WASHINGTON Feb 11 The U.S. Securities and
Exchange Commission scored a partial victory on Tuesday after a
jury found hedge fund manager Marlon Quan liable for helping to
facilitate a $3.65 billion Ponzi scheme.
But the Minneapolis jury produced a mixed verdict on whether
Quan knowingly committed fraud, finding that under one law he
did intentionally commit fraud, but under another he didn't.
It was the second time in less than two weeks that
conflicting jury verdicts have led both the SEC and defendants
to declare victory.
The SEC alleged that Marlon Quan, of Greenwich, Connecticut,
and several funds he controlled invested millions of dollars
with Thomas Petters, a Minnesota businessman who was convicted
of running a Ponzi scheme in 2009. When Petters's Ponzi scheme
began to unravel and he started to default on his payouts, the
SEC said Quan executed a "series of convoluted transactions" to
hide the defaults from investors.
Petters is currently serving a 50-year prison term for
perpetrating the Ponzi scheme, which lasted for over a decade.
"We're very pleased the jury found Marlon Quan liable for
securities fraud and that he will be held accountable for his
deception in funneling several hundred million dollars of
investor money into the Tom Petters Ponzi scheme," the SEC's
enforcement director, Andrew Ceresney, said in a statement.
Bruce Coolidge, an attorney with Wilmer Hale who represented
Quan, saw the verdict in a much different light.
"The jury unanimously found that the SEC prevailed on one of
its securities fraud claims, and it unanimously found that Mr.
Quan prevailed on the other securities fraud claim for the same
conduct," he said.
Since a verdict has to be unanimous in order for a defendant
to be liable, the SEC essentially failed to sustain its claims,
Earlier this month, a jury in Texas issued a split verdict
on whether Life Partners Holdings was liable for
intentional fraud, with the SEC losing on eight of its 12
This time around, the SEC won on the majority of its claims,
but still lost on a few crucial claims.
The verdict underscores how difficult it can be for the SEC
to obtain clear-cut victories in complex securities cases.
SEC Chair Mary Jo White, a former federal prosecutor,
recently pledged that her trial unit stands ready to try more
cases. Her comments came after she said the SEC would try to
extract admissions of wrongdoing in some cases, an act she
acknowledged could lead to more trials.
Despite White's background as a litigator and the hiring of
a handful of other ex-prosecutors, the SEC in recent months has
suffered a string of both full-blown defeats and mixed verdicts.
The cases lost so far all began well before White joined the
SEC, and many in the legal community are watching to see whether
White can help bullet-proof more of the cases that go to trial.