Securities and Exchange Commission v. Carrillo Huettel LLP et al

Filing 323

ORDER for 279 Motion for Default Judgment, filed by Securities and Exchange Commission, 304 Report and Recommendations: Having adopted the Report, the SEC's motion for default judgment is granted. This Court accepts the Report's disgorgement and civil penalties recommendations to the extent that: a. Carrillo Huettel LLP, Luis J. Carrillo, Wade D. Huettel, and Luniel de Beer are jointly and severally liable for the disgorgement of $13,376,519.99, reduced by the $6,6 73,035.84 the SEC has procured from other defendants through settlement agreements, for a total of $6,703,484.15, plus prejudgment interest as calculated by the SEC using the IRS underpayment rate; b. The defendants are liable for the following civil monetary penalties: i. Carrillo Huettel -- $375,000 ii. Luis J. Carrillo -- $375,000 iii. Wade D. Huettel -- $375,000 iv. Luniel de Beer -- $375,000 The Clerk of Court is directed to close the motion at ECF No. 279. (Signed by Judge George B. Daniels on 3/28/2017) (jwh) Modified on 3/28/2017 (jwh).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

ORDER

-against-

13 Civ. 1735 (GBD)

CARRILLO HUETTEL LLP, et al.,
Defendants.

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GEORGE B. DANIELS, United States District Judge:
In this enforcement action alleging violations of Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, 15 U.S.C. §§ 77e(a) & (c), 77q(a), Section lO(b) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78j(b), and Rule lOb-5, 17 C.F.R. § 240.lOb-5, the Securities and
Exchange Commission (the "SEC") seeks a default judgment pursuant to Rule 55(b)(2) of the
Federal Rules of Civil Procedure against six defendants: Carrillo Huettel LLP. Luis J. Carillo,
Wade D. Huettel, Gibraltar Global Securities, Warren Davis, and Luniel de Beer. ("SEC's Default
J. Mot.," ECF No. 279.)
This matter was referred to Magistrate Judge James C. Francis IV (ECF No. 295.) Before
this Court is Magistrate Judge Francis' Report and Recommendations. ("Report," ECF No. 304). 1
This Court adopts the Report's recommendations and overrules the objections filed by Carrillo and
Huetell. The Report properly recommended joint and several disgorgement of ill-gotten gains as
to Defendants Carrillo Huettel LLP, Luis J. Carillo, Wade D. Huettel and Luniel de Beer. However,
the joint and severable liability amount should be reduced by the disgorgement amounts the SEC

The relevant procedural and factual background is set forth in greater detail in the Report and is
incorporated herein.

1

1

I

has procured from the other defendants through settlement agreements. Further, the civil penalties
assessed by Magistrate Judge Francis are reasonable. 2

I.

LEGALSTANDARD
This Court "may accept, reject, or modify, in whole or in part, the findings or

recommendations" set forth within a magistrate judge's report. 28 U.S.C. § 636(b)(l). The Court
must review de nova the portions of a magistrate judge's report to which a party properly objects.

Id. Portions of a magistrate judge's report to which no or merely perfunctory objections have been
made are reviewed for clear error. See Edwards v. Fischer, 414 F. Supp. 2d 342, 346-47 (S.D.N.Y.
2006). Clear error is present only when "upon review of the entire record, [the court is] left with
the definite and firm conviction that a mistake has been committed." Brown v. Cunningham, No.
14-CV-3515, 2015 WL 3536615, at *4 (S.D.N.Y. June 4, 2015) (internal citations omitted).
Magistrate Judge Francis advised the parties that failure to file timely objections to the
Report would constitute a waiver of those objections on appeal. 3 (Report, at 29.) Only Carrillo
and Huettel oppose the SEC's motion and filed timely objections to the Report.

(Defs.'s

Objections to the Report ("Defs. 's Objs."), ECF Nos. 309, 311.) The SEC filed a timely response
to Defendants' objections. (ECF No. 318.)

II.

CIVIL PENAL TIES
The Report recommends that second-tier penalties of $375,000 be awarded against both

Carrillo and Huettel individually.

Carrillo and Huettel argue that this amount "seem[s]

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Carrillo and Huetell do not object to the Report's recommendations related to injunctive relief. Finding
no clear error, this Court adopts those recommendations.
3

The Report recommended this Court enter a default judgment as to Gibraltar Global Securities and
Warren Davis providing for injunctive relief, joint and several disgorgement and assessed civil penalties.
Gibraltar Global Securities and Warren Davis did not file objections to the Report. This Court is satisfied
that the Report contains no clear error of law as to these recommendations and adopts them.

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unnecessarily high based on the role [they] played as well as the total lack of civil penalties
assessed against the other, more culpable defendants." (Defs.'s Objs. at 14.) This Court rejects
Carrillo and Huettel's objection. Given that the civil fines assessed are substantially less than the
maximum third-tier penalties requested by the SEC, the Magistrate Judge's recommendation is
reasonable.

III.

DISGORGEMENT
The Report further recommends that Carrillo Huettel LLP, Carrillo, Huettel and de Beer

be held jointly and severally liable for disgorgement of $13 ,3 76,519 .99 plus prejudgment interest.
(Report at 29). As an initial matter, the total amount of disgorgement is not contested. Carrillo
and Huettel essentially argue that joint and several disgorgement is unnecessary and inequitable
as to them because (1) the settling defendants were the ones who orchestrated the scheme, (2) the
settling defendants are not required to jointly and severally disgorge the full amount of the
proceeds, and (3) the SEC does not allege that Carrillo and Huettel personally received the
$13,376,519.99.
Carrillo and Huettel made a conscious decision to cease defending against this action and
have defaulted. Therefore, this Court has no basis to conclude that they should be treated as less
culpable than the other defendants. They neither defended nor settled the claims against them. By
defaulting and failing to fully participate in discovery, Carrillo and Huettel "surrendered their
opportunity to minimize their exposure" in this action. (Report at 24.) Thus, this Court rejects
Carrillo and Huettel's objections as it relates to the Report's disgorgement recommendation. The
Report properly recommended joint and several disgorgement of the total ill-gotten gains obtained
by all defendants as a result of their concerted scheme. However, it is reasonable to credit the
individual amounts the SEC has procured from other defendants through settlement agreements

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and to hold Carrillo Huettel LLP, Carrillo, Huettel and de Beer jointly and severably liable for the
remaining amount of illicit profits generated by the overall scheme.
IV.

CONCLUSION
Having adopted the Report, the SEC' s motion for default judgment is granted. This Court

accepts the Report's disgorgement and civil penalties recommendations to the extent that:
a. Carrillo Huettel LLP, Luis J. Carrillo, Wade D. Huettel, and Luniel de Beer are
jointly and severally liable for the disgorgement of $13,376,519.99, reduced by the
$6,673,035.84 the SEC has procured from other defendants through settlement
agreements, for a total of $6,703,484.15, plus prejudgment interest as calculated by
the SEC using the IRS underpayment rate;
b. The defendants are liable for the following civil monetary penalties:
i.

Carrillo Huettel -- $375,000

11. Luis J. Carrillo -- $375,000
ni. Wade D. Huettel -- $375,000
1v. Luniel de Beer -- $375,000
The Clerk of Court is directed to close the motion at ECF No. 279.
Dated: New York, New
March 28, 2017

J;~k

SO ORDERED.

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