U.S. SEC suffers string of losses in the courtroom

Reuters

By Aruna Viswanatha and Sarah N. Lynch

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission has suffered a string of recent losses in the courtroom, dragging down what had been a consistently high trial success rate.

Since the start of the SEC's fiscal year on October 1, the agency's win rate has dropped to 58 percent, from about 80 percent in recent years. Below are 12 trials that have produced a verdict or ruling since October 1.

1. SEC v AIC, Inc, et al

ALLEGATIONS: The chief executive of financial services firm AIC misrepresented to investors how safe investments in its promissory notes and stock were. AIC was not profitable, and was instead run as a Ponzi scheme.

TRIAL LOCATION: Knoxville, Tennessee

DATE OF VERDICT: 10/10/13

DETAILS: After an almost three-week trial, a jury found AIC, its subsidiary, and its chief executive liable on all of the SEC's counts.

2. SEC v. Mark Cuban

ALLEGATIONS: The Dallas Mavericks owner avoided a $750,000 loss by selling shares in Internet search company Mamma.com after receiving confidential information from the company's CEO.

TRIAL LOCATION: Dallas, Texas

DATE OF VERDICT: 10/16/13

DETAILS: After a two-week trial, the jury found Cuban not liable for insider trading.

3. SEC v True North Finance Corp, et al

ALLEGATIONS: Attorney Todd Duckson, his advisory firm and a real estate lending fund he advised engaged in securities fraud by misleading investors about the fund's deteriorating financial condition.

TRIAL LOCATION: St. Paul, Minnesota

DATE OF VERDICT: 10/22/13

DETAILS: A jury sided with the SEC on all claims except one against the three defendants. Duckson and the fund were found liable for intentional fraud. The investment adviser was found not liable for intentional fraud.

4. SEC v Stephen Kovzan

ALLEGATIONS: Kovzan, the chief financial officer at NIC Inc (EGOV), misled investors by concealing more than $1.18 million in personal perks paid to the CEO on the company dime.

TRIAL LOCATION: Kansas City, Kansas

DATE OF VERDICT: 12/2/13

DETAILS: After a three-week jury trial, the verdict was in favor of the defendant on all counts.

5. SEC v Peter L. Jensen and Thomas C. Tekulve

ALLEGATIONS: Two former senior executives of Basin Water Inc overstated the company's financial results; one also engaged in insider trading.

TRIAL LOCATION: Los Angeles, California

DATE OF RULING: 12/10/13

DETAILS: After a nine-day bench trial, the judgment was in favor of the defendants.

6. SEC v Ladislav "Larry" Schvacho

ALLEGATIONS: Schvacho, a retired engineer who was close friends with the CEO of Comsys, traded in Comsys stock based on inside information.

TRIAL LOCATION: Atlanta, Georgia

DATE OF RULING: 1/7/14

DETAILS: After a two-day bench trial, the verdict and judgment were in favor of the defendant.

7. SEC v Siming Yang et al

ALLEGATIONS: Research analyst Yang traded in shares of Zhongpin Inc before a public announcement that its CEO would acquire all of the company's outstanding stock.

TRIAL LOCATION: Chicago, Illinois

DATE OF VERDICT: 1/13/14

DETAILS: A jury decided against the SEC on insider-trading, but in favor of the SEC on front-running claims and filing a false form about his stock holdings.

8. SEC v. Rex C. Steffes et al

ALLEGATIONS: Members of the Steffes family bought $1.6 million worth in securities of Florida East Coast Industries after learning it would be acquired by private equity firm Fortress Investment Group.

TRIAL LOCATION: Chicago, Illinois

DATE OF VERDICT: 1/27/14

DETAILS: After a nine-day jury trial, verdict was in favor of all defendants.

9. SEC v. Life Partners Holdings Inc, et al

ALLEGATIONS: The company and its executives misled investors about core aspects of its "life settlements" business, committed insider-trading and broke other rules.

TRIAL LOCATION: Austin, Texas

DATE OF VERDICT: 2/3/14

DETAILS: A jury cleared the company and its executives on eight of 12 violations, including some fraud and insider-trading related claims, but found the defendants liable for fraud in connection with two months of misleading statements, as well as bookkeeping, reporting and false certification of the financial statements by the CEO.

10. SEC v. Robert A. DiGiorgio

ALLEGATIONS: DiGiorgio and his firm, Radius, misled investors about the quality of loans that backed $23.5 million in securities that Radius issued.

TRIAL LOCATION: Fort Myers, Florida

DATE OF VERDICT: 2/6/14

DETAILS: A jury found DiGiorgio liable for fraud and sided with the SEC on all counts that went to trial.

11. SEC v Marlon Quan, et al

ALLEGATIONS: Quan and several funds he controlled invested with now-convicted Ponzi schemer Thomas Petters. When Petters's scheme began to unravel, Quan executed a "series of convoluted transactions" to hide the defaults from investors.

TRIAL LOCATION: Minneapolis, Minnesota

DATE OF VERDICT: 2/11/14

DETAILS: After a two-week trial, the jury found Quan liable on most counts, including intent to commit fraud. But the jury also found Quan was not liable for intentional fraud under a different law.

12. SEC v Leslie J. Jacobs, II and Andrew W. Jacobs

ALLEGATIONS: Leslie Jacobs traded on inside information from his brother about over-the-counter pharmaceutical product distributor Chattem.

TRIAL LOCATION: Cleveland, Ohio

DATE OF VERDICT: 3/6/2014

DETAILS: After a six-day trial, the jury found the brothers liable for fraud for misappropriating and trading on inside information about the tender offer, but not liable for broader fraud claims.

(Reporting by Aruna Viswanatha and Sarah N. Lynch; Editing by Karey Van Hall and Tiffany Wu)

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