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November 8, 2005.

In re ADLER, COLEMAN CLEARING CORP., Debtor. EDWIN B. MISHKIN, as SIPA Trustee for The Liquidation of the Business of Adler, Coleman Clearing Corp. Plaintiff,

The opinion of the court was delivered by: VICTOR MARRERO, District Judge



Plaintiff Edwin B. Mishkin brought this action as Trustee under the Securities Investor Protection Act of 1970 ("SIPA"), 15 U.S.C. § 78 et seq., for the liquidation of the business of Adler, Coleman Clearing Corp. ("Adler"). In prior related proceedings arising out of Adler's bankruptcy and liquidation, the Court extensively detailed relevant events, factual findings and legal conclusions that serve as background for the wrongful activities that gave rise to the Trustee's motion in the case at hand.*fn1 Familiarity with the pertinent facts is assumed.

  In this proceeding the Trustee moves for summary judgment against defendant Philip Gurian ("Gurian") on the Trustee's claim that Gurian, as a person controlling the six remaining named defendants herein (the "Bahamanian Companies"), may be held liable under the common law alter ego doctrine and Section 20 (a) ("Section 20 (a)") of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78t(a), for payment of judgments the Trustee obtained against the Bahamian Companies. The Trustee contends that the Bahamanian Companies were shell entities Gurian created and controlled as tools with which to commit the securities fraud that ultimately caused Adler's financial collapse.

  In other related proceedings, Gurian and several codefendants were charged with numerous acts of racketeering, securities fraud, extortion, money laundering conspiracy and witness tampering, in an indictment arising out of frauds that injured Adler and other securities firms and investors. Gurian pled guilty pursuant to a plea agreement to two counts of that indictment. By his plea, Gurian admitted to the crimes of mail fraud and conspiracy to commit mail fraud, wire fraud and securities fraud. The Trustee contends that through Gurian's plea allocution to these charges and other sworn statements he has made in the course of various legal proceedings arising out of Adler's demise, including the instant action, Gurian has admitted facts and conduct sufficient to support a finding, for the purposes of liability under the common law alter ego doctrine and Section 20(a), that Gurian controlled the Bahamian Companies. The Court concurs. For the reasons discussed below, the Trustee's motion for summary judgment is granted.


  Adler was forced by government regulators to close down its clearing house business in 1995 following the insolvency and demise of Hanover Sterling & Company, Ltd. ("Hanover"), a securities firm that served as one of Adler's introducing brokers. See Jackson, 263 B.R. at 417. Hanover collapsed as a result of an extensive scheme that operated to target for short selling and thus to lower the market prices of certain house stocks that Hanover had introduced into public markets. In the case at hand, the Trustee alleges that this scheme was perpetrated by Gurian through the device of the six Bahamian Companies, along with a seventh, Roddy DiPrimo, S.A. ("DiPrimo"),*fn2 against which the Trustee, in Adler's Bankruptcy Court proceeding, obtained a final judgment by default in an amount of $150 million on a claim of racketeering and $50 million for securities fraud. See Judgment (the "DiPrimo Judgment"), attached as Ex. A to Affidavit of James G. Corsiglia in Support of the Trustee's Motion for Summary Judgment, dated October 18, 2005 ("Corsiglia Aff."). In that bankruptcy proceeding, the Trustee also obtained a separate default judgment against the Bahamian Companies for liability to the same extent as DiPrimo. See Default Judgment ("the Bahamian Companies Judgment") attached as Ex. B to Corsiglia Aff.)

  In support of his allegation that Gurian sufficiently controlled the Bahamian Companies, the Trustee has introduced, and the Court has considered, among numerous other documents: (1) the Indictment in the case charging Gurian and other individuals with various crimes arising out of Hanover's demise (see Indictment (the "Indictment"), United States v. Gurian ("U.S. v. Gurian"), No. 99-215-CR-T-23(A) (M.D. Fla. 1999), attached as Ex. D to Corsiglia Aff.); (2) the plea agreement pursuant to which Gurian pled guilty to Counts Two and Three of the Indictment, counts which charged mail and wire frauds and conspiracy to commit securities frauds (see In Camera Plea Agreement (the "Plea Agreement"), attached as Ex. E to Corsiglia Aff.); (3) the transcript of Gurian's guilty plea in U.S. v. Gurian (see Transcript of Guilty Plea Before Honorable Mark Pizzo, United States Magistrate Judge (the "Guilty Plea"), attached as Ex. F to Corsiglia Aff.); (4) a motion Gurian made requesting release of certain interests Gurian possessed in accounts in the name of the Bahamian Entities and other companies (see Motion to Release Assets (the "Assets Release"), attached as Ex. G. to Corsiglia Aff.); and (5) Gurian's deposition taken in connection with this action (see Transcript of the Deposition of Philip Gurian on April 21, 2005 ("Gurian Dep."), attached as Ex. I to Corsiglia Aff.).

  To counter the Trustee's motion, Gurian has submitted three affidavits. The first one is his own. In it he asserts that he is a minority owner of the Bahamian Entities along with at least two other persons; that he does not dominate or control the Bahamian Entities; that the other owners act of their own free will and have interests that do not coincide with his own nor are dominated or controlled or coerced by Gurian. (See Affidavit of Philip Gurian, dated October 6, 2005 ("Gurian Aff."), attached to Memorandum of Law in Response to Plaintiff's Motion for Summary Judgment, dated October 7, 2005 ("Def.'s Mem."), at 1-2.) The other affidavits are from two other individuals, Glen T. Vittor ("Vittor") and Jaime Villaroel ("Villaroel"). Vittor, a co-defendant and co-conspirator in U.S. v. Gurian, attests that he is an owner of the Bahamian Entities, and that Gurian was not a majority owner and did not dominate, control or coerce the Bahamian Entities or their other owners. (See Affidavit of Glen T. Vittor, dated October 7, 2005, attached to Def.'s Mem.) Villaroel similarly declares that he is an owner of the Bahamian Entities; that he and Vittor combined had voting power substantially larger than that of Gurian; that neither he nor the Bahamian Entities were dominated or controlled by Gurian; and that he, Vittor and Gurian were separate individuals with separate interests who decided matters regarding the Bahamian Entities in accordance with each owner's respective personal interests. (See Affidavit of Jaime Villaroel, dated July 10, 2005, attached to Def.'s Mem.)


  In order to prevail on a motion for summary judgment, the moving party must demonstrate that "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A motion for summary judgment should be granted unless the evidence adduced by the non-moving party is "sufficient . . . for a jury to return a verdict for that party." Id. at 249.

  In determining whether genuine issues of material fact exist, "[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). Once the moving party has made a showing that no genuine issue of material fact remains to be tried, the burden shifts. In the face of a properly supported motion for summary judgment, the opposing party cannot not "get to a jury without `any significant probative evidence tending to support' [the existence of a disputed fact]." Anderson, 477 U.S. at 249 (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 290 (1968)). The nonmovant, however, cannot create a genuine issue of fact and defeat summary judgment through "[c]onclusory allegations, conjecture, and speculation." Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998). As the Second Circuit has recognized: "[T]he moving party may obtain summary judgment by showing that little or no evidence may be found in support of the nonmoving party's case. When no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper." Gallo v. Prudential Residential Servs., Ltd., 22 F.3d 1219, 1223-24 (2d Cir. 1994) (citations omitted).

  IV. ...

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