Jamieson v. Securities America, Inc.

Background

Robert Jamieson, Judith Jamieson, Robert Jamieson as trustee for the Raymond David Jamieson Irrevocable Grandchildren’s Trust, and Judith Jamieson as trustee for the Jamieson Family Foundation sued Vania May Bell. Bell was the former controller and chief compliance officer of Executive Compensation Planners, Inc. The plaintiffs asserted claims for aiding and abetting fraud and aiding and abetting breach of fiduciary duty, seeking compensatory and punitive damages. Bell proceeded without a lawyer.

The plaintiffs alleged that Hector May, their financial adviser and Bell’s father, persuaded them to transfer money from brokerage accounts to what they believed was a custodial account for purchasing municipal bonds. The account was allegedly held in ECP’s name, and May and Bell had access to the funds. The plaintiffs alleged that Bell helped send wiring instructions, prepared false account statements, and recorded transfers as loans even though she knew they were not loans. When the plaintiffs moved their funds elsewhere in February 2018, they allegedly found that only $51,313 remained.

May and Bell pleaded guilty to federal criminal charges arising from the scheme. Bell admitted under oath that she learned client money was being deposited into an ECP account, knew May was using it for payroll and his lifestyle, helped clients transfer money to ECP, recorded transfers as loans, and prepared fabricated statements to make clients believe their investments were safe. Bell also agreed in her criminal case to forfeit $589,942 and pay $8,041,233 in restitution jointly with the restitution ordered in May’s case.

Summary-judgment standard and issue preclusion

The court explained that summary judgment is proper when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law. Although Bell did not respond to the plaintiffs’ statement of undisputed facts, the court independently reviewed the record because she was representing herself.

The court also applied collateral estoppel, or issue preclusion. This rule prevents a party from relitigating an issue of fact or law that was actually decided in an earlier proceeding, when the party had a full and fair opportunity to litigate it and the issue was necessary to the earlier judgment. The court held that a guilty plea can establish facts in a later civil case and prevent the defendant from disputing those facts.

Aiding and abetting fraud

Under the law applied by the court, an aiding-and-abetting-fraud claim requires proof of a fraud, the defendant’s knowledge of the fraud, and substantial assistance that helped carry out the fraud.

The court held that Bell’s guilty plea established all three elements. Bell admitted that there was a scheme to obtain money through false representations, that she knowingly participated with intent to defraud, and that she helped carry out and conceal the scheme. Her admissions included sending or facilitating instructions for transferring the plaintiffs’ money, knowing May was using the money for purposes other than investments, labeling transfers as loans, and preparing fabricated statements.

The court rejected Bell’s argument that her guilty plea could not be used because the plaintiffs were not listed as victims in the final restitution order in her criminal case. The court noted that the plaintiffs had previously been listed as victims and that they were identified as “Victim-1” in May’s criminal case. It held that Bell was barred from challenging liability on the aiding-and-abetting-fraud claim and that the plaintiffs were entitled to judgment as a matter of law.

Aiding and abetting breach of fiduciary duty

The court stated that this claim requires a breach of fiduciary duty, the defendant’s knowing participation in or inducement of that breach, and damages caused by the breach. It found that May owed the plaintiffs a fiduciary duty as their investment adviser and had breached that duty. The court relied on May’s guilty plea and the prior default judgment entered against May and ECP in the same action.

The court found that Bell knowingly participated by sending wiring instructions, creating false account statements, and recording stolen transfers as loans. The court rejected Bell’s argument that she personally needed to owe the plaintiffs a fiduciary duty, explaining that the claim required her to provide substantial assistance to the person who breached the duty. The court also found damages based on the criminal restitution amount and the damages judgment previously entered against May.

The court therefore held that Bell was barred from challenging liability on the aiding-and-abetting-breach-of-fiduciary-duty claim and that the plaintiffs were entitled to judgment as a matter of law.

Damages

The court held that Bell acted jointly with May to cause one financial injury and knowingly participated in May’s breach of trust. Under the law applied by the court, Bell was jointly and severally liable for the plaintiffs’ compensatory damages. The court set those damages at $20,566,010, reduced by the $9,500,000 the plaintiffs had recovered from Securities America, Inc. and Securities America Advisors, Inc. in settlement. The resulting compensatory-damages amount was $11,066,010.

The court separately awarded punitive damages against Bell. It found her conduct highly reprehensible because it involved years of fraud and deceit, and because she knew her conduct was unlawful. The court determined that punitive damages equal to the compensatory-damages figure were appropriate: $20,566,010.

Disposition

The court granted the plaintiffs’ motion for summary judgment. It directed the Clerk to enter judgment against Bell on the aiding-and-abetting-fraud and aiding-and-abetting-breach-of-fiduciary-duty claims for a total of $31,632,020. Bell was jointly and severally liable with May and ECP for $11,066,010 in compensatory damages and individually liable for $20,566,010 in punitive damages. The court directed the Clerk to terminate the motion and close the case. It also certified that an appeal would not be taken in good faith and denied Bell permission to appeal without paying court fees.