Securities & Exchange Commission v. Tourre
4 F. Supp. 3d 579
S.D.N.Y.2014Background
- Jury verdict on August 1, 2013 found Tourre liable on six of seven SEC claims including sections 17(a)(1)-(3), 10(b) and Rule 10b-5, and 20(e).
- SEC moved for disgorgement, prejudgment interest, civil penalties, and injunctive relief on December 16, 2013; Tourre opposed on January 21, 2014; briefing concluded January 31, 2014; argument held February 20, 2014.
- The case centers on the AC1 transaction; Goldman had already disgorged $15 million and paid a civil penalty in separate settlements with the SEC.
- Tourre was the deal captain for AC1; the 2007 bonus (about $1.58 million) was at issue for disgorgement attributable to AC1, based on qualitative factors and his performance.
- Trial evidence showed AC1 generated significant profits and losses in related portfolios; Tourre’s self-evaluation and reviews highlighted his AC1 involvement; Tourre has not worked in the securities industry since 2010 and is pursuing academia.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Disgorgement of AC1-related bonus | SEC seeks Tourre's $175,463 AC1-related portion of the 2007 bonus. | Tourre argues double-counting with Goldman's $15M disgorgement and lack of causal link. | Disgorgement of $175,463 approved; not double-counting. |
| Civil penalties per violation vs scheme | SEC seeks penalties for seven offers tied to the ACA scheme as separate violations. | Tourre argues a single scheme and fewer violations should be charged. | Total penalties $650,000; third-tier for ACA/IKB/ABN and second-tier for Calcyon/CIFG/BAWAG/UBS. |
| No-reimbursement from Goldman | Penalties should not be reimbursable by Goldman to Tourre. | Tourre contends possible reimbursement should be allowed given ownership of penalties. | No-reimbursement order against Tourre from Goldman upheld; reimbursement from Goldman barred. |
| Injunctive relief | SEC seeks permanent injunction against future securities violations by Tourre. | Tourre has no current intent to return to the securities industry; injunction may be unnecessary. | Injunctive relief denied at this time; court retains jurisdiction for three years for potential future action if circumstances change. |
Key Cases Cited
- SEC v. First Jersey Sec., Inc., 101 F.3d 1450 (2d Cir. 1996) (disgorgement as broad equitable remedy)
- SEC v. Contorinis, 743 F.3d 296 (2d Cir. 2014) (illicit benefits may be included in disgorgement)
- SEC v. Razmilovic, 738 F.3d 14 (2d Cir. 2013) (reasonable approximation of profits for disgorgement)
- SEC v. Manor Nursing Centers, 458 F.2d 1082 (2d Cir. 1972) ( disgorgement of full proceeds in fraudulent stock offerings)
- SEC v. AbsoluteFuture.com, 393 F.3d 94 (2d Cir. 2004) (no-reimbursement considerations and beneficiary losses)
- SEC v. Warde, 151 F.3d 42 (2d Cir. 1998) (losses and penalties context in securities actions)
- SEC v. Coates, 137 F. Supp. 2d 413 (S.D.N.Y. 2001) (penalty methodology and tiered penalties)
- SEC v. Kern, 425 F.3d 143 (2d Cir. 2005) (district court discretion in penalty calculations)
- SEC v. Pentagon Capital Mgmt., 2012 WL 1036087 (S.D.N.Y. 2012) (penalty calculation by number of violations (contextual))
- SEC v. Solow, 554 F. Supp. 2d 1356 (S.D. Fla. 2008) (general verdict form uncertainty discussion)