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Securities and Exchange Commission v. Lines

October 2, 2009

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
BRIAN N. LINES, SCOTT G.S. LINES, LOM: (HOLDINGS) LTD., LINES OVERSEAS MANAGEMENT LTD., LOM CAPITAL LTD., LOM SECURITIES (BERMUDA) LTD., LOM SECURITIES (CAYMAN) LTD., LOM SECURITIES (BAHAMAS) LTD., ANTHONY W. WILE, WAYNE E. WILE, ROBERT J. CHAPMAN, WILLIAM TODD PEEVER, PHILLIP JAMES CURTIS, AND RYAN G. LEEDS, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Wayne E. Wew ("Wew"), formerly known as Wayne E. Wile, has moved to dismiss this action on the ground that the alternative service effected upon him pursuant to Court Order was improper and that the Securities and Exchange Commission ("SEC") unreasonably delayed prosecuting its claims against him. The motion is denied.

Background

The events underlying this action occurred between mid-2002 and mid-2003. Between June 2003 and June 2005, Mario Aieta of Satterlee, Stephens, Burke & Burke LLP ("Mr. Aieta") contacted the SEC on Wew's behalf at least eighteen times. Wew appeared before the SEC for a deposition in December 2003. At that time he was using the name Wayne Wile.

On December 19, 2007, the SEC filed this action, bringing securities fraud claims against Wayne Wile and others. In May and June 2008, the SEC and Mr. Aieta corresponded by email; the SEC sought to learn whether Mr. Aieta was currently representing Wayne Wile, was authorized to accept service on his behalf, or could provide current contact information for him. As reflected in their email string, Mr. Aieta refused to say whether he or anyone else was currently representing Wayne Wile and refused to provide contact information for him. As Mr. Aieta explained, "If that means you do not know if Mr. Wile is represented by counsel, then you do not know." Mr. Aieta did answer the second question, however, indicating that he was "not authorized to accept service on behalf of Mr. Wile." It appears that at the time Mr. Aieta refused to say whether he was the defendant's attorney, he was in fact representing Wew, may have known that Wayne Wile had legally changed his name to Wew, and certainly understood that the SEC still believed that the defendant's name was Wayne Wile. Mr. Aieta remains Wew's counsel in this action.

As described in the September 30, 2009 Opinion denying a motion to dismiss brought by a co-defendant, S.E.C. v. Lines, No. 07 Civ. 11387 (DLC), 2009 WL ---- (S.D.N.Y. Sept. 30, 2009), the SEC thereafter made two applications for alternative service. The first application was denied for failure to follow the Hague Service Convention in the Cayman Islands to serve the defendant. S.E.C. v. Lines, No. 07 Civ. 11387 (DLC), Order of July 21, 2008 [CM/ECF Doc. No. 25]. In its application, the SEC reported that the last known addresses for Wayne Wile were two Arizona addresses, but its efforts to serve him there led it to believe that he no longer resided there. Based on documentation "provided to the Commission by another governmental agency, the driver's license currently being used by Defendant Wayne Wile reflects a current address in the Cayman Islands" and the name "Wayne E. WEW." The SEC added that it understood that Wile "uses his initials 'WEW' as an alias last name."

The second application was granted on August 7, 2009.

S.E.C. v. Lines, No. 07 Civ. 11387 (DLC), 2009 WL 2431976 (S.D.N.Y. Aug. 7, 2009) ("August 7 Order"). The SEC reported that the Central Authority in the Cayman Islands was not able to locate Wayne Wile "at the address listed on the driver's license Mr. Wile provided to border agents in February 2007". Its application added that "[d]uring 2008, the Commission received several regulatory notices indicating that Wayne Wile was residing in the Cayman Islands."

At the time it made these applications, the SEC believed that Wayne Wile was the defendant's legal name and that he was a Canadian citizen who resided in the Cayman Islands. The August 7 Order permitted alternative service to be made on Wayne Wile by international certified mail to the Cayman Islands address and by email to two accounts: wilewm@yahoo.com and wilewm@aol.com. Wew's motion to dismiss recites that he received service at the Cayman Islands address and by email on August 13, 2009.*fn1

Wew explains that he is a citizen of Canada and admits that he has legal status as a resident of the Cayman Islands, but explains that he sold his residence at 53 Nelson Quay WB in 2005. He asserts he stopped using the post office box for that address in March 2009. Wew changed his last name from Wile to Wew on January 12, 2005 in Nova Scotia, Canada, in order to avoid being stopped and questioned by border guards each time he attempted to enter the United States using the name Wayne Wile; Wew's wife is a United States citizen and Wew was frequently attempting to travel to the United States during this time frame. Despite his change of name, on February 17, 2007, border guards again denied him entry and took and inspected his personal address book. Wew speculates that the guards may also have copied it.*fn2 Wew obtained two residence permits from Switzerland on June 19, 2007, and June 26, 2009, for the Cantons of Appenzell-Ausserhoden and Ticino, respectively. He currently lives in Switzerland.

In September 2009, when it was served with this motion to dismiss, the SEC learned for the first time that Wile had formally changed his name to Wew and was living in Switzerland. Wew contends that a Google search for "Wayne Wile" after October 14, 2006, could have led the SEC to find Wew in Switzerland. It points to a September 19, 2009 search for "Wayne Wile," which found an October 14, 2006 news story from the Vancouver Sun, a Canadian newspaper, about a charity event. At the end of the article entitled "New doorman opened his own doors," Wayne Wile is described as bidding on fiberglass spirit bears, including a bid of $50,000 for one bear, because of a personal tragedy. It lists the beneficiaries of the event as the B.C. Lions Society's Easter Seals operations and the Canucks For Kids Fund. Wew's counsel argues that a charitable organization obtaining "a substantial pledge from a donor must have information about the whereabouts of that donor," and that "an industrious plaintiff" could have used the information in this article to serve Wew in Switzerland.

Wew filed this motion to dismiss on September 2, 2009. It became fully briefed on September 25.

Discussion

Wew first moves to dismiss this action for the SEC's unreasonable failure to prosecute its claims against him. He largely relies on arguments made by co-defendant Anthony Wile that were recently rejected. See Lines, 07 Civ. 11387 (DLC), 2009 WL ---- (S.D.N.Y. Sept. 30, 2009). The additional ...


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