Protecting a career against SEC allegations
Crowell & Moring client Elaine Brown was a former chief financial officer of NYSE-listed Integral Systems, Inc. Ms. Brown was one of three former Integral executives accused by the U.S. Securities and Exchange Commission (SEC) of concealing from regulators and investors the fact that convicted felon Gary Prince was an alleged ‘de facto’ officer of Integral.
After a seven-year investigation that included three years of litigation, the SEC’s Division of Enforcement sought to permanently enjoin Ms. Brown from further violations of the federal securities laws and to bar her from ever again serving as an officer or director of a publicly-traded company.
In a matter that demonstrates the firm’s ability to chisel away at problems before they reach trial, we significantly reduced Ms. Brown’s potential exposure through successful pre-trial motions to dismiss and for summary judgment.
We substantially reduced our client’s potential exposure, first through a motion to dismiss in which we obtained dismissal of all fraud charges under the Securities Act of 1933. And, second, when the U.S. District Court for the District of Columbia granted us partial summary judgment in an unprecedented ruling that eliminated two of the SEC’s three claims for relief, holding that our client would not be subject to an injunction or an officer and director bar.
With the vast majority of the SEC’s claims for relief disposed of, we were able to settle the matter for a $25,000 civil penalty and avoid a five-week trial without our client admitting or denying any of the SEC’s claims. These victories are of paramount importance to Ms. Brown, who can now continue with her career without the burden of an SEC injunction or an officer and director bar.