Securities and Exchange Commission v. Carrillo Huettel LLP et al

Filing 304

REPORT AND RECOMMENDATION. For the foregoing reasons, I recommend that the plaintiff's motion for default judgment (Docket no. 279) be granted in part. Specifically, I recommend that 1. Default judgments be entered against Carrillo Huettel LLP, Luis J. Carrillo, Wade D. Huettel, Gibraltar Global Securities, Warren Davis, and Luniel de Beer; 2. Permanent injunctions be entered barring Luis J. Carrillo, Wade D. Huettel, and Luniel de Beer from a. Committing or aiding and abetting future viola tions of the securities laws and rules alleged against them; b. Participating in any offering of a penny stock; and c. Serving as an officer or director of any public company; 3. Carrillo Huettel LLP, Luis J. Carrillo, Wade D. Huettel, and Luniel de Beer be held jointly and severally liable for the disgorgement of $13,376,519.99 plus prejudgment interest as calculated by the plaintiff using the IRS underpayment rate; 4. Gibraltar Global Securities and Warren Davis be held jointly and severa lly liable for the disgorgement of $9,674,276.20 plus prejudgment interest as calculated by the plaintiff using the IRS underpayment rate; 5. The defendants be held liable for the following civil monetary penalties: a. Carrillo Huettel -- $ 375,000. b. Luis J. Carrillo -- $375,000. c. Wade D. Huettel -- $375,000. d. Luniel de Beer -- $375,000. e. Gibraltar Global Securities -- $225,000. f. Warren Davis -- $150,000. re: 279 MOTION for Default Judgment as t o Luis Carrillo, Wade Huettel, Carrillo Huettel LLP, Luniel De Beer, Warren A. Davis, and Gibraltar Global Securities and for Final Judgment against John Kirk filed by Securities and Exchange Commission. Objections to R&R due by 1/31/2017. (Signed by Magistrate Judge James C. Francis on 1/17/2017) Copies transmitted this date via ECF, email and U.S. Mail. (rjm)

and Mr. Huettel oppose the motion. I recommend granting the motion
in part.
Background
The Amended Complaint alleges that various defendants made
false or misleading representations and illegally distributed
shares in connection with two scams of the type popularly known by
the phrase “pump and dump.”2

(Amended Complaint, ¶ 1).

According

to the SEC, the fraudulent schemes centered on the publicly-traded
stock of two companies: Tradeshow, an entity established to sell
merchandise at trade shows and shopping malls (Amended Complaint,
¶ 31), and Pacific Blue, an enterprise re-purposed as a purported
alternative energy company (Amended Complaint, ¶ 77).
Tradeshow was largely controlled by John B. Kirk through the
complicity of the nominal CEO and President, Mr. de Beer. (Amended

settlement in principle with Mr. Kirk and requested a stay of that
portion of its motion. (Letter of Todd D. Brody dated Nov. 8,
2016). I therefore do not address that issue.
The residual defendants -- Benjamin T. Kirk, Dylan L. Boyle,
James K. Hinton, Jr., Joel P. Franklin, Pacific Blue Energy
Corporation (“Pacific Blue”), and Tradeshow Marketing Company Ltd.
(“Tradeshow”) -- have either settled with the SEC or had default
judgments entered against them. (Final Judgment as to Defendant
Benjamin T. Kirk dated July 20, 2016; Final Judgment as to
Defendant Dylan L. Boyle dated July 20, 2016; Final Judgment as to
Defendant James K. Hinton dated July 20, 2016; Final Judgment as to
Defendant Joel P. Franklin dated March 25, 2013; Default Judgment
and Order as to Defendant Tradeshow Marketing Company dated March
6, 2015; Default Judgment and Order as to Defendant Pacific Blue
Energy Corporation dated March 6, 2015).
2

“[In] the classic ‘pump and dump’ scheme[,] [] persons
holding certain securities fraudulently inflate their price (the
‘pump’) in order to sell at an artificial profit (the ‘dump’)
. . . .” United States v. Salmonese, 352 F.3d 608, 612 (2d Cir.
2003).
2

Complaint, ¶¶ 32-34; Declaration of Todd Brody dated Aug. 11, 2016
(“Brody Decl.”), ¶¶ 55, 60).

By mid-2009 -- through gifts of

shares from John Kirk’s father, Bruce Kirk, a non-party who had
founded the company -- John Kirk, his brother Benjamin T. Kirk, and
Dylan L. Boyle beneficially owned over 40% of the outstanding stock
of Tradeshow through various nominee entities. (Amended Complaint,
¶¶ 37-38; Brody Decl., ¶¶ 56, 61).

The Kirks, Mr. Boyle, and James

K. Hinton, Jr., a stock promoter, initiated and controlled two
“boiler room” operations,3 known as Skymark Media Group (“Skymark”)
and Emerging Stock Report (“ESR”), to “tout[] their purported
‘independent’ research coverage” misleadingly “predicting dramatic
increases in [Tradeshow’s] stock price.” (Amended Complaint, ¶¶
47-50, 55-57; Brody Decl., ¶¶ 49, 56-57).

The communications

Skymark and ESR had with potential buyers did not disclose that the
Kirks and Mr. Boyle held millions of shares in Tradeshow and were
selling those shares as their price (incrementally) rose. (Amended
Complaint, ¶¶ 58-62). When an article appeared in an on-line trade
publication highlighting connections among the Kirks, Tradeshow,
Skymark, and Carrillo Huettel (a law firm controlled by Mr. Carillo
and Mr. Huettel that represented Tradeshow and Skymark (Amended
Complaint, ¶¶ 15-17)), various defendants, including Skymark,
Tradeshow, and Mr. de Beer, made misleading statements intending to
cover up those connections.

(Amended Complaint, ¶¶ 69-75; Brody

3

A “boiler room” is a telemarketing or email marketing
operation that uses high-pressure selling techniques to sell stocks
of questionable value to the buyer without disclosing material
facts about the issuer. See, e.g., United States v. Burke, 718 F.
Supp. 1130, 1132 n.2 (S.D.N.Y. 1989).
3

Decl., ¶ 59).

In addition, Tradeshow and Mr. de Beer made false

and misleading statements in Tradeshow’s annual reports, quarterly
reports,

and

press

releases

in

use

stock

to

conceal

promoters,

and

Tradeshow’s

ownership,

control,

kickbacks.

(Amended Complaint, ¶¶ 42-46; Brody Decl., ¶¶ 62-64,

88-92).

of

order

payment

of

Mr. de Beer also made false statements in Tradeshow’s

corporate resolutions regarding the trading status of the shares,
which should have been restricted. (Amended Complaint, ¶¶ 127-130,
140; Brody Decl., ¶¶ 91-92).

Gibraltar, a Bahamian broker-dealer

at which Benjamin Kirk, Mr. Boyle, Mr. Hinton, and Mr. Carrillo
maintained accounts, and which was represented by Mr. Carrillo
(Amended Complaint, ¶¶ 18, 113), similarly provided misleading
representations -- signed by its president, Mr. Davis -- regarding
the ownership and trading status of Tradeshow shares in order to
facilitate

(illegal)

distribution

of

the

securities

(Amended

Complaint, ¶¶ 114-124, 144-146; Brody Decl., ¶¶ 65-70).
Pacific Blue was born, under a different name, as a travel
service company. (Amended Complaint, ¶ 76; Brody Decl., ¶ 47). In
September 2009, the Kirks and Mr. Carillo purchased all outstanding
shares

of

that

company,

renamed

it,

re-purposed

it

as

an

alternative energy company, and then installed Mr. de Beer as
Chairman

and

Mr.

Franklin

as

President,

CEO,

(Amended Complaint, ¶¶ 77-79; Brody Decl., ¶ 47).

and

Director.

Although over

90% of the purchase price came from John Kirk, Mr. Carrillo and Mr.
Huettel “arranged for Pacific Blue’s outstanding shares to be
distributed in blocks of 4.9% to John Kirk, [Mr. Carrillo’s father]
4

Dr.

Luis

Carillo,4

and

to

various

foreign

controlled by the Kirks and [Mr.] Boyle.”5
79-82; Brody Decl., ¶¶ 47-48).

nominee

entities

(Amended Complaint, ¶¶

Mr. Carrillo and Mr. Huettel

drafted sham stock purchase agreements in order to conceal the fact
that the Kirks, Mr. Boyle, Dr. Carrillo, and Mr. de Beer controlled
“at least 85% of the company’s outstanding shares” through offshore
nominee entities controlled by the Kirks, as well as to conceal the
existence of privately negotiated transactions in which John Kirk
sold over 1 million shares of Pacific Blue, netting proceeds of
over $210,000.

(Amended Complaint, ¶¶ 82-86; Brody Decl., ¶¶ 48-

49). The Kirks, through the cooperation of Mr. Franklin and Mr. de
Beer, also directed the release of misleading statements in Pacific
Blue’s annual reports, quarterly reports, and press releases as to
the company’s ownership, internal controls, stock promotion, and
payment of kickbacks.
¶¶ 50-52, 93).

(Amended Complaint, ¶¶ 91-96; Brody Decl.,

Mr. Carrillo and Mr. Huettel “drafted and actively

facilitated” these false statements by, for example, commenting on
false

representations

in

quarterly

reports

and

directing

Mr.

Franklin to sign misleading documents on which Pacific Blue’s
auditors would rely. (Amended Complaint, ¶¶ 97-101). Mr. Carrillo
and Mr. Huettel also provided false and misleading opinion letters

4

The original complaint named Dr. Carrillo as a defendant,
but the claims against him were dismissed for lack of personal
jurisdiction. (Order dated March 20, 2014 (“3/20/14 Order”) at 1).
5

Under Section 13(d) of the Exchange Act and Rule 13d,
beneficial ownership of more than 5% of a company’s outstanding
shares imposes certain reporting requirements on the beneficial
owner. 15 U.S.C. § 78m(d)(1); 17 C.F.R. § 240.13d-1.
5

to brokers “to facilitate the deposit and sale of the Kirks’ and
[Mr.] Boyle’s Pacific Blue shares.”

(Amended Complaint, ¶¶ 133-

138; Brody Decl., ¶¶ 79-84). ESR and Skymark misleadingly promoted
the company in a manner similar to that used to promote Tradeshow,
and Gibraltar similarly participated in illegal distribution of
Pacific Blue shares (Amended Complaint, ¶¶ 102-107, 121-125; Brody
Decl., ¶¶ 94-96).

Indeed, the Amended Complaint alleges that all

of the defendants participated in the illegal distribution of
Pacific Blue shares.

(Amended Complaint, ¶¶ 147-160).

Each of the individual Defaulting Defendants (that is, each
defaulting defendant other than Carrillo Huettel and Gibraltar) has
asserted

that

he

will

no

longer

defend

against

the

Amended

Complaint in this action. (Letter of William B. Fleming dated Nov.
24, 2015 (Mr. Huettel); Letter of Luniel de Beer dated Oct. 9, 2015
(Luniel de Beer); Letter of Thomas J. Curran dated

Sept. 2, 2015

(Mr. Carrillo); Letter of Nicholas M. de Feis dated May 13, 2015
(Mr. Davis); Affidavit of Warren A. Davis dated April 23, 2015,
attached as Exh. to Letter of Philip C. Patterson dated April 24,
2015, ¶ 5).

Mr. Davis has also violated a court order to produce

discovery, and Mr. Davis, Mr. Carrillo, and Mr. Huettel have each
violated one or more court orders to testify through deposition.
SEC v. Carrillo Huettel LLP, No. 13 Civ. 1735, 2015 WL 1610282, at
*6 (S.D.N.Y. April 8, 2015) (requiring Mr. Carrillo and Mr. Huettel
to testify regarding certain communications, but not setting date
or location for testimony); SEC v. Gibraltar Global Securities,
Inc., No. 13 Civ. 2575, 2015 WL 1514746, at *6 (S.D.N.Y. April 1,
6

2015) (requiring Mr. Davis to produce documents); (Memorandum
Endorsement dated April 8, 2015 (requiring Mr. Carrillo to appear
for deposition in New York); Memorandum Endorsement dated April 1,
2015

(“April

1

Order”)

(requiring

Mr.

Davis

to

appear

for

deposition in New York); Brody Decl., ¶¶ 9-13, 16-18, 30-33).6
Gibraltar and Carrillo Huettel are no longer represented by counsel
(Order dated July 2, 2015 (Gibraltar); Order dated Oct. 23, 2014
(Carrillo Huettel); Brody Decl., ¶¶ 22-23, 42-43) and, as each is
a business entity rather than a natural person, neither may appear
in this action pro se.

See, e.g., Eagle Associates v. Bank of

Montreal, 926 F.2d 1305, 1309-10 (2d Cir. 1991); RGI Brands LLC v.
Cognac Brisset-Aurige, S.A.R.L., No. 12 Civ. 1369, 2013 WL 1668206,
at *4-5 (S.D.N.Y. April 18, 2013), report and recommendation
adopted, 2013 WL 4505255 (S.D.N.Y. Aug. 23, 2013).
Discussion
A.

Legal Standards

The decision whether to grant a motion for a default judgment
“is within the sound discretion of the district court.”

SEC v.

Coronati, No. 16 Civ. 2022, 2016 WL 6462240, at *2 (E.D.N.Y. Oct.
14, 2016) (quoting United States Fidelity and Guaranty Co. v.

6

To be sure, the order requiring Mr. Davis to produce
documents was entered in a different case; however, as Mr. Davis
noted, the two cases were consolidated for the purpose of discovery
and the issues regarding the production of documents were
intertwined with the issue of Mr. Davis’ deposition. (Letter of
Philip C. Patterson dated Feb. 13, 2015, at 1-2).
The order
requiring Mr. Davis to appear for his deposition was entered in
both cases. (April 1 Order, Docket no. 217 in SEC v. Carrillo
Huettel, No. 13 Civ. 1735; April 1 Order, Docket no. 53 in SEC v.
Gibraltar Global Securities, No. 13 Civ. 2575).
7

Petroleo Brasiliero S.A., 220 F.R.D. 404, 406 (S.D.N.Y. 2004)). In
making

that

determination,

the

court

treats

all

factual

allegations of the complaint (other than those pertaining to
damages) as true and “then [] analyze[s] those facts for their
sufficiency to state a claim.” Id. (quoting Brown v. Gabbidon, No.
06 Civ. 8148, 2007 WL 1423788, at *2 (S.D.N.Y. May 14, 2007)); see
also Heneghan v. Thibeault, No 15 Civ. 9651, 2016 WL 4411424, at *2
(S.D.N.Y. Aug. 19, 2016).

Therefore, although only Mr. Carrillo

and Mr. Huettel have opposed the SEC’s motion, I must still
evaluate whether the plaintiff has stated a claim against each of
the

Defaulting

Defendants.

In

addition,

a

court

must

“independently establish the damages and other relief to be awarded
on the basis of sufficient evidence.”

SEC v. Tavella, 77 F. Supp.

3d 353, 358 (S.D.N.Y. 2015). Where, as here, the plaintiff submits
detailed affidavits and other evidence, it is unnecessary to hold
an inquest or other proceeding.

Id.

To establish a violation of Section 10(b) of the Exchange Act
and Rule 10b-5, the plaintiff must establish that a defendant “(1)
made a material misrepresentation or a material omission as to
which he had a duty to speak, or used a fraudulent device; (2) with
scienter;

(3)

in

connection

with

the

purchase

or

sale

of

securities.”

SEC v. Monarch Funding Corp., 192 F.3d 295, 308 (2d

Cir. 1999).

“Essentially the same elements are required under

Section 17(a)(1)-(3) [of the Securities Act] in connection with the
offer or sale of a security, though no showing of scienter is
required for the SEC to obtain an injunction under subsections
8

(a)(2) or (a)(3).”

Id.

“Information is material when there is a

substantial likelihood that a reasonable investor would find it
important in making an investment decision.”

United States v.

Contorinis, 692 F.3d 136, 143 (2d Cir. 2012).

In Section 10(b)

fraud cases, scienter requires an “intent to deceive, manipulate,
or defraud,” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 319 (2007) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185,
193 & n.12 (1976)), which can be proved by “strong circumstantial
evidence

of

conscious

misbehavior

or

recklessness,”

ATSI

Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir.
2007).

Because scienter is not required in fraud cases under

Section 17(a)(2) or (a)(3) of the Securities Act, “[a] showing of
negligence is sufficient.”

SEC v. Ginder, 752 F.3d 569, 574 (2d

Cir. 2014).
To establish a prima facie case for violation of Section 5 of
the Securities Act, the SEC must prove that (1) “no registration
statement

was

in

effect

as

to

the

securities,”

(2)

“the

defendant[s] sold or offered to sell these securities,” and (3)
“there was a use of interstate transportation, or communication, or
of the mails in connection with the sale or offer of sale.”

SEC v.

Cavanaugh, 1 F. Supp. 2d 337, 361 (S.D.N.Y.), aff’d, 155 F. 3d 129
(2d Cir. 1998).

“Liability for violations of Section 5 extends to

those who have ‘engaged in steps necessary to the distribution of
[unregistered] security issues,’”

SEC v. Universal Express, Inc.,

475 F. Supp. 2d 412, 422 (S.D.N.Y. 2007) (alteration in original)
(quoting SEC v. Chinese Consolidated Benevolent Association, Inc.,
9

120 F.2d 738, 741 (2d Cir. 1941)), aff’d sub nom. SEC v. Altomare,
300 F. App’x 70 (2d Cir. 2008), as long as those steps were not
merely

de

minimis,

see

SEC

v.

North

American

Research

Develpoment Corp., 424 F.2d 63, 81 (2d Cir. 1970).

and

Thus, a

defendant who neither offered nor sold an unregistered security
himself is still liable if his acts “were a ‘substantial factor in
the sales transaction,’” that is, if, “but for the defendant’s
participation, the sale transaction would not have taken place.”7
Universal Express, 475 F. Supp. 2d at 422 (quoting SEC v. Murphy,
626 F.2d 633, 650-51 (9th Cir. 1980)).
B.

Liability under Section 17(a) of the Securities Act and
Section 10(b) of the Exchange Act
1.

Mr. de Beer

Mr. de Beer signed Tradeshow’s annual and quarterly reports,
which falsely claimed that he was the only officer, director, or
control person of the company, omitting the facts that the Kirks
and

Mr.

Boyle

owned

shares

in

the

company,

that

the

Kirks

controlled the company, and that the Kirks served as “de facto
investment

bankers,

promoters[,]

and

investor

relations

consultants.” (Amended Complaint, ¶ 42; Brody Decl., ¶ 62). These
public filings also misrepresented Mr. de Beer’s compensation “by
failing to disclose kickbacks of stock sale proceeds he received
from the Kirks and [Mr.] Boyle.”
7

(Amended Complaint, ¶ 44; Brody

There is an exemption from liability under Section 5 for
“transactions by any person other than an issuer, underwriter, or
dealer.”
15 U.S.C. § 77d(a)(1).
However, the burden of
establishing that the exemption is applicable is on the party
seeking the exemption. See, e.g., SEC v. Guild Films Co., 279 F.2d
485, 489 (2d Cir. 1960).
10

Decl., ¶ 63).

Mr. de Beer also released “dozens” of misleading

press releases that failed to disclose that the primary purpose of
Tradeshow and of the press releases was to inflate the value of the
shares so that the Kirks and Mr. Boyle could sell them.
Complaint, ¶ 46; Brody Decl., ¶ 64).

(Amended

Lastly, Mr. de Beer provided

the Kirks and Mr. Boyle with misleading corporate resolutions and
certifications that falsely represented that they were not officers
or affiliates of Tradeshow, that they did not beneficially own 5%
or more of the company’s shares, and that the shares were not
restricted.
92).

(Amended Complaint, ¶¶ 128-130; Brody Decl., ¶¶ 89,

Similar false representations were made as to Pacific Blue

shares.

(Amended Complaint, ¶¶ 131-132; Brody Decl., ¶ 93).

These

misrepresentations

were

material.

Concealing

the

ownership of the shares of both companies was integral to the
fraud.

Indeed,

when

an

article

appeared

highlighting

the

connections among the Kirks, Tradeshow, and Skymark, the share
price tumbled 40%.

(Amended Complaint, ¶ 69; Brody Decl., ¶ 59).

Moreover, falsely reporting the ownership of the shares and their
trading status allowed them to be deposited and sold without
registration.
93).

(Amended Complaint, ¶¶ 126-132; Brody Decl., ¶¶ 91-

The undisclosed kickbacks were also material because such

arrangements

undermined

the

Tradeshow’s CEO and President.

independence

of

Mr.

de

Beer,

See, e.g., SEC v. Savino, No. 01

Civ. 2438, 2006 WL 375074, at *14 (S.D.N.Y. Feb. 16, 2006); SEC v.
Scott, 565 F. Supp. 1513, 1527 (S.D.N.Y. 1983), aff’d sub nom. SEC
v. Cayman Islands Reinsurance Corp., 734 F.2d 118 (2d Cir. 1984).
11

Finally, Mr. de Beer had the requisite scienter. He knew that
the Kirks controlled Tradeshow because he took direction from them
regularly.

(Amended Complaint, ¶¶ 34-35; Brody Decl., ¶ 60).

He

also knew about the ownership of Tradeshow and of Pacific Blue
(Amended Complaint, ¶¶ 39, 84; Brody Decl., ¶ 61), and he was
obviously aware of the kickbacks he received.
2.
Mr.

Mr. Davis and Gibraltar

Davis

signed

various

false

statements

on

behalf

of

Gibraltar, including an affidavit stating that Gibraltar held
Pacific Blue securities for the sole benefit of two fake nominee
companies, and share deposit forms falsely representing that the
shares were acquired from the nominee entities, notwithstanding the
fact that Benjamin T. Kirk was the beneficial owner of those
shares. (Amended Complaint, ¶¶ 109, 114-116, 120-123; Brody Decl.,
¶¶ 70-73).

These representations were material because, had the

broker-dealer with whom the shares were deposited known of the
ownership of the securities, it would have considered the shares
restricted and unable to be sold without registration.
Complaint, ¶ 119; Brody Decl., ¶ 95).
Gibraltar

knew

the

representations

(Amended

Furthermore, Mr. Davis and
were

false,

because

they

contradicted information on the documents opening Benjamin T.
Kirk’s Gibraltar accounts.

(Amended Complaint, ¶¶ 119, 123; Brody

Decl., ¶ 68).

12

3.

Mr. Carrillo, Mr. Huettel, and Carrillo Huettel8

Mr. Carrillo and Mr. Huettel provided multiple opinion letters
to brokers falsely asserting that Pacific Blue shares beneficially
owned by the Kirks and Mr. Boyle were unrestricted and free trading
or that they were registered and free trading. (Amended Complaint,
¶¶ 134-136; Brody Decl., ¶¶ 80-82).

Mr. Carrillo and Mr. Huettel

drafted SEC filings for Pacific Blue that contained statements
concealing

the

Kirk’s

control

over

the

company,

as

well

as

documents including similar misrepresentations intended for Pacific
Blue’s auditors.
51-52).

(Amended Complaint, ¶¶ 98-101; Brody Decl., ¶¶

The opinion letters were material because, in reliance on

them, brokers allowed the Pacific Blue shares to be deposited for
sale.

(Amended Complaint, ¶ 133; Brody Decl., ¶ 79).

The

statements concealing ownership were, as noted above, integral to
the scheme to falsely inflate the price of the shares to enrich
their owners.

Moreover, Mr. Carrillo and Mr. Huettel knew the

statements were false.

They knew Jon Kirk owned the controlling

block of shares because they were aware that John Kirk paid the
bulk of the purchase price (which was funneled through their firm’s
IOLTA trust account) and they arranged for the distribution of the

8

According to the SEC, “Carrillo Huettel’s liability in this
matter is derivative of its two partners.” (Memorandum of Law in
Support of the Securities and Exchange Commission’s Motion for
Default Judgment Against Luis Carrillo, Wade Huettel, Carrillo
Huettel LLP, Luniel de Beer, Warran A. Davis and Gibraltar Global
Securities, Inc. and its Motion for Final Judgment and Disgorgement
Against John Kirk (“Pl. Memo.”) at 9 n.5). Counsel for Carrillo
Huettel similarly acknowledged this fact at oral argument on the
firm’s motion to dismiss. (Transcript of Argument dated Feb. 26,
2014 (“2/26/14 Tr.”), at 98).
13

shares in blocks of 4.9%.
¶¶ 47-49).

(Amended Complaint, 79-81; Brody Decl.,

They knew the Kirks exercised control over the company

because they were intimately involved in communications with the
Kirks about Pacific Blue.

(Brody Decl., ¶ 50).

From this

knowledge, they were aware that the shares were not free trading.
(Amended Complaint, ¶ 137; Body Decl., ¶ 83).

They were further

aware that the Pacific Blue shares were not registered.

(Amended

Complaint, ¶ 138; Brody Decl., ¶ 84).
Mr. Carrillo and Mr. Huettel oppose the SEC’s motion.

They

argue that (1) “[n]one of the alleged ‘statements’ are ‘actionable’
to impose liability” because neither Mr. Carrillo nor Mr. Huettel
“made” the statements, but rather merely published them on behalf
of the controlling shareholders (Memorandum of Law in Support of
Defendants Carrillo and Huettel’s Opposition to Plaintiff’s Motion
for Default Judgment (“Carrillo/Huettel Memo.”) at 10); (2) the
opinion letters are not actionable because they were made based on
client representations alone, and were therefore not “made” by the
attorneys with the requisite scienter (Carrillo/Huettel Memo. at
11); the opinion letters were not made in connection with the
purchase or sale of a security because they did not cause purchases
or losses by the investing public (Carrillo/Huettel Memo. at 1112); (4) there is no basis for “scheme” liability against Mr.
Carrillo or Mr. Huettel (Carrillo/Huettel Memo. at 12-14); and (5)
there is no basis for aiding and abetting liability against Mr.
Carrillo or Mr. Huettel (Carillo/Huettel Memo. at 14-15).
Mr. Carrillo and Mr. Huettel raised these precise arguments in
14

their motions to dismiss.

(Memorandum of Law in Support of

Defendant Luis J. Carrillo’s Motion to Dismiss (“Carrillo MTD
Memo.”) at 6-8 (statements not attributable to Mr. Carrillo), 12
(statements not made in connection with purchase or sale of
security), 14 (no basis for “scheme” liability), 14-19 (requisite
scienter

absent),

19-22

(no

basis

for

aiding

and

abetting

liability); Memorandum of Law in Support of Defendant Wade D.
Huettel’s

Motion

to

Dismiss

(“Huettel

MTD

Memo.”)

at

12-15

(statements not attributable to Mr. Huettel), 15-18 (requisite
scienter absent and statements not made in connection with purchase
or sale of security), 20-22 (no basis for aiding and abetting
liability)).

The

Honorable

George

B.

Daniels,

U.S.D.J.,

necessarily rejected them when he denied both motions.

(3/20/14

Order; Transcript of Argument dated March 19, 2014 (“3/19/14 Tr.”)
at 194-95).
here.

I decline to revisit Judge Daniels’ determination

See, e.g., Christianson v. Colt Industries Operating Corp.,

486 U.S. 800, 817 (1988) (“[A]s a rule courts should be loathe to
[revisit

their

prior

legal

decisions]

in

the

absence

of

extraordinary circumstances such as where the initial decision was
‘clearly erroneous and would work a manifest injustice.’” (quoting
Arizona v. California, 460 U.S. 605, 618 n.8 (1983)); see also
Chen-Oster v. Goldman, Sachs & Co., No. 10 Civ. 6950, 2015 WL
1566722, at *15-16 (S.D.N.Y. March 10, 2015) (declining to revisit
prior decision by district judge in absence of extraordinary
circumstances).

15

C.

Liability under Section 5 of the Securities Act

The SEC has established, for the purposes of this motion, that
the Tradeshow and Pacific Blue shares at issue were not registered.
(Amended Complaint, ¶¶ 138-139, 147; Brody Decl., ¶¶ 77-78).

The

use of interstate transportation or communication or the mails is
similarly established.

(Amended Complaint, ¶¶ 221, 226).

The

remaining question is whether each of the Defaulting Defendants
engaged in conduct that was a substantial factor in the offer or
sale of these securities.
As noted above, Mr. de Beer provided misleading corporate
resolutions that allowed Tradeshow and Pacific Blue shares to be
deposited for sale. Mr. Davis and Gibraltar provided documentation
concealing the fact that Tradeshow and Pacific Blue shares offered
for sale were beneficially owned by Benjamin T. Kirk, which
similarly facilitated the deposit of those shares.
As to Mr. Carrillo and Mr. Huettel, their false opinion
letters allowed the Pacific Blue shares to be deposited for sale.
See SEC v. Greenstone Holdings, Inc., 954 F. Supp. 2d 211, 214
(S.D.N.Y. 2013) (attorney who drafted broker-required opinion
letter

providing

authority

to

issue

unrestricted liable under Section 5).

unregistered

shares

as

Moreover, the attorneys

concealed the true ownership of the shares, in part by structuring
ownership in 4.9% blocks, and facilitated the purchase of the
securities.

On this record, their “role in facilitating the

transactions clearly was a substantial factor in the sales of
unregistered securities.”

Murphy, 626 F.2d at 652.
16

Again, Mr. Carrillo and Mr. Huettel raise arguments that Judge
Daniels rejected on their motions to dismiss.

(Carrillo/Huettel

Memo. at 15 (allegations insufficient to show substantial factor in
offer or sale); Carrillo MTD Memo. at 23-24 (same); Huettel MTD
Memo. at 23-24 (same); 3/20/14 Order (denying motions to dismiss);
3/19/16 Tr. at 194-95 (same)).

Again, I decline to revisit these

issues.9
D.

Remedy
1.

Injunctive Relief

Mr. de Beer, Mr. Carrillo, and Mr. Huettel have consented to
the entry of an order permanently enjoining each of them from
violating

the

federal

securities

laws,

participating

in

any

offering of a penny stock, and serving as an officer or director of
any public company.10

(Letter of William B. Fleming dated Nov. 24,

2015 (Mr. Huettel); Letter of Luniel de Beer dated Oct. 9, 2015

9

As noted above, in April 2015, the Court ordered Mr. Huettel
to testify as to certain matters and ordered Mr. Carrillo and Mr.
Davis to appear at depositions in New York. These depositions did
not, apparently, take place. (Brody Decl., ¶¶ 9-13; 16-18; 30-33).
In addition, Mr. Davis has “concededly . . . failed to produce
court-ordered discovery.” (Letter of Nicholas M. de Feis dated
June 12, 2015, at 1).
Given these violations, which occurred
almost two years ago and which will not be remedied, severe
sanctions such as entry of a default judgment would be appropriate.
See, e.g., Granados v. Traffic Bar and Restaurant, Inc., No. 13
Civ. 500, 2015 WL 9582430, at *3 (S.D.N.Y. Dec. 30, 2015) (noting
that failure to obey discovery order may merit sanctions including
entering judgment against disobedient party).
10

Carrillo Huettel is a defunct entity. (2/26/14 Tr. at 98).
As such, it is not necessary to enter an injunction against it.
See, e.g., SEC v. John Adams Trust Corp., 697 F. Supp. 573, 574 (D.
Mass. 1988) (declining to enter injunction requiring compliance
with federal securities laws against defunct entity because
“[e]quity [] does not sit to strangle a corpse.”).
17

(Luniel de Beer); Letter of Thomas J. Curran dated Sept. 2, 2015
(Mr. Carrillo).

Mr. Davis and Gibraltar have not, however,

consented to injunctive relief.
Permanent injunctive relief is appropriate where a defendant
has violated securities laws and there is a reasonable likelihood
that he will do so again. SEC v. Commonwealth Chemical Securities,
Inc., 574 F.2d 90, 99-100 (2d Cir. 1978).

In determining the

likelihood of future violations, courts generally consider
the fact that defendant has been found liable for illegal
conduct; the degree of scienter involved; whether the
infraction is an ‘isolated occurrence;’ whether defendant
continues to maintain that his past conduct was
blameless; and whether, because of his professional
occupation, the defendant might be in a position where
future violations could be anticipated.
Id. at 100.

Here, many of those factors favor entry of a permanent

injunction barring Mr. Davis and Gibraltar from violating federal
securities

laws

--

the

only

injunction

sought

against

those

defendants (Pl. Memo. at 25): they knowingly violated federal
securities laws in connection with the securities at issue here, as
well as in connection with the securities at issue in SEC v.
Gibraltar Global Securities Inc., No. 13 Civ. 2575, 2015 WL
10910362,

at

*2-5

(S.D.N.Y.

Oct.

16,

2015),

report

and

recommnedation adopted in relevant part, 2016 WL 153090 (S.D.N.Y.
Jan. 12, 2016).

However, both Mr. Davis and Gibraltar are already

subject to such an injunction.

(Order at 1-2, Gibraltar Global

Securities, No. 13 Civ. 2575 (July 2, 2015)).

In light of this, I

fail to see why a further injunction should be entered in this
case.

See, e.g., SEC v. Mattera, No. 11 Civ. 8323, 2013 WL
18

6485949, at *18 (S.D.N.Y. Dec. 9, 2013) (“Because [the defendant]
has already been enjoined from future securities violations by one
federal court during the pendency of this action, an additional
injunction

against

[him]

would

be

unnecessarily

duplicative.

Therefore, the SEC’s request for a permanent injunction is denied
as moot.”).
2.

Disgorgement and Pre-Judgment Interest

“Disgorgement of ill-gotten gains is a congressionally and
judicially recognized remedy for a violation of the securities
law.”

SEC v. Shehyn, No. 04 Civ. 2003, 2010 WL 3290977, at *7

(S.D.N.Y. Aug. 9, 2010) (footnote omitted) (awarding disgorgement
for, inter alia, violation of Section 15); see also SEC v. Tavella,
77 F. Supp. 3d 353, 359-60 (S.D.N.Y. 2015) (awarding disgorgement
for

violation

of

Section

5).

Disgorgement

aims

to

deprive

lawbreakers of all unjust enrichment and thereby deter others from
committing similar violations. SEC v. Universal Express, Inc., 646
F. Supp. 2d 552, 563 (S.D.N.Y. 2009); see also SEC v. StratoComm
Corp., 89 F. Supp. 3d 357, 367 (N.D.N.Y. 2015).

While courts have

broad discretion in determining both whether to order disgorgement
and the amount to be disgorged, SEC v. First Jersey Securities,
Inc.,

101

F.3d

1450,

1474

(2d

Cir.

1996),

in

setting

the

disgorgement amount, “a court must focus on the extent to which a
defendant has profited from his [illegal conduct],”
Express, 646 F. Supp. 2d at 563.

Universal

“[D]isgorgement need only be a

reasonable approximation of profits causally connected to the
violation.”

SEC v. Patel, 61 F.3d 137, 139 (2d Cir. 1995)
19

(alteration in original) (quoting SEC v. First City Financial
Corp., 890 F.2d 1215, 1231 (D.C. Cir. 1989)).

Once the SEC

demonstrates such an approximation, the defendant has the burden to
show that the full amount was not realized and therefore should not
be disgorged.

See Universal Express, 646 F. Supp. 2d at 563.

Any

uncertainty in calculating the defendants’ illicit gains should be
resolved in favor of the plaintiff.

Patel, 61 F.3d at 140.

A court’s discretion to award disgorgement is not limited to
a defendant’s personal pecuniary gain.

See SEC v. Cole, __ F.

App’x __, __, 2016 WL 4703901, at *1 (2d Cir. 2016) (“To the extent
defendants’ challenge focuses [] on the purported absence of
personal

financial

benefit,

the

argument

is

defeated

by

precedent.”); SEC v. Contorinis, 743 F.3d 296, 306 (2d Cir. 2014)
(“The amount a court may order a wrongdoer to disgorge may not
exceed the total amount of gain from the illegal action, but that
does not entail that the gain must personally accrue to the
wrongdoer.”), petition for cert. dismissed, 136 S. Ct. 531 (2015).
Indeed,

courts

have

discretion

to

impose

joint

and

several

liability for “combined profits” where there are “collaborating or
closely related parties.”

See SEC v. AbsoluteFuture.com, 393 F.3d

94, 97 (2d Cir. 2004); see also SEC v. Pentagon Capital Management
PLC, 725 F.3d 279, 288 (2d Cir. 2013) (“[T]here is no statutory
requirement that a disgorgement award be measured as to each
individual defendant.”); SEC v. Verdiramo, 907 F. Supp. 2d 367, 373
& n.12 (S.D.N.Y. 2012) (stating that courts have discretion to
impose

joint

and

several

liability
20

for

combined

profits

and

collecting cases).
An award of prejudgment interest “ensure[s] that the defendant
does not profit [by] obtaining the time-value of any unlawful
profits.”

Gibraltar Global Securities, 2015 WL 10910362, at *7

(alterations

in

original)

(quoting

SEC

v.

World

Information

Technology, Inc., 590 F. Supp. 2d 574, 578 (S.D.N.Y. 2008)).
Courts generally use the IRS underpayment rate to calculate such
interest.

See id.

From Mr. Carrillo, Mr. Huettel, Carrillo Huettel, and Mr. de
Beer,

the

SEC

participants’

seeks

joint

Tradeshow

and

and

several

Pacific

Blue

$13,376,519.99 plus prejudgment interest.11

disgorgement

of

proceeds,”

that

“all
is,

(Pl. Memo. at 19-20,

22). From Mr. Davis and Gibraltar, the SEC seeks joint and several
disgorgement of proceeds from “Tradeshow and Pacific Blue shares
sold through accounts at Gibraltar and at [non-party broker-dealer]
Scottsdale [Capital Advisors] and in the fraudulent schemes” plus
commissions received in furtherance of the schemes, that is,
$9,674,276.20 plus prejudgment interest.12

(Pl. Memo. at 21-22).

The SEC has provided a declaration from a staff accountant at the
SEC sufficiently establishing these amounts through review of
financial records and other information obtained by the SEC, and no

11

Using the IRS underpayment rate, SEC staff has calculated
the interest on this amount from April 1, 2010, through July 31,
2016, to total $2,882,403.67. (Declaration of Jaqueline Fine dated
Aug. 11, 2016 (“Fine Decl.”), ¶¶ 7-8, 54-56, & Exhs. 9-10).
12

Using the IRS underpayment rate, SEC staff has calculated
the interest on this amount from April 1, 2010, through July 31,
2016, to total $2,085,136.47. (Fine Decl., ¶¶ 50-53 & Exh. 8).
21

defendant has argued that they are inaccurate.

(Fine Decl., ¶¶ 1,

3, 5-8, 54-56; Carrillo/Huettel Memo. at 22-23).
Joint and several liability is appropriate in this case.

The

operative complaint establishes that the Defaulting Defendants
collaborated closely in these fraudulent schemes: as the SEC points
out, Mr. Carrillo, Mr. Huettel, and Carrillo Huettel
provided legal counsel to Tradeshow, to the Kirks
regarding Skymark, facilitated funds for Tradeshow’s
operations, helped the promoters acquire the Pacific Blue
shell, drafted Pacific Blue’s misleading public filings,
provided misleading legal opinions, and allowed the
promoters to funnel sales proceeds through their firm’s
attorney-client trust account.
(Pl. Memo. at 19-20).

Mr. de Beer was similarly instrumental in

the fraud in his position as CEO and President of Tradeshow and
Chairman of Pacific Blue.

The Pacific Blue scam could not have

succeeded without the misrepresentations as to ownership of Pacific
Blue propounded by Mr. Davis and Gibraltar.
defendants

[]

engaged

in

complex

and

Moreover, “‘[the]
heavily

disguised

transactions’ in an effort to conceal their fraud,” SEC v. Boock,
No. 09 Civ. 8261, 2012 WL 3133638, at *3 (S.D.N.Y. Aug. 2, 2012)
(alteration in original) (quoting SEC v. Hughes Capital Corp., 124
F.3d 449, 455 (3d Cir. 1997)), as evidenced in part by the
transactions connected with Dr. Carrrillo’s sales of relevant
securities

outlined

by

Mr.

Carrillo

and

Mr.

Huettel

(Carrillo/Huettel Memo. at 17-20; Reply Memorandum of Law in
Further Support of the Plaintiff’s Motion for Default Judgment
(“Reply”), at 6-9).
Mr. Carrillo and Mr. Huettel argue that they cannot be jointly
22

and severally liable for total proceeds of the Tradeshow and
Pacific Blue stock because they neither “‘controlled’ the primary
malfeasors [n]or were ‘indispensible’ to the overall scheme.”
(Carrillo/Huettel Memo. at 23).

This assertion apparently derives

from the language of Section 20(a) of the Exchange Act, which
states that a person who “controls any person liable under any
provision of [the Exchange Act] or of any rule or regulation
thereunder shall also be jointly and severally liable with and to
the same extent as such controlled person.”
However, that section is irrelevant here.

15 U.S.C. § 78t(a).

Section 20(a) provides

for so-called “‘Controlling-person liability[,]’ [which] . . . is
a separate inquiry from that of primary liability and provides an
alternative basis of culpability.”

In re Adelphia Communications

Corp. Securities & Derivative Litigation, 398 F. Supp. 2d 244, 261
(S.D.N.Y.

2005)

(quoting

Suez

Equity

Investments

Toronto–Dominion Bank, 250 F.3d 87, 101 (2d Cir. 2001)).

v.

Nothing

in that section prohibits joint and several liability for primary
violators who collaborate. See, e.g., Pentagon Capital Management,
725

F.3d

at

288

(affirming

joint

and

several

liability

for

disgorgement award against primary violators who collaborated);
Gibraltar Global Securities, 2015 WL 10910362, at *7 (recommending
joint and several liability for disgorgement award against primary
violators who collaborated).
Mr. Carrillo and Mr. Huettel also complain that Benjamin Kirk,
Dylan Boyle, and James Hinton were not held jointly and severally
liable.

However,

those

individuals
23

entered

into

voluntary

settlements with the SEC, and these defendants have provided no
authority indicating that a court should take into account awards
imposed against settling defendants when determining whether nonsettling

defendants

should

be

jointly

and

severally

liable.

Indeed, as the SEC points out, consent decrees like those entered
on behalf of other defendants are compromises in which parties give
up something they might have won or avoid something that they might
have lost in litigation.

(Reply at 5-6).

Finally, to the extent

that Mr. Carrillo and Mr. Huettel argue that they were merely small
players

in

or

received

no

benefit

from

these

schemes

(Carrillo/Huettel Memo. at 16-21, 24), they have not established
that here.

Indeed, by failing to participate fully in discovery

and defaulting, they surrendered their opportunity to minimize
their exposure.

See, e.g., Gibraltar Global Securities, 2015 WL

10910362, at *7 (defaulting defendants’ “refusal to participate in
discovery []and thereby shed light on their relationship” with
other entities connected with the violation “makes it appropriate
to hold them jointly and severally liable for the total proceeds
generated

by

their

illegal

conduct”).

I

do

not

credit

the

affidavit of Dr. Carrillo describing a minimal role for Mr.
Carrillo and Mr. Huettel in the transactions.
Luis J. Carrillo dated Sept. 29, 2016).

(Affidavit of Dr.

Dr. Carrillo resisted the

SEC’s efforts to depose him in this case (Reply at 7; Declaration
of Todd Brody dated Nov. 10, 2016, ¶¶ 3-4 & Exhs. A-B), but now
seeks to absolve his son of significant responsibility through
written testimony not subject to cross-examination.
24

Moreover, the

declaration is undermined by other evidence in the record.13 (Reply
at 7-8; Brody Decl., ¶¶ 126-29 & Exhs. 32-36; Fine Decl., ¶¶ 21,
24).
3.

Civil Penalties

The federal securities laws empower courts to impose civil
penalties for violations based on a three-tiered system.
U.S.C. §§ 77t(d)(2) & 78u(d)(3)(B).
appropriate

for

a

violation

that

See 15

A second-tier penalty is
involves

“fraud,

deceit,

manipulation, or deliberate or reckless disregard of a regulatory
requirement,” and a third-tier penalty may be imposed if, in
addition

to

the

requirements

for

a

second-tier

penalty,

the

“violation directly or indirectly resulted in substantial losses or
created a significant risk of substantial losses to other persons.”
15 U.S.C. §§ 77t(d)(2) & 78u(d)(3)(B). Under any tier, a court has
the authority to impose a penalty equal to the amount of “pecuniary
gain” the defendant received as a result of the violation, if that
amount is greater than the listed statutory maximum.
77t(d)(2)(A) & 78u(d)(3)(B)(i).

13

15 U.S.C. §§

Otherwise, the maximum penalty

The SEC asserts that Dr. Carrillo’s declaration that he
controlled all trades involving his trading account “directly
conflicts with his attorney’s repeated arguments during the motion
to dismiss that the [SEC’s] complaint . . . had not sufficiently
alleged that Dr. Carrillo controlled the Pacific Blue account.”
(Reply at 7). However, Dr. Carrillo’s counsel merely contended
that the SEC had not sufficiently pled control in the complaint; he
did not state that Dr. Carrillo did not have control over the
account. (2/26/14 Tr. at 159-60). Judge Daniels agreed that those
allegations were insufficient to provide personal jurisdiction over
Dr. Carrillo, stating, “[N]othing in the complaint will give any
impression that the SEC believes that Dr. Carrillo is an active
participant in any of this activity . . . .” (3/19/14 Tr. at 18687).
25

amounts available for second-tier violations during the relevant
period are $75,000 for natural persons and $375,000 for entities,
and for third-tier violations are $150,000 for natural persons and
$725,000 for entities.

Adjustments to Civil Monetary Penalty

Amounts, 74 Fed. Reg. 9159, 9161 (March 3, 2009) (to be codified at
17 C.F.R. Pt. 201, Subpt. E, tbl. IV).

The factors a court may

consider in setting the size of the penalty include:
(1) the egregiousness of the violations at issue, (2)
defendants’ scienter, (3) the repeated nature of the
violations, (4) defendants’ failure to admit their
wrongdoing; (5) whether defendants’ conduct created
substantial losses or the risk of substantial losses to
other persons; (6) defendants’ lack of cooperation and
honesty with authorities, if any; and (7) whether the
penalty that would otherwise be appropriate should be
reduced due to defendants’ demonstrated current and
future financial condition.
SEC v. Lybrand, 281 F. Supp. 2d 726, 730 (S.D.N.Y. 2003).

In

contrast to disgorgement, a court may not impose a civil penalty on
a joint and several basis.
at 288.

Pentagon Capital Management, 725 F.3d

Furthermore, the amount of “pecuniary gain” is limited to

gains received within a five-year statute of limitations.

SEC v.

Cole, No. 12 Civ. 8167, 2014 WL 4723306, at *5 (S.D.N.Y. Sept. 22,
2014).
Regarding the relevant considerations listed above, each of
the Defaulting Defendants engaged in repeated violations of the
federal securities laws with an intent to deceive, manipulate, or
defraud; none has admitted wrongdoing; and all announced their
refusal to cooperate in this litigation in 2015.

These factors

indicate that a penalty of at least the second tier would be

26

justified.14
The SEC seeks a substantial third-tier penalty.
is rather lackadaisical, however.

Its argument

It merely asserts at the outset

that “[t]here is no question here that third-tier penalties are
appropriate given the nature of the fraudulent conduct as well as
the

risk

of

substantial

loss

to

investors

who

purchased

unregistered Tradeshow and Pacific Blue stock sold by the boiler
rooms.” (Pl. Memo. at 23-24).

In Gibraltar Global Securities, I

noted that “emphasiz[ing] the sheer volume of illegal transactions”
does not “demonstrate that the defendants’ conduct created a
substantial risk of loss.” 2015 WL 10910362, at *8. The plaintiff
then concludes that “the conduct warrants the imposition of maximum
third-tier

penalties.

Their

egregious

and

recurrent

actions

involved fraud, deceit, and manipulation and caused substantial
losses to the investors.”

(Pl. Memo. at 25).

I will not infer,

from this paltry argument, a substantial risk of loss.15

“Such

cursory presentation is scarcely adequate for a law enforcement
agency

seeking

to

[significant] fines.”

invoke

the

Court’s

discretion

to

impose

Tavella, 77 F. Supp. 3d at 363.

I therefore recommend imposing tier-two fines in the amount of
14

Mr. Carrillo and Mr. Huettel argue against a significant
penalty
based
on
arguments
I
have
already
rejected.
(Carrillo/Huettel Memo. at 21-22).
15

In its Reply, the SEC asserts that the sale of unregistered
securities creates a substantial risk of loss “as a matter of law.”
(Reply at 10 & n.12). I decline to read the cases it cites as
establishing that legal rule. Indeed, if the SEC’s position were
correct, nearly every violation of Section 5(a) of the Securities
Act would merit tier-three penalties, whether or not the SEC
presented argument or evidence of risk of loss.
27

$75,000 for each securities law or rule violated.16
2010 WL 3290977.

See Shehyn,

This amounts to $375,000 each for Mr. Carrillo,

Mr. Huettel, Carrillo Huettel, and Mr. de Beer; $225,000 for
Gibraltar; and $150,000 for Mr. Davis.

(Pl. Memo. at 24 n.10).

Although these fines are substantially less than the maximum thirdtier penalties requested by the SEC, “[i]n light of the substantial
disgorgement and prejudgment interest award I have recommended, the
‘punitive and deterrent purposes of the civil penalty statutes’ can
be achieved by [these] penalties.”

Gibraltar Global Securities,

2015 WL 10910362, at *9 (quoting SEC v. Razmilovic, 822 F. Supp. 2d
234, 282 (E.D.N.Y. 2011), vacated in part on other grounds, 738
F.3d 14 (2d Cir. 2013).
Conclusion
For the foregoing reasons, I recommend that the plaintiff’s
motion for default judgment (Docket no. 279) be granted in part.
Specifically, I recommend that
1.

Default judgments be entered against Carrillo Huettel
LLP, Luis J. Carrillo, Wade D. Huettel, Gibraltar Global
Securities, Warren Davis, and Luniel de Beer;

2.

Permanent injunctions be entered barring Luis
Carrillo, Wade D. Huettel, and Luniel de Beer from

J.

a.

Committing or aiding and abetting future violations
of the securities laws and rules alleged against
them;

b.

Participating in any offering of a penny stock; and

c.

Serving as an officer or director of any public
company;

16

The SEC does not present an argument that Carillo Huettel
and Gibraltar should be subject to higher fines than the individual
defendants.
28