“WASHINGTON – The Securities and Exchange Commission is asking a federal court to skip the trial and rule against former Ramapo, N.Y. town supervisor Christopher St. Lawrence due to his earlier criminal conviction, a request that has drawn opposition from St. Lawrence’s attorney.
At issue before the U.S. District Court for the Southern District of New York is whether or not to grant summary judgment against St. Lawrence, who was convicted last year on criminal charges for masterminding a scheme to conceal Ramapo’s financial troubles in the bond documents for municipal securities issued over a period of five years.
The SEC is arguing that Judge Cathy Seibel can rule against St. Lawrence without a civil trial and should order St. Lawrence to pay a penalty as well as be barred from participating in any future municipal bond offerings.
The SEC’s argument relies on “collateral estoppel,” a common law doctrine that prevents re-litigating facts that have already been decided in court. A jury presented with the facts of the case already decided that St. Lawrence was guilty of securities fraud, SEC lawyers Alexander Vasilescu and Rhonda Jung told the court in their motion, so under the doctrine of collateral estoppel St. Lawrence can’t now argue that he did not do the things the jury said he did. St. Lawrence’s conviction was the first for securities fraud in connection with municipal bonds.
Whether or not the St. Lawrence case continues rests on the issue of collateral estoppel, a doctrine designed to prevent courts from having to deal with facts previously decided in court.
“The jury’s guilty verdict, after a four week trial, establishes that there is no material dispute that St. Lawrence committed securities fraud,” Vasilescu and Jung wrote.”Based on collateral estoppel, the Court should grant the Commission the injunctive relief and civil penalty it seeks.”
A civil penalty ordered against St. Lawrence could technically be millions of dollars. The SEC’s filing notes that penalties for violations like the ones St. Lawrence was convicted of are capped at $160,000 per violation, but that the court could consider each separate bond issuance a violation. St. Lawrence is eligible for a New York State pension benefit of $3,621.84 per month after taxes, the SEC told the court, meaning he will have “ample” ability to pay a civil penalty.
But St. Lawrence, already sentenced to 30 months in prison following his criminal conviction, doesn’t look ready to accept that outcome without a fight. His lawyer Michael Burke of Burke, Miele, Golden & Naughton told the court that it should not apply collateral estoppel to St. Lawrence’s case and that injunctions barring his client from future securities law violations or involvement in muni offerings are unwarranted.
The crux of Burke’s argument is that the SEC complaint is not truly identical to the criminal indictment, as it mentions some bond issuances and payments not included in the indictment. As such, St. Lawrence has not had “a full and fair opportunity” to litigate those facts, Burke told the court.
Further, Burke, argued, the injunctions the SEC seeks are not appropriate because St. Lawrence will neither violate any securities laws in the future nor will he be involved in any muni offerings.
“There is no possibility, at any point in the future, that St. Lawrence may become involved with municipal securities again,” Burke wrote. “His felony conviction will preclude him serving as a Town Supervisor or elected official. St. Lawrence will never be able to be an elected official of a municipality again. Additionally, because the criminal trial was believed to be the first of its kind, the trial received national coverage, especially in the industry of municipal securities. As a result, there is no actual possibility that St. Lawrence would be able to participate in municipal securities, or any securities for that matter, on either the municipal end nor the private industry aspect.”
St. Lawrence’s co-defendants in the civil case, Nachman “Aaron” Troodler, Nathan Oberman, and Michael Klein, are all close to settling with the SEC according to a letter the commission submitted to the court in February.”
Kyle Glazier is a reporter covering market trends, infrastructure, and the Far West region for The Bond Buyer.