Daniel Imperato v. U.S. Securities and Exchange Commission

• Court: Court of Appeals for the Eleventh Circuit
• Decided: June 30, 2017
• Docket: 15-11574
• Status: Unpublished

Opinion

Case: 15-11574 Date Filed: 06/30/2017 Page: 1 of 14

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 15-11574 Non-Argument Calendar ________________________

Agency No. 3-15628

DANIEL IMPERATO,

Petitioner,

versus

U.S. SECURITIES AND EXCHANGE COMMISSION,

Respondent.

________________________

Petition for Review of a Decision of the Securities and Exchange Commission ________________________

(June 30, 2017)

Before MARTIN, JULIE CARNES, and JILL PRYOR, Circuit Judges.

PER CURIAM: Case: 15-11574 Date Filed: 06/30/2017 Page: 2 of 14

Daniel Imperato, proceeding pro se, petitions for review of the Securities

and Exchange Commission’s (“SEC”) final order permanently restricting his

participation in any penny stock offering and in various securities-industry roles.

See 15 U.S.C. § 78o(b)(6). In response, the SEC argues Imperato’s petition is

meritless but requests that we vacate part of its order. After careful review, we

deny Imperato’s petition and vacate the SEC’s order in part.

I.

In 2012, the SEC filed a civil enforcement complaint in federal court against

Imperato and other defendants, including his company, Imperiali. The SEC

alleged the defendants violated several securities laws. The magistrate judge

issued a report and recommendation (“R&R”) recommending that the district court

grant the SEC’s summary judgment motion. See SEC v. Imperiali, Inc., No. 12-

80021-CIV, 2013 WL 12080193, at *1 (S.D. Fla. Sept. 25, 2013). The magistrate

judge found that Imperato violated a number of securities laws by: (1) knowingly

making and disseminating “blatantly false and deceptive material statements” as

part of a fraudulent scheme to lure investors to Imperiali with an intent to deceive,

id. at *4; (2) selling unregistered shares of Imperiali, id. at *3; (3) engaging in

broker conduct—including solicitation of potential Imperiali investors—without

registering as a broker with the SEC, id. at *5–6; and (4) failing to comply with

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various statutory and SEC reporting and recordkeeping requirements.1 Id. at *6.

The district court adopted the R&R and granted the SEC’s motion for summary

judgment. SEC v. Imperiali, Inc., No. 12-80021-CIV, 2013 WL 12080173 (S.D.

Fla. Oct. 8, 2013). The court then entered a judgment permanently enjoining

Imperato from violating a number of securities laws and ordering him to disgorge

(1) $2,493,785 in ill-gotten profits; and (2) $640,703 in prejudgment interest. SEC

v. Imperiali, Inc., No. 12-80021-CIV, D.E. 195, at 1–10 (S.D. Fla. Nov. 7, 2013).

Imperato appealed, and this Court affirmed. SEC v. Imperiali, Inc., 594 F.

App’x 957, 959 (11th Cir. 2014) (per curiam) (unpublished). In summarizing the

facts, the Imperiali panel noted that Imperato had distributed a memorandum to

existing and prospective investors stating the proceeds of Imperiali’s stock offering

would be invested in up to fifteen publicly traded companies. Id. at 959.

However, those funds were instead transferred to another one of Imperato’s

companies, and Imperato used them for personal ends. Id. Imperato then

continued to make false statements, announcing in a press release that Imperiali

was generating revenue from equity investment into public companies. Id.

Beyond that, when Imperiali later elected to be regulated by the SEC as a business-

development company, “Imperato directed Imperiali to file statements with the

[SEC] that overrepresented Imperiali’s assets by millions of dollars.” Id. The

1 The magistrate judge also found Imperato liable for Imperiali’s violations as a controlling person and an aider and abettor. Id. at *4 n.6. 3 Case: 15-11574 Date Filed: 06/30/2017 Page: 4 of 14

Imperiali panel also addressed issues of material fact asserted by Imperato. Id. at

960. In doing so, it held “[t]he record established that Imperato dictated and

approved press releases and financial statements that included millions of dollars in

false investments, including a $70 million valuation of investments in companies

that were never incorporated and that Imperato testified had ‘no operation.’” Id. at

961. Further, the panel concluded Imperato filed with the SEC a number of forms

containing “material misrepresentations about the value of Imperiali and its

subsidiary companies.” Id.

On November 27, 2013, during the pendency of Imperato’s appeal, the SEC

brought an administrative proceeding under § 15(b) of the Securities Exchange Act

to determine whether it should impose additional remedial sanctions against

Imperato. 2 In his answer, Imperato disputed the district court’s factual findings in

the earlier civil enforcement action. He also argued the district court’s judgment

violated his due process rights, and that the SEC’s follow-on administrative

proceeding violated his due process and trial-by-jury rights. Further, he said the

conduct alleged by the SEC occurred outside the five-year statute of limitations.

An administrative law judge (“ALJ”) issued a decision granting the SEC’s

motion for summary disposition. The decision permanently barred Imperato “from

2 The SEC noted that such a proceeding—that is, one seeking to impose sanctions against someone after he has been enjoined from acts involving securities fraud—is commonly called a “follow-on” proceeding. 4 Case: 15-11574 Date Filed: 06/30/2017 Page: 5 of 14

associating with a broker, dealer, investment adviser, municipal securities dealer,

municipal advisor, transfer agent, or nationally recognized statistical rating

organization, and from participating in an offering of penny stock.” The ALJ

concluded this industry-wide bar against Imperato was appropriate after

considering the factors set out in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir.

1979), aff’d, 450 U.S. 91, 101 S. Ct. 999 (1981). The ALJ also determined the

doctrine of collateral estoppel precluded Imperato from challenging the district

court’s findings, attacking the district court’s judgment, and relitigating issues.

Finally, the ALJ found the follow-on proceeding fell within the five-year statute of

limitations because that limit ran from the date Imperato was enjoined from future

securities law violations, and not from the date of Imperato’s underlying conduct.

Imperato appealed the ALJ’s initial decision to the SEC. On March 27,

2015, after independently reviewing the record and considering the Steadman

factors, the SEC determined the lifetime industry-wide bar imposed by the ALJ

against Imperato was appropriate and in the public interest. Further, the SEC

concluded the doctrine of collateral estoppel prevented Imperato from attacking the

district court’s injunction and the issues actually litigated and necessary to the

district court’s decision. Finally, the SEC found that (1) the follow-on proceeding

was not subject to the five-year statute of limitations because it sought an industry

bar, and not a civil fine, penalty, or forfeiture; and (2) even if the statute of

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limitations applied, the follow-on action fell within the statute of limitations

because the SEC brought it less than one month after the district court enjoined

Imperato.

On April 8, 2015, Imperato filed a motion for reconsideration with the SEC.

Five days later, on April 13, 2015, Imperato filed a petition for review of the

SEC’s order in this Court. On May 6, 2015, the SEC denied Imperato’s motion for

reconsideration. Then, on May 15, 2015, the SEC filed a motion to dismiss

Imperato’s petition for review for lack of jurisdiction. In response, Imperato filed

a “[s]econd [n]otice of appeal” on May 28, 2015. In it, he purports to file an

“[a]mended notice of appeal if required by this [C]ourt” and identifies both the

SEC’s March 27, 2015 order and its May 6, 2015 denial of his motion for

reconsideration. This Court ordered that the SEC’s motion to dismiss be carried

with the case. 3

II.

We first address whether we have jurisdiction to consider Imperato’s

petition for review. This Court has jurisdiction over a petition to review any “final

3 This Court also issued a jurisdictional question that asked (1) whether Imperato’s motion for reconsideration with the SEC was timely filed; and (2) what effect an untimely motion for reconsideration would have on the finality and appealability of the SEC’s March 27, 2015 order. Because our jurisdictional holding in this case does not implicate this question, we do not discuss it further.

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order” of the SEC. 4 15 U.S.C. § 78y(a)(1). However, an order is not “final and

reviewable” by this Court if there is a motion for reconsideration of that order

pending before the SEC. See Aeromar, C. Por A. v. Dep’t of Transp., 767 F.2d

1491, 1493 (11th Cir. 1985) (per curiam). The SEC says this Court lacks

jurisdiction to consider Imperato’s petition to review the SEC’s order because he

filed it on April 8, 2015, while his motion for reconsideration of the SEC’s order

was still pending. The SEC also argues its later denial of his motion for

reconsideration on May 6, 2015 “does not retroactively validate” his “incurably

premature” April 8, 2015 petition.

We need not address whether Imperato’s April 8, 2015 petition for review

was “incurably premature.” Instead, we conclude we have jurisdiction to review

the SEC’s order because Imperato’s “[s]econd [n]otice of appeal,” filed on May

28, 2015 in response to the SEC’s motion to dismiss, was sufficient to qualify as a

second petition for review. In that notice of appeal, Imperato (1) identified himself

as the appealing party; (2) identified the SEC’s March 26, 2015 order and its May

6, 2015 denial of his motion to reconsider that order; and (3) sought relief from this

Court. See Rinaldo v. Corbett, 256 F.3d 1276, 1278–79 (11th Cir. 2001) (detailing

the factors courts examine to determine “whether a pro se appellant’s brief could

4 In order to obtain review in this Court, the petitioner must (1) reside or have his principal place of business in this circuit; and (2) file his petition for review within sixty days after the SEC enters its order. 15 U.S.C. § 78y(a)(1). 7 Case: 15-11574 Date Filed: 06/30/2017 Page: 8 of 14

constitute a notice of appeal”). He also filed the notice within sixty days of the

SEC’s denial of his motion for reconsideration, as is required for petitions to

review SEC orders. See 15 U.S.C. § 78y(a)(1). Liberally construing Imperator’s

pro se second notice of appeal as we must, see Alba v. Montford, 517 F.3d 1249,

1252 (11th Cir. 2008), it constitutes a new petition, and we have jurisdiction to

review that petition. 5 We therefore deny the SEC’s motion to dismiss for lack of

jurisdiction and proceed to the merits of Imperato’s petition.

III.

Imperato asserts several challenges against the SEC’s order. We address

each in turn. In doing so, we are mindful that the SEC’s factual findings are

“conclusive” if they are “supported by substantial evidence.” 15 U.S.C. §

78y(a)(4). Substantial evidence means “relevant evidence as a reasonable mind

might accept as adequate to support a conclusion.” Pierce v. Underwood, 487 U.S.

552, 565, 108 S. Ct. 2541, 2550 (1988) (quotation omitted). We review de novo

the SEC’s legal conclusions. Orkin v. SEC, 31 F.3d 1056, 1063 (11th Cir. 1994).

5 Imperato did not pay a filing fee for this second petition for review, as required by Federal Rule of Appellate Procedure 15(e). Neither did he submit a copy of the SEC order, as required by 11th Circuit Rule 15-2. However, these rules are not jurisdictional requirements listed in the relevant statute. See 15 U.S.C. § 78y. Further, in light of our precedent warning that “claim-processing rules . . . requiring that the parties take certain procedural steps at certain specified times generally should not be deemed jurisdictional,” Avila-Santoyo v. U.S. Att’y Gen., 713 F.3d 1357, 1360 (11th Cir. 2013) (en banc) (per curiam) (quotations omitted), we conclude these requirements are not jurisdictional. 8 Case: 15-11574 Date Filed: 06/30/2017 Page: 9 of 14

We will “overturn the SEC’s decision to impose a particular sanction only upon

finding a gross abuse of discretion.” Id. at 1066.

A.

Imperato seems to challenge his underlying liability for violating numerous

securities laws as determined by a federal district court and affirmed by this Court.

See Imperiali, 594 F. App’x at 959. However, we will not entertain a collateral

attack on an earlier injunction or finding of liability in a follow-on administrative

proceeding. See Elliott v. SEC, 36 F.3d 86, 87 (11th Cir. 1994) (per curiam)

(rejecting a petitioner’s collateral attack on his criminal conviction and injunction);

see also Siris v. SEC, 773 F.3d 89, 95 (D.C. Cir. 2014) (“In an administrative

proceeding following an injunctive action, the petitioner may not relitigate those

factual questions conclusively decided in the underlying civil suit . . . .”); Blinder,

Robinson & Co. v. SEC, 837 F.2d 1099, 1108 (D.C. Cir. 1988) (holding that “an

attack on the validity of [a] district court injunctive proceeding” that could have

been raised there “is doomed to fail”). Thus, Imperato is precluded from

challenging his underlying liability.

B.

Imperato also emphasizes the severity of the lifetime industry-wide bar

imposed against him. We construe this as an argument that the SEC’s decision to

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impose that bar was a gross abuse of discretion.6 See Orkin, 31 F.3d at 1066. We

conclude, however, that the SEC did not grossly abuse its discretion.

In analyzing whether the public interest supports a particular set of remedial

sanctions against a person who violated securities laws, the SEC should consider,

among other factors: (1) “the egregiousness of the [respondent’s] actions”; (2) “the

isolated or recurrent nature of the infraction”; (3) “the degree of scienter involved”;

(4) “the sincerity of the respondent’s assurances against future violations”; (5) “the

[respondent]’s recognition of the wrongful nature of his conduct”; and (6) “the

likelihood that the [respondent]’s occupation will present opportunities for future

violations.” Steadman, 603 F.2d at 1140 (quotation omitted). 7 Here, the SEC

considered these factors and determined that all of them weighed against Imperato

and substantially in favor of imposing a lifetime industry-wide bar against him.

We do not read Imperato’s pleadings to challenge any specific aspect of the SEC’s

analysis. Neither does he identify any mitigating factors the SEC failed to

consider. In any event, the factual findings underlying the SEC’s analysis are

supported by substantial evidence. For example, the SEC’s conclusion that

Imperato “acted with a high degree of scienter” is consistent with the district

court’s finding that he knowingly made “blatantly false and deceptive material 6 Imperato does not challenge the SEC’s authority to impose such a bar against him under 15 U.S.C. §§ 78o(b)(4)(C) and (b)(6). 7 Under Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), we are bound by all decisions of the former Fifth Circuit handed down before October 1, 1981. Id. at 1209. 10 Case: 15-11574 Date Filed: 06/30/2017 Page: 11 of 14

statements” with an intent to deceive, manipulate, or defraud. Imperiali, 2013 WL

12080193, at *4. Also, the arguments Imperato offered in the follow-on

administrative proceeding support the SEC’s determination that instead of

“provid[ing] assurances against future violations or acknowledg[ing] his wrongful

conduct,” Imperato “continues to deny wrongdoing and attempts to shift blame to

others.” On this record, we cannot say the SEC grossly abused its discretion by

imposing a lifetime industry-wide bar against Imperato.

C.

In several parts of his brief, Imperato argues the follow-on administrative

proceeding brought by the SEC was unfair because (1) the SEC “act[ed] as

[p]rosecutor, [j]ury, and [j]udge,” which violated due process; and (2) the SEC

violated his Seventh Amendment right to a jury trial. These arguments are

meritless. First, this Court has held that the SEC “may combine investigative,

adversarial, and adjudicative functions, as long as no employees serve in dual

roles.” Sheldon v. SEC, 45 F.3d 1515, 1519 (11th Cir. 1995) (quotation omitted).

Imperato does not argue, and the record does not show, that SEC employees were

serving dual roles in the course of the follow-on proceedings. Second, it is well-

established that the Seventh Amendment does not require a jury trial in

administrative proceedings designed to adjudicate statutory “public rights.” Atlas

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Roofing Co. v. Occupational Safety & Health Review Comm’n, 430 U.S. 442,

455–56, 97 S. Ct. 1261, 1269 (1977).

D.

Next, Imperato says the SEC initiated its follow-on administrative

proceeding after the statute of limitations expired. But he cannot prevail on this

argument either. The statute of limitations that arguably applies in this case is 28

U.S.C. § 2462, which says any “proceeding for the enforcement of any civil fine,

penalty, or forfeiture, pecuniary or otherwise” must be brought “within five years

from the date when the claim first accrued” unless another statute specifies

otherwise.8 Even assuming (without deciding) that § 2462 applies here—that is,

assuming the lifetime industry-wide bar against Imperato is a “civil fine, penalty,

or forfeiture”—the SEC complied with § 2462 because it brought its follow-on

proceeding “within five years from the date when [its] action first accrued.”

Specifically, the SEC’s cause of action for its follow-on proceeding did not accrue

until the district court permanently enjoined Imperato from violating several

securities laws on November 7, 2013. Imperiali, No. 12-80021-CIV, D.E. 195, at

1–8; see 15 U.S.C. § 78o(b)(6)(A)(iii); see also In re Contorinis, Exchange Act

Release No. 72031, 2014 WL 1665995, at *3 (Apr. 25, 2014) (“[A]ny applicable 8 Imperato also cites 28 U.S.C. § 1658, but that statute applies only to (1) actions based on statutes enacted after § 1658 was enacted in 1990, see Judicial Improvements Act of 1990, Pub. L. No. 101-650, § 313(a), 104 Stat. 5089, 5114; and (2) “private” securities fraud actions. The SEC brought its follow-on administrative proceeding under § 15(b) of the Securities Exchange Act, which was enacted before 1990. 12 Case: 15-11574 Date Filed: 06/30/2017 Page: 13 of 14

statute of limitations for a follow-on proceeding . . . runs from either the date of the

criminal conviction or the injunction upon which the action is based, not from the

date of the underlying conduct.”). And the SEC initiated its follow-on proceeding

on November 27, 2013, less than three weeks after the district court handed down

its injunction.9

IV.

Finally, although Imperato’s petition for review has no merit, the SEC

requests that we vacate the industry bars against Imperato prohibiting his

association with municipal advisors and nationally recognized statistical rating

organizations. The SEC says it gained its authority to impose these two

restrictions in 2010 from the Dodd-Frank Act. 10 However, the SEC notes that it

based these restrictions on Imperato’s pre-Dodd-Frank conduct. As a result, these

bars may have an impermissible retroactive effect. We have the authority to

9 Imperato raises a variety of other arguments without merit. First, he says the SEC’s docket sheet is “incomplete,” but fails to identify any materials that are missing. Second, Imperato argues the SEC “withheld vital evidence,” but he does not identify why the evidence he points to is relevant. Third, he cites Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505 (1986), to argue the SEC failed to apply the correct standard when it reviewed the ALJ’s initial decision. However, Anderson is about the summary judgment standard in federal civil actions, and not about an agency’s review of an ALJ’s decision. Id. at 257, 106 S. Ct. at 2514– 15. Here, the SEC correctly conducted a de novo assessment of the ALJ’s order. See Jarkesy v. SEC, 803 F.3d 9, 12–13 (D.C. Cir. 2015) (“The Commission reviews ALJ decisions de novo.”). Finally, Imperato asserts some challenges he did not raise during the follow-on administrative proceedings, but gives no reasonable grounds for failing to raise those arguments to the SEC. Those challenges are therefore forfeited. See 15 U.S.C. § 78y(c)(1). 10 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). 13 Case: 15-11574 Date Filed: 06/30/2017 Page: 14 of 14

modify the SEC’s order. See 15 U.S.C. § 78y(a)(3). We therefore deny

Imperato’s petition but vacate the portion of the SEC’s order that imposed the two

industry bars prohibiting Imperato from associating with municipal advisors and

nationally recognized statistical rating organizations.

PETITION DENIED; COMMISSION ORDER VACATED IN PART.