Sec. & Exch. Comm'n v. Mogler
| Decision Date | 05 March 2020 |
| Docket Number | No. CV-15-01814-PHX-SPL,CV-15-01814-PHX-SPL |
| Parties | Securities and Exchange Commission, Plaintiff, v. Mogler et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
Before the Court are the Securities and Exchange Commission's ("SEC") Motion for Summary Judgment as to Liability and Non-Monetary Relief (the "Motion") (Doc. 99-1) and defendant Hinkeldey's Response to the Motion (Doc. 105). Defendants Mogler, Polanchek, and Stevens have not filed a response to the Motion.
On September 10, 2015, a criminal indictment (the "Indictment") was unsealed. See United States v. Mogler at al., Case No. 2:15-CR-01118-PHX-SPL (D. Ariz.) The Indictment charged defendants Mogler, Stevens, Hinkeldey, and Polanchek (the "Defendants") with a conspiracy to violate and violations of the federal mail fraud, wire fraud, identity theft, and money laundering statutes. (Doc. 99-2, Ex. 1)
On September 11, 2015, the SEC filed a civil complaint (the "Complaint") againstthe Defendants alleging violations of various provisions of federal securities laws. (Doc. 1) The Complaint alleges that Defendants have violated the antifraud provisions of the Securities Act of 1933 (the "Securities Act) and the Securities Act of 1934 (the "Exchange Act"), the securities registration provisions of Section 5 of the Securities Act, and that Defendants Polanchek and Buckley have violated the broker-dealer registration provisions of Section 15 of the Exchange Act. (Doc. 1 at 2-3) It further alleges that those violations took place when the Defendants engaged in a fraudulent unregistered securities offering in which they promoted and sold $18 million in high-yield promissory notes, claiming that funds raised through the sale of the notes would be used to acquire and develop beachfront property in Mexico, operate recycling facilities, and purchase foreclosed residential properties for later resale at a profit. (Doc. 1 at 6-7) The Complaint and the Indictment concerned the same victims and the same allegedly fraudulent scheme. (Docs. 1 at 3, 27-32; 99-2, Ex. 1 at ¶ 11)
Defendant Mogler pleaded guilty to one count of conspiracy, 18 U.S.C. § 371, one count of wire fraud, 18 U.S.C. § 1343, and one count of money laundering, 18 U.S.C. § 1957. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 113. He was sentenced to a 292-month prison term and ordered to pay restitution in the amount of $14,019,815.56. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 439. In his plea agreement, Defendant Mogler admitted the following facts: he and Defendant James Hinkeldey orchestrated and directed a scheme to promote and sell fraudulent high-yield investment products, primarily involving: real estate development projects in Sonora, Mexico; waste management companies in Nevada and Illinois; and distressed residential real estate in Arizona. (Doc. 99-2, Ex. 2 at 12) Defendant Mogler admitted that, acting in concert with his co-defendants, he defrauded investors to obtain funds by making materially false promises, representations, and omissions to them either orally, in-person and over the radio, or in writing in offering materials. (Doc. 99-2, Ex. 2 at 12) The Court notes that Defendant Mogler has filed a petition to vacate his sentence under 28 U.S.C. § 2255 arguing ineffective assistance of counsel. See Mogler v.United States, Case No. 2:20-CV-00173-SPL-DMF, doc. 1.
Defendant Stevens pleaded guilty to one count of conspiracy to commit wire fraud, 18 U.S.C. § 371. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 132. He was sentenced to 36 months of probation and ordered to pay $8.2 million in restitution. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 602. In his plea agreement, Defendant Stevens admitted the following facts: he participated in a fraudulent scheme to promote and sell fraudulent high-yield investment products involving real estate development projects in Sonora, Mexico; he conspired and acted with other who were knowingly involved in the fraudulent scheme which was designed to obtain funds from investors by means of materially false promises, representations, and omissions made orally and in writing related to the purported projects. (Doc. 99-2, Ex. 3 at 11)
Defendant Hinkeldey proceeded to trial and a jury returned a verdict finding him guilty of conspiracy, 18 U.S.C. § 371, wire fraud, 18 U.S.C. § 1343, money laundering, 18 U.S.C. § 1957, mail fraud, 18 U.S.C. § 1341, aggravated identity theft, 18 U.S.C. § 1028A, and transactional money laundering, 18 U.S.C. § 1957. See United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), docs. 488-89, 491, 493, 495, 497-99, 501-502, 505, 512, and 520. He was sentenced to a 365-month prison term and ordered to pay $14,019,818.56 in restitution. United States v. Hinkeldey, Case No. 2:15-CR-01118-002-PHX-SPL (D. Ariz.), doc. 678. Defendant Hinkeldey has appealed the jury verdict and sentence, and the appeal is pending as of the date of this Order. (Doc. 105 at 2)
Defendant Polanchek pleaded guilty to observing grand jury proceedings, a class A misdemeanor offense, in violation of 18 U.S.C. § 1508. See United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 720. All other counts in the Indictment were dismissed. United States v. Mogler et al., Case No. 2:15-CR-0118-PHX-SPL (D. Ariz.), doc. 714 at 1-2.
The SEC filed its Motion on November 12, 2019. (Doc. 99-1) Defendant Buckley consented to entry of judgment against him. (Doc. 104) Judgment was entered accordinglyby the Court. (Doc. 110) Defendant Hinkeldey filed a response to the Motion, objecting in part to the SEC's statement of facts in support of its Motion, but agreeing to the entry of judgment for summary judgment and non-monetary relief proposed by the SEC although he has appealed the jury verdict and sentence from the criminal case. (Doc. 105) The Court's ruling on the Motion is as follows.2
A court must grant summary judgment if the pleadings and supporting documents, viewed in the light most favorable to the non-moving party, "show[] that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A fact is "material" when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute of material fact arises "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "If the evidence is merely colorable, . . . or is not significantly probative, . . . summary judgment may be granted." Id. at 249-50 (citations omitted).
The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of any genuine issue of material fact. Celotex, 477 U.S. at 323 (citations omitted). The moving party need not disprove matters on which the opponent has the burden of proof at trial. Id. Summary judgment is, therefore, proper if the nonmoving party fails to make a showing sufficient to establish the existence of an essential element of his case on which he will bear the burden of proof at trial. Id.
The doctrine of collateral estoppel or issue preclusion prohibits relitigation of an issue of fact or law that has been decided in earlier litigation. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, n.5 (1979). Additionally, it is "well-established that a prior criminal conviction may work an estoppel in favor of the Government in a subsequent civil proceeding." Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568 (1951). "Such estoppel only extends to questions distinctly put in issue and directly determined in the criminal prosecutions." Id. at 569 (quoting Frank v. Mangum, 237 U.S. 309, 334 (1915)). Furthermore, in a case of criminal conviction based on a jury verdict of guilty, issues which were essential to the verdict must be regarded as having been determined by the judgment. Id.; see also United States v. Podell, 572 F.2d 31, 35 (2d Cir. 1978) (). "Although it is settled law in this Circuit that a guilty plea may be used to establish issue preclusion in a subsequent civil suit, preclusion has only been allowed where an element of the crime to which the defendant pled guilty or of which he was convicted was at issue in the second suit." United States v. Real Property Located at Section 18, 976 F.2d 515, 519 (9th Cir. 1992); see also United States v. $31,697.59 Cash, 665 F.2d 903, 906 (9th Cir. 1982). Courts have not hesitated to apply the doctrine to civil securities fraud violations in civil suits when similar issues of facts arose and were necessarily decided in the criminal case. SEC v. Braslau, 2016 WL 5922666, at *3 (C.D. Cal. May 13, 2016) (citing SEC v. Alexander, 2015 U.S. Dist. LEXIS 93476, *10 (N.D. Cal. July 17, 2015)); see also SEC v. Reyes, 2008 U.S. Dist. LEXIS 65895, at *2 (N.D. Cal. Aug. 25, 2008); SEC v. Bilzerian, 29 F.3d 689, 694 (D.C. Cir. 1994); SEC v. Gruenberg, 989 F.2d 977, 978 (8th Cir. 1993); SEC v. McCaskey, 2001 U.S. Dist. LEXIS 13571, at *11-12 (S.D.N.Y. Sept. 6, 2001); In re Towers Fin. Corp. Noteholders Litig., 75 F. Supp. 2d 178, 181 (S.D.N.Y. 1999); SEC v. Everest Mgmt. Corp., 466 F. Supp. 167, 172 (S.D.N.Y. 1979).
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