S.E.C. v. Recile

• Decision Date: 03 December 1993
• Docket Number: No. 92-3837,92-3837
• Citation: 10 F.3d 1093
• Parties: Fed. Sec. L. Rep. P 98,008, 27 Fed.R.Serv.3d 1202 SECURITIES & EXCHANGE COMMISSION, Plaintiff-Appellee, v. Sam J. RECILE, et al., Defendants, Sam J. Recile, Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1093

10 F.3d 1093

Fed. Sec. L. Rep. P 98,008, 27 Fed.R.Serv.3d 1202

SECURITIES & EXCHANGE COMMISSION, Plaintiff-Appellee, v. Sam J. RECILE, et al., Defendants, Sam J. Recile, Defendant-Appellant.

No. 92-3837

Summary Calendar.

United States Court of Appeals,

Fifth Circuit.

Dec. 3, 1993.

Sam J. Recile, pro se.

James S. Holliday, Jr., Baton Rouge, LA, for defendant-appellant Sam J. Recile.

Louise Post Videau, John E. Birkenheier, Atlanta, GA, Judith B. Starr, Sp. Counsel, Jacob H. Stillman, Assoc. Gen. Counsel, Susan B. Mann, Paul Gonson, Eric Summergrad, Washington, DC, for plaintiff-appellee.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, WIENER, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:

Defendant-Appellant Sam J. Recile appeals from the summary judgment order (the "Order") entered in favor of Plaintiff-Appellee Securities & Exchange Commission ("SEC"). In the Order, the district court concluded that Recile violated the federal securities registration and antifraud provisions along with the broker-dealer registration requirements. The district court consequently granted the SEC's request for equitable and injunctive relief. As we conclude that Recile has completely failed to present any arguments raising genuine issues of material fact with which to challenge the district court's entry of summary judgement, we dismiss this appeal as frivolous and impose sanctions under Federal Rules of Appellate Procedure 38.

I FACTS AND PROCEEDINGS

Sam Recile's dream of building a huge shopping complex, to be known as Place Vendome, proved to be a nightmare for his investors. Recile sold investment units for the asserted purpose of financing the initial stage of development of Place Vendome. He began selling these units in August 1990 and eventually collected more than $15,000,000 from hundreds of investors nationwide.

Investor's funds were funneled primarily through Hannover, Inc., a corporation controlled by Recile and a female friend, codefendant V. Rae Phillips. ¹ Through Hannover, Recile offered and sold securities, called Pre-Acquisition Investment Units ("Investment Units") to the public. Recile solicited purchases of these Investment Units by offering investors "a share of the profit [in Place Vendome] in exchange for preacquisition financing." As Chairman of Hannover, he entered into letter agreements with investors regarding Investment Units wherein he promised investors returns of 100% on their investments within six months--a profit that was to be paid out of long-term financing for Place Vendome once the land was acquired. Moreover, Recile represented that investors' funds would be used to pay "attorneys', architects', engineers', and planners' fees ... and related preacquisition financing costs" for construction of Place Vendome.

While soliciting these funds from investors, Recile repeatedly represented, in letters signed by him, that: 1) long-term financing had been obtained for Place Vendome, 2) Hannover had acquired signed leases for 700,000 square feet of space in Place Vendome, and 3) the required wetlands permit had already been obtained from the U.S. Army Corps of Engineers. Recile also represented to some investors that he had a personal net worth in the millions, and he touted Hannover as a successful real estate development corporation that owned a large portfolio of real estate.

None of these representations were true. The record reveals that Recile never obtained long-term financing for Place Vendome. The three companies that Recile represented as providing such financing for Place Vendome--DSL Capital Corporation, SAE/Carlson, and Federal Construction Co.--had in fact expressly advised Recile, unequivocally and in writing, that they did not intend to provide such financing. Neither had Recile or Hannover acquired any signed leases for Place Vendome--the representation of Hannover's having secured leases for 700,000 square feet was patently false. In addition, Recile did not obtain the necessary wetlands permit from the Army Corps of Engineers until after he had acquired almost $8,000,000 from investors and after the SEC had filed the instant suit. Finally, Hannover--rather than being a successful real estate development company with large real estate holdings--was in fact a management company that did not own any real estate.

The record further reveals that Recile's representations regarding his own net worth and the use of the investors' funds were In April 1991, the SEC filed its complaint, and one month later obtained a preliminary injunction. This injunction prohibited Recile from selling to anyone other than his wealthy friends; yet Recile repeatedly violated this prohibition by acquiring funds from non-approved investors after the injunction was implemented. Recile also continually misrepresented to the court and to investors that financing for the project was imminent. ² In addition, he evaded the reporting and spending limits contained in the preliminary injunction by depositing investors' funds in an account under the name of Place Vendome of America, Inc., a company formed after the complaint was filed.

likewise false. For example, Recile was subject to an unsatisfied judgment of $250,000. And instead of using the investors' funds for preacquisition costs only, significant portions of these funds were diverted for the personal use of Recile and his friend, Ms. Phillips. For example, approximately $1,200,000 was used to renovate the property on which they lived. Another $1,300,000 was used to renovate a house owned by Phillips and for other real estate projects not related to Place Vendome. In December 1990, $59,000 was used to purchase a Mercedes Benz for Phillips' use. Finally, between August 1990 and February 1992 Recile withdrew at least $790,000 for his own personal expenses. Recile never disclosed these uses of the funds to his investors.

The SEC filed its Motion for Summary Judgment in June 1992. This motion claimed that Recile: 1) failed to register the Investment Units in violation of Sec. 5(a) & (c) of the Securities Act of 1933, ³ 2) failed to register as a broker-dealer in violation of Sec. 15(a) of the Securities Exchange Act of 1934, ⁴ and 3) committed securities fraud in violation of Sec. 10(b) ⁵ and Rule 10b-5 ⁶ of that same act. The SEC supported its motion by offering extensive documentation of Recile's fraud and registration violations; documentation that included the offering materials, the letter agreements, and depositions and affidavits obtained from investors and participants in the scheme.

In response to the SEC's motion, Recile requested a continuance of 60 days. The district court granted a one week continuance and rescheduled the summary judgment hearing to allow oral argument. On the day of the hearing, Recile filed an Opposing Statement of Material Facts and presented oral argument.

The district court adopted the SEC's Statement of Material Facts and entered summary judgment for the SEC on all of its claims. The district court's Order granted the SEC broad-ranging relief, which included: 1) permanently enjoining Recile from committing any violation of the federal securities laws, 2) appointing a receiver and granting the receiver complete authority to manage the Place Vendome project, and 3) limiting Recile to spending up to $1,000 a month for personal living expenses. Recile timely appealed from this Order.

II DISCUSSION

We liberally construe briefs in determining issues presented for review; however, issues not raised at all are waived. ⁷ Moreover, Rule 28 of the Federal Rules of Appellate Procedure mandates that The brief of the appellant shall contain ... [a]n argument.... The argument shall contain the contentions of the appellant with respect to the issues presented, and the reasons therefor, with citations to the authorities, statutes and parts of the record relied on. ⁸

Even when we thus construe Recile's brief liberally, we discern but two challenges to the district court's Order. He argues first that a genuine issue of material fact exists concerning the fraud claims, and second, that the district court abused its discretion when it refused to grant him a longer continuance for the summary judgment hearing. Recile presents no argument regarding the securities and broker-dealer registration claims, and he raises only limited argument regarding the fraud claims. ⁹

A. Summary Judgment Standard of Review

The grant of a motion for summary judgment is reviewed de novo. ¹⁰ Although we review the evidence and any inferences therefrom in the light most favorable to the nonmoving party, ¹¹ a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." ¹² And once a properly supported motion for summary judgement has been made, the nonmoving party may not rest upon the mere allegations of denials in its pleadings, but must instead set forth specific facts showing that there is a genuine issue for trial. ¹³

B. Raising a Genuine Issue of Material Fact

The SEC amply established its entitlement to summary judgment on the fraud claims. The summary judgment evidence proffered by the SEC showed, inter alia, that Recile repeatedly misrepresented to investors that he had obtained long-term financing for and had leased 700,000 square feet of Place Vendome, when in fact he had done neither. He further represented to the investors that their funds would be used to pay preacquisition financing costs, when in fact over $3,000,000 of the funds were diverted to Recile and his friend's personal use. Moreover, Recile never disclosed this use of the funds to his investors. Finally, Hannover Corporation--which Recile had represented to be a...