The opinion of the court was delivered by: Richard J. Holwell, District Judge
MEMORANDUM OPINION AND ORDER
This is an enforcement action by the Securities Exchange Commission ("SEC") against former executives of StarMedia Network, Inc. ("StarMedia" or the "Company") for accounting fraud. The SEC brings claims under the Securities Act of 1933 ("Securities Act") and the Exchange Act of 1934 ("Exchange Act"). In a previous decision, the Court allowed certain claims against defendant Betsy Scolnik ("Scolnik") to survive her motion to dismiss. SEC v. Espuelas, 579 F. Supp. 2d 461 (S.D.N.Y. 2008) ("Espuelas I"). Now Scolnik moves for summary judgment on those claims. For the reasons given below, Scolnik's motion is granted.
The SEC's allegations in this action are set forth in detail in two other decisions: Espuelas I, 579 F. Supp. 2d 461, in which the Court dismissed in part the SEC's original complaint, and SEC v. Espuelas, No. 06-2435, --- F. Supp. 2d ---, (S.D.N.Y. March 26, 2010) ("Espuelas II"), in which the Court resolved defendants' motion to dismiss the SEC's amended complaint. Familiarity with those opinions is presumed. Here the Court sets forth only those facts relevant to the resolution of this motion. Except where they are described as alleged or disputed, the following facts are not in dispute.
StarMedia was an Internet media company that targeted Spanish- and Portuguese-speaking markets. (Pltf.'s 56.1 Stmt. ¶ 1.) Scolnik worked for the company from 1998 through November 2001. (Id. ¶ 2.) Beginning in April 1998, Scolnik was the Vice President of Business Development. (Def.'s 56.1 Stmt. ¶ 8.) In February 1999, she became Senior Vice President for Strategic Development, and in May 2001, she was promoted to be an Executive Vice President. (Id. ¶ 9.) Scolnik summarizes her work as "identifying and closing strategic deals, focusing on e-commerce opportunities, building distribution relationships, and opening and staffing offices in Latin America." (Id. ¶ 7.) After becoming Vice President, Scolnik took on more responsibility to develop strategies for e-commerce and distribution; later, as Senior Vice President, Scolnik worked on content development as well. (Id. ¶¶ 8--9.) Scolnik asserts that preparing, reviewing, or approving company filings or public statements was never part of her job duties. (Id. ¶ 11.) The SEC disputes that claim. It relies on the declaration of Michael Hartman, StarMedia's general counsel, that Scolnik "had one of the broadest roles in the company, after Fernando Espuelas and Jack Chen," and that "she interacted at the highest levels with sales, business development, revenue development, and the strategic planning of the company." (Hartman Decl. ¶ 58; Pltf.'s 56.1 Stmt. ¶ 77.)
This litigation has its source in StarMedia's recognition of revenue for certain transactions it undertook in 2000 and 2001. In late 2001, StarMedia restated its financial statements to correct the accounting for these transactions, including the so-called "contingent transactions." (Pltf.'s 56.1 Stmt. ¶¶ 6--11; Def.'s Response to Pltf.'s 56.1 Stmt. ¶¶ 6--11.) In the contingent transactions, StarMedia allegedly agreed to provide services to another party that was either not obligated to pay or was obligated to pay only if it approved the services. (Am. Compl. ¶¶ 47, 50.) StarMedia then allegedly reported revenue on the transactions. (Id. ¶¶ 48, 51.) The SEC asserts that, in 2000 and 2001, StarMedia struck deals like this with two companies, Groupe Danone ("Danone") and AMG International, Inc. ("AMG"). For example, in late 2000, it contracted with AMG to supply advertising for $500,000 and recorded the same amount as revenue, even though AMG had paid only $10,000 up front, with the rest contingent on its approval of the services. (Id. ¶ 47.) When AMG later found the services unacceptable, it did not pay the remaining $490,000. (Id. ¶ 49.) StarMedia also provided services to Danone at no charge as an incentive for Danone to hire StarMedia to work on a project in Latin America. But StarMedia still recorded the transactions as if they were ordinary sales, and reported revenue from it in amounts as large as one million dollars, in the fourth quarter of 2000. (Id. ¶ 50.)*fn1
According to the SEC, Scolnik played a role in these deals. The SEC claims that she, along with defendants Adriana J. Kampfner ("Kampfner") and Peter E. Blacker ("Blacker"), agreed that StarMedia would provide services to AMG on a contingent basis. (Id. ¶ 47.) Although Scolnik allegedly knew that StarMedia's finance department required accurate insertion orders or contracts to enable it to properly report revenue, she did not report the oral contingency with AMG to the department. (Id. ¶¶ 47, 54.) In addition, the Danone transaction was negotiated after "pressure from Scolnik." (Id. ¶ 50.) Scolnik also allegedly played a part in misstating revenue from the transactions in SEC filings.*fn2 In its 10-K for the year ended 2000 and its 10-Qs for the first two quarters of 2001, StarMedia allegedly misstated the amount of its barter revenue and the percentage of barter revenue compared to total revenue. (Id. ¶ 7.)
Scolnik disputes the SEC's allegations that she intended StarMedia to record revenue from these transactions, or that she even knew the transactions included contingencies until late in the second quarter of 2001, during a company investigation. (Def.'s Mem. 13, 15--20.) She argues that the SEC has offered no facts to support its claims. (Id. 15--20.)
After StarMedia restated its revenue in late 2001, the SEC began an investigation into the company. It obtained documents from StarMedia, the defendants, and third parties, including the company's outside auditor, Ernst & Young. (Pltf.'s Response to Def.'s 56.1 Stmt. ¶ 2.) In 2006, the SEC initiated this action. The defendants moved to dismiss the original complaint, and the Court granted that motion as to several claims against Scolnik. But the claims relating to her involvement in the contingent transactions-claims under Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, Rule 10b-5, and Rule 13b2-1-survived dismissal. The SEC then filed an amended complaint, and several defendants again moved to dismiss. Scolnik joined in that motion except as to the claims against her that had already withstood dismissal. She separately filed this motion for summary judgment on those claims.
A court must grant summary judgment "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The court must resolve all ambiguities and draw all factual inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A party opposing summary judgment "may not rely merely on allegations or denials in its own pleading; rather, its response must-by affidavits or as otherwise provided in this rule-set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e). As the Court has noted, "[t]his requirement has particular relevance when a party's responsive documents are long on speculation and short on specific facts." Medici Classics Productions, LLC v. Medici Group, LLC, -- F. Supp. 2d --, 2010 WL 437444, at *3 (S.D.N.Y. Feb. 9, 2010); see Woodman v. WWOR-TV, Inc., 411 F.3d 69, 85 (2d ...