United States District Court, D. Colorado
REMEDIES ORDER
R.
Brooke Jackson United States District Judge.
I.
BACKGROUND
A.
Sonya D. Camarco.
Sonya
D. Camarco, a financial advisor and stock broker, defrauded
several investor clients out of more than $2.8 million. The
stolen funds came at least in part from the accounts of
elderly people or their relatives. On May 14, 2018 Ms.
Camarco pled guilty in a state court criminal case to felony
counts of filing a false tax return, securities fraud, and
theft. She was sentenced to prison for two consecutive terms
of 10 years each and was ordered to pay more than $1.7
million in restitution to the victims.
B.
SEC Lawsuit and Asset Freeze.
On
August 23, 2017 the SEC filed the present suit to obtain
disgorgement of the stolen funds, or assets derived from
those funds, and the return of as much as possible of the
money to the investors.[1] Essentially, this is an alternative to
the restitution order in the criminal case, because it is
unlikely that Ms. Camarco, who will be in prison for much of
the next 20 years, will be able to pay the restitution
otherwise. Ms. Camarco is the “defendant” in the
present case, but disgorgement is also sought from the
“relief defendants, ” meaning the other entities
or individuals who have monies or assets derived from the
stolen funds. The relief defendants originally named were
Camarco Investments, Inc. (a company into which Ms. Camarco
deposited investor funds) and the Camarco Living Trust (a
trust established by Ms. Camarco and her husband Paul O.
Camarco into which a substantial portion of their assets were
placed. Complaint, ECF No. 1. The Complaint was later amended
to add Mr. Camarco individually as a relief defendant. ECF
Nos. 50-1 (redlined version of proposed Amended Complaint)
and 54 (order granting plaintiff's motion to
amend).[2]
On the
day the lawsuit was filed I entered an order freezing the
funds and other assets of Ms. Camarco, Camarco Investments,
and the Trust to the extent those assets were derived
directly or indirectly from Ms. Camarco's fraud. ECF No.
10. I also ordered the defendant and the then-two relief
defendants to provide an accounting of investor funds and
other assets; prohibited destruction or alteration of
documents; and authorized expedited discovery. Later I
entered a modified form of the asset freeze order. ECF No.
27.
Camarco
Investments apparently has no assets now. The remaining
Camarco assets are largely held by the Trust. According to an
“accounting” filed on behalf of the Trust on
November 17, 2017 its assets included five real properties
(the Camarco's home in Monument, Colorado, referred to as
the Woodhaven property, and four rental properties); a
brokerage account; and two bank accounts. ECF No. 43. The
Trust filed a statement of rental income and expenses related
to the four rental properties. ECF Nos. 42. Monthly
statements of rental income and expenses were filed
thereafter.
On
February 22, 2018 the Court granted the Trust's unopposed
motion to sell one of the rental properties, 501 Greta Valley
Road, Guffey, Colorado, for $252, 500. ECF No. 76. The Court
ordered that the net proceeds of the sale be deposited in a
savings account maintained by Paul Camarco at Vectra Bank, to
be used only if the funds were needed to pay expenses for the
other properties. Id.
On May
11, 2018 the Court granted the Trust's unopposed motion
to sell another rental property, 106 Vale Avenue, Palmer
Lake, Colorado, for $235, 000. ECF No. 81. The net proceeds
were ordered to be deposited in an account maintained by the
Trust at Vectra Bank and would remain subject to the asset
freeze order. Id.
On July
10, 2018 the Court granted the Trust's unopposed motion
to sell another rental property, 16970 Buffalo Valley Path,
Monument, Colorado for $391, 000. ECF No. 88. The net
proceeds were again ordered to be deposited in an account
maintained by the Trust at Vectra Bank and would remain
subject to the asset freeze order. Id.
Accordingly,
to the best of the Court's knowledge the real estate
assets of the Trust now are the proceeds of the sales of the
Greta Valley Road, Vale Avenue and Buffalo Valley Path
properties; an Oregon property referred to as the Old Coast
Road property (which apparently is being marketed), and the
Woodhaven property. There is no dispute that the four rental
properties or their proceeds may be disgorged. There is a
dispute about the Woodhaven property. That property, which is
the Camarco's home, contains personal property, some of
which is apparently quite valuable, as I will discuss next.
On
August 10, 2018 Ms. Camarco moved for permission to liquidate
certain assets described by her attorney as “arguably
subject to” the asset freeze order. These assets
included vacant real estate at 329 4th Street,
Monument, Colorado, which was held in trust for her benefit
in a Simplified Employee Pension (“SEP”) IRA
account, with an estimated value of $69, 000; cash or cash
equivalents held in a SEP IRA account with an approximate
value of $90, 810; and funds in a U.S. Bank Money Savings
Account in her name with an approximate balance of $35, 227.
Her motion also sought permission to sell six pieces of
artwork with an estimated value of approximately $99, 000
(hereafter referred to as “the Artwork”) and a
Steinway Baby Grand Piano with an estimated value of
approximately $10, 000 (hereafter referred to as “the
Piano.” My understanding is that the Artwork and the
Piano were in the Woodhaven residence and are probably assets
of the Trust, although there was some confusion during the
hearing as to whether they belong to the Trust, or to Camarco
Investments, or to Ms. Camarco. See ECF No. 132 at
53.
Ms.
Camarco proposed that the proceeds of these assets be
deposited in a savings account at U.S. Bank and later
transferred to the state court registry and applied to her
restitution obligation. The given reason for these requests
was Ms. Camarco's (or her attorney's) fear that the
proceeds of the SEC's disgorgement proceeding in the
present lawsuit might be deposited with the United State
Treasury and not returned to investors, such that Ms. Camarco
would not have her criminal restitution order reduced.
See Id. at 6-8. The SEC did not oppose liquidation
of those assets, but it insisted that the assets remain in an
account that is subject to the asset freeze order rather than
being applied to a restitution order in the state criminal
case. It argued that Ms. Camarco's request in that regard
was premature because a restitution order had not yet been
entered. The SEC also expressed concern that Ms. Camarco
intended to use such a payment to affect her sentence in that
case, a concern that, even if considered to be reasonable, is
now moot. The SEC also indicated that it would likely ask
this Court for an order to distribute the proceeds of
disgorgement to investors, and that the Artwork and the Piano
belonged to the Trust, not to Ms. Camarco. See ECF
No. 92.
The
Court ultimately granted permission to liquidate the assets
but ordered that the proceeds of the sales be deposited in
the registry of this court if the parties could not otherwise
agree on disposition of the proceeds. The Court noted that it
would give full faith and credit to the state court's
restitution order. ECF No. 103 at 12-14. No. one has informed
the Court since that time whether or to what extent those
assets were liquidated, nor where any proceeds are now
located. I have checked with the Clerk of Court who has
informed me that the court has received no funds related to
the case.
C.
Summary Judgment.
This
case was originally set for a five-day jury trial beginning
January 14, 2019 and was later continued to February 11,
2019. However, on September 14, 2018 the SEC filed a motion
for summary judgment. ECF No. 98. In the motion it sought (1)
a permanent injunction prohibiting Ms. Camarco from violating
the securities laws; (2) a determination that
“third-tier” civil penalties against her are
appropriate; (3) imposition of joint and several liability
for disgorgement of $1, 503, 856.86 against Ms. Camarco and
the Trust, subject to offset of any disgorgement paid by
Camarco Investments; (4) imposition of joint and several
liability for disgorgement of $903, 631.10 against Ms.
Camarco and Camarco Investments; and (5) an order that Paul
Camarco disgorge $118, 475.92. Id. at
20.[3]
The motion was fully briefed. Ms. Camarco did not contest the
relief sought except as to civil penalties. The relief
defendants contended that the relief sought against them
punishes them for the crimes of Ms. Camarco and was
inequitable.
Separately,
relief defendants Paul Camarco and the Camarco Living Trust
filed their own motion for summary judgment, asserting that
the relief sought by the SEC has not been authorized by
Congress. ECF No. 100. The SEC responded that it is
authorized to seek disgorgement from those possessing gains
obtained by securities violations. ECF No. 107.
While
the summary judgment motions were pending, the SEC moved to
convert the jury trial scheduled for February 11-15, 2019
into a one-day remedies hearing to be conducted by the Court
without a jury. ECF No. 117. The SEC informed the Court that
Ms. Camarco had confessed liability; that the SEC would not,
after all, request a civil penalty; and, therefore, that the
sole remaining issue to be decided was equitable relief to be
ordered against Ms. Camarco and the relief defendants.
Id. at 2. The Trust and Mr. Camarco opposed the
motion on grounds that the relief sought amounted to a civil
penalty, such that they were entitled to a jury trial. ECF
No. 118. In reply the SEC stated that it was authorized to
seek disgorgement; that disgorgement is an equitable remedy;
and that even if it weren't, a jury could only determine
liability for a civil penalty. But the relief
defendants have confessed that they received ill-gotten
gains. Therefore, the only remaining issue is the
amount of the penalty. See ECF No. 120 at
1-2.
The
Court granted the SEC's motion for summary judgment as to
liability against Ms. Camarco and ordered that the scope of
the remedies would be determined in the remedies hearing that
the SEC had requested. ECF No. 121 at 3. The Court denied the
relief defendants' motion for summary judgment.
Id. at 3-6.
II.
REMEDIES HEARING
The
Court held a hearing to determine appropriate remedies,
including the extent to which disgorgement would be ordered
and against whom, on February 11, 2019. Both sides presented
testimony and documentary evidence. A transcript of the
hearing can be found at ECF No. 132.
A.
Plaintiff's Evidence.
1. The
SEC called Michael Hennigan as an expert witness. Mr.
Hennigan is a former Certified Public Accountant with an
employment history in financial management as a controller
and Chief Financial Officer. He presently is a subcontractor
for CACI International which holds government contracts
including with the SEC. He conducted an extensive
investigation of bank records of Ms. Camarco, Mr. Camarco,
Camarco Investments, and the Trust. He also reviewed certain
LPL Financial records; certain real estate records, and other
documents. His goal was to trace the stolen investor funds to
the extent he could for the ultimate purpose of supporting a
disgorgement order. See generally Exhibit 1 (Mr.
Hennigan's summary findings and conclusions) and Exhibits
2-24 (supporting documents).
2. Mr.
Hennigan's conclusions, as set forth in Ex. 1 at 1-2
were:
a. The
amount misappropriated by Ms. Camarco between August 2012 and
...