U.S. Sec. & Exch. Comm'n v. Ali
| Decision Date | 10 April 2020 |
| Docket Number | Civil Action No. 1:18-CV-1832-RWS |
| Citation | 454 F.Supp.3d 1281 |
| Parties | UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Solomon RC ALI, a/k/a Richard Marshall Carter, Jr., Defendant. |
| Court | U.S. District Court — Northern District of Georgia |
Harry B. Roback, Madison Graham Loomis, William P. Hicks, Lucy T. Graetz, U.S. Securities & Exchange Commission, Atlanta, GA, for Plaintiff.
Roel Campos, Pro Hac Vice, Hughes Hubbard & Reed LLP, Terence M. Healy, Office of the United States Attorney, Washington, DC, Brandon R. Keel, King & Spalding LLP, Atlanta, GA, for Defendant.
This case comes before the Court on Plaintiff United States Securities and Exchange Commission's ("SEC") Motion for Partial Summary Judgment [Doc. 67 (liability only) ] and Motion to Strike the Counterclaim [Doc. 66] of Defendant Solomon RC Ali ("Ali"). Also before the Court are various pro se motions submitted by Defendant Ali, including two Motions to Dismiss for Failure to State a Claim [Docs. 52, 63] and a Motion for Extension of Time to Complete Discovery [Doc. 55]. These matters are ripe for disposition. For the reasons explained herein, the Court finds that Plaintiff's Motion for Partial Summary Judgment and Motion to Strike Counterclaim are due to be granted, and Defendant Ali's motions are rendered moot.
This civil action is prosecuted by the SEC pursuant to Section 10(b) of the Exchange Act of 1934 ("Exchange Act"), Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 ("Securities Act"). See 15 U.S.C. § 78j(b) ; 17 C.F.R. § 240.10b-5 ; 15 U.S.C. § 77q(a). The SEC asserts that Defendant Ali perpetrated an egregious fraud against the investors of Revolutionary Concepts, Inc. ("REVO"), a start-up company that holds technology patents, while serving as REVO's Senior Vice President. The SEC contends that Ali arranged for REVO to enter into multiple transactions with entities that Ali had a financial interest in to the detriment of REVO's investors. According to the SEC, the transactions were shams and not conducted at arms-length in that Ali had close ties to the other companies, the assets REVO purportedly acquired were worthless, and Ali's claim in each instance that REVO could potentially earn millions from the deals was baseless. The SEC argues that Ali violated the federal securities laws by publishing press releases that he knew to be false or misleading in connection with the REVO sham transactions.1
The SEC moves for partial summary judgment pursuant to Federal Rule of Civil Procedure 56 based upon the pleadings, statement of material facts, exhibits, and discovery materials submitted to the Court.2 When evaluating the merits of a motion for summary judgment, the court must "view the evidence and all factual inferences raised by it in the light most favorable to the non-moving party, and resolve all reasonable doubts about the facts in favor of the non-moving party." Comer v. City of Palm Bay, Florida, 265 F.3d 1186, 1192 (11th Cir. 2001). However, mere conclusions and unsupported self-serving statements by the party opposing summary judgment are insufficient to avoid summary judgment. See Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) () (emphasis added).
Defendant Ali filed a document labeled "Defendants' [sic] Response to Plaintiff's Statement of Undisputed Material Facts in Support of its Motion for Partial Summary Judgment and Controverting Statement of Facts." ) ]. Ali did not file a separate Statement of Disputed Facts, and his response is largely conclusory and argumentative. For example, preceding his response to each disputed fact is some version of the following: . Ali has largely failed to comply with Local Rule 56.1(B)(2), N.D. Ga., which provides in pertinent part:
This Court will deem each of the movant's facts as admitted unless the respondent: (i) directly refutes the movant's fact with concise responses supported by specific citations to evidence ...; (ii) states a valid objection to the admissibility of the movant's fact; or (iii) points out that the movant's citation does not support the movant's fact or that the movant's fact is material or otherwise has failed to comply with the provisions set out in LR 56.1(B)(1).
LR 56.1(B)(2)(a)(2), N.D. Ga.; see also Thyssen Elevator Co. v. Drayton-Bryan Co., 106 F. Supp. 2d 1342, 1345 n.1 (S.D. Ga. 2000) (). Because the Court finds that Plaintiff SEC's fact statements are supported by the evidence presented, its SMF are deemed admitted unless otherwise noted herein.
Ali was born Richard Marshall Carter, Jr. in 1964. [Deposition of Defendant Solomon RC Ali ("Ali Dep.") 17-18, 25]. He changed his name to Solomon RC Ali in 2008. [Ali Dep. 22-23].
In July 2010, Ali became an officer and director of REVO, a publicly traded penny stock company.3 [Ali Dep. 47, Exhibit 2 at 1, Exhibit 5 at 3]. Ronald Carter ("Carter"), who is not related to Ali, founded REVO. [Ali Dep. 45]. REVO owns patents related to smart camera technology. [Ali Dep. 41-42].4 From 2012 through 2014, Carter and Ali were the senior officers and the only full-time employees at REVO. [Ali Dep. 58-59, 64-65]. As a start-up company, REVO did not have any earnings or revenue, and its stock traded at less than one cent per share. [Ali Dep. 41-42, 65-66, Exhibit 32].
Ali was hired by REVO because of Ali's prior experience in "corporate finance" and his ability "to raise money." [Ali Dep. 45-47]. Carter named Ali REVO's Senior Vice President for Corporate Finance and Investor Relations. [Ali Dep. 47]. Ali was responsible for overseeing REVO's finances, mergers, and acquisitions, helping REVO raise money, and increasing REVO's market capitalization. [Ali Dep. 51, 53, 55-56, 63-64, Exhibits 4, 5]. Ali professes to be self-taught but does not have a college degree or hold any professional certifications in accounting, business, finance, or evaluation. [Ali Dep. 22-24; PSMF 3; Def. Resp. PSMF 3].5 Ali also wrote and issued REVO's press releases. [Ali Dep. 56, 74-82, Exhibit 6 at 277-78].
Between 2009 and 2011, Ali created seven irrevocable trusts (the "Ali Trusts"). [Ali Dep. 319-20, Exhibits 59, 64-65, 67-71]. The Ali Trusts include the Rainco Holdings Trust, the Deen Executive Trust, the Ghanimah Holdings Trust, the Ibadah Life Trust, the Patronus Capital Trust, the Premier Executive Trust, and the Falah Family Trust. [Ali Dep. 319-20, Exhibits 59, 64-65, 67-71]. Ali and his family members were designated as the primary beneficiaries for six of the seven trusts. [Ali Dep. 320, 342-44, Exhibit 66; Deposition of Earnest H. DeLong, Jr. ("DeLong Dep.") 33-39]. The Falah Family Trust designated charities as beneficiaries. [Ali Dep., Exhibit 66]. Ali appointed his attorney, Earnest H. DeLong, Jr., (also a named Defendant) the trustee for each of the trusts. [Ali Dep. 320; DeLong Dep. 17-18]. Ali did not fund the Ali Trusts with any assets when they were created. [DeLong Dep. 19-20, 22-23]. Financial records reveal that the Ali Trusts never had more than nominal assets. [DeLong Dep., Exhibits 9-15]. According to DeLong, "most of the accounts ... had little or no money in them." [DeLong Inv. 119-120; DeLong Dep., Exhibit 9 at 193, Exhibit 11 at 461, Exhibit 12 at 539, Exhibit 13 at 404, Exhibit 14 at 102, Exhibit 15 at 026]. According to Ali, the Ali Trusts had a combination of corporate convertible notes and cash assets and received revenues in cash fees. . In addition, DeLong opened brokerage accounts for three of the Ali Trusts. [DeLong Dep. 65, Exhibits 16-20]. Most of the Ali Trusts' holdings were shares of stock or promissory notes relating to REVO and UBRG, companies at which Ali was an officer and director. [DeLong Dep. Exhibits 16 at 19432, Exhibit 18 at 017, Exhibit 20 at 001; DeLong Inv. 134-35].
Rainco Industries, Inc.
In 2011, Ali created a company called Rainco Industries, Inc. (also a named Defendant). [Ali Dep. 302, Exhibit 50; DeLong Dep. 107]. Ali made the Rainco Holdings Trust - one of the seven Ali Trusts for which Ali was the primary beneficiary - the majority shareholder of Rainco. [Ali Dep. 308, Exhibit 66 at 15; DeLong Dep. 110]. Ali's daughter was a director and the Corporate Secretary of Rainco. [Ali Dep. 118, Exhibits 55-56]. Nicole Singletary, Ali's "on and off" girlfriend between 2012 and 2016, was the President of Operations for Rainco. [Ali Dep. 21-22, Exhibit 52]. DeLong was Rainco's General Counsel. [DeLong Dep. 109].
In support of its partial summary judgment motion, the SEC has submitted, inter alia , an Expert Report dated March 8, 2019, and prepared by Brian M. Daniel, ASA, CFA, CLP ("Daniel"), Vice President of Charles River Associates ("CRA"), an international consulting firm specializing in the areas of business valuation, licensing, and litigation and support services. [Doc. 67-8 – Daniel Report]. CRA was retained by the SEC to independently analyze the four transactions described below. Daniel's expert report provides a comprehensive analysis of the individuals allegedly involved, the relevant entities, and the underlying...
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