U.S. Securities and Exchange Comm'n v. Thomas C. Conradt , 696 F. App'x 46 ( 2017 )

15-2887-cv, 15-2967-cv, 16-2694-cv
U.S. Securities and Exchange Comm’n v. Thomas C. Conradt
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 23rd day of August, two thousand seventeen.
PRESENT: JOHN M. WALKER, JR.,
JOSÉ A. CABRANES,
REENA RAGGI,
Circuit Judges.
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff-Appellee, 15-2887-cv, 15-2967-cv, 16-2694-cv*
v.
THOMAS C. CONRADT,
Defendant-Appellant,
DAVID J. WEISHAUS, TRENT MARTIN,
Defendants.†
* 15-2887 was closed by stipulation in 2016.
† The Clerk of the Court is directed to amend the caption as set forth above.
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FOR PLAINTIFF-APPELLEE: DAVID D. LISITZA (Michael A. Conley,
Jacob R. Loshin, on the brief) for Acting
General Counsel of the United States
Securities and Exchange Commission
Sanket J. Bulsara, Washington, DC.
FOR DEFENDANT-APPELLANT: JUSTIN D. SANTAGATA, Kaufman,
Semeraro, & Leibman, LLP, Fort Lee, NJ.
Appeal from the judgment of the United States District Court for the Southern District of
New York (Jed S. Rakoff, Judge).
UPON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Defendant-Appellant Thomas C. Conradt appeals the July 23, 2015 amended order and June
16, 2016 judgment of the district court, denying his motion to vacate his consent judgment under
Federal Rule of Civil Procedure 60(b) and ordering a civil penalty of $980,229.1 On appeal, Conradt
argues that the district court: (1) erred in denying his Rule 60(b) motion to vacate his consent
judgment in light of the district court’s decision to vacate his guilty plea in a parallel criminal
proceeding; (2) erred in holding that Conradt breached his settlement by not cooperating fully and
truthfully and thus did not merit a reduction in his penalty for cooperation; and (3) erred in
imposing a civil penalty of $980,229. For the reasons set forth in the district court’s orders and
opinion, we find these claims to be without merit. We assume the parties’ familiarity with the
underlying facts, procedural history of the case, and issues on appeal.
A.
First, we review a district court’s decision to deny vacatur under Rule 60(b) for abuse of
discretion. See United States v. Bank of New York, 14 F.3d 756, 758 (2d Cir. 1994); accord Agostini v.
Felton, 521 U.S. 203, 238 (1997). “A district court has abused its discretion if it based its ruling on an
erroneous view of the law or on a clearly erroneous assessment of the evidence, or rendered a
decision that cannot be located within the range of permissible decisions.” In re Sims, 534 F.3d 117,
132 (2d Cir. 2008) (internal quotation marks, alteration, and citations omitted); see also In re City of
New York, 607 F.3d 923, 943 n.21 (2d Cir. 2010) (explaining that “abuse of discretion” is a
nonpejorative “term of art”).2
1 Conradt’s two appeals were eventually consolidated.
2 Conradt also argues that the district court’s interpretation of Rule 60(b)(5)’s “based on” clause, and
whether United States v. Newman, 773 F.3d 438 (2d Cir. 2014) changed our law for insider trading cases are
subject to de novo review. Under either standard, we find no error.
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Conradt argues that the civil consent judgment at issue here was “based on” his now-vacated
guilty plea in the parallel criminal proceeding. Def. Br. 3-4. He asserts that applying the consent
judgment is no longer equitable under Rule 60(b) because the law on which it were based has
changed due to United States v. Newman, 773 F.3d 438 (2d Cir. 2014), abrogated by Salman v. United
States, 137 S. Ct. 420 (2016) (concerning insider trading). Under our precedents and the express terms
of his agreement, Conradt’s consent judgment was solely “based on” his consent—not on any
collateral estoppel effect of his guilty plea in the parallel criminal matter. See United States v. Bank of
New York, 14 F.3d at 760. As the district court explained, Conradt, “with the advice and assistance of
counsel, entered into [this] agreement[ ] voluntarily, in order to secure the benefits thereof, including
finality. While [Conradt’s] decisions in the criminal proceeding may have influenced [his] strategy in
the civil proceeding, the two proceedings were entirely separate actions.” Joint App’x (“JA”) 7
(internal citation omitted). Accordingly, we hold that the district court was within its discretion to
deny vacatur absent the “exceptional circumstances” required to grant relief under Rule 60(b). United
States v. Int'l Bhd. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001).
B.
Second, we review a district court’s interpretation of the terms of a cooperation agreement de
novo and “related findings of fact” applying those terms “for clear error.” United States v. Roe, 445
F.3d 202, 206 (2d Cir. 2006); see also Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284, 289
(2d Cir. 1997). Where a district court makes credibility findings, we are “[m]indful of the district
court’s significant advantage in seeing the witnesses testify.” United States v. Messina, 806 F.3d 55, 64
(2d Cir. 2015).
Conradt argues that he did not materially breach his cooperation agreement. Any alleged
discrepancies between his trial testimony in February 2016 and deposition on July 17, 2015, he
contends, resulted from the SEC’s failure to prepare him as a witness. He submits that he made
several requests to the SEC for witness preparation in advance of the trial. See Def. Br. 14; JA 946-
47, 949, 951. Conradt also asserts that any alleged discrepancies in his testimony were
inconsequential because a jury ultimately held his co-conspirators liable for insider trading.
We find these arguments to be without merit. Upon review of the record, we agree with the
district court that Conradt’s testimony materially varied from his deposition in contravention of the
truth. At several points in his testimony, Conradt stated “I don’t recall offhand” when asked about
episodes that he had clearly recounted at his deposition. Trial Transcript (“Tr.”) 256:15-18; see also
Tr. 237:19-238:12 (“[I]t[‘]s been very, very confusing for me to peg down exactly what was said in
each conversation to each person . . . .”); accord In re Bongiorno, 694 F.2d 917, 922 (2d Cir. 1982)
(“[T]he false assertion of an inability to remember” is not consistent with full and truthful
cooperation.). Since Conradt materially changed his testimony without justification, we hold that the
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district court properly determined that Conradt was not entitled to reap the benefits of the
cooperation agreement.
C.
Finally, we turn to whether the district court erred by imposing a penalty of $980,229 against
Conradt. Section 21A of the Securities Exchange Act of 1934 states that the amount of the penalty
“shall not exceed three times the profit gained or loss avoided as a result of such unlawful purchase,
sale, or communication.” 15 U.S.C. § 78u-1(a)(2). In this case, the district court was allowed to
impose a penalty of up to $2,940,687. Our precedents instruct the district court to determine “[t]he
amount of the penalty . . . in light of the facts and circumstances.” 15 U.S.C. § 78u-1(a)(2); see also
SEC v. Rosenthal, 426 F. App’x. 1, 4 (2d Cir. 2011). However, “the actual amount of the penalty [is]
left up to the discretion of the district court.” SEC v. Kern, 425 F.3d 143, 153-54 (2d Cir. 2005).
While the district court imposed a substantial penalty, the amount was clearly within the range of
permissible outcomes. Accordingly, we conclude that the district court did not err by ordering a
penalty of $980,229 for Conradt’s unlawful insider trading activity after it had determined he
breached his cooperation agreement.
CONCLUSION
We have considered all of Conradt’s claims on appeal and found them to be without merit.
For the foregoing reasons, the judgment of the district court is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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