Bid to Apply 'Honeycutt' to SEC Disgorgement Scuttled by Appellate Panel
A Second Circuit panel Tuesday said it wasn't swayed by arguments hoping to apply a recent U.S. Supreme Court decision limiting excessive forfeitures to a $52.5 million disgorgement won by the Securities and Exchange Commission.
August 29, 2017 at 04:02 PM
5 minute read
An appellate panel Tuesday said it wasn't swayed by arguments hoping to apply a recent U.S. Supreme Court decision limiting excessive forfeitures to a $52.5 million disgorgement won by the Securities and Exchange Commission.
Judges Peter Hall, Gerard Lynch and Christopher Droney affirmed in SEC v. Metter, 16-526-cv, a decision by U.S. District Chief Judge Dora Irizarry of the Eastern District of New York approving a multimillion-dollar disgorgement in the civil fraud case against former SpongeTech Delivery Systems CEO Michael Metter.
Metter appealed a consent judgment in the case, saying he wasn't in reality in control of RM Enterprises, a business involved in the “pump-and-dump” scheme. The panel rejected Metter's claim as a violation of the “unambiguous terms” of the consent. The district court was therefore within its power to order the disgorgement, as the facts of the case showed the funds from inflated stock price proceeds going into the company. The panel also found no Eighth Amendment excessive fine concerns.
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