Matthew J. Platkin, Etc. v. Owusu A. Kizito

• Court: New Jersey Superior Court Appellate Division
• Decided: May 7, 2025
• Docket: A-0739-22
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0739-22

MATTHEW J. PLATKIN, Attorney General of New Jersey, on behalf of AMY KOPLETON, Acting Chief of THE NEW JERSEY BUREAU OF SECURITIES,

Plaintiff-Appellant/ Cross-Respondent,

v. APPROVED FOR PUBLICATION

May 7, 2025 OWUSU A. KIZITO, individually APPELLATE DIVISION and as Managing Member of INVESTIGROUP, LLC,

Defendant-Respondent/ Cross-Appellant,

and

INVESTIGROUP, LLC, a Hawaiian limited liability company, and INVESTIGROUP NP A NJ NONPROFIT CORPORATION, a New Jersey nonprofit corporation,

Defendants-Respondents. _______________________________

Argued December 17, 2024 – Decided May 7, 2025

Before Judges Smith, Chase and Vanek. On appeal from the Superior Court of New Jersey, Chancery Division, Union County, Docket No. C-000095-20.

Michael Eleneski, Deputy Attorney General, argued the cause for appellant/cross-respondent (Matthew J. Platkin, Attorney General, attorney; Sookie Bae-Park, Assistant Attorney General, of counsel; Michael Eleneski, on the brief).

Respondents have not filed a brief.

The opinion of the court was delivered by

SMITH, J.A.D.

In this statutory interpretation matter, we consider a trial court's

authority to impose multiple remedies in a single enforcement action under the

Uniform Securities Law of 1997 1 (the Securities Law or the Act). Plaintiff,

Bureau of Securities, sued defendant and two companies that he owned and

controlled. The Bureau alleged that defendants violated the Securities Law by

participating in various fraudulent activities.

After the trial court entered default judgment against defendants, it

conducted a proof hearing to determine damages. After the hearing, the court

entered judgment for the Bureau, granting nearly all the relief requested with

one exception. The court denied the Bureau's simultaneous request for

restitution against one co-defendant and disgorgement from a related co-

1 N.J.S.A. 49:3-47 to -89.

A-0739-22 2 defendant, finding that N.J.S.A. 49:3-69(a)(2) did not authorize both remedies

in the same enforcement action. The Bureau appealed, contending that the

trial court erred in its interpretation of the statute. We reverse and remand for

the reasons which follow.

I.

A.

In October 2020, the Bureau of Securities (plaintiff, or the Bureau) filed

a complaint against Owusu Kizito and two companies that he owned and

controlled, Investigroup LLC, a for-profit securities firm, and Investigroup NP,

a nonprofit company (collectively, defendants). The complaint alleged that

from 2016 to 2020, defendants made material misrepresentations to investors,

fraudulently sold millions in unregistered Investigroup securities to investors,

and misused investor funds. The complaint contained seven counts, alleging

violations under various provisions of the Securities Law and unjust

enrichment.2

2 Count One of the complaint alleged that defendants violated N.J.S.A. 49:3- 52(a) by defrauding investors of $2,187,814 by misrepresenting or omitting material facts and diverting at least $960,500 of investor funds to Investigroup NP, and misusing investor funds; Count Two alleged defendant violated N.J.S.A. 49:3-52(b) by misrepresenting or omitting material facts regarding Investigroup's registration status and use of certain proceeds; Count Three alleged defendants violated N.J.S.A. 49:3-52(c) by making fraudulent representations about the offer and sale of Investigroup securities in addition

A-0739-22 3 Among other things, plaintiff sought to permanently enjoin Kizito and

Investigroup from: violating the Securities Law; participating in any sale or

sale-related activity regarding securities from or within New Jersey; acting as

an agent or broker-dealer doing business from, into, or within the state; or

controlling an issuer who sold or offered securities in New Jersey. The Bureau

further petitioned the court to impose civil monetary penalties for each offense

and require defendants to pay restitution and/or disgorge of all profits.

Defendants' answer was eventually suppressed with prejudice in October

2021. In 2022, plaintiff moved for default judgment pursuant to Rule 4:43-

2(b). The trial court conducted a proof hearing over eight days during June

and July 2022. Multiple witnesses testified, including Kizito, and numerous

documents were admitted into evidence. The court made detailed findings

based on the comprehensive record established during the hearing. We

summarize them here.

__________________________ to diverting investor funds to Investigroup NP and engaging in sham transactions; Count Four alleged defendants violated N.J.S.A. 49:3-60 by selling unregistered securities; Count Five alleged Kizito violated N.J.S.A. 49:3-56(a) by conducting security transactions without being registered as an agent; Count Six alleged Investigroup violated N.J.S.A. 49:3-56(h) by hiring Kizito, an unregistered agent; Count Seven sought relief in the form of plaintiff's claim for unjust enrichment against defendants.

A-0739-22 4 B.

The court found that Kizito and Investigroup offered and sold securities

in the form of investment contracts. Together, Kizito and Investigroup sold at

least $16,187,651 of securities to sixty-nine or more different investors. The

securities were neither registered with the Bureau and exempt from

registration, nor federally qualified. Kizito himself was not registered with the

Bureau as an agent authorized to offer or sell securities under N.J.S.A. 49:3 -

49(b) but did so anyway in his capacity as an employee of Investigroup, LLC,

one of the co-defendant companies which he controlled.

Between 2016 and 2018, Kizito diverted a total of $1,500,000 in investor

funds earmarked for Investigroup and to Investigroup NP, a co -defendant

nonprofit company he also controlled, without alerting investors. Kizito used

the diverted funds to: repay prior investors and debts; fund undisclosed

litigation; and pay Kizito's personal expenses and debts.

Throughout the course of the scheme, Kizito made numerous

misrepresentations or material omissions to Investigroup investors. The

misrepresentations included claims that invested funds would be used to grow

Investigroup when, in fact, they were used for Kizito's personal and other non -

business expenses. Kizito failed to: notify investors that Investigroup was

subject to multiple lawsuits and IRS tax penalties; disclose his actual use of

A-0739-22 5 investor funds; or notify investors that he and Investigroup diverted

$1,500,000 in investor funds to Investigroup NP. Additionally, Kizito and

Investigroup failed to disclose to their investors that neither Kizito nor the

securities themselves were properly registered with the Bureau.

C.

In an order supported by a comprehensive written statement of reasons

dated August 16, 2022, the trial court enjoined and restrained all defendants

from, among other things: violating the Securities Law; selling securities or

engaging in any sale-related conduct with regard to securities; transacting in

securities without being registered with the Bureau as an agent or broker -

dealer; acting as an agent or investment adviser or controlling or associating

with any broker-dealer or investment advisor doing business in the state; or

controlling or associating with any broker-dealer or investment adviser whose

securities were offered for sale in New Jersey.

The court found defendants Kizito and Investigroup, LLC jointly and

severally liable for multiple violations of the Securities Law. The court further

found that each unlawful offer and sale by Kizito and Investigroup constituted

a separate violation under N.J.S.A. 49:3-52(a), (b), and (c); N.J.S.A. 49:3-

56(a) and (h); and N.J.S.A. 49:3-60. The court then ordered Kizito and

Investigroup to pay $15,161,043 as restitution for investors pursuant to

A-0739-22 6 N.J.S.A. 49:3-69(a). Finding defendants committed 753 separate violations

under the Securities Law in connection with the sale of securities to sixty -nine

individuals, the court imposed $1,505,000 in civil penalties on Kizito and

Investigroup, LLC, pursuant to N.J.S.A. 49:3-70.1. The court then combined

the restitution, and civil penalty amounts and entered final judgment against

Kizito and Investigroup, LLC in the amount of $16,666,043. On August 17,

2022 the trial court issued an amended order, denying plaintiff's application for

disgorgement of $1,500,000 by co-defendant Investigroup NP. It stated that,

"[p]laintiff may receive one, but not all three of the remedies set forth in

N.J.S.A. 49:3-69(a)(2)." The court denied plaintiff's motion for

reconsideration on the disgorgement question. 3

The Bureau appealed.

II.

"We will ordinarily defer to an agency's reasonable construction of

statutes it is charged with implementing. However, we are not bound to an

agency's interpretation of a statute and our review in this regard is always de

novo." Matter of Competitive Solar Incentive Program, 478 N.J. Super. 341,

349 (App. Div. 2024) (citations omitted).

3 Defendant Kizito's cross-appeal brief was stricken as deficient on January 2, 2024.

A-0739-22 7 "The object of statutory interpretation is to effectuate the intent of the

Legislature, as evidenced by the plain language of the statute, its legislative

history and underlying policy, and concepts of reasonableness." State v.

Courtney, 243 N.J. 77, 85 (2020).

"If the plain language leads to a clear and unambiguous result, then our

interpretative process is over." Id. at 86 (quoting Johnson v. Roselle EZ Quick

LLC, 226 N.J. 370, 386 (2016)). "But when the statutory language is

ambiguous or a plain reading of the statute leads to an absurd result, 'we may

turn to extrinsic evidence, "including legislative history, committee reports,

and contemporaneous construction."'" Ibid. (quoting State v. Rodriguez, 238

N.J. 105, 114 (2019)).

III.

On appeal the Bureau makes a simple argument, which is that N.J.S.A.

49:3-69(a)(2) should be interpreted to authorize restitution and disgorgement

in the same enforcement action and, therefore, the trial court erred in rejecting

application of both remedies after the proof hearing.

We consider the disputed provision.

The Securities Law is "a comprehensive statutory scheme of securities

regulation and investor protection . . . ." Kaufman v. I-Stat Corp., 165 N.J. 94,

112 (2000). "Consistent with its protective purpose, the Act prohibits any

A-0739-22 8 party from engaging in dishonest and unethical practices—'as the bureau chief

may by rule define' such practices—vis-à-vis the investing public." Goldfarb

v. Solimine, 245 N.J. 326, 336 (2021) (quoting N.J.S.A. 49:3-53(a)(3)). The

"Securities Law was adopted 'to promote uniformity and standardization of

transactions' consistent with guidance from sister jurisdictions." Ibid. (quoting

Cola v. Terzano, 129 N.J. Super. 47, 53-54 (Law Div. 1974) aff'd, 156 N.J.

Super. 77 (App. Div. 1977)).

N.J.S.A. 49:3-69(a)(2), which governs Securities Law enforcement

actions, provides in pertinent part:

(a) If it appears to the bureau chief that any person has, or directly or indirectly controls another person who has engaged in, is engaging in, or is about to engage in any act or practice constituting a violation of any provision of this act or any rule or order hereunder, or if it appears that it will be against the public interest for any person to issue, sell, offer for sale, purchase, offer to purchase, promote, negotiate, advertise or distribute any securities from or within this State, the bureau chief may take, in addition to any other enforcement actions available under this act and in the bureau chief's discretion, either or both of the following actions:

....

(2) Have an action brought by the Attorney General in the Superior Court on the bureau chief's behalf to enjoin the acts or practices to enforce compliance with this act or any rule or order hereunder. Upon a proper showing, a permanent or

A-0739-22 9 temporary injunction, restraining order, or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. In addition, upon a proper showing by the bureau chief, the court may enter an order of rescission, restitution or disgorgement or any other order within the court's power, directed to any person who has engaged in any act constituting a violation of any provision of this act or any rule or order hereunder. The court may not require the bureau chief to post a bond. The court may proceed in the action in a summary manner or otherwise[.]

[(Emphasis added).]

There is overlap between the remedies of restitution and disgorgement,

but the concepts are distinct.

Restitution "aim[s] to compensate the victims of the wrongful acts,"

while disgorgement "is an equitable remedy meant to prevent the wrongdoer

from enriching himself by his wrongs." Johnson v. McClellan, 468 N.J. Super.

562, 578 (App. Div. 2021) (quoting Edmonson v. Lincoln Nat'l Life Ins. Co.,

725 F.3d 406, 415 n.3 (3d Cir. 2013)).

A purpose of disgorgement is to "deter others from violating securities

laws." Id. at 577 (quoting SEC v. Hughes Cap. Corp., 124 F.3d 449, 455 (3d

Cir. 1997)). Disgorgement is "grounded in the theory that a wrongdoer should

not profit from its wrongdoing regardless of whether the innocent party

A-0739-22 10 suffered any damages." Id. at 578 (quoting City Council of Orange Twp. v.

Edwards, 455 N.J. Super. 261, 279 (App. Div. 2018) (internal quotation marks

omitted)). Some jurisdictions have held that "a disgorgement order might be

for an amount more or less than that required to make the victims whole."

SEC v. Hughes Capital Corp, 917 F. Supp. 1080, 1085 (D.N.J. 1996) (quoting

SEC v. Huffman, 996 F.2d 800, 802 (5th Cir. 1993)). 4

The trial court's exclusive disjunctive reading of the word "or"

separating the three remedies—"rescission, restitution or disgorgement"—is

not consistent with how "or" is deployed by the Legislature in the rest of

subsection (a)(2). N.J.S.A. 49:3-69(a)(2) clearly authorizes the Bureau to

pursue a single enforcement action directed at: past and present violations

("has engaged in, is engaging in, or is about to engage in"); violations of both

"provisions of" and "orders" under the Act ("violation of any provision of this

act or any rule or order hereunder"); and the "sell[ing]" and "offer[ing] for

sale" of securities where "it appears that it will be against the public interest"

("sell, offer for sale, purchase, offer to purchase, promote, negotiate, advertise

4 While not at issue before us on appeal, we note that the third statutory remedy, recission, refers to the process by which an "investor returns the security and receives the purchase price in return." SEC v. McNamee, 481 F.3d 451, 457 (7th Cir. 2007).

A-0739-22 11 or distribute any securities"). N.J.S.A. 49:3-69(a)(2) (emphasis added). 5 We

have considered the disjunctive "or" in the context of a statute, and interpreted

"or" as "and/or". See Wildwood Storage Ctr., Inc. v. Mayor & Council of City

of Wildwood, 260 N.J. Super. 464, 471 (App. Div. 1992) ("The word 'or,'

while normally used to indicate disjunctive clauses . . . has often been

interpreted to mean the conjunctive if this is more consistent with legislative

intent.") (internal citation omitted).

To the extent subsection (a)(2)'s disjunctive language can be considered

ambiguous, we turn to the statute's legislative history. N.J.S.A. 49:3-75,

governs the construction of the Act. It states:

This act shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact similar laws and to co-ordinate the interpretation and administration of this act with related federal regulations. The bureau chief and the bureau chief's designees may participate in private investigations and enforcement proceedings and cooperate in sharing information with other State authorities, and with authorities of other states and of federal and foreign governments.

5 We note that subsection (a)(2) also uses the disjunctive to describe both temporary and permanent injunctive relief, each of which the trial court ordered at different stages of this proceeding.

A-0739-22 12 The legislature clearly contemplated that the Securities Law be

construed in a manner consistent with jurisdictions which enact similar laws.

We consider two cases, one federal and one state, for illustration.

In SEC v. Better Life Club of America, Inc., 995 F. Supp. 167, 179

(D.D.C. 1998), aff'd, 203 F.3d 54 (D.C. Cir. 1999), a federal securities fraud

case, the court found that the proper amount for restitution was $25,805,577 in

investor principal that remained unreturned. In considering disgorgement, the

court found that "[d]efendants are also in possession of the undeserved profits

from their illegal scheme." Ibid. The court ordered defendants to disgorge

those profits. However, in this instance, the court stated it "would not require

defendants to make a double payment by paying the combined amounts of both

the restitution liability and the disgorgement liability." Ibid. Instead, the

Court ordered defendants to pay a single sum of $25,805,577, plus interest,

describing the payment as representing "both restitution and disgorgement."

Ibid.

In Oklahoma Department of Securities v. Blair, 231 P.3d 645, 656 (Okla.

2010), the Oklahoma Supreme Court read language identical to that at issue

here—"rescission, restitution, or disgorgement"—to "expressly authorize[]

both disgorgement and restitution involving a person who has violated the

securities laws[,]" adding that "[d]epartmental action for disgorgement and

A-0739-22 13 restitution against one who has violated securities laws serves an obvious

public purpose." Ibid. (emphasis in original).

We see nothing in the language of N.J.S.A. 49:3-69(a)(2) or the

legislative history of the Securities Law which compels us to read the "or" in

the phrase "rescission, restitution or disgorgement" as exclusively disjunctive.

Indeed, we conclude the that the phrase should be interpreted as "recission,

restitution and/or disgorgement." The Legislature has granted a broad

authority to the Bureau to seek whatever remedy is "proper[ly] show[n]" to be

appropriate under the circumstances. N.J.S.A. 49:3-69(a)(2). Our

interpretation of the disjunctive "or" in the remedies provided under subsection

(a)(2) to mean "and/or" follows the clear Legislative intent to effectuate proper

remedies for violations of the Securities Law. 6

Beyond parsing the word "or" in the phrase "recission, restitution, or

disgorgement," we observe that the Legislature has provided an alternative

solution to the question before us. N.J.S.A. 49:3-69(a)(2) also uses the phrase

"or any other order within the court's power" immediately following

"rescission, restitution or disgorgement." Given that the remedies of

6 This proposition is consistent with the legislative history of the statute. See Assemb. Fin. Insts. Comm. Statement to A. 2990 (June 12, 1997) ("This bill provides the Bureau of Securities strong enforcement powers to deal with securities firms and individuals regulated by the bureau who violate the law.").

A-0739-22 14 restitution and disgorgement are both "within the court's power" pursuant to

N.J.S.A. 49:3-69(a)(2), we easily reach the conclusion that an order which

grants both remedies arguably falls under "any other order within the court's

power."

Using either analysis, we conclude that restitution and disgorgement can

be imposed together in the same Securities Law enforcement action.

Having concluded that disgorgement and restitution can be applied as

remedies in the same case, we consider whether disgorgement is an appropriate

remedy on this record. Plaintiff asks us to remand to the trial court and direct

it to enter an order compelling Investigroup NP to disgorge $1,500,000 without

more. We think a better approach is to remand this part of the litigation to the

trial court to conduct any further inquiry needed to support such a finding.

As in SEC v. Better Life Club of America, Inc., the trial court must

make findings to ensure that there is no double recovery. 995 F. Supp. at 179.

On remand, after applying an interpretation of N.J.S.A. 49:3-69(a)(2) in

a manner consistent with this opinion, the trial court must next determine

whether disgorgement is appropriate. To do so, the trial court should consider

whether it can make appropriate findings based on the existing record, or

whether further development of the record is required to support a finding that

disgorgement should be imposed to preclude defendants, or any one of them,

A-0739-22 15 from keeping any illegally obtained profits. See Cnty. of Essex v. First Union

Nat. Bank, 186 N.J. 46, 56 (2006) (providing that disgorgement is a remedy to

avoid the unjust enrichment of unlawfully obtained profit).

We conclude that the statutory remedy of disgorgement is permissible in

tandem with the statutory remedy of restitution under N.J.S.A. 49:3-69(a)(2).

We express no opinion on the ultimate question of whether disgorgement

should be imposed here. Neither do we impose on the trial court the quantum

of additional inquiry needed to answer the ultimate question. We leave this

determination to the trial court's sound discretion.

Affirmed in part and remanded in part for proceedings consistent with

this opinion.

A-0739-22 16