U.S. Securities & Exchange Commission v. Jensen

Concurrence by Judge BEA

OPINION

The Securities and Exchange Commission appeals from a district court judgment in favor of Peter Jensen and Thomas Tekulve, the former Chief Executive Officer and Chief Financial Officer of the now-defunct Basin Water, Inc. The SEC filed suit against Defendants in 2011 alleging that they had participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized. The district court granted partial summary judgment to Defendants on the SEC’s claim under Rule 13a-14 of the Securities Exchange Act (Exchange Act), which requires that an issuer’s CEO and CFO certify the accuracy of the issuer’s financial reports. 17 C.F.R. § 240 .13a-14. The court held that the rule requires CEOs and CFOs to certify certain financial statements but does not provide a cause of action against officers who certified false statements. The court held a bench trial on the SEC’s remaining claims and found for Defendants on all counts.

On appeal, the SEC challenges the district court’s grant of partial summary judgment, its grant of Defendants’ motion to withdraw their demand for a jury trial, its decision to exclude evidence…

concurring:

I generally concur in the panel’s analysis and disposition. I write separately only to clarify the intended scope of the new legal rules we announce today.

A. Rule 13a-

I turn first to our holding that Rule 13a-14, a regulation promulgated pursuant to the Exchange Act of 1934 (“Exchange Act”), permits a cause of action against a Chief Executive Officer (“CEO”) or Chief Financial Officer (“CFO”) for “false” certification of a financial report. 1 Maj. Op. at 1104, 1112-13. I agree that the district court erred to the extent it recognized a cause of action under Rule 13a-14 only for the failure to file any certification at all, and granted summary judgment to Defendants Peter Jensen (“Jensen”) and Thomas Tekulve (“Te-kulve”) (collectively, “Defendants”) on that basis. I therefore concur in the panel’s reversal of the district court’s grant of summary judgment to Defendants on this claim. Maj. Op. at 1113.

Nevertheless, I would emphasize that not every inaccurate certification is “false” within the meaning of the rule we announce. Maj. Op. at 1104, 1112-13. Rather, the concept of falsity embodies a mental element. Merriam-Webster defines “false,” as “intentionally…

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

U.S. SECURITIES & No. 14-55221

EXCHANGE COMMISSION,

Plaintiff-Appellant, D.C. No. 2:11-cv-05316-R-AGR v.

PETER L. JENSEN; OPINION

THOMAS C. TEKULVE, JR.,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding

Argued and Submitted February 10, 2016 Pasadena, California

Filed August 31, 2016

Before: Jerome Farris, Richard R. Clifton, and Carlos T. Bea, Circuit Judges.

Opinion by Judge Clifton; Concurrence by Judge Bea SUMMARY*

Securities and Exchange Commission

The panel vacated the district court’s judgment in favor of defendant-corporate officers of the now-defunct Basin Water, Inc., in an enforcement action filed by the Securities and Exchange Commission (“SEC”) alleging that the defendants participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized; and remanded for further proceedings.

The panel reversed the district court’s rulings interpreting Rule 13a-14 of…