.] Mr. Senefeld settled the charges,
was ordered to cease and desist from violating federal securities laws, served a twelve-month
suspension from associating with any broker-dealer, and paid a $25,000 civil penalty. Yet, he has
violated federal securities laws again.
The Court has weighed Mr. Senefeld’s history with federal securities law violations, the
seriousness of his violations here, his intent, the fact that the violations were recurring, and the
loss caused by his conduct against his financial condition and the fact that the SEC did not seek
civil penalties against Mr. Haab and Mr. Risinger. It finds that a second tier civil penalty of
$50,000 is appropriate, and will hopefully have a deterrent effect on Mr. Senefeld. See Alanar,
2008 WL 1994854 at *19-20. The SEC’s Motion for Disgorgement, Prejudgment Interest, and
Civil Penalties is GRANTED IN PART to the extent that the Court imposes a $50,000 civil
penalty on Mr. Senefeld.
14
III.
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART the SEC’s Motion for
Disgorgement, Prejudgment Interest, and Civil Penalties, [444], to the extent that it ORDERS Mr.
Senefeld to disgorge $698,818.29, pay $94,538.36 in prejudgment interest, and pay a civil penalty
of $50,000. The Court DENIES Mr. Senefeld’s Motion to Strike References to McShane
Affidavit, [465]. Final judgment as to Mr. Senefeld shall enter accordingly.
Date: 2/6/2018
Distribution via ECF only to all counsel of record
15
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