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Securities And Exchange Commission v. Somers

United States District Court, W.D. Kentucky

March 17, 2015

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF
v.
STEPHEN P. SOMERS, et al., DEFENDANTS

 Decided March 16, 2015

As Corrected March 18, 2015.

For Securities And Exchange Commission, Plaintiff: Daniel J. Hayes, James A. Davidson, Jason Andrew Schmidt, U.S. Securities & Exchange Commission-Chicago, Chicago, IL USA; William F. Campbell, U.S. Attorney Office - Louisville, Louisville, KY USA.

For John P. Monroe, Defendant: John J. Muldoon, III, Muldoon & Muldoon, LLC, Chicago, IL USA.

For Stephen Somers, Defendant: Kent Wicker, Lesley A.S. Bilby, LEAD ATTORNEYS, Dressman Benzinger LaVelle PSC, Louisville, KY USA; John M. Clifford, Clifford & Garde, LLP, Washington, DC USA; Laurence Storch, Pollack & Storch, Washtington, DC USA; Stanley Sporkin, Washington, DC USA.

Page 877

MEMORANDUM ORDER AND OPINION

John G. Heyburn II, Senior United States District Judge.

Plaintiff, the Securities and Exchange Commission, filed this civil enforcement action against Defendant, Stephen Somers, and others in March 2011. The SEC alleged that Somers engaged in insider trading of Steel Technologies, Inc. securities in violation of federal law. All other defendants settled, and the Court entered final judgments in accordance with those settlement agreements.

Somers did not concede so easily. His attorneys mounted a vigorous and virtuous defense. On the eve of trial, however, Somers did sign an agreement (the " Consent" ) to resolve the SEC's claims against him by the entry of a final judgment requiring him to pay disgorgement, prejudgment interest, and a civil penalty. The SEC gave up its right to a trial, did not require Somers to admit liability, did not to seek an injunction against Somers, and did not seek the full civil penalty allowed by the law. The Commission had to approve the Consent, so the Court did not immediately enter a final judgment.

On December 10, 2014, before the Commission approved the Consent, the Second Circuit issued its decision in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), a criminal insider trading case. That court held that the SEC must establish more than the " mere fact of friendship" between people sharing inside information to satisfy the benefit element in criminal insider trading cases; instead, the SEC must prove that the tipper received something of " consequence." Id. at 452. Somers argues that this case represents a big shift in the Second Circuit's insider trading jurisprudence and notes that the SEC has requested en banc review.

After the decision, Somers wrote the SEC to request that it drop this case because the SEC has relied on the fact that the alleged tippers and tippees were friends. The SEC declined. Somers also requested a telephonic conference with

Page 878

this Court and stated that he would not object if this court dismissed the case against him sua sponte. This Court declined. Somers never revoked his settlement offer, perhaps hoping that the SEC would not approve the Consent in light of the Second Circuit's decision. He was wrong.

On January 8, 2015, the Commission accepted and approved the terms of the Consent. The SEC moved to approve the final judgment on the same day. Now, Somers requests this Court to refrain fro consideration of the SEC's motion until there has been a final judgment in Newman. For the reasons that follow, the Court denies Somers's ...


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