557 F. App'x 917
11th Cir.2014Background
- SEC investigated GlobeTel’s fraudulent scheme to report fictitious revenue from 2004–2006.
- GlobeTel executives Huff (CEO), Jimenez (CFO), Lynch (COO/CFO), Monterosso (COO of Centerline), and Vargas (VP of Centerline; CSI owner) led the program.
- Monterosso and Vargas ran GlobeTel’s wholesale business and directed the creation of fake invoices and CDRs under the off-net program.
- The off-net scheme used invoices and data from related parties (Volta, Lonestar, CSI, Mercury/WCCS) to inflate reported revenue.
- GlobeTel’s revenue was misrepresented by over $100 million across quarterly reports, registrations, and press releases; SEC filed complaints in 2007–2008; district court granted summary judgment in 2011 and imposed remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antifraud liability and scienter | SEC argues Monterosso and Vargas violated antifraud provisions with knowing misconduct. | Monterosso and Vargas claim lack of scienter and reliance on management. | Summary judgment affirmed; scienter established |
| Recordkeeping/Reporting violations | SEC argues 13b2-1/13b2-2 violations due to falsified books and aiding auditors. | Monterosso/Vargas contend they weren’t the book-entry makers and defenses to liability. | Liability under 13b2-1 and 13b2-2 sustained |
| Disgorgement sanctions | SEC seeks disgorgement of ill-gotten gains; seeks joint and several liability. | Disgorgement should be limited to amounts actually received. | Disgorgement affirmed; joint and several liability upheld; amounts supported by record |
| Civil penalties | SEC seeks third-tier penalties for fraud with substantial risk of loss to investors. | Challenge as to magnitude and ability to pay; uneven penalties among defendants. | Penalties affirmed; district court had discretion; consideration of ability to pay acknowledged |
Key Cases Cited
- SEC v. Yun, 327 F.3d 1263 (11th Cir. 2003) (disgorgement as equitable remedy; reasonable approximation suffices)
- Calvo, 378 F.3d 1211 (11th Cir. 2004) (joint and several liability in securities cases; discretionary remedies)
- Lyttle, 538 F.3d 601 (11th Cir. 2008) (circumstantial evidence supports scienter; summary judgment possible)
- Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (S. Ct. 2011) (definition of ‘maker’ of a statement; Rule 10b-5(b) scope)
- Goble, 682 F.3d 934 (11th Cir. 2012) (aiding-and-abetting liability framework under securities laws)
- Warren, 534 F.3d 1368 (11th Cir. 2008) (penalty considerations and ability to pay factors)