Securities and Exchange Commission
SEC Obtains Judgments Against Two Attorneys in Fraudulent Scheme to Issue False Legal Opinions
Litigation Release No. 24715 / January 14, 2020
Securities and Exchange Commission v. Diane D. Dalmy et al., o. 19-civ-00745 (D. Colo. Mar. 13, 2019)
On March 13, 2019, the SEC charged Dalmy for concealing from transfer agents and brokerage firms her involvement in preparing legal opinion letters concerning the sale of certain microcap securities. According to the SEC's complaint, Dalmy had been placed on the prohibited attorneys list maintained by OTC Markets Group, Inc., which owns and operates the largest U.S. electronic quotation and trading system for microcap securities. To evade this prohibition, Dalmy allegedly recruited Michael J. Woodford, a retired divorce lawyer, to sign legal opinion letters drafted by Dalmy. Without performing due diligence or conducting any legal analysis, Woodford provided the opinion letters to transfer agents and brokerage firms. On June 28, 2019 the SEC charged Woodford for his role in the scheme.
The court entered a final judgment against Dalmy by default. Dalmy was previously ordered to comply with the SEC's September 2016 order permanently suspending her from appearing and practicing before the SEC as an attorney. Woodford consented to the entry of a final judgment against him. The final judgments, which were both entered on December 6, 2019, enjoin Dalmy and Woodford from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and impose penny stock bars. The judgment against Dalmy orders her to pay disgorgement and prejudgment interest of $30,236, and prohibits her from providing legal services pertaining to federal securities law exemptions from registration. She is also required to provide clients or potential clients seeking advice or representation in matters related to the federal securities laws with copies of the SEC's and the court's prior orders against her. The judgment against Woodford orders him to pay disgorgement and prejudgment interest of $29,762, but waives payment based on his financial condition.
The SEC's case was handled by J. Lauchlan Wash, Josh Grinspoon, Frank Huntington, and Amy Gwiazda of the SEC's Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut and the Federal Bureau of Investigation.