US Securities & Exch v. Tambone, No. 07-1384. This is a close case. On the one hand, the government is bringing an enforcement action regarding misleading prospectuses to sell mutual funds. On the other hand, the defendants are represented by a large firm. The government wins. I wonder what mistakes the large firm made in representing their clients. I have been told that large firms are very detail-oriented and win all the time.
But, because these are rich defendants, the First pours a lot of type into it. However, I am just going to copy and paste from the SEC’s public domain press release, so you can get the gist of what happened.
The Commission announced that on December 3, the United States Court of Appeals for the First Circuit issued a ruling that allowed the SEC to proceed with its fraud action against James Tambone and Robert Hussey, former executives of Columbia Funds Distributor, Inc. (Columbia Distributor), the principal underwriter and distributor for a group of approximately 140 mutual funds in the Columbia mutual fund complex (Columbia Funds). The SEC had alleged in a civil injunctive action that from 1998 through 2003, Tambone and Hussey participated in a fraudulent scheme with Columbia Distributor and Columbia Management Advisors, Inc. (Columbia Advisors), the investment adviser to the funds, by secretly entering into or approving arrangements with at least eight preferred customers allowing them to engage in frequent short-term trading in certain Columbia Funds in contravention of the prospectuses that represented that the funds did not permit or were otherwise hostile to market timing or other short-term or excessive trading.
The First Circuit ruling reversed a decision by the District of Massachusetts that had dismissed the case in December 2006 on the ground that Tambone and Hussey could not be held primarily liable for false statements in the prospectuses because they did not make those statements. The First Circuit held that Tambone and Hussey could be held liable. In its decision, the First Circuit emphasized the unique role that underwriters play in the sale and distribution of mutual funds to the investing public and the reliance that the investing public places on them as a result. The First Circuit explained that Tambone and Hussey, as executives of Columbia Distributor, had a legal duty to confirm the accuracy and completeness of the prospectuses and other fund material that they distributed. By distributing the misleading prospectuses, the First Circuit reasoned, Tambone and Hussey made implied statements to potential investors that they had a reasonable basis for believing that the key statements in the prospectuses regarding market timing were accurate and complete.
The SEC first bought action against Tambone and Hussey on Feb. 9, 2005. The District Court dismissed that action without prejudice on Jan. 27, 2006. Thereafter, on May 19, 2006, the SEC filed a new complaint concerning the same conduct. The SEC's complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and aided and abetted Columbia Distributor's violations of Section 15(c)(1) of the Exchange Act, Columbia Advisors' violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and the Columbia entities' violations of Section 10(b) and Rule 10b-5 of the Exchange Act. The SEC is seeking an order permanently enjoining Tambone and Hussey from violating the antifraud and other provisions of the federal securities laws, requiring them to disgorge funds received through their violations of the securities laws, and imposing civil monetary penalties. Although the District Court dismissed this complaint on Dec. 29, 2006, the First Circuit, in its decision, remanded the case to the District Court for further proceedings.
In related proceedings, the SEC filed a civil injunctive action against Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc., in federal court in Massachusetts on Feb. 24, 2004. That action was later dismissed when the two Columbia entities agreed to settle charges through administrative proceedings that resulted in an Order issued by the SEC on Feb. 9, 2005 requiring, among other things, $140 million in disgorgement and penalties to be distributed to investors harmed by market timing activity at Columbia. The SEC is in the process of distributing those funds to investors. [SEC v. James Tambone and Robert Hussey (United States Court of Appeals (1st Cir.), No. 07-1384)] (LR-20822)
US v. Hebshie, 07-2339 (12/4/08). This is a federal arson case. As you know, the framers of the constitution really envisioned the federal government prosecuting insurance fraud (or, as they say, “mail fraud”). The first says that pretty much any sort of mailing in connection with collecting on an insurance policy where the defendant is up to know good is mail fraud. (Even if it is just “proof of loss.”). Even letters that expressly said it wasn’t “conceding” liability are in furtherance of a mail fraud scheme. I guess everything is now mail fraud.
U.S. v. Jordan, No. 08-1432 (12/5/08). The defendant committed some criminal acts while out on bail – namely drinking and driving. At sentencing, the District Court denied an offense level reduction under § 3E1.1 based on his putative acceptance of responsibility. Selya sees no problem with it, because, well, the defendant “didn’t care” about his bail conditions which includes not being a criminal, and Selya points to the fact that the defendant didn’t cease all criminal activity but continued to act like a poor person and went into bars with his buddies. In the future I would advise his ilk to get wasted at the firm picnic and have the office manager call a car service.
Most people know that the Victims Rights Industry exists to troll lay people into think that lawyers care about them. In reality it is a way for lawyers to earn money writing briefs without having to be accountable to actual clients. The lay people contribute to their organizations.
Now, it comes as no shock the Victims Rights Industry doesn’t care too much about two things. 1) Qualified Immunity; and 2) lying cops.
Now, I don’t have too much of a problem with qualified immunity as a defense to a § 1983 action. Sometimes good cops have to make snap judgments. And sometimes those judgments will violate someone’s constitutional rights. However, someone has been victimized here. Shouldn’t they get some compensation for it? In essence, when a cop asserts qualified immunity he is admitting that someone’s rights were violated (at least for the purpose of summary judgment), but saying that there is nothing that can or should be done about it. This is sort of like what happens when someone asserts an insanity defense. There is still a crime, a violation of some “right” and a victim, but for some reason the Victims Rights Industry doesn’t care about violations of “rights” by cops.
Now, most people know that cops lie. Some departments lie a little. Some lie a lot. Everyone tolerates some lying. (Hell, if society didn’t tolerate some lying, large law firms would have to take resumes from people from low-ranked schools seriously, which, thankfully, they don’t.) But, “Copsbusters” seems to delight in showing the ways in which cops lie about “confidential informants.” The Victims Rights Industry doesn’t seem to care about these kinds of victims.
USA v. Steirhoff, 08-1183. Selya tries to be dramatic. He says “The tale of how the stalker became the stalked follows.” Anyway, the defendant seems like a bad guy because he talked to the police without a lawyer. And he had about $100,000 in cash lying around. A true American would have the money in CDs or municipal bonds, and only terrorists and furries talk to the police without lawyers. Just like people that try and avoid taxation on their interest income, this defendant said that he didn’t pay taxes and didn’t trust banks. I hate him already.
Anyway, the state called the IRS, and the IRS started investigating him and found out that he wasn’t pulling his weight tax-wise.
Anyway, the legal issues are fairly straight-forward, especially when the defendant is a simpleton. This is absolutely no evidence that he retained a tax lawyer, and, as I said he is the kind of America-hating person that talks to the cops and consents to a search without a lawyer.
So, it should come as no surprise that a search of a briefcase is held to be within the scope of the consent this idiot gave the police. If he was a real American he would not have given the consent, and certainly not on boilerplate forms that say “letters, papers, or other property." The defendant meekly asserted that he meant to consent only to a search of part of his computer for poetry. Ha ha. No cop wants to look for poetry. All they want are looking for his guns, pr0n and cash. Obviously, because Selya sees that this guy isn’t really acting like an American, he sides with the cops. As he usually does. He adds, “A police officer is not required to take a suspect's statements concerning the whereabouts of incriminating evidence at face value.” See, if the defendant was a true American he would have not made a statement.
He also makes some BS argument that he wasn’t subject to the tax code. Obviously this fails. There was no evidence that he had retained a law firm to write him an opinion letter.
There is an interesting Cheek issue regarding “willfullness.” And, in this case, since the defendant had a bunch of aliases, it was enough to infer that he was willfully not paying taxes.
Also, the Selya says that a “summary witness” was okay. Selya let’s it pass by saying that the witness was just adding numbers up.
And, after affirming the sentence, Selya sends the guy that couldn’t be bothered to retain counsel until after he was arrested to jail by saying “For aught that appears, the defendant was fairly tried, justly convicted, and lawfully sentenced.”