Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

DIETRICH v. BAUER

January 8, 2001

DEL DIETRICH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
RICHARD BAUER; GROUPE SCORPION, B.V.; GREEN-COHN GROUP; MORTON COHN; VAN D. GREENFIELD; CS FIRST BOSTON; SMITH, BENTON & HUGHES, INC.; MICHAEL ZAMAN; CLAUDIA ZAMAN; EMMET A. LARKIN & COMPANY; EDWARD FISCH; BARRY WITZ; MARIO V. ANDRADE; WESTFIELD FINANCIAL CORPORATION; IDATA, INC.; ROBERT BOGUTSKI; AND KATHLEEN BOGUTSKI, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

The Parties

The parties in this action are set forth in this Court's prior opinion of March 4, 1999, familiarity with which is assumed. See Dietrich v. Bauer, 76 F. Supp.2d 312 (S.D.N.Y. 1999) ("Dietrich I").

Prior Proceedings

This action was commenced by the filing of a complaint on August 28, 1995 by Dietrich and has proceeded in the wake of a related action In re Scorpion Technologies, Inc. Sec. Litig., No. C-93-20333, 1994 WL 774029 (N.D.Cal.).

In the second amended complaint, filed April 20, 1999, Dietrich alleges, inter alia, that the defendants engaged in a scheme to sell unregistered shares of Scorpion Technologies, Inc. ("Scorpion") in the United States, which shares had purportedly been issued pursuant to Regulation S,*fn1 promulgated under the Securities Act of 1933, and to manipulate the trading price of the Scorpion shares. Dietrich alleges that defendant Green-Cohn Group, Inc. ("Green-Cohn"), a registered broker-dealer, acted as the conduit through which nearly 11 million shares of unregistered Scorpion stock were sold by foreign entities to investors in the United States, and that Green-Cohn reaped substantial profits from these sales by being allowed to charge grossly excessive commission rates on the trades. Dietrich further alleges that Cohn is liable for these illegal activities as a "control person" of Green-Cohn, pursuant to Section 20(a) of the Securities Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. § 78t(a), and that Cohn is also liable for common law fraud and for securities fraud pursuant to the California Corporations Code, see Cal. Corp.Code §§ 25400, 25500 (West 2000).

The surviving claims in this action include primary liability claims under Section 10(b) of the 1934 Act, SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, and common law fraud, against defendant Green-Cohn Group, Inc., and a controlling person liability claim under Section 20(a) of the 1934 Act, 15 U.S.C. § 78t(a), and pendent state law claims, against Cohn. See Dietrich I, 76 F. Supp.2d 312 (dismissing as to first amended complaint certain federal law claims against certain defendants and dismissing but granting leave to replead state law claims).

The parties have engaged in discovery, exchanging documents and deposing witnesses. Cohn's motion for summary judgment was filed on June 2, 2000, Dietrich's motion to strike was filed on August 1, 2000, and oral argument was heard on September 27, 2000, at which time these matters was deemed fully submitted.

The Facts

The facts set forth below are gleaned from the parties' Rule 56.1 statements, affidavits and exhibits, with any factual inferences drawn in the non-movant's favor. They do not constitute findings of fact by the Court.

In January 1990, Cohn, a Texas resident, entered into a relationship with Greenfield in which Greenfield would manage an investment by Cohn of $2.6 million. Before forming Green-Cohn as a New York corporation doing business as a broker, Greenfield had discussions with Cohn concerning the formation of Green-Cohn as a company.

Green-Cohn had offices in New York which Cohn visited during the period in which the alleged fraud involving the Scorpion stock was occurring. Cohn and Greenfield talked monthly and met once or twice a year during the relevant time period. On occasion, Green-Cohn used the address of Cohn's office in Houston as the address for Green-Cohn. Cohn paid Greenfield $30,000 a month for Green-Cohn operating expenses and overhead.

A photocopy of a letter from Greenfield to Cohn dated January 4, 1991 (the "January 4 Letter") states that Greenfield would "unilaterally make all management, employment and trading decisions of [Green-Cohn]" and would "have total control over the entity and its management," and that Cohn had no authority to fire Greenfield from his post as president of the company. No original of the letter has been furnished. Dietrich has submitted an affidavit from an expert challenging the letter's authenticity based on forensic evidence. Greenfield testified that he did not know if he ever sent the letter to Cohn and that he only provided the photocopy to Cohn within the couple of months preceding Greenfield's deposition on February 9, 2000. Although the letter states that Cohn is 100% owner of Green-Cohn, Cohn testified at his deposition that he did not know he was the owner of the firm or even that there was a firm called Green-Cohn, as well as that he had no recollection of the letter.

Green-Cohn submitted its procedural manual as required to the National Association of Securities Dealers ("NASD"). According to expert testimony, Green-Cohn violated its own procedural manual, the NASD and SEC rules and industry practice with respect to opening new accounts, documentation, customers orders, short-selling, the opening of foreign accounts and its trading in Scorpion stock.

Greenfield provided monthly accounting statements to Cohn, and Cohn received these statements, which were kept at Cohn's office. Greenfield also had discussions with Cohn's accountant, who worked out of Cohn's office, regarding Cohn's investment. Greenfield has submitted an affidavit in which he states that his oral and written reports to Cohn did not describe particular investments and did not discuss Scorpion technologies. Cohn "think[s]" that the statements he received reflected the specific investments made by Greenfield, "assume[s]" that the statements included such information because Greenfield acted as a money manager for him and "money managers basically will tell you where they've invested [your money]," and "vaguely" recalls seeing such statements. In November 1999, Dietrich served a document request on Cohn seeking, inter alia, documents concerning ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.