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United States Securities and Exchange Commission v. Collyard

United States Court of Appeals, Eighth Circuit

June 29, 2017

United States Securities and Exchange Commission Plaintiff-Appellee
v.
Gary Albert Collyard; Collyard Group, LLC Defendants Paul D. Crawford; Crawford Capital Corp. Defendants-Appellants Ronald Musich; Joshua J. Singer; Michael B. Spadino; Marketing Concepts, Inc.; Christopher C. Weides Defendants

          Submitted: November 16, 2016

         Appeal from United States District Court for the District of Minnesota - Minneapolis

          Before BENTON and SHEPHERD, Circuit Judges, and STRAND, [1] District Judge.

          BENTON, Circuit Judge.

         The Securities and Exchange Commission sued Paul D. Crawford and Crawford Capital Corporation (collectively "Crawford") for acting as unregistered brokers in violation of § 15(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(a). The district court granted the SEC summary judgment, permanently enjoined Crawford, and ordered disgorgement. Crawford appeals, arguing that he qualifies for a "finder exception" to broker registration, and that a statute of limitations bars the injunction and disgorgement. Having jurisdiction under 28 U.S.C. § 1291, this court affirms in part and vacates in part.

         I.

         Paul D. Crawford has a long history of working in investment. He registered as a securities broker in 1969 and was associated with registered broker-dealers for decades. He founded Crawford Capital Corporation in 1990.[2] Its business is helping raise capital for early-stage companies. In 1996, his license was suspended for selling unregistered securities. He never reinstated it.

         In 2003, Crawford learned about a company called Bixby Energy Systems. He invested about $20, 000 in Bixby. Starting around February 2004, Crawford agreed with a third party to refer investors to Bixby in exchange for a 3% commission on referred investments. At some point in 2004 or 2005, Crawford agreed directly with Bixby to refer investors in exchange for a 10% fee for referred investments. Crawford was never a Bixby employee.

         Between February 2004 and November 2006, Crawford worked to connect investors with Bixby. He invited Crawford Capital clients to Bixby presentations, emailed them suggesting they invest in Bixby, predicted success for Bixby, advised clients on tax credits, helped at least one client complete a Bixby subscription agreement, told clients he could negotiate Bixby stock prices, and told at least one client he could arrange a Bixby-related credit-line deal. Crawford received $240, 000 from Bixby, 10% of his referred investments.

         At no point between 2004 and 2006 were Crawford or Crawford Capital registered brokers.

         In December 2011, the SEC sued Crawford and Crawford Capital, alleging violations of Securities Exchange Act § 15(a) by acting as unregistered brokers and seeking a permanent injunction and disgorgement. Crawford argued he was not a broker but a "finder." He also argued that a statute of limitations barred any disgorgement or injunction. The district court rejected Crawford's arguments, granting summary judgment to the SEC, ordering disgorgement of the $240, 000, and permanently enjoining Crawford from violating § 15(a). Crawford appeals.

         II.

         Crawford argues this action is time-barred: "Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued . . . ." 28 U.S.C. § 2462 (emphasis added). Crawford contends § 2462 bars the SEC from seeking disgorgement and an injunction.

         According to the SEC's complaint, Crawford acted as an unregistered broker between February 2004 and November 2006. The SEC sued in December 2011, more than five years after November 2006. If § 2462 applies, it bars this suit. See Gabelli v. SEC, 133 S.Ct. 1216, 1220, 1224 (2013) (holding, in SEC enforcement action, that claim "accrued" under § 2462 when allegedly unlawful conduct occurred).

         The district court found § 2462 does not apply to suits for disgorgement and injunctive relief. This court reviews de novo. Smithrud v. City ...


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