SEC v. New Futures Trading, et al. CV-11-532-JL 4/20/12
UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE
Securities and Exchange Commission
v. Civil No ll-cv-532-JL Opinion No. 2012 DNH 073 New Futures Trading International Corporation and Henry Roche
SUMMARY ORDER
The Securities and Exchange Commission brought this action
to enforce the federal securities laws against defendants New
Futures Trading International Corporation and Henry Roche,
alleging that Roche controlled the operations of New Futures as
part of a scheme to defraud investors. Specifically, the SEC
claims that Roche solicited monies by falsely representing that
they would be invested in stocks or bonds traded through New
Futures, when in fact he used those funds to repay investors in
other schemes or to operate a horse ranch in Ontario, Canada.
The SEC further claims that, in providing some of the investors
in this scheme with promissory notes purportedly issued by New
Futures, the defendants were dealing in unregistered securities,
a further violation of federal law.
On January 31, 2012, this court, acting on motions by the
SEC, entered default against New Futures and Roche for failing to
answer or otherwise respond to the SEC's complaint. Order of Jan. 31, 2012. The court also ordered the SEC to file a motion
for a default judgment and scheduled a damages hearing. The SEC
later filed that motion, together with proposed final judgments
against each of New Futures and Roche.
The SEC also informed the court, however, that a damages
hearing would be unnecessary since Roche is believed to be a
fugitive from justice--he has been indicted on criminal charges
arising out of the same conduct at issue here--and therefore
would in all likelihood not appear at any hearing. Indeed,
neither Roche nor New Futures appeared at an earlier hearing the
court conducted in this case, on the SEC's motion for preliminary
injunction; nor, for that matter, has either appeared in this
action at any point through counsel or otherwise. Accordingly,
the court will formulate the default judgment without conducting
a hearing. See Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 64 (1st
Cir. 2002) ("Discretion as to the judgment or the need for a
hearing on damages is vested with the district court.").
Through its complaint, and its motion for default judgment,
the SEC seeks three forms of final relief authorized by the
federal securities laws or this court's eguitable powers: (1) a
permanent injunction against the defendants' future violations of
those laws, see 15 U.S.C. §§ 77t(b), 78u(d)(1); (2) disgorgement
of their ill-gotten gains, together with interest on those sums.
2 see, e.g., SEC v. First Jersey Secs., Inc., 101 F.3d 1450, 1474-
77 (2d Cir. 1995); and (3) a monetary penalty, see 15 U.S.C.
§§ 77t(d), 78u(d)(3). These requests are granted.
Because default has entered, the defendants are "taken to
have conceded the truth of the factual allegations in the
complaint as establishing the grounds for liability." Ortiz-
Gonzalez , 277 F.3d at 62-63 (quotation marks omitted). Based on
those allegations, and the declaration submitted with the motion
for default judgment, the SEC is entitled to its sought-after
permanent injunctive relief and civil disgorgement in the amount
of $1,268,907.48 (including $40,917.47 in interest as of the date
the motion was filed, February 29, 2012).
The SEC is also entitled to the imposition of a monetary
penalty against each of the defendants under 15 U.S.C. §§ 77t(d)
and 78u(d)(3). Each of these provisions authorizes a penalty for
"any violation" of the relevant securities laws, with "[t]he
amount of the penalty [to] be determined by the court in light of
the facts and circumstances." The statutes provide that, "[f]or
each violation, the amount of the penalty shall not exceed the
greater of (I) $5,000 . . . or (II) the gross amount of pecuniary
gain to such defendant," though this limit increases to $150,000
(or the amount of the gain) if the violation "involved fraud,
deceit, manipulation, or deliberate or reckless disregard of a
3 regulatory requirement; and . . . directly or indirectly resulted
in substantial losses or created a significant risk of
substantial losses to other persons."1
The allegations of the SEC's complaint establish that the
defendants' conduct as a whole "involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a regulatory
requirement; and . . . directly or indirectly resulted in
substantial losses or created a significant risk of substantial
losses to other persons" so as to warrant a penalty of $150,000
per violation. Those allegations do not indicate, however, how
many separate violations of the securities laws the defendants
perpetrated, and the SEC provides no guidance on this issue in
its motion for default judgment, saying simply, as to the
penalty, that "[t]he exact amount is for this Court's
discretion." Accordingly, the court imposes a total civil
penalty of only $150,000 against each defendant.
1The SEC notes that, as required by the Debt Collection Improvement Act of 1996, it increased the applicable maximum penalty from $100,000 to $150,000 for each violation occurring after March 3, 2009. See 17 C.F.R. § 201.1004 & p t . 201 subpt. E tbl. IV. The specific conduct alleged in the amended complaint occurred after that date. The statutes allow higher penalties against a defendant who is not a natural person, such as New Futures, but because the SEC seeks a penalty of no more than $150,000 per violation the court has not considered any higher amount (based either on this or on the amount of the gain).
4 Finally, the SEC's proposed final judgments provide that the
SEC "may enforce [the provisions] for disgorgement and
prejudgment interest by moving for civil contempt (and/or through
other collection procedures authorized by law) at any time after
14 days following entry." But Rule 69(a) of the Federal Rules of
Civil Procedure provides that "[a] money judgment is enforceable
by a writ of execution, unless the court directs otherwise," and
"a money judgment is not a personal order to the defendant that
normally is enforceable by contempt." 12 James Wm. Moore et al.,
Federal Practice & Procedure § 3011, at 141 & n.9 (2d ed. 1997);
see also 17 C.J.S. Contempt § 15, at 36 (1999). Indeed, as these
sources recognize, holding a debtor in contempt for failing to
pay a money judgment against him would essentially amount to
putting him in "debtors' prison"--a practice that is not
recognized in the United States (though practitioners of
securities fraud may find themselves in prison for the criminal
nature of their conduct, of course).
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SEC v. New Futures Trading, et al. CV-11-532-JL 4/20/12
UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE
Securities and Exchange Commission
v. Civil No ll-cv-532-JL Opinion No. 2012 DNH 073 New Futures Trading International Corporation and Henry Roche
SUMMARY ORDER
The Securities and Exchange Commission brought this action
to enforce the federal securities laws against defendants New
Futures Trading International Corporation and Henry Roche,
alleging that Roche controlled the operations of New Futures as
part of a scheme to defraud investors. Specifically, the SEC
claims that Roche solicited monies by falsely representing that
they would be invested in stocks or bonds traded through New
Futures, when in fact he used those funds to repay investors in
other schemes or to operate a horse ranch in Ontario, Canada.
The SEC further claims that, in providing some of the investors
in this scheme with promissory notes purportedly issued by New
Futures, the defendants were dealing in unregistered securities,
a further violation of federal law.
On January 31, 2012, this court, acting on motions by the
SEC, entered default against New Futures and Roche for failing to
answer or otherwise respond to the SEC's complaint. Order of Jan. 31, 2012. The court also ordered the SEC to file a motion
for a default judgment and scheduled a damages hearing. The SEC
later filed that motion, together with proposed final judgments
against each of New Futures and Roche.
The SEC also informed the court, however, that a damages
hearing would be unnecessary since Roche is believed to be a
fugitive from justice--he has been indicted on criminal charges
arising out of the same conduct at issue here--and therefore
would in all likelihood not appear at any hearing. Indeed,
neither Roche nor New Futures appeared at an earlier hearing the
court conducted in this case, on the SEC's motion for preliminary
injunction; nor, for that matter, has either appeared in this
action at any point through counsel or otherwise. Accordingly,
the court will formulate the default judgment without conducting
a hearing. See Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 64 (1st
Cir. 2002) ("Discretion as to the judgment or the need for a
hearing on damages is vested with the district court.").
Through its complaint, and its motion for default judgment,
the SEC seeks three forms of final relief authorized by the
federal securities laws or this court's eguitable powers: (1) a
permanent injunction against the defendants' future violations of
those laws, see 15 U.S.C. §§ 77t(b), 78u(d)(1); (2) disgorgement
of their ill-gotten gains, together with interest on those sums.
2 see, e.g., SEC v. First Jersey Secs., Inc., 101 F.3d 1450, 1474-
77 (2d Cir. 1995); and (3) a monetary penalty, see 15 U.S.C.
§§ 77t(d), 78u(d)(3). These requests are granted.
Because default has entered, the defendants are "taken to
have conceded the truth of the factual allegations in the
complaint as establishing the grounds for liability." Ortiz-
Gonzalez , 277 F.3d at 62-63 (quotation marks omitted). Based on
those allegations, and the declaration submitted with the motion
for default judgment, the SEC is entitled to its sought-after
permanent injunctive relief and civil disgorgement in the amount
of $1,268,907.48 (including $40,917.47 in interest as of the date
the motion was filed, February 29, 2012).
The SEC is also entitled to the imposition of a monetary
penalty against each of the defendants under 15 U.S.C. §§ 77t(d)
and 78u(d)(3). Each of these provisions authorizes a penalty for
"any violation" of the relevant securities laws, with "[t]he
amount of the penalty [to] be determined by the court in light of
the facts and circumstances." The statutes provide that, "[f]or
each violation, the amount of the penalty shall not exceed the
greater of (I) $5,000 . . . or (II) the gross amount of pecuniary
gain to such defendant," though this limit increases to $150,000
(or the amount of the gain) if the violation "involved fraud,
deceit, manipulation, or deliberate or reckless disregard of a
3 regulatory requirement; and . . . directly or indirectly resulted
in substantial losses or created a significant risk of
substantial losses to other persons."1
The allegations of the SEC's complaint establish that the
defendants' conduct as a whole "involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a regulatory
requirement; and . . . directly or indirectly resulted in
substantial losses or created a significant risk of substantial
losses to other persons" so as to warrant a penalty of $150,000
per violation. Those allegations do not indicate, however, how
many separate violations of the securities laws the defendants
perpetrated, and the SEC provides no guidance on this issue in
its motion for default judgment, saying simply, as to the
penalty, that "[t]he exact amount is for this Court's
discretion." Accordingly, the court imposes a total civil
penalty of only $150,000 against each defendant.
1The SEC notes that, as required by the Debt Collection Improvement Act of 1996, it increased the applicable maximum penalty from $100,000 to $150,000 for each violation occurring after March 3, 2009. See 17 C.F.R. § 201.1004 & p t . 201 subpt. E tbl. IV. The specific conduct alleged in the amended complaint occurred after that date. The statutes allow higher penalties against a defendant who is not a natural person, such as New Futures, but because the SEC seeks a penalty of no more than $150,000 per violation the court has not considered any higher amount (based either on this or on the amount of the gain).
4 Finally, the SEC's proposed final judgments provide that the
SEC "may enforce [the provisions] for disgorgement and
prejudgment interest by moving for civil contempt (and/or through
other collection procedures authorized by law) at any time after
14 days following entry." But Rule 69(a) of the Federal Rules of
Civil Procedure provides that "[a] money judgment is enforceable
by a writ of execution, unless the court directs otherwise," and
"a money judgment is not a personal order to the defendant that
normally is enforceable by contempt." 12 James Wm. Moore et al.,
Federal Practice & Procedure § 3011, at 141 & n.9 (2d ed. 1997);
see also 17 C.J.S. Contempt § 15, at 36 (1999). Indeed, as these
sources recognize, holding a debtor in contempt for failing to
pay a money judgment against him would essentially amount to
putting him in "debtors' prison"--a practice that is not
recognized in the United States (though practitioners of
securities fraud may find themselves in prison for the criminal
nature of their conduct, of course).
The SEC does not provide any basis for holding the
defendants in contempt for failing to satisfy the monetary
aspects of the proposed judgments. So the court strikes the
provision of the proposed judgments allowing the SEC to move for
contempt against the defendants if they fail to satisfy their
disgorgement and interest obligations.
5 This is not intended to affect, however, the SEC's ability
to enforce the judgment through a writ of execution and the
proceedings in aid of execution available under applicable law.
See Fed. R. Civ. P. 69(a). Nor is it intended to affect the
SEC's ability to move for contempt against the defendants for
violating other provisions of the proposed judgments, including
those enjoining the defendants from further violations of the
securities law or, for that matter, the provision reguiring each
defendant to pay the civil penalty--as opposed to disgorgement or
the associated interest--within 14 days. Because the provisions
of the federal securities laws authorize this court to order
payment of the penalty, see 15 U.S.C. §§ 77t(d)(3)(A) and
78u(d)(3)(C)(i), this court can hold the defendants in contempt
for failing to comply with that order. See 12 Moore, supra,
§ 3011, at 141 & n.8 (citing Laborers' Pension Fund v. Dirty Work
Unlimited, Inc., 919 F.2d 491, 494 (7th Cir. 1990)); see also
United States v. Garden Homes, Inc., 144 F. Supp. 644 (D.N.H.
1956) (imposing civil contempt for violation of court order to
pay specific sum). So each defendant will be ordered to pay the
penalty within 14 days of the judgment, as proposed by the SEC.
Accordingly, the SEC's motion for default judgment2 is
GRANTED to the extent set forth in this order and otherwise
2Document no. 22.
6 DENIED. The proposed default judgments3 shall be entered with
the modifications set forth herein, and the case shall be closed.
SO ORDERED.
ited States District Judge
Dated: April 20, 2012
cc: Deena R. Bernstein, Esg.
3Document nos. 22-3 and 22-4.