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Diana L. Courson

Zuckerman Spaeder LLP Client Prevails Over SEC on Federal Securities Fraud Charges Following a Three-Week Trial

May 9, 2013

After seven years of investigation and litigation, SEC v. Gary Prince, Civil Action No. 09-1423 (D.D.C.) was resolved on May 2, 2013 by Federal District Judge Gladys Kessler in a 118-page opinion. The U.S. Securities and Exchange Commission (SEC) had charged Mr. Prince, Zuckerman Spaeder LLP’s client, with six independent fraud claims under the federal securities laws. After a three-week bench trial (covering December 2012 through January 2013), Judge Kessler expressly rejected each fraud claim. In rejecting the SEC’s fraud claims, Judge Kessler found that there was no conspiracy, no investor harm, and no material misrepresentations; the judge also found that a national law firm had been actively engaged in all the issues that the SEC charged as fraudulent and had consistently opined that Mr. Prince and his employer were in full compliance with the federal securities laws.

“Judge Kessler’s decision vindicates not only Mr. Prince’s conduct that the SEC said was fraudulent, but also his decision to persevere over the past seven years and ultimately to go to trial,” said Zuckerman Spaeder partner C. Evan Stewart, who led the trial team. “When we submitted our Wells Submission to the SEC five years ago, we argued that to bring on a case where Mr. Prince acted in good faith, and on the basis of repeated legal advice, would send a perverse message to regulated entities and individuals. Now that he has prevailed on all of their fraud claims, one would hope the SEC would redirect its efforts and resources to where there has been real investor harm.”

The SEC also charged that Mr. Prince separately violated a Rule 102(e) bar order (dating from 1995) and sought an injunction to enforce that bar order. Although Judge Kessler recognized that Mr. Prince and his employer were advised by a national law firm on several occasions that he had not violated the bar order, she nonetheless agreed to issue an injunction.

In addition to Mr. Stewart, the Zuckerman Spaeder team included partner Shawn P. Naunton and associate Megan Quattlebaum of the firm’s New York office. Zuckerman Spaeder has a nationally recognized Securities Litigation Practice. We have extensive experience representing financial services companies, executives, boards of directors, accountants, lawyers, financial services professionals, and shareholders in matters involving allegations of financial fraud, financial misstatements and nondisclosures, insider trading, questionable foreign payments, failure to perform professional obligations, and violations of fiduciary duties.