Securities and Exchange Commission v. Abraaj Investment Management Limited
- Alvin Hellerstein
- 1:19-cv-03244
- U.S. District Court · Southern District of New York
- 6
Securities and Exchange Commission v. Abraaj, Judge Nathan granted the Government’s motion to intervene and stayed the civil action pending a parallel criminal case.
The order paused the SEC’s civil enforcement action against Abraaj Investment Management Limited and Arif Naqvi, allowed the Government to intervene, and affected the parties’ ability to conduct civil discovery while Naqvi’s related criminal case proceeds.
What happened
In Securities and Exchange Commission v. Abraaj Investment Management Limited, the Securities and Exchange Commission accused Abraaj and Arif Naqvi of civil violations of the Investment Advisers Act. The Government asked to join the case and pause it while a related criminal prosecution against Naqvi proceeded; Naqvi opposed the pause, while the SEC and Abraaj did not.
The court found that the criminal and civil cases substantially overlapped, an indictment had already been issued, and pausing the civil case would promote judicial efficiency. The court also found that proceeding with civil discovery could improperly give Naqvi information restricted in the criminal case and could threaten witness security.
Judge Nathan granted the Government’s motion to intervene and stay the civil case. The court stayed the action until the criminal case against Naqvi ends and ordered the parties to provide a status update within two weeks afterward.
The detailed version
- Securities and Exchange Commission v. Abraaj Investment Management Limited · No. 1:19-cv-03244
- Alvin Hellerstein
- Dec. 3, 2019
Background
The Securities and Exchange Commission (SEC) sued Abraaj Investment Management Limited and Arif Naqvi, alleging civil violations of the Investment Advisers Act of 1940. The civil complaint alleged that Naqvi defrauded two investment funds he advised.
A grand jury had indicted Naqvi on securities-fraud and wire-fraud charges. The criminal indictment included the conduct alleged in the SEC’s civil case, along with additional alleged criminal conduct. Naqvi was arrested in London under a United States provisional-arrest request and was contesting extradition to the United States.
The Government moved under Federal Rule of Civil Procedure 24 to intervene in the civil case and asked the court to stay, or pause, the entire action until the criminal case was resolved. Naqvi opposed the stay. The SEC and Abraaj did not oppose it.
Intervention
The court granted the Government’s motion to intervene. Under Rule 24(a), intervention is required when a movant has an interest related to the case and resolving the case could impair the movant’s ability to protect that interest. The opinion stated that Naqvi did not object to this part of the Government’s request. The court also cited the Government’s interest in preventing civil discovery from being used to bypass the more limited discovery available in a criminal case.
Stay of the Civil Action
The Government offered two grounds for a stay: the fugitive-disentitlement doctrine and the court’s inherent authority to delay a civil case while a related criminal prosecution proceeds when the interests of justice require it. The court did not decide whether the fugitive-disentitlement doctrine supported a stay. Instead, it held that a full stay was justified in the interests of justice.
The court considered six factors:
- Overlap between the proceedings. The parties agreed that the criminal allegations completely included the allegations in the civil case. The court found that this strongly favored a stay.
- Status of the criminal case. An indictment had already been issued. The court explained that an indictment showed that the criminal process was underway and reduced concerns that the civil case would be delayed indefinitely.
- The SEC’s interest. Because the SEC took no position on the Government’s request, the court did not weigh the SEC’s interests.
- Naqvi’s interests. Naqvi argued that a stay would delay his opportunity to clear his name and could cause memories to fade or evidence to be lost. The court found that the prejudice would be minimal, in part because the criminal proceedings could preserve witness statements and testimony. The court also observed that Naqvi could benefit from a stay because proceeding with discovery might require him to invoke his right against self-incrimination during a deposition.
- The courts’ interests. The court found that a stay would avoid duplicated efforts and conserve judicial resources because the criminal case could resolve factual issues common to the civil case.
- The public interest. The court found that allowing civil discovery to proceed could undermine restrictions on criminal-case discovery, give Naqvi access to information not ordinarily available in a criminal case, allow him to tailor his defense, and potentially create witness-security concerns. The court held that the Government did not need to prove that Naqvi was likely to engage in misconduct before this public interest favored a stay.
Disposition
Judge Alison J. Nathan granted the Government’s motion. The court stayed the civil action pending resolution of the criminal case identified in the opinion as United States v. Arif Naqvi, 19-cr-233 (LAK). The parties were ordered to provide a joint status update within two weeks after the criminal proceeding concluded. The order resolved Docket Entry 31.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.