Securities & Exchange Commission v. Sabhlok

MEMORANDUM

1. Substantial evidence supported the jury’s verdict that Michael Pattison violated Section 13(b)(5) of the Exchange Act and SEC Rule 13b2-1. See Harper v. City of Los Angeles, 533 F.3d 1010, 1021 (9th Cir.2008); Watec Co., Ltd. v. Liu, 403 F.3d 645 , 651 n. 5 (9th Cir.2005). As a reviewing court we do not generally appraise the credibility of the witnesses and the weight of the evidence. See Watec, 403 F.3d at 651 n. 5.

The jury heard sufficient evidence that Pattison regularly cherry-picked the lowest share price of each quarter to serve as the “grant date” for employee stock options, and that he submitted documents to E*Trade and auditors that failed to reflect that options had been so backdated. Pattison wrote an internal controls memo indicating that his company was not issuing stock options below fair market value. Pattison made the same representation in his signed letter to auditors, who testified that Pattison misled them with documents indicating that no compensation expense was required, even though the accounting principles his company followed required recognizing such an expense. A reasonable factfinder could have returned a verdict of liability on this…