United States District Court, D. Maryland
Richard D. Bennett United States District Judge.
the Securities and Exchange Commission ("SEC")
moves for an Order of Disgorgement, Prejudgment Interest, and
Civil Penalty against Defendant Joseph A. Giordano pursuant
to the Consent Judgment entered against him on February 10,
2016 ("Plaintiffs Motion") (ECF No. 27).
Specifically, the SEC requests that this Court issue an Order
requiring Giordano to pay disgorgement of $69, 300.00,
prejudgment interest of $16, 616.49, and a civil penalty of
$150, 000.00. (Id. at 1.) The parties'
submissions have been reviewed, and no hearing is necessary.
See Loc. R. 105.6 (D. Md. 2016). For the reasons
stated herein, the SEC's Motion is GRANTED, and defendant
Joseph A. Giordano shall pay $235, 916.49 to the SEC.
initiated this case against defendant Giordano and
co-defendants Wilfred T. Azar, III, and Empire Corporation
("Empire") in November 2014. (ECF No. 1.) In
its Complaint, the SEC alleged that Giordano violated a
series of securities laws, including the Securities Act of
1933, the Exchange Act of 1934, the Investment Advisors Act
of 1940, and the Investment Company Act of 1940. (ECF No. 1
at ¶ 7.) Specifically, the Complaint alleged that
Giordano and the co-defendants "raised more than $7
million from dozens of investors through the unregistered
offering of purported bonds issued by Empire by making
materially false and misleading statements to investors
concerning, among other things, Empire's financial
condition, its ability to generate the promised returns, and
the safety and risk of the investment." (Id. at
¶ 2.) In its Motion, the SEC asserts that,
"Giordano played a critical role in the success of the
Empire fraud, and alone was responsible for convincing his
clients to invest over $1.5 million that they will likely
never recover." (ECF No. 27-1 at 1.)
February 10, 2016, this Court issued a Consent Judgment
against Giordano, in which he agreed to "pay
disgorgement of ill-gotten gains, prejudgment interest
thereon, and a civil penalty." (ECF No. 19.) The Consent
Judgment further provided that "[t]he Court shall
determine the amounts of the disgorgement and civil penalty
upon motion of the Commission, " and that
"prejudgment interest shall be calculated from December
1, 2009, based on the rate of interest used by the Internal
Revenue Service for the Underpayment of federal income
tax." (Id. at 7.)
Motion is fully ripe for this Court's determination. (ECF
Disgorgement and Prejudgment Interest
Court explained in S.E.C. p. Resnick, 604 F.Supp.2d
773, 782 (D. Md. 2009), that:
"When securities fraud is found, courts may order
disgorgement. Disgorgement is an equitable remedy designed to
prevent the unjust enrichment of the wrongdoer and to deter
others from violating the federal securities laws.
Accordingly, disgorgement is not limited to an extraction of
ill-gotten gains from the fraud. Indeed, the district court
has broad discretion in determining whether to award
disgorgement and in what amount. It is also recognized that
the disgorgement calculation is inexact; it is impossible to
say with certainly what portion of [a defendant's]
profits is attributable to his securities violations.
Therefore, a court's disgorgement calculation need only
be a reasonable approximation of gains causally connected to
S.E.C. p. Resnick, 604 F.Supp.2d 773, 782 (D. Md.
2009) (internal citations omitted).
case, the SEC seeks disgorgement in the amount of $69,
300.00. (ECF No. 27-1 at 4.) In support of this claim, the
SEC has produced a copy of the Internal Revenue Service
1099-MISC form issued by Empire to Giordano reflecting
nonemployee compensation of • $69, 300.00. (ECF No.
27-4.) Plaintiff asserts that this amount reflects the value
of Giordano's allegedly ill-gotten gains.
argues in his Opposition to Plaintiffs Motion that because he
incurred $24, 000.00 in expenses in order to earn the $69,
300.00, his "total compensation net of expenses was only
$45, 300." (ECF No. 28 at 3.) Accordingly, Giordano
argues, disgorgement should be limited to his net income
related to the fraud.
is well established that defendants in a disgorgement action
are 'not entitled to deduct costs associated with
committing their illegal acts.'" F.T.C. v.
Bronson Partners, LLC,654 F.3d 359, 375 (2d Or. 2011)
(quoting SEC v. Cavanagh, 2004 WL 1594818, at *30
(S.D.N.Y. July 16, 2004)). See also F.T.C. v. Alban,
No. CIV.A. MJG-11-1483, 2014 WL 1236690, at *3 (D. Md. Mar.
24, 2014) (following die rule stated in Bronson).
Thus, even if defendant's ultimate profit from the