U.S. SECURITIES AND EXCHANGE COMMISSION v. CLAY CAPITAL MANAGEMENT, LLC et al, No. 2:2011cv05020 - Document 50 (D.N.J. 2013)

Court Description: OPINION fld.. Signed by Judge Dennis M. Cavanaugh on 11/6/13. (sr, )

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NOT FOR PUBLICATION UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY U.S. SECU RJT IFS AND EXCHANGE COMM ISSSION. Hon. Dennis M. Cavanaugh OPINION Plaintiff, Civil Action No. 2:1 1-cv-05020-DMC-JBC V. CLAY CAPITAL MANAGEMENT, FEC, .JAMES F. TURNER TI, SCOTT A. VOLLMAR, SCOTT A. ROBARGE, ,L\ND MARK A. DURBIN:, Defendants. DENNIS M. CAVANAUGH. U.S.D.J.: This matter comes before the Court upon Plaintiff U.S. Securities and Exchange Commission s ( Commission or SEC or Plaintiff ) Motion for Summary Judgment against Defendant Scott A. Volimar ( Volimar or Defendant ). (Pl. s Mot. for Summ. J.. Mar. 27. 20 13, ECF No. 41). Pursuant to Fed. R. Civ. P 78, no oral argument was heard. Based on the following and for the reasons expressed herein, Plaintiffs Motion br Summary Judgment is granted 1. 1 BACKGROUND Volimar was employed by Autodesk, a California company, as director of business development. In this position, Vol imar was privy to confidential information about Autodesk S financial results. business plans. and potential sales and mergers. Vollmar understood that lie The facts set forth in this Opinion are taken from the parties respective pleadings and movini papers. had a duty to Autodesk to keep such information confidential. Volimar had a cloSe relationship with James F. Turner ( Turner ). Voilmar and Turner were friends, busine ss school classmates and brothers-in-law. Turner was the Chief Investment Officer of a hedge fund, the Clay Capital Fund, LP ( Clay Fund ), and was responsible for directing the Clay Fund s trading. In January 2008. Vollmar disclosed confidential information to Turner about Autod esk s intciest in potentialk acquiling Moldfio\\ Speciiicalh bctwccn lanual\ 2008 md \l r 1 2008. Vollmar updated Turner on the status of the negotiations between Autod esk and Moldflow. During this time, Turner purchased more than $2.3 million \Vorth of Moldf iow stock for the Clay Fund. Turner also purchased Moldflow stock in eleven separate broker age accounts that he controlled, including his own accounts and accounts in the names of his childre n, his wife, his parents, and his sister. As a result of Autodesk acquiring Moldflow on Ma 1. 2008. Moldflows stock increased by 11 percent over the previous day s closing price. \vhich yielded Turner greater than $1.89 million in trading prolits. Volimar also disclosed con Odenual intormatlon to Turner about Autodesk s anticip ated financial results for the fourth quarter ending January 31, 2008, and indicated to Turner that Autodesk would likely exceed its earnings targets for the quarter. Later, however, Vollm ar received confidential information indicating that Autodesk s outlook had changed, which Volimer disclosed to Turner. Specifically, Vollrnar learned that it would be difficu lt for Autodesk to meet its fourth quarter targets. l3ased on this confidential information, Turner directed the Clay Fund to sell short 20,000 shares of Autodesk stock and to purchase 600 put option contracts on Autodesk stock. Turner also purchased 1 .700 Autodesk put options in five separate brokerage accounts that he controlled, This illicit Autodesk trading generated profits in excess of $836,000 for Turner. 2 After the Commission sued Voilmar and Turner for insider trading, both were charged criminally for the same misconduct and both pled guilty before this Court. At his plea allocution. Volimar admitted that he tipped Turner about Moldflow and Autodesk. and that Voilmar did so knowingly, willfully and intentionally. The Court sentenced Turner to 12 months in prison and fined him $25,000. The Court sentenced Voilmar to two years probation and fined him S 15.000. The Commission filed this action against Volimar and three other individuals for perpetrating an insider trading scheme that generated illicit profits otnearlv $3.9 million. The Commission has settled with each of Vollmar s codefendants, but settlement discussions between the Commission and Voilmar have been unsuccessful. For this reason. the moves for summary judgment against Volirnar based on the preclusive effect of his criminal conviction and the undisputed evidence of Volimar s unlawful tipping of material nonpublic information about Autodesk and Moldfiow. Given that Volimar admitted to the illegal tipping in his plea allocation, the Commission asserts that Volimar can offer no disputed issue of material fact to defeat summary judgment. The Commission seeks an order permanently enjoining Vollmar from future violations of the laws at issue in this case ordering Volimar to disgorge $627,574 of the illicit trading profits plus prejudgment interest of $124,984; and imposing a civil penalty of $8.1 82,722, the maximum civil penalty allowed under the securities laws. Ii. STANDARD OF REVIEW A. Summary Judgment Summary judgment is granted only if all probative materials of record. viewed with all inferences in favor of the nonmoving party, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. $e 477 U.S. 317, 330 (1986); FED. R. Civ. P. 56(c). The moving party bears the burden of showing that there is no genuine issue of fact. Id. The burden has two distinct components: an initial bmdLn ol pioduction hicli shifts to the non mo1ng palt ii satisfied b thc mo\ ing paIt\ an ultimate burden of persuasion, which always remains on the moving party. ich md The non- moving party may not rest upon the mere allegations or denials of his pleading to satist v this burden, but must produce sufficient evidence to support a jury verdict in his favor, Id. at 322; see also FED, R. Civ. P. 5 6(e); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574. 586 (1986). In determining whether there are any issues of material fact, the Court must resolve all doubts as to the existence of a material fact against the moving party and draw all reasonable inferences - including issues of credibility in favor of the non-moving party. N.ewsome v. - Admm Office of the Courts of the State of N J 103 F Sup 2d 807 815 (D N J 2000), aUd 51 Fed. App x 76 (3d Cir. 2002) (citing Watts v. Univ. of DeL. 622 F.2d 47. 50 (D.N..J. l)80fl. ilL The Federal Securities Laws Prohibit the Tipping of Material Nonpublic Information Section 1 7(a) of the Securities Act prohibits fraud in the offer or sale of a security. 15 U.S.C. § 77q(a). Insider trading. which constitutes the unlawful trading in securities based on material non public information, is well established as a violation of Section 10(b) of the Securities Exchange Act and Rule lOb-S. See l)irks v. SEC. 463 U.S. 646. 653-54 (l9X3: Chi miella lnited Staics 445 U S 222 226-30 (1980) 1 hc Umted Statcs Supicmc (. ouit s insider trading jurisprudence is not limited to insiders or misappropriators who trade br their own account. Section 10(b) and Rule lOb-S also apply to situations in which the insider or misappropriator tips another who trades on the information. In Dirks. the United States Supreme Court held that a tipper violates Section 1 0(b) by disclosing material nonpublic information to his tippee, in breach of his duty to keep the information confidential. 463 U.S. at 662 63. In 4 determining the scope of tipper-tippee liability under Section 1 0(b), the Suprem e Court expressed that the test is whether the insider personally will benefit, direct/v or indirect/v. from his disclosure. Id. at 662. (emphasis added). In regards to the insider s perso nal benefits, the Supreme Court ruled that, as with someone in Volimar s position. elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend. Id. at 664. Similarly, Section 14(e) of the Exchange Act and Rule 14e 3 thereunder proscribes fraud Ifl connection ,ith a tendei olfei SLC 15 U S C 78n(L) 17 C F R 240 14L i( ) ROIL 14L prohibits trades based on material nonpublic information concerning a tender oiler that a person knows or has reason to know has been acquired from an insider, either directly or indirec tly. IinltLd States 0 Hagan 521 U 5 642 669 (1997) (quoting United States x Chcstm m 947 F.2d 551, 557 (2d Cir. 1991)). In the case of tippers. these provisions make it unlawful for an insider to communicate material, nonpublic information relating to a tender offer to any other person under circumstances in which it is reasonably foreseeable that such communicatio is n likely to result in illicit insider trading. SEC v. Drescher, No. 99-1418, 1999 U.S. Dist. LEXIS 16033, at *l3.15 (S.D.N.Y. Oct 19, 1999) (allegations that tipper and tippees were close friends plus allegations concerning statements about acquiring company and targets determ ined to be sufficient circumstantial evidence to show that tipper was reckless in disclosing nonpub lic information and reckless disregard of the fact that tippees were likely to trade based on the information). Although Voilmar argues that he should not be found liable for insider trading because he did not receive any personal benefit for tipping Turner, (Dcf s Br. 10-15), the relatio nship between Vollrnar and Turner is precisely the type of close, familial, and personal relatio nship 5 that courts hold as demonstrating a personal benefit to the tipper. gg SEC v. Warde, 1 51 F.3d 42 49 (2d Cii 1998) ( Ehe close hiendship beteen [the tippel and tippccj suggcsts th it (thc tipper s] tip was intended to benefit [the tippee]. and therefore allows ajurv finding that Ithe tippct s tip breached a duty undei 10(b) ) SEC v BIackxclI 291 1 Supp 2d 673 692 (S D Ohio 2003) (jThe tipper] obviously could have intended to give a gift to his family members.. . ). It is undisputed that Voilmar and Turner attended business brothers-in-law, and that Voilmar was the best man in School together. are Turner s wedding. Contrary to Voilmar s attempt to downplay his relationship with Turner, there is evidence showing that Volimar and Turner placed more than fifty telephone calls to one another during the time period in which Vollmar made the illicit tips. Thus, the Court finds that no material issue of fact exists as to whether Voilmar received a personal benefit from tipping Turner. A. Collateral Estoppel /ollmar s Guilty Plea Prevents Him from Contesting l;lis Liability for insider Trading The doctrine of collateral estoppel bars a party from relitigating issues that were actually litigated and necessary to the outcome of a first action in subsequent suits arising from different causes of action. See ParkIane i-Iosiery Co., Inc. v. Shore. 439 U.S. 322, 326 n.5 (1979). The Third Circuit has held that a party is precluded from relitigating a legal or factual issue when: (1) the issue . . . is the same as that involved in the prior action; (2) the issue was actually litigated; (3) it was determined by a final and valid judgment; and (4) the determination was essential to the prior judgment. SEC v. Lazare Indus.. 294 Fed. Appx. 711. 714 (3d Cir. 200$) (quoting Peloro v. United States, 488 F.3d 163, 174-75 (3d Cir. 2007)). in the context of a criminal conviction, the Third Circuit also ruled that the preclusive effect [of a criminal conviction] extends to all issues that are necessarily admitted in the 698 F.3d 160, 164 (3d Cir. 2012). 6 plea. Anderson v. Commr. In an attempt to establish that a disputed issue of material facts exists, Vollmar argues that he: (1) did not actively participate in an insider trading conspiracy; (2) was not privy to confidential and material inside information; (3) did not expect that Turner would trade on Vollmar s tips; and (4) never discussed with Turner a false cover story to be given to the authorities. (Def. s Br. 6-10). These assertions by Vollmar, however, contradict his own sworn admissions at his plea hearing. (Pl. s Reply Br. 1-3). At Volimar s plea hearing, he made the following specific and inculpatory admissions: (1) Vollmar admitted that he knowingly and willfully conspired with Turner to engage in securities fraud (Pl. s Ex. A at 21:7-12); (2) Vollmar admitted that he was privy to material, non public information as an Autodesk employee concerning Autodesk s financial results, business plans, and potential acquisitions and mergers (jj at 22:23-23:3); (3) Vollmar admitted that he violated his duty of confidentiality to Autodesk by disclosing material non-public information about Autodesk and Moldflow to Turner (jj at 23:22-24:3,24:9-13,25:12-16); (4) Vollmar admitted that he understood that it was likely that Turner would use the information to make securities trades at the time he disclosed the information about Autodesk and Moldflow (jj at 24:4-8, 25:17-22); (5) Vollmar admitted that after being contacted by the Commission, he and Turner discussed a fake cover story to give to the authorities in the event they were contacted about Turner s Moldflow purchases (jj at 24:14-19); and (6) Voilmar admitted that he acted knowingly, willfully, and intentionally ( at 26:20-23). Having unambiguously admitted to each of these facts at his plea hearing, Vollmar cannot create an issue of material fact by now disputing the veracity of his prior admissions. $çç Gonzalez v. Sec y of Dept. of Homeland Sec.. 678 F.3d 254,263 (3d Cir. 2012) (conclusory, self-serving statements cannot create an issue of fact to defeat a summary judgment, when the 7 statements are impeached by a well supported showing to the contrary ) (citations omitted). Because Volimar admitted to each of the requisite elements of insider trading in his guilty plea, he is now precluded from re-litigating those issues in this civil matter. Anderson. 698 F.3d at 164. Thus, Vollmar s belated attempts to take back his sworn admissions from his plea hearing do not entitle him to a trial in this case. As Vollmar admitted to each of the elements of insider trading at his plea hearing, the Court finds that no genuine issue of material fact exists summary judgment in favor of the Commission is appropriate. and that $ SEC v. Obus, 693 F.3d 276, 286 (2d Cir. 2012) ( To be held liable, a tipper must (1) tip (2) material non-public inform ation (3) in breach of a fiduciary duty of confidentiality owed to. . . the source of the information; (4) for personal benefit to the tipper. ). B. Permanent Injunction Analysis The Commission requests that this Court grant a permanent injunction prohibiting Vollmar from committing future violations of Section 17(a) of the Securities Act, Section 10(b) and 14(e) of the Exchange Act, and Rules lob-5 and 14e-3 thereunder. (Pl. s Br. 9). The Commission is authorized to seek a permanent injunction whenever it appears that a person is engaged or is about to engage in acts or practices constituting a violation of the federal securities laws. $ 15 U.S.C. § 78u(d)(1). The purpose of injunctive relief is to protect the investing public and deter future infractions of the securities law. SEC v. Bonastia, 614 F.2d 908, 912 (3d Cir. 1980). Tn determining whether injunctive relief is warranted, the Third Circuit has articulated five factors: (I) the degree of scienter involved; (2) the isolated or repeatcd nature of the violations; (3) the defendant s recogDition of the wrongful nature of the conduct; (4) the sincerity of the defendant s assurances, if any, against future violations; and (5) the likelihood that the defendant s occupation will present opportunities for future violations. 8 $. SEC v. Teo, No. 04-01815,2011 U.S. Dist. LEX1S 103413, at *2327(D.N,J. Sept. 12, 201 1) (citing Bonastia, 614 F.2d at 912). In applying these five factors, no one factor is determinative, hut rather, the totalit ol the circumstances should be considered in reaching a decision. Id. Based on an analysis of the relevant factors, the Court finds that Voilmar should he enjoined from future violation of the federal securities laws, The evidence sho\vs that Voilmar acted with a high degree of scienter given that he admitted to knowingly. willfully, and intentionally tipping Turner on numerous occasions. Although Volirnar was a tipper and did not trade himself, courts have found that the tipper s conduct, almost invariably, is more culpable than that of the tippee. See Blackwell, 477 F. Supp. 2d at 911 (finding {tlhe fact that [the tipperi did not personally trade on inside information does not make his conduct less egregious. ). In addition. Volimar s attempts to take back his sworn admissions in response to the Commission s Motion for Summary Judgment do not demonstrate a recognition of the wrongfulness of his conduct. Furthermore, given Voilmar s M.B.A. and work experience as a corporate executive, it is possible that he will return to the business world where he will have the opportunity to commit future violations. The fact that Vollmar has been criminally convicted for his conduct and is not currently working as a corporate executive in the securities industry fails to establish a sufficient basis to preclude the issuance of an injunction. See Bonasita. 61 4 F.2d at 9 13 (finding that no longer working in the securities industry is insufficient by itself to preclude the issuance of an injunction); Tco, 2011 U.S. Dist. LEXIS 103413, at *2327 (issuing an injunction even though defendant has already pled guilty to insider trading): Blackwell. 477 F. Supp. 2d at 911 (granting an injunction following insider trading conviction, and finding that [o]n several previous occasions, courts have awarded injunctive relief to the SEC after it has 9 used collateral estoppel based on criminal convictions. ). Accordingly, the Court finds that injunctive relief is appropriate under these circumstances. C. 1)isgorgcrnent Analysis Section 27 of the Exchange Act, 15 U.S.C. § 78a. coni er[s] general equity powers upon the disict coults to fashion remedies foi seculities Iavvs ioIations InicBayouGroup,IIC 564 F.3d 541. 548 (2d Cir. 2009); see also SEC v. Manor Nursing Centers, inc., 458 F,2d 1082, 1103 (2d Cir, 1972) ( Once the equity jurisdiction of the district court has been properly invoked by a showing of a securities law violation, the court possesses the necessary power to fashion an appropri ite icmeth ) Disgoigement is an equitable Iemed\ designed to deprie a \\iongdocl of his unjust enrichment and to deter others from violating securities laws. SEC v. 11 uge Capital Corp.. 124 F.3d 449, 455 (3d Cir. 1997) (quoting SEC v. First City Fin, Corp.. 281 IS. App. D.C. 410, 890 F.2d 1215, 1230 (D.C. Cir. 1989). Once the equity jurisdiction of the district court has been properly invoked by a showing of a securities law violation, as shown here, the court possesses the necessary power to fashion an appropriate remedy, includ ing an order req uiring the defendant to disgorge the profits that he obtained by fraud. Manor Nursing, Cengnc., 458 F.2d at I 103 SEC v. Blati, 583 F.2d 1325, 1335 (5th Cir. 1978). The SEC need not trace every dollar of proceeds misappropriated by the defendants but must present a reasonable approximation of the illicit profits. SEC v. Chester Holdings. Ltd., 41 F.Supp. 2d at 528 (quoting SEC v. Hughes Capital Corp., 917 F. Supp. 1080, 1085 (D.N.J. 1996). alicI, 124 F.3d 449 (3d Cir. 1997)). The proper measure of the amount of disgorgement is the difference between the price at which the inside trader sold the stock and the price of the stock shortly afier the diselosuie of the inside infoimation SEC Patel 61 F 3d 137 139 40 (2d Cu 199) In the context of a tipper tippee relationship. 1a] tippee s gains are attribu table to the tipper. regardless of whether or not a benefit accrues to the tipper. SEC v. \Varde . 1 5 1 F3d 42. 49 (2d Cir. 1998); see also SEC v. Teo. No. 04-01815. at *21 (D.N.J. Sept. 12. 2011) ( [WIhere two or more individuals or entities collaborate or have a close relationship in engaging in the violations of the securities laws, they have been held jointly and severally liable for the disgorgement of illegally obtained funds ); Hughes, 124 F.3d at 455 ( When apportioning liability among multiple tortfeasors, it is appropriate to hold all tortfias ors jointly and severally liable for the full amount of the damage... ). In this case, the SEC determined that the total profits Turner earned for himself, his family, and Clay Capital was $2727 .574. 1t is undisputed that Turner and Clay Capital have already paid a total of $2,100,000 in disgorgemen t in this matter. Thus. the total amount of illegal profits that remains unpaid is $627.5 74. The Court finds disgorgement is warranted here and that Volimar is jointly and severa lly liable for the illicitly earned profits. Although Volimar claims that he did not protit in any wa from the illicit insider trading activity, supporting case law recognizes that a tipper may be held liable for the profits of his tippee. See Warde, 151 F.3d at 49 (citing SEC v. Clark, 915 R2d 439, 454 (9th Cir. 1990)) ( The value of the rule in preventing misuse of insider inform ation would he virtually nullified if those in possession of such information, although prohib ited from trading for their own accounts. were free to use the inside information on trades to benefit their Ibmilies. friends, and business associates. ). Because Volimar hears the burden ol resolvi ng the risk of uncertainty in calculating disgorgement. and because Vollmar fiuils to oiler an credibl e evidence to the contrary, the Commission s sum of $627,574 is a reasonable approx imation of the remaining unpaid profits that Turner traded using the inside information provided by Vollmar. As such the Court orders Vollmar to pay $627,574 in disgorgement. T), Prejudgment Interest A district court has the discretion to order payment of prejudgment interest upon a consideration of both compensation and fairness. SEC v. Antar, 44 F. Appx 548, 552 (3d Cir. 2002) (citation omitted). The Third Circuit has held that prejudgment interest may be denied when its exaction would be inequitable. 14 The purpose of preiudgment interest is to prevent a defindant from obtaining the benefit of what amounts to an interest free loan on the l)rocecds otan illegal activity while also compensat[ing] an aggrieved party for the wrongful deprivation of its money. SEC v. Hughes Capital Corp, 917 F. Supp. 1080, 1085 (D,N,J. 1996), 124 F.3d 449 (3d Cir. 1997)) (citation omitted). The calculation of prejudgment interest follows the delinquent tax rate for unpaid taxes as determined by the Internal Revenue Service, and is assessed on a quarterly basis. SEC v. Chester Holdings. Ltd.. 41 F. Supp. 2d 505. 529 T).N..l. 1 999). Although the Third Circuit has not enumerated a list of factors that district courts should consider when determining whether prejudgment interest is warranted. other Circuit Court of Appeals have considered: ii) the need to fully compensate the wronged party for actual damages suffered; (ii) considerations of fairness and the relative equities of the awarch (iii) the remedial ui ose of the statute involved; and/or (iv) such other general principles as are deemed relevant by the court. SEC v. First Jersey Sec.. Inc., 101 F.3d 1450. 1 476 (2d Cii. 1 996). In this case, the balance of equities weigh in Voilmar s favor and thus warrants against awarding prejudgment interest. Even though Vollmar, who was an insider and privy to confidential information at Autodesk, divulged inside information to Turner. Voilmar did not himself execute any trades based on the information. The Commission has also failed to provide any evidence demonstrating that Voilmar directly profited from tipping inside information to Turner or that he had access to Turner s illicit profits at an time. Moreover, the Commissioii 12 cannot point to any aggrieved party that was wrongfully deprived of an economic benefit as a result of the insider trading scheme between Turner and Vollmar. As such, the Court finds an award of prejudgment interest in this case is unwarranted. See SEC v. Rubin, No. 91-653 1 1993 LLS. Dist. LEXTS 13301, at *16 (S.D.NX. Oct. 8. 1993) (declining to impose prejudgment interest on tipper who did not trade or profit from trading on inside information because such interest would constitute an unjust penalty). Accordingly, the Court denies the Commissions request to order Volimar to pay prejudgment interest of $1 24.984 on the disgorgement award. E. Civil Monetary Penalty Section 2 IA of the Exchange Act authorizes the court to assess a civil monetary penalty on a person who has engaged in insider trading. 15 U.S.C. § 78u-1. The amount of the penalty shall be determined by the court in light of the facts and circumstances, but shall not exceed three times the profit gained or loss avoided as a result of the insider trading activity. See 1 5 U.S.C. § 78u-i(a)(2). The civil penalty is intended to serve as a deterrent mechanism. because disgorgement of profits alone merely restores a defendant to his original position without extracting a real penalty for his illegal behavior. H.R. Rep. NC). 98-355, 98th Cong., 2d Sess., 7-8 (1984), reprinted in 1984 U.S.C.A.A.N. 2274, 2280-81. in determining the amount of a civil penalty, courts look to a numbers of factors, including: (1) the egregiousness of the deP.ndant s violations; (2) the isolated or recurrent nature of the violations; (3) the degree of scienter: (4) the amount of illegal profits: and (5) the deterrent effect of the penalty in light of defendant s net worth, SEC v. Johnson, No. 02-5490, 2004 U.S. Dist. LEXIS 30875, at *14 (1).N.J. Aug. 27, 2004). The Commission contends that Voilmar s actions warrant the Court to impose a maximum penalty of $8. 1 82,722. (P1. s Br. 13). According to the Commission. the maximum 13 penalty is appropriate in this case because Volimar admitted during his plea hearing that he acted del iberatelv in repeatedly tipping Turner with confidential information that Voll mar was entrusted to protect. Id. Thus, the Commission argues that Voilmar s violations were egregious. recurring and . . . intentional. Id. Voilmar argues that the nature othis illicit conduct was isolated because there were only two incidents during his fourteen years of emplo yment with Autodesk that he misappropriated material nonpublic information. (Def. s Br. 22). Vollmar also argues that he did not reap any profit from tipping inside information to Turner. Id. at 22-23. Moreover, as a consequence for his illicit actions, \JoHmar has lost his job: has been unable to secure other employment: and was forced to sell his home for a $1 50.00() loss to avoid foreclosure. Id. at II 1 2. Voilmar also argues that his current net worth demonstrates his inability to pay a meaningful penalty award. (. at 22-23). The Court finds that a civil monetary penalty is not appropriate in this case. First, Vollrnar s modest financial worth weighs against the assessment of a substantial civil penalty. As an initial matter, courts recognize that a defendant s net worth is a critical factor in determining the amount ot civil penalty to award. çg SEC v. Pardue, 367 F. Supp. 2d 773 777 (ED. Pa. 2005) (rejecting the Commissions argument that a defendant s impecuniousness should have no effect on the Courts determination of what civil penalty to assess on the grounds that ignoring a defendants present financial condition would entail doing considerable misjustice ); see also SEC v. Gunn, No, 08-1013, 2010 U.S. Dist. LEXIS 88164, at *44 (N.L). Texas Aug. 25, 201 0) ( The defendants net worth and corresponding ability to pay has proven to be one of the most important factors that district courts consider when determining how much of a civil penalty to assess in an insider-trading case. ). 14 The Court also finds that awarding a substantial civil monetary penalty is not approp riate because Volimar s violations of the federal securities laws were isolated. Compa re. e.g.. SEC v. Op[tict. 479 F. Supp. 2d 3 1 9, 329 (S.D.N.Y. 2007) (finding that a violation was not a single, isolated incident where the violation arose out of a continuing course ot wrongful conduct of more than eighteen months ), with United States SEC v. Snyder, No. 03-465 8. 2006 U.S. Dist. LEX1S 81830, at *11.12 (S.D. Tex. Aug. 22, 2006) (characterizing as isolate d the conduct ota defendant who committed four separate violations of the federal securities laws over a period of a few months); SEC v. Ingoldsby, No. 88-1001, 1990 U.S. Dist. LEXIS 11383. at *56 (D. Mass. 1 990) (declining to issue an injunction where the defendant s infraction of the securities law was an isolated event, and the SEC has presented no evidence of either prior or subseq uent violations by the defendant. ). Volimar s tipping can be characterized as two inciden over ts less than a five month period. Furthermore. this is the first time that Voilmar has been found liable for violating the securities laws. Thus, the Court finds that Volimar s conduct was isolate d. The Court concludes that a civil penalty is inappropriate in this case. The Court finds that Voilmar s criminal penalties in conjunction with the injunctive relief and disgor gement of profits ordered in this Opinion will serve as a sufficient deterrent against any future violations of securities laws. In making this determination, the Court has also considered (1) Vollmar s precarious financial condition; (2) the lack of evidence showing any personal econom ic benefit: and (3) the fact that this is Voilmar s first violation of the securities laws and appear s to be an isolated incident. Accordingly, in light of the facts and circumstances of this case and based on its consideration of the factors enumerated above, the Court denies the Commission s request to impose a civil penalty against Vollmar. 15 1. 1CONCLUSION For the foregoing reasons, Defendant s Motion for Summary Judgm ent is granted. The Court enters a permanent injunction against Volirnar prohibiting him from committing future violations of Section 1 7(a) of the Securities Act. Section 1 0(b) and 14(e) of the Exchange Act. and Rules 1 Ob 5 and 14e 3 thereunder. The Court tnds that \/ollmar is liable o the Commission for disgorgement in the amount of $627,574, The Commission s request for prejudgment interest and a civil penalty is denied. An appropriate Order accom panies this Opinion. I)ate: Original: cc: November 2013 Clerks Offlce Hon. James B. Clark. U.S.M.J. All Counsel of Record File . 16

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