Justia California Court of Appeals Opinion Summaries

Overstock.Com alleged that defendants intentionally depressed the price of Overstock stock by effecting “naked” short sales: sales of shares the brokerage houses and their clients never actually owned or borrowed to artificially increase the supply and short sales of the stock. The trial court dismissed claims under New Jersey Racketeer Influence and Corrupt Organizations (RICO) Act without leave to amend and rejected California market manipulation claims on summary judgment. The appeals court affirmed dismissal of the belatedly raised New Jersey RICO claim and summary judgment on the California claim as to three defendants, but reversed as to Merrill Lynch. The evidence, although slight, raised a triable issue this firm effected a series of transactions in California and did so for the purpose of inducing others to trade in the manipulated stock. The court concluded that Corporations Code section 25400, subdivision (b), reaches not only beneficial sellers and buyers of stock, but also can reach firms that execute, clear and settle trades; such firms face liability in a private action for damages only if they engage in conduct beyond aiding and abetting securities fraud, such that they are a primary actor in the manipulative trading.View "Overstock.com, Inc. v. Goldman Sachs Grp., Inc." on Justia Law

Doolittle was a registered securities broker/dealer, and a registered investment advisor. He or his corporations held licenses, permits, or certificates to engage in real estate and insurance brokerage and tax preparation. Around 1990 his primary business became “trust deeds investments,” in which he “would arrange groups of investors together to buy those loans or to fund those transactions for different types of individuals and institutional borrowers.” After investors lost money, Doolittle was convicted and sentenced to 13 years in prison for three counts of theft by false pretenses; six counts of theft from an elder or dependent adult; nine counts of false statements or omissions in the sale of securities; selling unregistered securities; and sale of a security by willful and fraudulent use of a device, scheme, or artifice to defraud The appeals court reversed in part, holding that Doolittle’s challenge that the trial court’s implied finding of timely prosecution was not supported by substantial evidence required remand with respect to two of the charges. A further hearing may be necessary with respect to applicability of a sentence enhancement for aggregate losses over $500,000. Doolittle’s conviction for sale of unregistered securities and sale of securities by means of a fraudulent device did not rest on the same conduct as his convictions for fraud against specific victims; his sentence on the former counts therefore does not offend the proscription against duplicative punishment. View "People v. Doolittle" on Justia Law

A jury convicted defendants James Sweeney II and Patrick Ryan of 65 counts of white-collar crime (all relating to the sale of securities) and found true three special allegations. The court sentenced Sweeney to 33 years and Ryan to 31 years. The court also imposed restitution. On appeal, both defendants challenged the sufficiency of the evidence on count 68 and the convictions on counts 67, 68, 69, 70, and 71, primarily involving multi-level marketing programs. Ryan also claimed various sentencing errors, including those related to fines and restitution.3 Sweeney makes similar arguments. The Court of Appeal found sufficient evidence for count 68. The Court also upheld convictions on counts 67 through 71. View "California v. Sweeney" on Justia Law