Securities and Exchange Commission v. Malom Group AG et al

Filing 98

ORDER. IT IS HEREBY ORDERED that 78 Plaintiff's Motion for Summary Judgment is GRANTED, pursuant to the foregoing. IT IS FURTHER ORDERED that 86 Defendant Warras' Motion for Summary Judgment is DENIED. IT IS FURTHER ORDERED that 83 Defendant Brandel's Motion for Stay is DENIED as moot. The Clerk of Court is ordered to enter judgment accordingly and close the case. Signed by Chief Judge Gloria M. Navarro on 9/29/17. (Copies have been distributed pursuant to the NEF - MR)

Kenneth Guido
Timothy N. England
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Fax: [phone]
[e-mail] Tel. [phone]
[e-mail] / Tel. [phone]
[e-mail] / Tel. [phone]
Attorneys for the Plaintiff

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEVADA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
MALOM GROUP AG, MARTIN U.
SCHLÄPFER, HANS-JÜRG LIPS,
JAMES C. WARRAS, JOSEPH N.
MICELLI, M.Y. CONSULTANTS, INC.,
ANTHONY B. BRANDEL, M. DWYER,
LLC, AND SEAN P. FINN,
Defendants.

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2:13-CV-2280 (GMN)(PAL)
FINAL JUDGMENT AS TO JAMES
C. WARRAS AND ANTHONY B.
BRANDEL

The Plaintiff, Securities and Exchange Commission (“SEC” or “the Commission”), filed
a motion for summary judgment as to James C. Warras (“Warras”) and Anthony B. Brandel
(“Brandel”) pursuant to Federal Rule of Civil Procedure 56(a).

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The Court has reviewed Plaintiff Securities and Exchange Commission’s
(“Commission”) Motion For Summary Judgment as to Warras and Brandel, all supporting
documents, and all opposition thereto (see ECF Nos. 82-86, 93).
Based on the evidence and authorities presented in support of the motion, the Court
hereby FINDS as follows:
On December 16, 2013, the SEC filed the Complaint in this action against Warras and
Brandel, among others, alleging that Defendants violated Section 10(b) of the Securities and
Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder
[17 C.F.R. § 240.10b-5], Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”)
[15 U.S.C. §§ 77e(a) and (c)], and Securities Act Section 17(a) [15 U.S.C. § 77q(a)]. The SEC
also alleged that Brandel acted as an unregistered broker in violation of Section 15(a) of the
Exchange Act [15 U.S.C. § 78o(a)]
On December 11, 2013, the United States indicted Defendants for, inter alia, their
violations of Section 10(b) of the Exchange Act, Rule 10b-5 enacted thereunder, and Section
17(a) of the Securities Act.
On December 7, 2015, the jury in U.S. v. Brandel, 2:13 cr 439 (D. Nevada), unanimously
decided, inter alia, that Defendants Warras and Brandel (collectively Defendants”) violated the
Section 10(b) of the Exchange Act, Rule 10b-5, and Section 17(a) of the Securities Act.
The undisputed evidence is that Warras and Brandel solicited investors to purchase the
securities that were not registered with the SEC and that the funds for the investments were
transmitted via wire transfers in interstate commerce in violation of Sections 5(a) and (c) of the
Securities Act 15 U.S.C. §§ 77e(a) and (c).
V.
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The undisputed evidence is that Brandel not only solicited investors to purchase the
unregistered securities, but negotiated the terms of those agreements, instructed the investors
where to deposit their investments and how the investors’ funds should be distributed, and
earned transactions based income on the transactions, acting as an unregistered broker in
violation of Section 15(a) [15 U.S.C. § 78o(a)].
The Court finds that there are no genuine issues of material fact and that the SEC is
entitled to judgment as a matter of law.
THEREFORE,
I.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the SEC’s motion
should be, and is hereby, GRANTED.
II.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants are
permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R.
§ 240.10b-5], by using any means or instrumentality of interstate commerce, or of the mails, or
of any facility of any national securities exchange, in connection 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 material fact
necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or

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(c)

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

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that, as
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the
following who receive actual notice of this Final Judgment by personal service or otherwise: (a)
Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active
concert or participation with Defendants or with anyone described in (a).
III.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants are permanently restrained and enjoined from violating, directly or indirectly,
Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] in the offer or sale of any security by the
use of any means or instruments of transportation or communication in interstate commerce or
by use of the mails:
(a)

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

(b)

to obtain money or property by means of any untrue statement of a material fact
or any omission of a material fact necessary to make the statements made, in light
of the circumstances under which they were made, not misleading; or

(c)

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

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that, as
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the
following who receive actual notice of this Final Judgment by personal service or otherwise: (a)
Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active

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concert or participation with Defendants or with anyone described in (a).
IV.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants are permanently restrained and enjoined from violating Section 5 of the Securities
Act [15 U.S.C. § 77e] by, directly or indirectly, in the absence of any applicable exemption:
(a)

Unless a registration statement is in effect as to a security, making use of any
means or instruments of transportation or communication in interstate commerce
or of the mails to sell such security through the use or medium of any prospectus
or otherwise;

(b)

Unless a registration statement is in effect as to a security, carrying or causing to
be carried through the mails or in interstate commerce, by any means or
instruments of transportation, any such security for the purpose of sale or for
delivery after sale; or

(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 any security, unless a registration
statement has been filed with the Commission as to such security, or while the
registration statement is the subject of a refusal order or stop order or (prior to the
effective date of the registration statement) any public proceeding or examination
under Section 8 of the Securities Act [15 U.S.C. § 77h].

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IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that, as
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the
following who receive actual notice of this Final Judgment by personal service or otherwise: (a)
Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active
concert or participation with Defendants or with anyone described in (a).
V.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Brandel
and Brandel’s 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 from violating, directly or indirectly, Section
15(a) of the Exchange Act [15 U.S.C. § 78o] by, directly or indirectly, in the absence of an
applicable exemption, 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 unless the Defendants are registered in accordance with Section 15(b) of the
Exchange Act.
VI.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ 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 from directly or indirectly
participating in the issuance, offer, or sale of any security, including but not limited to joint
venture agreements, proofs of funds, bank guarantees, medium term notes, standby letters of

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credit, structured notes, and similar instruments, with the exception of the purchase or sale of
securities listed on a national securities exchange.
VII.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants are jointly
and severally liable with each other for disgorgement of $4,920,000 representing the profits
gained by the defendants in this matter as a result of the Defendants’ conduct alleged in the
Complaint, together with prejudgment interest thereon in the amount of $1,015,020.15, for a total
of $5,935,020.15. The amount Defendants are jointly and severally required to pay in
disgorgement may be reduced by the amount that they have paid or will pay as a Forfeiture or
Restitution in the criminal proceeding. Pursuant to Section 21(d)(3)(B) of the Securities
Exchange Act of 1934 [15 U.S.C. § 78u(d)(3)(B)] and Section 20(d) of the Securities Act of
1933 [15 U.S.C. § 77t(d)]. The Court adopts the pecuniary gain approach in calculating the
appropriate civil penalty here. Therefore, Warras is individually liable for a civil penalty in the
amount of $720,000.00. Brandel is individually liable for a civil penalty in the amount of
$630,000.00. Warras and Brandel each shall satisfy their obligation(s) by paying disgorgement
with prejudgment interest and civil money penalties to the Securities and Exchange Commission
within 14 days after entry of this Partial Final Judgment. Defendants 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 at http://www.sec.gov/about/offices/ofm.htm. Defendants also may pay
by certified check, bank cashier’s check, or United States postal money order payable to the
Securities and Exchange Commission, which shall be delivered or mailed to:

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Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
and shall be accompanied by a letter identifying the case title, civil action number, and name of
this Court; disclosing James C. Warras and Anthony B. Brandel as Defendants in this action; and
specifying that payment is made pursuant to this Final Judgment.
Defendants shall simultaneously transmit photocopies of evidence of payment and case
identifying information to the Commission’s counsel in this action. By making this payment,
Defendants relinquish all legal and equitable right, title, and interest in such funds and no part of
the funds shall be returned to Defendants.
The Commission may enforce the Court’s judgment for disgorgement and prejudgment
interest by moving for civil contempt (and/or through other collection procedures authorized by
law) at any time after 14 days following entry of this Final Judgment. Defendants shall pay post
judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961. The Commission
shall hold the funds, together with any interest and income earned thereon (collectively, the
“Fund”), pending further order of the Court.
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 2002. The Court shall retain
jurisdiction over the administration of any distribution of the Fund. If the Commission staff
determines that the Fund will not be distributed, the Commission shall send the funds paid
pursuant to this Final Judgment to the United States Treasury.

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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 penalties paid to the
government for all purposes, including all tax purposes. To preserve the deterrent effect of the
civil penalty, Defendants shall not, after offset or reduction of any award of compensatory
damages in any Related Investor Action based on Defendants’ payment of disgorgement in this
action, argue that they are entitled to, nor shall they further benefit by, offset or reduction of such
compensatory damages award by the amount of any part of Defendants’ payments of civil
penalties in this action (“Penalty Offset”). If the Court in any Related Investor Action grants such
a Penalty Offset, Defendants shall, within 30 days after entry of a final order granting the Penalty
Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty Offset
to the United States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall
not be deemed an additional civil penalty and shall not be deemed to change the amount of the
civil penalty imposed in this Judgment. For purposes of this paragraph, a “Related Investor
Action” means a private damages action brought against Defendants by or on behalf of one or
more investors based on substantially the same facts as alleged in the Complaint in this action.
VIII.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain
jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.
IX.
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. Any amount that Warras and Brandel pay in restitution shall be offset against the
disgorgement ordered herein.

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Accordingly,
CONCLUSION
IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment (ECF No. 78) is GRANTED,
pursuant to the foregoing.
IT IS FURTHER ORDERED that Defendant Warras' Motion for Summary Judgment (ECF No. 86) is
DENIED.
IT IS FURTHER ORDERED that Defendant Brandel's Motion for Stay (ECF No. 83) is DENIED as moot.
The Clerk of Court is ordered to enter judgment accordingly and close the case.
DATED this 29 day of September, 2017
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___________________________
Gloria M. Navarro, Chief Judge
United States District Court

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