Judge Scheindlin decides MSJ on Limitations in favor of Wyly against SEC - Questions of Fact Remain

Judge Scheindlin ruled today that the SEC's penalty claims against the Wylys and other co-defendants are barred to the extent that they arose more than five years before the Wylys and the SEC entered into tolling agreements during the SEC investigation. The Judge also ruled that certain insider trading claims are time-barred.

In conclusion the Court ruled as follows: (1) the SEC’s penalty claims for conduct occurring more than five years prior to the execution of each defendant’s respective tolling agreement are time-barred as to that defendant; (2) summary judgment on the claim for injunctive relief against Schaufele is
denied; (3) summary judgment on the insider trading claims against the Wylys and
Schaufele is denied; (4) summary judgment on the aiding and abetting Section
13(d) violations is denied; and (5) summary judgment on the fraud claims against
the Wylys and French, and aiding abetting fraud against Schaufele are denied.
146 See SEC 56.1 Supp. ¶ 104 (citing 10/5/01 Email from Schaufele re:
Sam Wyly (forwarding email in which a Lehman employee wrote “In a
conversation yesterday between Michael[s] Store[s]’ counsel and Gordon Kiesling,
the attorney said that while Michael[s] Stores considers the entity not to be an
affiliate, that attorney was not sure he would arrive at the same conclusion if asked.
This was not a comforting conversation. What we need is for credible counsel to
Wyly to state that this entity is not an affiliate [and] address the current facts and
circumstances.”).

As can be seen from the conclusion and as detailed in the decision, disputed facts remain about the Wylys knowledge and facts necessary for the SEC to demonstrate there was knowing wrongdoing here. 

If the SEC does not cut a deal, it will be an incredible trial.

The Case No. is 10-cv-05760-SAS, Docket Document No. 190.

DISCLOURE:  SDNY author Luke McGrath previously worked on this matter for the defense team but after switching firms is no longer engaged on this matter.  Nothing in this post discloses any information that is not public or a matter of opinion.