Securities Diary provides views on developments in securities litigation which are not burdened by client interests or preferences.  The author has many years of experience as a securities litigator in both government enforcement actions and private litigation.

Straight Arrow

4 thoughts on “About

  1. Joel Shapiro

    I would like to quote your blog on the SEC’s plans to avoid jury trial. We just went through this “farce” and our case is 2 -3years+++ out of the SOL. We have not received a “ALJ” verdict yet but Judge Elliott (our ALJ) is 50-something to 0 for the SEC.

    Joel Shapiro 404-386-9496


  2. Joel

    Hope you are well and Happy New Year. I am curious as to your thoughts on filing a class action suit against the SEC and Cameron Elliott for Bias in as much as he has never found against the SEC.

    As you know, in our case he refused to sign an affidavit saying he was unbiased.

    A class action against him and the SEC would allow for testimony of Lillian McEwen—and perhaps others. This could really make waves nationally, and I believe we could win and change things!


    Previous case whereby bias was settled against ALJ’s.


    Would you have any recommendations on attorneys?




  3. John McLemore

    Et tu, Fifth Circuit Court of Appeals?
    Instead of instilling confidence in our judicial system,
    Court’s ruling only reinforces Americans’ growing fear of the SEC

    The Fifth Circuit Court of Appeals could have ended a seven year legal battle between the Securities and Exchange Commission and a Texas based investment company. The Court could have seen that justice prevailed in this embarrassment of a case but the vindictive tone of its ruling only solidified the Court’s reputation as the most appellant unfriendly of all the appellate courts.

    For all practical purposes, this battle should have ended in January of 2014, when a U.S. District Court Jury in Austin, Texas sided overwhelmingly with LPHI and CEO, Brian Pardo.

    Despite enormous amounts of pretrial grandstanding, the SEC swung and missed on 10 of the 12 allegations it brought before the jury, including the most serious allegations of fraud, scienter and insider trading.

    The two SEC victories were clerical violations with no findings of misconduct. Judge James Nowlin himself ruled, the violations were not caused by any misconduct of LPHI, rather by its “good faith reliance on its auditors.” Additionally, these clerical violations had no bearing on stock price or investor ROI. Then, ten months later, Judge Nowlin issues a $46 million penalty for the two violations – forcing LPHI to file for bankruptcy.

    If ever there was a case deserving justice from an appeals court, this was it! It doesn’t take a keen legal trained mind to see that Judge Nowlin’s penalty is out of line, it only takes common sense.

    Compare the $46 million penalty Judge Nowlin issued in this case to the $4 million penalty issued in the SEC’s conviction of James E. Koenig, the former CFO of Waste Management, Inc. A jury found that Koenig committed 60 securities laws violations, including 13a, over a five-year period.

    Jeffrey Skilling, CEO, Enron – Convicted on 19 counts of conspiracy, fraud, false statements and insider trading. Fined $45 million.

    Compare the $46 million penalty Judge Nowlin issued in this case to the $22 million penalty issued in the SEC case of Angelo Mozilo, convicted of fraud and insider trading (two charges Pardo was acquitted of). Mozilo, CEO Countrywide Mortgage, ranked #1 on Time Magazine’s list of people causing the 2007 economic crash.

    It’s blatantly erred court rulings like the one by Judge Nowlin that make our appellate courts so important. The Fifth Circuit Court of Appeals has appellate jurisdiction over the federal courts in Texas, Louisiana, and Mississippi. It often has the last word on questions of federal law, so it’s imperative that the court is staffed with fair-minded judges who uphold the rule of law and treat all litigants equally. Perhaps we need a new legal definition for “fair-minded” and “treating all litigants equally?”

    In 2010, (Jane Doe vs. Silsbee Independent School District) a Texas high school cheerleader allegedly raped by a member of the school basketball team, was told by school officials she still had to cheer at basketball games or be released from the cheerleading squad and face possible suspension. She sues, arguing the school’s actions violated her First Amendment rights. In a decision written by Judge Edith Brown Clement, the Fifth Circuit not only dismisses the claim, but it orders the rape victim to pay legal fees for filing a “frivolous” suit.

    Judge Priscilla Owen, “She reflexively favors manufacturers over consumers, employers over workers, and insurers over sick people,” said the New York Times in an editorial opposing her appointment.

    Judge W. Eugene Davis and Judge Jerry Smith have attended seminars funded by the Foundation for Research on Economics and Environment (FREE), an anti-regulation think tank funded by the oil industry. Only months after the Deepwater Horizon disaster, these judges ruled in favor of oil companies challenging the president’s partial moratorium on offshore drilling in the Gulf.

    In 2013, a broad coalition of civil rights organizations, legal ethicists and others filed a judicial-misconduct complaint against Judge Edith Jones following a speech she made at the University of Pennsylvania School of Law. The complaint alleged Judge Jones made statements that violated the Code of Judicial Conduct and constituted misconduct under the Rules for Judicial-Conduct, including the fundamental duty of impartiality. In January of 2014, after a year long secret investigation, a ruling body of federal judges in Washington, D.C., held a hearing at which Judge Jones and an attorney hired by the Washington, D.C., circuit as an investigator, were the only people to testify. The complainants, which included the NAACP, LULAC, the National Bar Association (Dallas chapter) as well as several students and faculty of the University, were not invited to testify or even attend the hearing. Requests by the complainants to see the transcript of the hearing were denied as were requests to see the Special Investigator’s report. August 2014, the D.C. Circuit dismissed the Complaint.

    The LPHI case is a travesty that the Fifth Circuit Court of Appeals should have corrected. It was the SEC’s greed that started the ball rolling and the SEC’s arrogance that keeps it in motion. It was a shameful ruling by the District Judge in Austin that started this nightmare of a case. The Federal Bankruptcy Court in Ft. Worth made it worse by allowing the SEC to select a trustee for LPHI that has cost 20,000 LPHI investors to lose more than $50 million paying legal fees and administrative expenses for litigation they had no role in initiating.
”Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good
man.” ~ Abraham Lincoln
    I wonder what Abe would think about this case….

    John McLemore


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