Securities and Exchange Commission v. Zouvas et al

RESPONSE to Motion re: 145 MOTION for Partial Summary Judgment

D. Ariz.February 7, 2019

Page 1 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ANTHONY B. BINGHAM BINGHAM LAW 1423 SOUTH HIGLEY ROAD BUILDING 4, SUITE 110 MESA, ARIZONA 85206 480.832.1922 TELEPHONE 844.270.5937 FACSIMILE TONY@BINGHAMLAWAZ.COM STATE BAR NUMBER 014732 Attorney for Defendant Robb IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Securities and Exchange Commission, Plaintiff, vs. Luke C. Zouvas, et al., Defendants. No. CV-17-00427-PHX-SPL DEFENDANT ROBB’S RESPONSE TO PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT Oral Argument Requested Defendant Cameron F. Robb (“Defendant” or “Robb”) files this Response to Plaintiff’s Motion for Partial Summary Judgment (Document 145) and respectfully states as follows: I. INTRODUCTION The SEC lacks evidence sufficient to prove Robb was negligent in engaging in fraudulent and deceitful transactions, practices or courses of business that resulted in market manipulation of stock in Crown Dynamics Corp. (“Crown”). The SEC cannot prevail on the basis of negligence under Section 17(a)(3) of the Securities Act of 1933. All actions taken by Robb were legal, without negligence and in compliance with applicable securities laws. Mr. Robb at no time engaged in fraudulent activities with respect to Crown. Summary judgment in favor of the SEC is not appropriate in this case and is not supported by the evidence. Genuine disputes concerning material facts do exist and Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 1 of 6 Page 2 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 therefore the SEC is not entitled to judgment as a matter of law. Genuine issues for trial do exist regarding the claims against Robb. Summary judgment in favor of the SEC should be denied. II. ARGUMENTS AND AUTHORITIES A. Robb’s Minimal Involvement with Crown’s Reverse Merger with Zorah Aninye approached Robb inquiring about how to raise capital for Zorah. Robb spoke with Larson about Zorah and then Larson contacted Zouvas about a merger between Crown and Zorah. Plaintiff’s Statement of Facts, pg. 7, #24. Robb had no agreement with Aninye to divide Crown shares as a result of the merger between Crown and Zorah. The alleged proof the SEC cites to support its claim falls short of proving any agreement concerning division of the Crown outstanding shares. Robb and Larson did introduce investors to Crown. These investors acted independently of Robb and Larson. Exhibit 2, Dec. Robb, pg. 1. As far as Robb knows, these investors paid for the Crown shares. Robb was not involved in the negotiations for the sale of Crown shares to these investors. Zouvas handled the legal side and paperwork for the merger between Crown and Zorah. Zouvas and Aninye communicated directly concerning the merger between Crown and Zorah. Nothing Robb did with respect to the merger between Crown and Zorah was illegal. None of Robb’s actions concerning the merger was negligent in violation of federal securities laws. B. Investors’ Acquisition of Crown’s Free-Trading Shares The SEC accuses Larson and Robb of directing Zouvas to have the free-trading shares in Crown transferred from the Israeli subscribers to the investors they introduced to Crown. To support this accusation, the SEC cites to paragraphs 42 and 44 of its Statement of Facts. The relevant paragraph is 44 which references to Zouvas’ deposition testimony. When Zouvas was asked who instructed him to have Crown Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 2 of 6 Page 3 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 shares issued his response was “Well, either Mr. Aninye or, at that period, it would have been Mr. Larson or Mr. Robb.” O’Donnell Dec., Ex. 2, 86:3-19. This is hardly conclusive that Larson or Robb directed the transfer of Crown shares. Robb denies that he ever directed Zouvas to transfer Crown shares to any investors. Robb’s Statement of Facts, pg. 12, 19-25. The SEC claims Robb’s and Larson’s investors acquired Crown’s free-trading shares without paying for them. As stated above, Robb believed these investors did pay money for the shares they received. After introducing these investors to Crown, Zouvas took care of the sale of stock. C. Robb is Wrongfully Accused of Inflating Crown’s Stock Price Larson contracted a marketing campaign company by the name of Ritman Agency (“Ritman”) to promote Crown stock. Ritman dealt solely with Larson as the contact person for Crown. Robb had no involvement with the promotion conducted by Ritman. However, Robb, through Larson, did seek the advice of Zouvas to ensure the promotion by Ritman was legal and compliant with securities laws. The SEC alleges that Robb negligently issued press releases for Crown to inflate the share price. The SEC blames Robb when in reality Aninye is the person at fault for any press releases with incorrect information in them. Robb assisted Aninye with many of the press releases issued by Crown but not with all of them. Robb’s Statement of Facts, Response: pg. 30, #104. The information in the press releases was always provided by Aninye. Robb Dec., Ex. 2, pg. 2. Robb’s Statement of Facts, Responses: pg. 26, #92; pg. 27, #96; pg. 28, #97; pg. 30, #103. Aninye always authorized the content and the dissemination of all press releases issued by Crown that Robb assisted drafting. Id. The SEC claims that Robb issued a press release, dated January 31, 2012, that claimed the PomCom was ready to enter the market and that the press release was issued without Aninye’s prior review or approval. However, information in this press release originated with Aninye and was drafted in conjunction with Aninye. Robb’s Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 3 of 6 Page 4 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Statement of Facts, Responses: pg. 27, #96; pg. 28, #97. Robb and Aninye had communicated about the press release before it was issued and Aninye agreed to contact Robb by their deadline if any changes needed to be made to it. Aninye did not contact Robb about changing the content until after the deadline. Subsequently, Aninye attested during a telephonic conference with FINRA that he had approve the press release. Robb Dec., Ex. 2, pg. 2. In early February, Robb assisted Aninye with preparing a press release for Crown. This press release was dated February 7, 2012. The SEC alleges that Robb negligently aggrandized the company in the press release. This press release, as with the others Robb participated in helping Aninye with, was based on information provided by Aninye. Robb’s Statement of Facts, Response: pg. 30, #103. The SEC claims that the press release falsely claimed the software platform on which the PomCom ran allowed Crown to generate revenue. However, the statement in the press release does not necessarily claim Crown was currently generating revenue, only that revenue could be generated from the platform and the benefits of having the software. Id. Robb is accused of knowing Crown was in desperate need of capital. However, he was not aware of the specific capital needs of Crown because he was not involved in the business operations of the company. Robb Dec., Ex. 2, pg. 2. If Aninye had truly disagreed with press releases issued by Crown then he should have retracted the press releases and issued amended press releases. As CEO of Crown, Aninye certainly had the authority to do this. D. Robb Did Rely on the Legal Advice of Zouvas Robb did rely on advice concerning Crown and the promotion by Ritman from Zouvas that was communicated through Larson. Robb Dec., Ex. 2, pg. 2; Robb’s Statement of Facts, Response: pg. 35-36, #124. Robb, through Larson, made disclosures (if applicable), requested counsel’s advice as to the legality of actions, received advice that it was legal, and relied on the Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 4 of 6 Page 5 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 advice in good faith. SEC v. Goldfield Deep Mines Co., 758 F.2d 459, 467 (9th Cir. 1985). Therefore, Robb has met the elements of the “advice of client” defense. III. CONCLUSION Robb, nor any of the other defendants, participated in a fraudulent scheme regarding Crown. There is a lack of evidence that Robb was negligent in violating any federal securities laws. Robb, respectfully requests that this Court deny the SEC’s motion for partial summary judgment. Dated this 7th day of February, 2019. Bingham Law By: s/Anthony B. Bingham Anthony B. Bingham Attorney for Cameron Robb Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 5 of 6 Page 6 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Certificate of Service: I hereby certify that on February 7, 2019, I electronically transmitted the attached document to the Clerk’s Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Patrick R. Costello Securities and Exchange Commission 100 R Street N.E. Washington, DC 20549-5985 Attorneys for Plaintiff Alan S. Baskin Baskin and Richards PLC 2910 N. Central Avenue, Suite 1150 Phoenix, AZ 85012 Attorneys for Luke C. Zouvas Jason M. Hopkins (Pro Hac Vice) Jason S. Lewis (Pro Hac Vice) DLA Piper, LLP 1717 Main Street, Suite 4600 Dallas, TX 75201 Attorneys for Larson, Schiprett and Jorgenson By: s/Anthony B. Bingham Anthony B. Bingham Case 2:17-cv-00427-SPL Document 177 Filed 02/07/19 Page 6 of 6