United States Securities and Exchange Commission v. Collyard et al

Filing 149

ORDER: (1) The SEC's motion for summary judgment [Docket No. 130 ] is GRANTED IN PART and DENIED IN PART. Summary judgment against Gary A. Collyard is granted. Summary judgment against Collyard Group is denied. (2) The SEC's motion to voluntarily dismiss its monetary claims against Gary A. Collyard and Collyard Group [Docket No. 136 ] is GRANTED. (3) The Clerk of Court shall terminate Gary A. Collyard's motion for extension of time to respond [Docket No. 144 ]. (4) Gary A. Collyard and his officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are permanently enjoined from violating Sectio n 15(a) of the Securities Exchange Act of 1934 by making use of the mails or any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security (other than an exe mpted security or commercial paper, bankers' acceptances, or commercial bills) without being registered in accordance with Section 15(b) of the Securities Exchange Act of 1934. (5) Gary A. Collyard and his officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are permanently enjoined from violating Section 17(a)(2) of the Securities Act of 1933 by, in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly, obtaining money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. (6) Gary A. Collyard and his officers, agents, servants, employees, attorneys, and al l persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder by, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, in connection with the purchase or sale of any security. (Written Opinion) Signed by Judge Joan N. Ericksen on April 6, 2015. (CBC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
United States Securities and Exchange
Commission,
Plaintiff,
v.

Civil No. 11-3656 (JNE/JJK)
ORDER

Gary A. Collyard, Collyard Group, LLC,
Paul D. Crawford, Crawford Capital Corp.,
Ronald Musich, Joshua J. Singer, Michael
B. Spadino, Marketing Concepts, Inc., and
Christopher C. Weides,
Defendants.
In the Amended Complaint, the United States Securities and Exchange
Commission (SEC) alleged that Gary Collyard and Collyard Group, LLC, had violated
the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as a rule
promulgated by the SEC under the latter. The case is before the Court on the SEC’s
motion for summary judgment against Collyard and Collyard Group and motion to
voluntarily dismiss its monetary claims against Collyard and Collyard Group. 1 For the
reasons set forth below, the Court grants in part and denies in part the SEC’s motion for

1

Three days before the motion hearing was scheduled to take place, the Court
received a motion for extension of time to respond from Collyard himself. Collyard and
Collyard Group are represented by counsel. Their counsel has not withdrawn from the
representation. See D. Minn. LR 83.7. Thus, the Court declines to consider Collyard’s
motion. See Abdullah v. United States, 240 F.3d 683, 686 (8th Cir. 2001); Brasier v.
Jeary, 256 F.2d 474, 478 (8th Cir. 1958). Even if the Court were to consider the motion,
the Court would deny it because Collyard may not represent Collyard Group, see
Rowland v. Cal. Men’s Colony, 506 U.S. 194, 201-03 (1993), and he has not adequately
explained his request for additional time, see Fed. R. Civ. P. 56(d); Huggins v. FedEx
Ground Package Sys., Inc., 592 F.3d 853, 856-57 (8th Cir. 2010).
1

summary judgment. The Court grants the SEC’s motion to voluntarily dismiss its
monetary claims against Collyard and Collyard Group.
Summary judgment is proper “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). To support an assertion that a fact cannot be or is genuinely disputed, a
party must cite “to particular parts of materials in the record,” show “that the materials
cited do not establish the absence or presence of a genuine dispute,” or show “that an
adverse party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P.
56(c)(1)(A)-(B). “The court need consider only the cited materials, but it may consider
other materials in the record.” Fed. R. Civ. P. 56(c)(3). In determining whether
summary judgment is appropriate, a court must view genuinely disputed facts in the light
most favorable to the nonmovant, Ricci v. DeStefano, 557 U.S. 557, 586 (2009), and
draw all justifiable inferences from the evidence in the nonmovant’s favor, Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
In Count I of the Amended Complaint, the SEC alleged that Collyard and Collyard
Group had violated Section 15(a) of the Securities Exchange Act of 1934, which provides
that it is “unlawful for any broker . . . to make use of the mails or any means or
instrumentality of interstate commerce to effect any transactions in, or to induce or
attempt to induce the purchase or sale of, any security . . . unless such broker . . . is
registered . . . .” 15 U.S.C. § 78o(a)(1) (2012). A broker is “any person engaged in the
business of effecting transactions in securities for the account of others.” Id. § 78c(a)(4).

2

In Count II of the Amended Complaint, the SEC alleged that Collyard and
Collyard Group had violated Section 17(a)(2) of the Securities Act of 1933, 15 U.S.C.
§77q(a)(2) (2012). In Count III of the Amended Complaint, the SEC alleged that
Collyard and Collyard Group had violated Section 10(b) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78j(b) (2012), as well as Rule 10b-5(b), 17 C.F.R. § 240.10b-5(b).
“To establish a violation of these antifraud provisions of the federal securities laws, the
SEC must prove that [a defendant] made a material misstatement or omission in
connection with the offer, sale, or purchase of a security by means of interstate
commerce.” SEC v. Shanahan, 646 F.3d 536, 541 (8th Cir. 2011). In addition, to
establish a violation of Section 10(b) or Rule 10b-5, the SEC must prove that the
misstatement or omission was made with scienter. Id. at 541, 543-44. To establish a
violation of Section 17(a)(2), the SEC need only prove the defendant acted negligently.
Id. at 541, 545-46; Pagel, Inc. v. SEC, 803 F.2d 942, 946 (8th Cir. 1986).
Citing Collyard’s guilty plea to charges of conspiracy to commit securities fraud
and conspiracy to commit bank fraud, 2 the SEC relied on collateral estoppel to establish
that Collyard and Collyard Group had violated the securities laws as alleged in the
Amended Complaint:
The principle of collateral estoppel precludes a party from re-litigating an
identical issue that was adjudicated on the merits in a prior proceeding. “It
is well established that prior criminal proceedings can work an estoppel in a
subsequent civil proceeding, so long as the question involved was
‘distinctly put in issue and directly determined’ in the criminal action.”
2

Collyard moved to withdraw his guilty plea. The district court denied his motion.
Collyard appealed, and the Eighth Circuit affirmed. United States v. Collyard, 554 F.
App’x 541 (8th Cir.) (per curiam), cert. denied, 135 S. Ct. 292 (2014).
3

SEC v. Gruenberg, 989 F.2d 977, 978 (8th Cir. 1993) (per curiam) (citation omitted); see
United States v. Aleff, 772 F.3d 508, 510 (8th Cir. 2014). In his plea agreement, Collyard
admitted that he “communicated with prospective investors and shareholders by
telephone, mail, email, and in person, for the purpose of inducing those investors and
shareholders to provide funds” to Bixby Energy Systems, Inc. (Bixby); that he
“knowingly and willfully caused unqualified investors to be solicited to invest in Bixby
in violation of federal securities laws”; that he “caused the sale of Bixby securities to
investors” in exchange for investment funds; that he “made, and caused to be made,
numerous material false statements, false representations, and omissions of material facts
about Bixby’s business project and prospects of conducting an initial public offering of
Bixby shares” to entice investors; and that he and others received a significant portion of
the investors’ funds in the form of salaries and commissions. It is undisputed that
Collyard was neither registered as a broker nor associated with a registered broker.
Viewed in the light most favorable to Collyard, the record reveals that he violated the
securities laws as alleged in the Amended Complaint. As to Collyard, the Court grants
the SEC’s motion for summary judgment.
The SEC has not explained how Collyard’s guilty plea establishes that Collyard
Group violated the securities laws as alleged in the Amended Complaint. To the extent
the SEC moved for summary judgment against Collyard Group, the Court denies the
motion.
The SEC sought permanent injunctive relief against Collyard. See 15 U.S.C.
§§ 77t(b), 78u(d) (2012). To obtain a permanent injunction, the SEC must prove that
4

Collyard violated the securities laws and that there is a reasonable likelihood of future
violations if he is not enjoined. See SEC v. Comserv Corp., 908 F.2d 1407, 1412 (8th
Cir. 1990). Collyard knowingly and willfully violated the securities laws over the course
of many years. His conduct in the criminal case reveals a failure to acknowledge his
wrongdoing. The Court concludes that a permanent injunction against Collyard is
appropriate. See Gruenberg, 989 F.2d at 978.
Finally, citing the sentence imposed on Collyard in the criminal case, the SEC
moved to dismiss its claims for monetary relief against Collyard and Collyard Group.
The Court grants the motion.
Based on the files, records, and proceedings herein, and for the reasons stated
above, IT IS ORDERED THAT:
1.

The SEC’s motion for summary judgment [Docket No. 130] is GRANTED
IN PART and DENIED IN PART. Summary judgment against Gary A.
Collyard is granted. Summary judgment against Collyard Group is denied.

2.

The SEC’s motion to voluntarily dismiss its monetary claims against Gary
A. Collyard and Collyard Group [Docket No. 136] is GRANTED.

3.

The Clerk of Court shall terminate Gary A. Collyard’s motion for extension
of time to respond [Docket No. 144].

4.

Gary A. Collyard and his officers, agents, servants, employees, attorneys,
and all persons in active concert or participation with them who receive
actual notice of this Order by personal service or otherwise are permanently
enjoined from violating Section 15(a) of the Securities Exchange Act of
1934 by making use of the mails or any means or instrumentality of
interstate commerce to effect any transactions in, or to induce or attempt to
induce the purchase or sale of, any security (other than an exempted
security or commercial paper, bankers’ acceptances, or commercial bills)
without being registered in accordance with Section 15(b) of the Securities
Exchange Act of 1934.

5

5.

Gary A. Collyard and his officers, agents, servants, employees, attorneys,
and all persons in active concert or participation with them who receive
actual notice of this Order by personal service or otherwise are permanently
enjoined from violating Section 17(a)(2) of the Securities Act of 1933 by,
in the offer or sale of any securities by the use of any means or instruments
of transportation or communication in interstate commerce or by use of the
mails, directly or indirectly, obtaining money or property by means of any
untrue statement of a material fact or any omission to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.

6.

Gary A. Collyard and his officers, agents, servants, employees, attorneys,
and all persons in active concert or participation with them who receive
actual notice of this Order by personal service or otherwise are permanently
enjoined from violating Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5(b) thereunder by, directly or indirectly, by the use of
any means or instrumentality of interstate commerce, or of the mails or of
any facility of any national securities exchange, making any untrue
statement of a material fact or omitting to state a material fact necessary in
order to make the statements made, in the light of the circumstances under
which they were made, not misleading, in connection with the purchase or
sale of any security.

Dated: April 6, 2015
s/Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge

6