In a complaint filed Tuesday, CDO manager Harding Advisory and its principal Wing Chau allege that the SEC violated their due process and equal protection rights by “shoehorning” a case against them into an administrative proceeding instead of suing in federal court.  The plaintiffs allege that an administrative hearing is wholly unsuitable for a complex case like theirs, especially given the rigid requirement that hearings occur within approximately four months of the matter being initiated.  They  seek to enjoin the proceeding, and force the SEC to sue in federal court instead. The plaintiffs allege that the SEC has refused to explain why their case, as compared to similar CDO cases, was “singled out” to be kept out of court, and argue that the SEC’s must be acting based upon one or more of the following improper motives:
Continue Reading CDO Manager Sues to Enjoin SEC Administrative Case Based on Inadequate Procedural Protections

In an opinion today, Judge Forrest denied the motion of former Goldman Sachs banker Fabrice Tourre for a new trial of SEC charges that he helped conceal from investors that a mortgage security was constructed, in part, by a hedge fund that was run by John Paulson and that was betting against the transaction.  She found there was sufficient evidence for the jury’s verdict:
Continue Reading Judge Forrest Denies Tourre’s Motion for New Trial

In the civil litigation against the Madoff feeder fund Fairfield Greenwich, its auditors and others, Judge Maas on Thursday (Thanksgiving Day), denied the defendants’ letter motion to compel depositions of two SEC employees for the purpose of showing that, since Madoff successfully deceived the SEC, he could have also deceived the defendants.  Judge Maas found the proposed depositions to be of “marginal relevance”:
Continue Reading Judge Maas Rejects Request to Depose SEC Officials to Prove Madoff’s Elusiveness

In an opinion dated yesterday, Judge Oetken dismissed an SEC complaint against two individuals who made what it contended were highly suspicious trades in the stock of Onyx Pharmaceuticals, Inc. shortly before Amgen, Inc. made an unsolicited bid for Onyx that made Onyx’s stock price rise. Judge Oetken ruled that the complaint did not have enough facts to suggest that there was an unlawful tip:

Continue Reading Judge Oetken Dismisses SEC Insider Trading Complaint Containing “All Belief and No Information”

In an opinion today, Judge Gardephe rejected Gibson Dunn’s attempt, in a civil defamation suit, to prevent disclosure of interview notes from witnesses whose statements were shared with the SEC. Judge Gardephe had earlier ruled that any privilege was waived, but Gibson Dunn argued that, apart from any waiver, the firm had its own internal interest in protecting the notes:
Continue Reading Judge Gardephe Orders Gibson Dunn to Produce Notes of Interviews of Witnesses Whose Statements It Revealed to SEC

In the civil litigation against the Madoff feeder fund Fairfield Greenwich and other related parties, the SEC and the defendants recently exchanged briefs on the standard for determining whether the SEC must comply with a nonparty subpoena.  The defendants want to depose current and former SEC employees to elicit testimony showing that, since Madoff successfully deceived the SEC, he could have also deceived the defendants. The SEC’s brief argues the Court cannot compel compliance unless the SEC’s decision to not comply was “arbitrary and capricious” under the Administrative Procedures Act:
Continue Reading Madoff Case Raises Standard of Review When SEC or Other Agencies Balk at Nonparty Subpoenas

Thomson Reuters today moved to dismiss a whistleblower complaint from a former employee who claimed that he was fired for complaining internally, and to the FBI, that the company’s selective release of certain survey data constituted insider trading. The motion argues that the Dodd-Frank whistleblower protections apply only to those who raise complaints with the SEC, and relies heavily on a recent Fifth Circuit’s recent, Asadi, holding as much.  Prior to Asadi, Judges Furman and Sand had found that internal reporting would suffice (see our prior post on Judge Furman’s ruling here), but Thomson Reuters’s motion asks that the judge in its case, Judge Scheindlin, follow Asadi instead. The definition of “whistleblower” under Dodd-Frank is limited to those who report to the SEC, but there is a separate provision, 15 U.S.C. § 78u-6(h)(1)(A)(iii), prohibiting retaliation for a broader category of conduct.  Judges Furman and Sand found that this provision was in tension with the “whistleblower” definition, but Thomson Reuters argues that that the two provisions could be harmonized:

Continue Reading Thomson Reuters’s Dismissal Motion Argues that Dodd-Frank Covers Only Whistleblowers Reporting to SEC