Case 6:09-cv-01963-JA-GJK Document 195

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UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION ) ) ) ) ) ) CASE NO. 09-cv-1963-Orl-28GJK ) ) ) ) ) ) )

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. BIG APPLE CONSULTING USA, INC., et al., Defendants

PLAINTIFFS MOTION FOR SCHEDULING ORDER FOR THE REMEDIES PORTION OF TRIAL Pursuant to Rule 7 of the Federal Rules of Civil Procedure and Local Rule 3.01(b), plaintiff, the Securities and Exchange Commission (the Commission), respectfully requests that the Court issue a scheduling order to complete the remedies portion of the trial in subject action: reopening discovery for a period of 60 days to permit the Commission an opportunity to obtain evidence relevant to what injunctive relief, disgorgement and penalties are appropriate; schedule an evidentiary hearing for presentation of evidence concerning these remedies at the Courts earliest convenience after completion of discovery; direct the Commission to file its memorandum in support of the imposition of injunctive relief, disgorgement and penalties against defendants within 21 days of completion of the evidentiary hearing; and order defendants to file their responses to the Commissions memorandum 14 days thereafter.

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BACKGROUND On November 18, 2009, the Commission filed its complaint against defendants Big Apple Consulting USA, Inc. (Big Apple), MJMM Investments, LLC (MJMM), Marc Jablon (M. Jablon), Matthew Maguire (Maguire), Kaley and Keith Jablon (K. Jablon). Dkt. No. 1. That complaint was based upon the defendants role in the fraud perpetrated by James Plant (Plant) and CyberKey Solutions, Inc. (CyberKey) from about November 2005 to about March 2007. On March 29, 2011, the Commission filed a motion for partial summary judgment with respect to: the Section 5(a) and (c) claims against Big Apple, MJMM, M. Jablon and Maguire; the Section 15(a) claims against Big Apple and MJMM; and the Section 20(a) claims against M. Jablon, Maguire and Kaley. Dkt. No. 62. On August 25, 2011, the Court

granted the Commissions motion for partial summary judgment. Dkt. No. 91. Trial on the claims that all the defendants violated Section 17(a) of the Securities Act and Section 20(a) of the Exchange Act commenced on January 9, 2012, and on January 19, 2012, the jury returned a verdict in favor of the Commission, finding all the defendants violated Section 17(a)(1), (2) and (3) of the Securities Act and that all the defendants violated Section 20(e) of the Exchange Act . Dkt. No. 140. On August 9, 2012, the Court issued its Order (the August 9th Order) denying all defendants motions for judgment as a matter of law. Dkt. No. 188. In that Order, the Court indicated that it would direct entry of judgment once the remedies portion of the case is resolved. Id. At 15. 2

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ARGUMENT I. The Court Determines What Remedies Are Appropriate Once it has been determined that a defendant is liable for violating the securities laws, the Court is given broad discretion to enjoin violations of the Act. SEC v. Goble, 682 F.3d 934, 952 (11th Cir. 2012) (citing 15 U.S.C. 78u(d)(1)). The determination whether an injunction should issue is based on consideration of several factors, including whether there is a reasonable likelihood that the wrong will be repeated, and the likelihood that the defendants occupation will present opportunities for future violations. SEC v. Calvo, 378 F.3d 1211, 1216 (11th Cir. 2004). Further, Section 21(d)(6)(A) of the Exchange Act authorizes a court in injunctive proceedings to order a penny stock bar against any person participating in, or, at the time of the alleged misconduct, who was participating in, an offering of penny stock, conditionally or unconditionally, and permanently or for such period as the court shall determine. SEC v. Converge Global, Inc., No. 04-8084CV., 2006 WL 907567, at *5 (S.D. Fla. March 10, 2006) (citing 15 U.S.C. 78u(d)(6)(A)). In addition, the Court may impose the equitable remedy of disgorgement to deprive a wrongdoer of his unjust enrichment and to deter others from violating the securities laws. SEC v. Solow, 682 F. Supp.2d 1312, 1325 (S.D. Fla. 2010); see SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1474-75 (2d Cir. 1996). Once the court determines that disgorgement is appropriate, it has the discretion to charge pre-judgment interest at the IRS underpayment rate. See First Jersey, 101 F.3d at 476. Finally, the Court has the authority to order that a defendant who violated the 3

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securities laws pay a civil penalty. 15 U.S.C. 78u(d)(3)(B); 15 U.S.C. 77t(d)(2). When determining whether a civil penalty should be imposed the Court again considers a number of factors, including: (1) the egregiousness of a defendants conduct; (2) the degree of his scienter; (3) whether a defendants conduct created substantial loss or the risk of substantial loss to other persons; (4) whether a defendants conduct was isolated or recurring; and (5) whether the penalty should be reduced because of a defendants demonstrated financial position. See SEC v. Opulentica, LLC, 479 F. Supp.2d 319, 331 (S.D.N.Y. 2007); SEC v. Huff, 758 F. Supp.2d 1288, 1364 (S.D. Fla. 2010). II. The Court Should Re-Open Discovery The Court should re-open discovery for a period of 60 days for the limited purpose of permitting the Commission to obtain evidence that is relevant to what remedies the Court should impose against the defendants. This additional discovery is necessary because several of the factual issues that are relevant to determining what remedies the Court could order were beyond the scope of discovery that was conducted for the purpose of determining the defendants liability. For example, the likelihood that the defendants will be repeat offenders and their present occupation which is relevant to whether the Court should issue an injunction and a penny stock bar was not relevant for purposes of determining their liability. Similarly, although the ability of the defendants to pay a penalty was not a relevant consideration for purposes of determining their liability and, therefore, not a legitimate area for discovery during the liability phase of the trial, it may be relevant to the amount of any penalty they should be ordered to pay. 4

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The Commission intends to use any time the Court permits for additional discovery to obtain evidence that is relevant to whether the Court should impose an injunction and penny stock bar against the defendants and the duration of any such order, as well as evidence related to the defendants ability to pay disgorgement and penalties. During any period of discovery permitted by the Court, the Commission intends to request documents from the defendants and issue subpoenas to third parties related to these issues and, if necessary, conduct a limited number of depositions. III. The Court Should Schedule An Evidentiary Hearing Upon the completion of any period of additional discovery, the Court should schedule an evidentiary hearing so that any evidence relevant to the determination of what remedies should be imposed can be presented by the Commission and the defendants. Cf. SEC v. Smyth, 420 F.3d 1225, 1230-32 (11th Cir. 2005) (appropriate for court to hold evidentiary hearing where amount of disgorgement in dispute). The Commission anticipates that at an evidentiary hearing it will present documentary evidence and call witnesses, including the individual defendants, to establish the need for a permanent injunction and penny stock bar and the appropriateness of both disgorgement and penalties. Upon completion of any evidentiary hearing, the Court should direct the Commission to file its memorandum in support of the imposition of injunctive relief, disgorgement and penalties against defendants within 21 days, with the defendants responses due 14 days thereafter.

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CONCLUSION For the reasons set forth above, the Court should: reopen discovery for a period of 60 days to permit the Commission an opportunity to obtain evidence relevant to what injunctive relief, disgorgement and penalties are appropriate; schedule an evidentiary hearing for presentation of evidence concerning these remedies at the Courts earliest convenience after completion of discovery; direct the Commission to file its memorandum in support of the imposition of injunctive relief, disgorgement and penalties against defendants within 21 days of completion of the evidentiary hearing; and order defendants to file any response to the Commissions memorandum 14 days thereafter.

CERTIFICATION PURSUANT TO LOCAL RULE 3.01(g) I hereby certify that on October 1, 2012, prior to filing Plaintiffs Motion for Scheduling Order for the Remedies Portion of Trial, undersigned counsel for the Commission attempted to confer with Carl F. Schoeppl, counsel for Big Apple Consulting USA, Inc., MJMM Investments, LLC and Marc Jablon, and pro se defendants, Mark C. Kaley, Keith Jablon and Matthew Maguire to determine if they would consent to this motion. However, as of the date of this motion, undersigned counsel has not received a response from any of the defendants

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October 5, 2012 Of Counsel: David R. Herman

Respectfully submitted, s/Jeffery T. Infelise Jeffrey T. Infelise Assistant Chief Litigation Counsel D.C. Bar No. 456998 Lead and Trial Counsel Duane K. Thompson Assistant Chief Litigation Counsel 100 F Street, N.E. Washington, DC 20549-4010 Tel: (202) 551-4904 Fax: (202)772-9362 E-mail: infelisej@sec.gov Attorneys for Plaintiff U.S. Securities and Exchange Commission

CERTIFICATE OF SERVICE I hereby certify that on October 5, 2012, I electronically filed the foregoing with the Clerk of the Court by using the CM/ECF system. I also certify that the foregoing document is being served this day on counsel of record or pro se parties identified on the attached Service List in the manner specified, either via transmission of Notices of electronic filing generated by CM/ECF or in some other authorized manner for those counsel or parties who are not authorized to receive electronically Notices of Electronic filing.

s/Jeffery T. Infelise Jeffery T. Infelise

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SERVICE LIST VIA CM/ECF Carl F. Schoeppl Florida Bar No. 818518 Schoeppl & Burke, P.A. 4651 North Federal Highway Boca Raton, FL 33431-5133 Tel: (561) 394-8301 Fax: (561) 394-3121 E-mail: carl@schoepplburke.com Attorney for Defendants Big Apple Consulting USA, Inc.; MJMM Investments, LLC, and Marc Jablon VIA FIRST CLASS MAIL Matthew Maguire 8645 Spikerush Court Sanford, FL. 32771 Defendant pro se Mark C. Kaley 14924 Gaulberry Run Winter Garden, FL 34787 Defendant pro se Keith Jablon 329 Blue Stone Circle Winter Garden, FL 34787 Defendant pro se