U.S. Securities and Exchange Commission
Litigation Release No. 18066 / April 3, 2003
SEC v. Joseph C. Kane, Jr., 97 Civ. 2931 (CBM) (S.D.N.Y.)
The Securities and Exchange Commission ("Commission") announced today that on March 31, 2003, the Honorable Constance Baker Motley, United States District Court Judge for the Southern District of New York, issued an order imposing a civil penalty in the amount of $200,000 against defendant Joseph C. Kane, Jr., a former registered representative charged with defrauding customers of two brokerage firms at which he was employed.
In its compliant, the Commission alleged that Kane defrauded investors by investing without authorization and, in some cases, simply stealing a total of nearly $600,000 of their cash or securities. The Commission also alleged that Kane fabricated documents and made additional misrepresentations to his victims to conceal his fraudulent conduct. On April 11, 2002, the court entered a partial final consent judgment ("Partial Final Judgment") against Kane permanently enjoining him from violating antifraud provisions of the federal securities laws. In the Partial Final Judgment, the court also ordered that if the parties could not agree on a civil penalty amount, the court would make the determination.
In its March 31, 2003 order, the court imposed a $200,000 civil penalty after considering several "mitigating circumstances" proffered by Kane, including a claim that he is "impoverished and, as a result, may not be able to pay if a severe penalty is imposed" a factual contention that the Commission questioned in its motion papers. The court stated that, "in light of the goal of deterrence, a defendant's claims of poverty cannot defeat the imposition of a civil penalty." The court went on to hold as follows:
Even if Kane's proffered representations concerning his bleak financial condition are complete and accurate, his financial problems, including his inability to work again as a stock broker, are the natural consequences of his fraudulent conduct. Kane's predicament is shared by many defendants in similar cases, and if given the weight Kane urges, a defendant's impecuniosity could preclude the imposition of a meaningful penalty in even those cases involving the most egregious fraud. In addition, the court agrees with the Commission that it should not ignore the possibility that a defendant's fortunes will improve, and that one day the SEC will be able to collect on even a severe judgment."
All of the Commission's claims for relief against Kane have now been resolved. Kane previously also pleaded guilty to parallel criminal charges brought by the United States Attorney's Office for the Southern District of New York.