U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23449 / January 20, 2016
Securities and Exchange Commission, Plaintiff-Appellee v. Stewart A. Merkin, Defendant-Appellant, United States Court of Appeals for the Eleventh Circuit, Appeal No. 13-13929
Securities and Exchange Commission v. Stewart A. Merkin, Civil Action No. 1:11-cv-23585 (S.D. Fla.)
Court of Appeals Affirms Summary Judgment in Case Against Miami Attorney Stewart A. Merkin
On January 13, 2016, the United States Court of Appeals for the Eleventh Circuit affirmed entry of summary judgment in favor of the Securities and Exchange Commission on its claims of securities fraud against defendant Stewart A. Merkin ("Merkin"), an attorney in Miami, Florida.
The Commission brought a civil action against Merkin on October 3, 2011, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder. The Complaint alleged that on four occasions, Merkin, an experienced attorney, wrote letters falsely stating that his client, StratoComm Corporation ("StratoComm"), was not under investigation for violations of the securities laws. The Complaint further alleged that Merkin knew that his statements were false because, at the time that he wrote each letter, he was representing StratoComm and several individuals in the Commission's investigation into the company's activities. The Commission's Complaint alleged that Merkin authorized his letters to be posted on the website maintained by Pink Sheets LLC (currently OTC Markets Group Inc.) for viewing by the investing public.
On October 3, 2012, the Honorable Donald L. Graham, United States District Judge for the Southern District of Florida granted the Commission's motion for summary judgment with respect to liability, finding that Merkin made false statements of material fact, with scienter, in connection with the purchase or sale of securities. Merkin subsequently consented to the entry of a final judgment that: (i) orders him liable to pay a total of $125,000 in disgorgement, prejudgment interest and a civil penalty; (ii) imposes a permanent injunction against future violations of Section 10(b) and Rule 10b-5 of the Exchange Act by making false or misleading statements; and (iii) permanently bars Merkin from participating in an offering of penny stock. In consenting to these remedies, Merkin retained his right to appeal from the Court's ruling on summary judgment with respect to liability. That appeal has now been rejected.
For further information, please see Litigation Release No. 22115 (October 6, 2011) and No. 22746 (July 9, 2013).