United States District Court, S.D. New York
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge
Securities and Exchange Commission (the “SEC”)
brought this civil enforcement action against Defendant John
Jankovic (“Jankovic”) and others, alleging
violations of Section 10(b) of the Securities Exchange Act of
1934 (the “Exchange Act”), 15 U.S.C. §
78j(b); Rule 10b-5 implemented thereunder, 17 C.F.R. §
240.10b-5; and Sections 17(a)(1), (2), and (3) of the
Securities Act of 1933 (the “Securities Act”), 15
U.S.C. § 77q(a)(1)-(3). On August 8, 2016, the SEC moved
for summary judgment on each alleged violation. On March 21,
2017, this Court granted the SEC's motion for summary
judgment solely with respect to the claims under Sections
17(a)(2) and (3). See SEC v. Jankovic, No. 15 Civ.
1248 (KPF), 2017 WL 1067788 (S.D.N.Y. Mar. 21, 2017).
now moves for post-judgment remedies and relief.
Specifically, it requests that the Court order disgorgement
in the amount of $450, 000, plus prejudgment interest of
$121, 039; a civil monetary penalty; and permanent
injunctions prohibiting Jankovic from violating Sections
17(a)(2) and (3) of the Securities Act and from soliciting or
accepting funds from any person or entity in an unregistered
offering of securities. Jankovic opposes all facets of the
SEC's motion, arguing that disgorgement should be limited
to the amount of his personal profits, $57, 000; that
prejudgment interest is unwarranted; and that the Court
should impose neither a civil penalty nor a permanent
injunction against him. For the reasons set forth in the
remainder of this Opinion, the SEC's requests for
disgorgement, a civil monetary penalty, and a permanent
injunction prohibiting violations of Sections 17(a)(2) and
(3) of the Securities Act are granted. The SEC's request
for a permanent injunction prohibiting Jankovic from raising
funds in an unregistered offering of securities is denied.
following sections discuss the underlying facts only to the
extent necessary to resolve the instant motion, as the Court
has previously engaged in a more exhaustive factual
recitation. See Jankovic, 2017 WL 1067788, at *2-6.
Jankovic's Role at Premiere Power
was an initial member - along with his father, Jerry
Jankovic, and an Oklahoma-based attorney, Thomas Gudgel
(“Gudgel”) - of Premiere Power, LLC
(“Premiere”). Jankovic, 2017 WL 1067788,
at *2. Sandra Dyche (“Dyche”), with whom Jerry
Jankovic had previously founded another company (21st Century
Morongo Energy LLC (“Morongo”)), became a member
of Premiere's Board of Directors. Id. at *1, 3.
Premiere's ostensible mission was to develop and operate
power plants on Native American tribal land, though the
company never developed, built, or operated any such plants
nor generated any revenues. Id. at *2, 6.
worked at Premiere from July 2009 until January 1, 2012.
Jankovic, 2017 WL 1067788, at *3, 6. Starting in
early December 2009, Jankovic assumed the role of
Premiere's Chief Executive Officer (“CEO”),
id. at *3, a position he kept until his
“active role” in the company “ceased in
summer of 2011, ” id. at *6. Between December
2009 and March 2010, Jankovic helped Premiere raise nearly $2
million in interim financing from three sets of investors:
Moon Joo Yu (“Yu”), who invested $1.5 million;
Hee Rak Kim, who invested $150, 000; and Hyun Ja Kim and Jae
Duk Kim, who invested $300, 000. Id. at *3, 6. Yu
made her investments in three equal tranches: On December 9,
2009, she gave Dyche $500, 000 in cash; on December 14 and
15, 2009, she wired a total of $500, 000 to Premiere's
bank account in two separate installments; and sometime after
December 15, 2009, she gave Dyche another $500, 000.
Id. at *3. Yu was told that, in exchange for her
$1.5 million investment, she would receive a 0.60% stake in
the company. Id. Jae Duk Kim invested $300, 000 on
December 23, 2009, for a 0.12% interest in the company.
Id. at *6. And in March 2010, Hee Rak Kim invested
$150, 000 in exchange for a 0.06% stake in the company.
Misstatements and Omissions Regarding Proceeds from
of the funds that Yu invested actually went to Premiere.
Jankovic, 2017 WL 1067788, at *3. Instead, $1
million of Yu's investment was used to pay for
“legal fees” incurred in a 2006 lawsuit arising
out of events at Morongo. Id. Like Premiere, Morongo
was an energy company with the stated goal of developing a
power plant on Native American land. Id. at *2. In
the Morongo litigation, two individuals - Byung Chul An and
Hyang Ok An (collectively, the “Ans”) - who had
invested a combined $1.2 million in Morongo, sued Jerry
Jankovic, Dyche, and others for fraud, negligent
misrepresentation, and conversion. Id.
in 2009, Jankovic learned from his father that Morongo had
been sued by its investors and that his father was a named
defendant in that action. Jankovic, 2017 WL 1067788,
at *2. On September 15, 2009, Jankovic sent an email to his
father and Gudgel; it attached a letter addressed to the Ans
asking them to “drop any and all legal actions against
[Morongo], Jerry Jankovic, [and Dyche]” in exchange for
“a 2% ownership interest in Premiere.”
Id. at *3. By December 2009, Jankovic understood
that Dyche planned to give part of Yu's investment in
Premiere to the Ans in order to resolve the Morongo
litigation. Id. And on December 10, 2009, Jankovic
sent Gudgel and Dyche an email, copying his father, that
stated: “Sandra, your proposed buy-out of the An
interest will serve the same purpose as the An
settlement.” Id. (internal quotation marks
was well aware of the gap between the ownership share that Yu
was entitled to, per a Subscription Agreement she had signed
on December 9, 2009, and the money that was actually received
by Premiere from Yu's investment. Jankovic, 2017
WL 1067788, at *12. Yu's Subscription Agreement, which
Jankovic received on December 13, 2009, indicated that she
was receiving a 0.60% stake in Premiere in exchange for $1.5
million. Id. at *3. But Yu had wired just $500, 000
into Premiere's bank account; she gave the remaining $1
million directly to Dyche. Id. Jankovic spoke with
Gudgel about the gap between the $500, 000 that Premiere had
received and the $1.5 million represented on Yu's
Subscription Agreement. Id. at *4. Together, they
then spoke with Dyche. Id. In Jankovic's telling
of events, he encouraged Dyche to update the Subscription
Agreement to reflect that Yu had only invested $500, 000, as
well as to speak with Yu to “make sure that [Yu]
understood what [she] was buying.” Id.
(internal quotation marks omitted). Dyche did neither.
himself did nothing to correct the problem, though not for
lack of opportunity. On December 22, 2009, Premiere hosted a
meeting for current and prospective investors in the offices
of a prominent New York law firm (the “Investors
Meeting”). Jankovic, 2017 WL 1067788, at *5.
Jankovic, Dyche, Gudgel, and others from Premiere attended
the meeting, as did Yu, Hee Rak Kim, Jae Duk Kim, and other
potential investors. Id. Jankovic took the lead in
addressing investors at the meeting. Id. Yet
Jankovic never spoke with Yu at the meeting (or anytime
thereafter) about the disparity between the money she had
invested and the money Premiere had actually received, or,
more generally, about the Morongo litigation and the use of
her investment in Premiere to resolve that litigation.
Id. at *4.
contrary, Jankovic made affirmative misstatements to Yu that
perpetuated the discrepancy between Yu's Subscription
Agreement and Yu's actual investment in Premiere.
Jankovic, 2017 WL 1067788, at *4. In January 2010,
Jankovic signed a Certificate of Ownership indicating that Yu
held a 0.60% interest in Premiere, even though only $500, 000
of her investment had actually gone to Premiere. Id.
And on February 10, 2010, Jankovic wrote a letter to Yu in
which he referred to her “0.60% membership in
Premiere.” Id. He did so despite being aware
that at least $500, 000 of Yu's investment had not been
invested in Premiere and instead had been used to cover costs
related to the Morongo litigation. Id.
Other Misstatements and Omissions in Key Communications with
missteps extended well beyond failing to inform Yu of the gap
between her $1.5 million investment and the $500, 000
Premiere actually received and issuing a Certificate of
Ownership that perpetuated that error. On various occasions,
Jankovic communicated with investors and potential investors
and made material misstatements and omissions that sustained
Premiere's fraudulent scheme. To begin with, Jankovic was
one of the authors of the Preliminary Information Memorandum
(the “PIM”) that Premiere distributed to
potential investors, including Yu, Hee Rak Kim, and Jae Duk
Kim. Jankovic, 2017 WL 1067788, at *6. The PIM
contained multiple “lies” that “lent to
Premiere an imprimatur of legitimacy.” Id. at
*11. Premiere's leadership, including Jankovic, made
these misstatements even though they warranted that they
“ha[d] taken reasonable care to ensure that the
information” in the PIM was “true and accurate in
all material respects.” Id. at *5 (internal
quotation marks omitted). The PIM's material
misstatements included the following:
i) The PIM listed a former Oklahoma Congressman as a member
of Premiere's Board of Directors and claimed that this
Congressman held a 1% equity interest in Premiere. That
Congressman never agreed to serve on Premiere's Board.
ii) The PIM identified the Managing Executive Director of an
energy company as a member of Premiere's Board of
Directors. Like the Congressman, the Managing Director was
purported to hold a 1% stake in Premiere. The Managing
Director had discussed the possibility of joining Premiere,
but had never committed to serving as a member of
iii) The PIM stated that an Oklahoma accounting firm would
handle Premiere's outsourced accounting and bookkeeping.
That firm, however, never agreed to work with Premiere.
iv) Finally, the PIM identified a nationally known accounting
firm as an “Affiliate” of Premiere's
“Corporate Holdings” division. But the National
Accounting Firm never ...