15 U.S.C. § 78j · C relations

fact · supports Alan Box, EZ’s CEO, and Ginsburg discussed a specific share price, and Ginsburg knew both that Evergreen was interested in acquiring EZ and that EZ was talking to other companies.

fact · supports As for the nonpublic nature of the evidence, the jury heard testimony from Ron Peale, EZ’s CFO, that the talks were confidential.

rule The materiality of an uncertain prospective event “depend[s] at any given time upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.”

held The insider information in this case meets the materiality standard.

fact · supports As to Katz, Ginsburg was clearly privy to information gleaned under a confidentiality agreement.

fact · supports The jury had before it sufficient evidence to conclude that Ginsburg’s June 16 meeting with Olds indicated to Ginsburg that a deal had to happen fast.

held The jury could reasonably infer that the information was material and nonpublic.

fact · supports Ginsburg was chairman and CEO of Evergreen Media Corporation, which owned and operated a number of radio stations. In 1996 Evergreen became interested in acquiring EZ, a corporation that owned radio stations. Ginsburg met with EZ’s CEO Alan Box on Friday, July 12, 1996, and Box told him EZ was considering several “strategic alternatives.” Before the meeting no decision had been made to sell the company. On Sunday evening, July 14, Ginsburg called Mark at 10:02 p.m., and they spoke for 26 minutes. The next day, Monday, July 15, Mark bought 3800 shares of EZ stock. Mark spoke with Jordan in person and on the telephone over the next few days, and they admit they discussed the purchase of EZ stock.

fact · supports On July 24, EZ’s investment banker faxed a letter to Ginsburg stating that EZ bids were due by July 26. At 7:40 a.m. July 25, a call was placed from Ginsburg’s cell phone to his parents’ home. Later that day Mark purchased 3200 shares of EZ stock for Mark and his wife’s joint account. On July 26, Mark purchased 4300 shares of EZ stock for the same joint account and 7500 shares for a trust account for his son. Also on July 26, Ginsburg, on Evergreen’s behalf, submitted a written offer to acquire EZ for cash and stock. On Sunday, July 28, a ten minute call was placed from Ginsburg’s home to Mark’s home. On Monday, July 29, Jordan bought 5000 shares of EZ stock, and an hour later Mark bought 30,000 shares.

fact · supports That same evening, June 16, a call was placed from a cell phone registered to Ginsburg to a phone registered to Mark. The next day, June 17, Mark bought 150,-000 shares of Katz. On July 14, Evergreen/Chancellor announced it would acquire Katz through a tender offer for Katz stock at $11 a share. On July 16 or 17, 1997, Mark sold 132,500 shares of Katz and tendered the rest, resulting in a total profit of $729,000.

fact · cuts-against Ginsburg offered evidence of public information about the companies as motivation for Mark’s trading, argued that the trades were consistent with prior trading history, and put forward innocent explanations for the calls.

rule The SEC must prove violations of § 10(b) and § 14(e), and their supplementary Rules, by a preponderance of the evidence, and may use direct or circumstantial evidence to do so.

held The call/trade pattern occurrences coupled with the jury’s right to disbelieve the innocent explanations of the calls and trades are enough to support the verdict.

fact · supports (1) On April 25, 2011, Rodham claimed that EB-5 funds accounted for only 7.8% of GreenTech's capital during an event in Beijing, China.

fact · supports (1) On November 11, 2011, McAuliffe told a CNBC interviewer that GreenTech "ha[d] only sold 11,000 cars, but it's still a new business for us." J.A. 154.

fact · supports The complaint alleges that each of those statements was false when made because GreenTech (1) had not sold 11,000 cars; (2) did not have a contract with Denmark; (3) had not mass-produced any electric vehicles; and (4) had fewer than one hundred employees.

held The problem for defendants, however, is that their alleged misstatements go beyond mere projections or puffery.

held Plaintiffs' allegation thus counts as an assertion of fact under the case law in this circuit.

fact · supports Mr. Malouf and Mr. Lamonde had a financial arrangement that resulted in payments to Mr. Malouf from bond trades that he had routed through the Raymond James branch. This arrangement gave an incentive to Mr. Malouf to route his clients' bond trades through the Raymond James branch, compromising the independence of UASNM and Mr. Malouf as investment advisers. The SEC reasonably concluded that Mr. Malouf was aware of the conflict and tried to exploit it, for UASNM's outside consultant testified that Mr. Malouf had lied and resisted disclosure of the financial arrangement with Mr. Lamonde.

fact · supports Second, the evidence allowed the SEC to reasonably find that Mr. Malouf was familiar with the contents of UASNM's Forms ADV and its website. For example, Mr. Malouf admitted that he had periodically reviewed the Forms ADV and the website. Yet for several years, Mr. Malouf took no action to correct material misstatements on the forms or the website.

fact · supports Third, the evidence suggests that Mr. Malouf dragged his feet even after being directed to disclose the conflict. This directive stemmed from the outside consultant's discovery that Mr. Malouf had been receiving installment payments from the buyer of the Raymond James branch. Upon this discovery, the consultant told Mr. Malouf and UASNM that the arrangement had created a conflict of interest that needed to be disclosed. But about nine months passed before UASNM disclosed the conflict. Mr. Malouf's contribution to that delay reasonably supports a finding of scienter.

rule Conduct is extremely reckless when the petitioner knows or must have known that the conduct created a danger of misleading investors.

held For three reasons, we reject Mr. Malouf's arguments and conclude that substantial evidence supports the SEC's finding of scienter.

fact · supports In 2007, Raymond James became concerned about the conflict of interest between (1) Mr. Malouf's role at its branch office and (2) his role at UASNM. These concerns led Raymond James to ask Mr. Malouf to choose between the two roles. Mr. Malouf opted to remain at UASNM and sold his Raymond James branch to Mr. Maurice Lamonde for roughly $1.1 million, to be paid in installments based on the Raymond James branch's collection of securities-related fees.

fact · supports To facilitate the installment payments, Mr. Malouf routed bond trades on behalf of his UASNM clients through the Raymond James branch. This way, Mr. Lamonde would receive enough in commissions to allow him to pay what he owed Mr. Malouf.

fact · supports Mr. Malouf later acknowledged that his financial arrangement with Mr. Lamonde had created a conflict of interest that should have been disclosed. But Mr. Malouf did not disclose that arrangement to UASNM's chief compliance officer or the outside consultant. Because these individuals did not know the details of the Malouf-Lamonde arrangement, UASNM not only failed to disclose Mr. Malouf's conflict of interest but also boasted that (1) UASNM's employees were not receiving any commissions or fees from the Raymond James branch and (2) UASNM was providing impartial advice untainted by any conflicts of interest.

fact · supports While UASNM was boasting of its impartiality, Mr. Malouf was participating in deciding what UASNM would disclose. He acknowledged that he had reviewed some of the Forms ADV for what to disclose and had at least some familiarity with the contents of the website. But he took no steps to remedy UASNM's misstatements or to disclose his own conflict of interest.

rule The Court expressly held that a person could incur liability under these provisions when the conduct involves another person's false or misleading statement.

held Given these definitions, we conclude that the SEC did not err in finding a fraudulent device, scheme, or artifice to defraud.

fact · supports Feng also entered into marketing agreements with regional centers. Through these agreements, he reserved a number of the limited investor "spots" in certain EB-5 projects, which he then promoted on his website and tried to fill within a set time period. If one of Feng's clients made the required capital contribution to one of these regional centers, and if the USCIS approved the investor's I-526 petition, the regional center agreed to pay Feng commissions of $ 15,000 to $ 70,000. Although hundreds of regional centers participate in the EB-5 program, Feng procured investors only for ten centers, all of which agreed to pay commissions. Feng did not disclose to his clients the commissions he received from the regional centers unless they specifically asked about them.

fact · supports Here, the record includes statements of individual investors who said that if they had known about Feng's commissions, they would have attempted to negotiate their administrative fees.

rule Generally, an omission is material "if there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.' "

held We thus agree with the district court that Feng's failure to disclose his conflict of interest was material.

fact · supports Feng stated that he did not want to tell clients about his commissions from the regional centers because it would be costly.

fact · supports Feng's brief similarly describes his choice not to disclose as a "business decision."

rule Although there are differences in the state of mind requirements for Rule 10b-5(b) and Section 17(a)(2), a showing of intentional or knowing conduct satisfies both.

held Finally, Feng's testimony establishes intent to deceive.

fact · supports When told by some regional centers that they could only pay commissions to overseas recruiters, Feng responded that he had referral partners in China who were finding investors. He entered into marketing agreements in which he promised to relay the commissions to those individuals. He also arranged agreements that were directly between the regional centers and the individuals. The referral partners included Feng's wife, mother, and mother-in-law. Feng described these individuals in his deposition testimony as his "nominees," whose role was to be "just a surrogate to receive the money." They did not do the work of recruiting investors-Feng did that himself. After the regional centers paid commissions to the individuals, they transferred the funds to Feng. Feng asserts that the regional centers only asked for a foreign contact to pay and did not "care" who it was.

rule But, deceptive conduct that is not "inherently unlawful" may form the basis of a scheme to defraud.

held The district court addressed the fraud against the regional centers only as a scheme to defraud, not as a material omission.

held We accordingly affirm the district court's finding that Feng engaged in securities fraud in violation of Section 17(a) and Section 10(b).

fact · supports Approximately 20 percent of Feng's clients asked him to seek a reduced administrative fee from the regional centers. In those instances, Feng negotiated with regional centers and facilitated contracts between those regional centers and his clients for a rebate of a portion of the administrative fee. Feng did not disclose to these clients, however, that the administrative fees helped to fund his commissions, nor that the regional centers offset the clients' administrative fee rebate with a reduction in the commissions to which he was contractually entitled. Indeed, Feng asked the regional centers not to inform the clients about either fact. Feng explained in his deposition that he wanted to create the appearance to his clients that he was advocating on their behalf with the regional center and also to "keep as much of the marketing fee as possible"-that is, his commission-and to avoid further "haggl[ing]" with clients who might ask Feng to rebate more of the commission.

held The fraudulent conduct was his scheme to make the rebate appear to come from his advocacy on behalf of the client, while concealing the relationship between the reduction and his undisclosed commission.