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Litigation Release No. 21315 / November 30, 2009

SEC v. William A. DiBella and North Cove Ventures LLC, No. 08-1673-CV(L); 08-3797-CV(CON)) (2d Cir.)


The Securities and Exchange Commission announced today that on November 25, 2009, the United States Court of Appeals for the Second Circuit rejected an appeal brought by William A. DiBella, the former Majority Leader of the Connecticut State Senate, and his consulting firm, North Cove Ventures, L.L.C. DiBella and North Cove had sought to overturn a jury verdict and judgment against them for their involvement in a fraudulent scheme relating to investments by the Connecticut state pension fund. In its decision, the Second Circuit held that there was substantial evidence to support the jury verdict and that the District Court for the District of Connecticut did not abuse its discretion in imposing a judgment requiring DiBella to pay disgorgement and civil penalties.

In the underlying civil injunctive action, the SEC had alleged that, in November 1998, Paul J. Silvester, then Treasurer of the State of Connecticut, had requested that Thayer Capital Partners, a Washington, DC-based private equity firm, hire DiBella. Thayer, through its chairman, Frederic V. Malek, agreed to retain DiBella and to pay him a percentage of the state pension fund's total investment with Thayer, even though DiBella had no prior involvement with the transaction. The SEC had also alleged that Silvester had increased the amount of the investment with Thayer by at least $25 million (to a total of $75 million) solely to secure a larger fee for DiBella.

On May 18, 2007, after a seven-day trial, a jury found DiBella and North Cove liable for aiding and abetting Silvester's intentional violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the negligent violations by Malek, Thayer and its affiliates of Section 206(2) of the Investment Advisers Act of 1940. In her decision of March 13, 2008, Honorable Ellen Bree Burns, United States District Judge, reaffirmed the jury's findings and entered a judgment imposing sanctions against DiBella and North Cove. The court ordered DiBella to disgorge $374,500 (the amount of his ill-gotten gains from the scheme) and to pay $307,127.45 in prejudgment interest. In addition, the Court imposed a penalty of $110,000. On October 3, 2007, the district court denied the defendants' motion for a new trial and for judgment as a matter of law.

For further information, see Litigation Release No. 20498 (March 14, 2008); Litigation Release Number 20133 (May 30, 2007), Litigation Release Number 18829 (August 12, 2004), and Administrative Proceeding Release Number 33-8457 (August 12, 2004); see also SEC v. Silvester et al Litigation Release Numbers 16759 (October 10, 2000), 16834 (December 19, 2000), 18436 (October 30, 2003), 18460 (November 17, 2003), 18461 (November 17, 2003), 19241 (May 31, 2005), 19566 (February 15, 2006), 19583 (March 1, 2006), and 20027 (March 2, 2007), and Administrative Proceeding Release Numbers 34-49377 (March 9, 2004), 34-50300 (September 1, 2004), 34-54774 (November 17, 2006).



Modified: 11/30/2009