Lorenzo v. SEC

872 F.3d 578 (D.C. Cir. 2017)


D became the director of investment banking at Charles Vista, LLC. Charles Vista was owned by Gregg Lorenzo, no relation to D. D's only investment-banking client was a start-up company named Waste2Energy Holdings, Inc. (W2E). W2E claimed to have developed a 'gasification' technology that could generate electricity by converting solid waste to gas. W2E's conversion technology never materialized. All of its intangible value would have to be written off. W2E sought to offer $15 million in convertible debentures. Charles Vista would serve as the exclusive placement agent for W2E's debenture offering. W2E's Form 8-K contained no indication of any possible devaluation of the company's intangible assets. The form stated that W2E's intangibles were worth just over $10 million as of the end of 2008. W2E issued a Private Placement Memorandum that also included no mention of any devaluation of the company's intangibles. W2E decided to come clean, and on October 1, 2009, it filed an amended Form 8-K to value its gasification technology at zero. Its total assets were $370,552. In its quarterly Form 10-Q it valued its total assets at $660,408 as of June 30, 2009. D knew everything about W2E's amended Form 8-K filing. A few days later, D emailed two potential investors but omitted any mention of the wholesale devaluation of W2E's intangibles. D stated that there are over $10 mm in confirmed assets; there are purchase orders and LOI's for over $43 mm in orders and that Charles Vista has agreed to raise additional monies to repay these Debenture holders (if necessary). One message said it had been sent at the request of Greg and another at the request of Adam Spero and Gregg.  D urged the recipients to '[p]lease call [him] with any questions.' D signed both messages with his name and title as 'Vice President - Investment Banking.' P commenced cease-and-desist proceedings against D, Gregg, and Charles Vista. The claims against Lorenzo proceeded to resolution before P. An ALJ concluded that D had 'willfully violated the antifraud provisions of the Securities and Exchange Acts by his material misrepresentations and omissions concerning W2E in the emails.' The full Commission sustained the ALJ's decision, including her 'imposition of an industry-wide bar, a cease-and-desist order, and a $15,000 civil penalty.' D appealed. D contends in part that he did not 'make' the relevant statements within the meaning of the express terms of one of Rule 10b-5's subsections, Rule 10b-5(b).