Securities and Exchange Commission v. Boock et al

Filing 150

OPINION AND ORDER: Wong's September 8, 2011 motion for reconsideration is denied. So Ordered (Signed by Judge Denise L. Cote on 11/9/2011) (js)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
SECURITIES AND EXCHANGE COMMISSION,
:
Plaintiff,
:
:
-v:
:
IRWIN BOOCK, STANTON B.J. DEFREITAS,
:
NICOLETTE D. LOISEL, ROGER L. SHOSS and
:
JASON C. WONG,
:
Defendants,
:
:
and
:
:
BIRTE BOOCK and 1621533 ONTARIO, INC.,
:
Relief Defendants.
:
:
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09 Civ. 8261 (DLC)
OPINION AND ORDER

APPEARANCES:
For the plaintiff:
Justin Chretien
Paul W. Kisslinger
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
For defendant Jason C. Wong:
Russell Cornelius Weigel, III
Edward Robert Averbuch
Law Office of Russell C. Weigel, III, P.A.
5775 Blue Lagoon Drive
Suite 100
Miami, FL 33126

DENISE COTE, District Judge:
The plaintiff, the United States Securities and Exchange
Commission (“SEC”), brought this action against five defendants
-- Irwin Boock (“Boock”), Stanton B.J. DeFreitas (“DeFreitas”),

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Nicolette D. Loisel (“Loisel”), Roger L. Shoss (“Shoss”) and
Jason C. Wong (“Wong”) (collectively, the “Defendants”) -alleging a securities fraud scheme whereby these individuals
hijacked defunct or inactive corporations (the “Hijacked
Corporations”), issued unregistered stock and sold the
securities in violation of the antifraud and registration
requirements of the federal securities laws (the “Scheme”).
Court has entered a default as to Boock and DeFreitas.

The

This

action is stayed with regard to Loisel and Shoss pending
criminal proceedings against them.
On February 25, 2011, the SEC filed a motion for summary
judgment as to Wong and Wong filed a cross-motion for partial
summary judgment.
6.

These motions were fully submitted on April

On August 25, the Court issued an opinion granting the SEC’s

summary judgment in part and denying Wong’s motion for partial
summary judgment (the “Summary Judgment Opinion”).

SEC v.

Boock, et al., No. 09 Civ. 8261 (DLC), 2011 WL 3792819 (S.D.N.Y.
Aug. 25, 2011)
Wong timely filed this motion for reconsideration of the
Summary Judgment Opinion on September 8, 2011.

Familiarity with

the facts of this case, as set out in the Summary Judgment
Opinion, is assumed.

For the following reasons, the motion for

reconsideration is denied.

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DISCUSSION
The standard for reconsideration is strict. “Generally,
motions for reconsideration are not granted unless the moving
party can point to controlling decisions or data that the court
overlooked -- matters, in other words, that might reasonably be
expected to alter the conclusion reached by the court.”

In re

BDC 56 LLC, 330 F.3d 111, 123 (2d Cir. 2003) (citation omitted).
“[A] motion to reconsider should not be granted where the moving
party seeks solely to relitigate an issue already decided.”
Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).
Likewise, a party moving for reconsideration may not “advance
new facts, issues, or arguments not previously presented to the
Court.”

Nat’l Union Fire Ins. Co. of Pittsburgh v. Stroh Cos.,

Inc., 265 F.3d 97, 115 (2d Cir. 2001) (citation omitted).

The

decision to grant or deny the motion for reconsideration is
within “the sound discretion of the district court.”

Aczel v.

Labonia, 584 F.3d 52, 61 (2d Cir. 2009) (citation omitted).
Wong’s motion for reconsideration does not meet this
exacting standard.
reconsideration.

He provides two arguments for
First, that this Court overlooked the Supreme

Court’s recent decision in Janus Capital Group, Inc. v. First
Derivative Traders, 131 S. Ct. 2296 (2011), in finding Wong
liable for violations of Rule 10b-5.

Second, Wong presents a

new argument, not asserted in opposition to the SEC’s motion for
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summary judgment nor in support of his motion for partial
summary judgment, that there was insufficient evidence that the
Hijacked Corporations were indeed hijacked.
I.

The Supreme Court’s Janus Capital Decision Does Not Relieve
Wong of Liability Under Rule 10b-5.
Wong argues that Janus Capital “has effectively narrowed

the scope of liability under Section 10(b) and Rule 10b-5” by
limiting the scope for one to be held liable if they are not the
party with ultimate authority over a material misstatement or
omission.

Indeed, Janus Capital found that

[f]or purposes of Rule 10b–5, the maker of a statement
is the person or entity with ultimate authority over
the statement, including its content and whether and
how to communicate it. Without control, a person or
entity can merely suggest what to say, not “make” a
statement in its own right. One who prepares or
publishes a statement on behalf of another is not its
maker. And in the ordinary case, attribution within a
statement or implicit from surrounding circumstances
is strong evidence that a statement was made by -- and
only by -- the party to whom it is attributed. This
rule might best be exemplified by the relationship
between a speechwriter and a speaker. Even when a
speechwriter drafts a speech, the content is entirely
within the control of the person who delivers it. And
it is the speaker who takes credit -- or blame -- for
what is ultimately said.
Janus Capital, 131 S. Ct. at 2302.

As a result of this holding,

the Supreme Court found that an investment advisor and parent
capital group could not be held liable for any misstatements in
the prospectuses of the legally distinct fund they owned and
administered, as they did not “make” the statements at issue in

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the case.

Id. at 2304-05.

The investment advisor’s assistance

in preparing the fund’s prospectuses did not change the fact
that the fund was in ultimate control of the message.

Id. at

2305.
Wong contends that this Court’s finding in the Summary
Judgment Opinion that “the fact that the SEC may not have shown
that Wong himself made a material misrepresentation or a
material omission does not raise a genuine issue of material
fact,” cannot stand in the face of the principles articulated by
Janus Capital.

Wong’s argument takes this sentence entirely out

of context, and in so doing, pretends that this Court was
finding Wong liable secondarily for the misleading statements or
omissions of others.

Quite to the contrary, as the Summary

Judgment Opinion noted, the SEC had not alleged that any of the
Defendants had made material misstatements or omissions in
violation of Rule 10b-5, but instead sought to bring claims
based on their participation in a fraudulent scheme under the
antifraud provisions of the securities laws.

Accordingly, the

Summary Judgment Opinion found that Wong “directly participated”
in “a device, scheme, or artifice to defraud, or an act,
practice, or course of business which operates or would operate
as a fraud or deceit, unlawful under Rule 10b–5(a) and (c) and
Section 17(a)(1) and (3).”

It went on to note that the lack of

evidence of Wong making a material misstatement or omission was
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of no moment because Wong was a primary actor in “employ[ing a]
device, scheme, or artifice to defraud” with scienter in
connection with the purchase or sale of securities, which is
clearly a violation of the portions of § 10(b), Rule 10b-5, and
§ 17(a) that impose liability without there having been any
misstatement or omission. 1
II.

The SEC Established at Summary Judgment that the Hijacked
Companies Were, Indeed, Hijacked.
Wong next raises a new argument that suggests that the

Hijacked Corporations were not actually “hijacked,” and claims
that the SEC has failed to provide sufficient evidence that the
participants in the Scheme -- Wong and the other Defendants -lacked the consent of the Hijacked Corporations’ true owners in
selling them as shells to the Scheme’s clients.

Therefore, Wong

asks this Court to reconsider the Summary Judgment Opinion’s
disposition in favor of the SEC on its § 10(b) and Rule 10b-5
claim.
This argument is entirely new, having not been raised in
either Wong’s motion for partial summary judgment, which
addressed only the SEC’s § 5 claim, or in Wong’s opposition to

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Wong also does not explain why Janus Capital, which found
that the wording of the relevant statutes did not permit private
actors to sue those who may be liable for the misstatements of
others in violation of Rule 10b-5, has any bearing on the SEC’s
capacity to sue secondary violators, which is provided for
specifically by the Private Securities Litigation Reform Act of
1995, 15 U.S.C. § 78t(e).
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the SEC's motion for summary judgment t which focused instead on
the defenses of lack of scienter, and lack of personal
involvement in the Scheme.

It is therefore not properly rai

on a motion for reconsideration.
dispute concerning any

In any event t there is no

the material facts showing that the

Scheme involved taking control
rightful owners.

Support

public companies from their

evidence included the testimony of

Defendants Boock and DeFreitas admitting the facts

the Scheme

and their participation in itt documents filed with state
secretaries of state t CUSIP Services and NASDAQ, emails and
other communications.

CONCLUSION
Wong's September 8, 2011 motion for reconsideration is
denied.

Dated:

New York t New York
November 9 t 2011

United S

I

I

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ct Judge