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Securities and Exchange Commission v. Milan Capital Group, Inc.

United States District Court, S.D. New York

June 23, 2014

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
MILAN CAPITAL GROUP, INC., et al., Defendants. AARON R. MARCU, as Receiver for MILAN CAPITAL GROUP, INC., Cross-Claim Plaintiff,
v.
IRA A. MONAS, et al., Cross-Claim Defendants.

\ Michael J. Roessner, Washington, DC, for the Plaintiff.

Alan S. Fellheimer, Fellheimer & Eichen LLP, New York, NY, James P. Sammon, Dubyak Connick Sammon Thompson & Bloom LLC, Cleveland, OH, for the Defendant.

OPINION AND ORDER

DENISE COTE, District Judge.

Defendant Jason M. Cope ("Cope") has moved to alter the outstanding judgment amounts against him, as to disgorgement and prejudgment interest. For the reasons explained below, the motion is denied.

BACKGROUND

This is the latest iteration in a case stretching back almost fifteen years. A more complete recounting of the underlying facts can be found in this Court's prior decisions in SEC v. Milan Capital Group, Inc., et al., No. 00 Civ. 108 (DLC) , 2000 WL 1682761 (S.D.N.Y. Nov. 9, 2000) ("Milan I"), and in SEC v. Milan Capital Group, Inc., et al., No. 00 Civ. 108 (DLC) , 2001 WL 921169 (S.D.N.Y. Aug. 14, 2001) ("Milan II").

In brief, in early 2000, the U.S. Securities and Exchange Commission ("SEC") brought this action against five defendants: Milan Capital Group, Inc. ("Milan"), Ira A. Monas ("Monas"), Cope, Michael Lamhut ("Lamhut"), and Investment Offices d/b/a AC Financial, Inc. ("AC Financial"). The suit alleged, inter alia, that the defendants perpetrated a fraud by which they received funds from investors to purchase shares in initial public offerings but did not make the purchases.

In an Opinion of November 9, 2000, the Court granted the SEC's motion for partial summary judgment against Monas, Lamhut, and Cope. Cope was represented by counsel and opposed summary judgment. The Court found each defendant liable for securities fraud and for aiding and abetting Milan's violation of the broker-dealer registration requirements. Milan I , 2000 WL 1682761, at *6-*8. Specifically, the Court found that Cope had played a central role in the fraud; he personally solicited customers and was responsible for the supervision of the other brokers offering the aforementioned shares. Id . at *6. The Court also stated that permanent injunctions would be entered against these defendants, and that both full disgorgement and prejudgment interest were appropriate, with the amount of disgorgement to be determined after the conclusion of an investigation by the Receiver for Milan. Id . at *9-*10.

On December 29, 2000, a permanent injunction was entered against Monas, Lamhut, Cope, and AC Financial (which had defaulted). Cope appealed but later abandoned his appeal, which was dismissed by the Second Circuit for failure to prosecute. See Milan II , 2001 WL 921169, at *2.

On December 15, 2000, the Receiver filed under seal a lengthy report summarizing his investigation thus far. As relevant here, the Receiver found that, during the fraud, Milan took in, as gross revenue, at least $8, 370, 680 from at least 200 investors. The Receiver also found that, during this same period of time, Milan returned approximately $2, 356, 271.78 to investors. A letter summarizing most of the report's findings, but withholding personal information, was served on all defendants.

In June 2001, the SEC moved for entry of a judgment against Cope and other defendants. The SEC sought $8, 370, 680 in disgorgement, which it explained was the amount that defendants "took in" from investors. Cope did not oppose the motion.

In an Opinion of August 14, 2001, Milan, [1] Monas, Cope, and AC Financial were found to be jointly and severally liable for $8, 370, 680 in disgorgement, $1, 024, 386.67 in prejudgment interest, and $854, 316.61 in fees and costs to the Receiver (as well as future costs and fees incurred by the Receiver), for a total of $10, 249, 383.28. Cope and Monas were also found to be jointly and severally liable for a statutory penalty of $10, 000, 000. Milan II , 2001 WL 921169, at *2-*4 (S.D.N.Y. Aug. 14, 2001).[2] As per the terms of the partial final judgment entered against him on August 15, 2001, Cope was required to pay $20, 249, 383.28, plus post-judgment interest ("August 2001 Judgment").

According to the SEC's accounting, as of the date of the August 2001 Judgment, the Receiver had recovered from the defendants $5, 124, 780.61, of which $42, 935.77 came from Cope. Those funds were first applied against the Receiver's fees and costs, and then put towards the disgorgement and prejudgment interest. The August 2001 Judgment was not satisfied, and thus post-judgment interest began to accrue on the outstanding portion of the August 2001 Judgment.

Between August 2001 and February 2011, the Receiver recovered from the defendants and relevant third parties an additional $645, 219.39, of which Cope's only contribution was $22, 531.10. These recovered funds were put towards post-judgment interest first and then the outstanding portion of the August 2001 Judgment. As of August 29, 2013, Cope's balance on the August 2001 Judgment was $22, 916, 312.90, the disgorgement component (including prejudgment and post-judgment interest) of which was $7, 808, 261.75. See SEC v. Milan Capital Grp., Inc. et al., No. 00 Civ. 108 (DLC), 2013 WL 6462233, at *1 (S.D.N.Y. Dec. 10, 2013) ("Milan III").

Cope did not appeal the August 2001 Judgment. And this case was almost entirely dormant from 2002 to 2012.

During that time, Cope made no payments towards the August 2001 Judgment. In June 2013, after the SEC took discovery and advised Cope that it would be filing a motion ...


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