Securities and Exchange Commission v. Mekawy

Background

The Securities and Exchange Commission filed a civil enforcement action against Benjamin Mekawy and Seidel. The opinion text says the civil action and a parallel criminal case concerned allegations that the defendants falsified the books and records of Seidel & Co., LLC, submitted false reports to the Commission about the company’s net capital, and, in the criminal case, made false statements to Commission staff.

The United States Government asked to intervene under Rule 24 of the Federal Rules of Civil Procedure. Intervention allows a nonparty to become involved in an existing lawsuit. The Government also asked the court to stay, or pause, all proceedings in the civil action until the criminal case ended. The defendants consented to the request. The Commission consented to the Government’s intervention and took no position on the proposed stay.

Arguments described in the filing

The Government argued that it had a right to intervene because it had an interest in the transactions at issue. Alternatively, it argued that permissive intervention was appropriate because the civil and criminal cases involved common questions of law and fact.

For the stay request, the Government cited factors courts consider when a civil enforcement case overlaps with a criminal prosecution, including the overlap between the cases, the status of the criminal case, potential prejudice from delay, the interests and burdens affecting the parties, judicial efficiency, and the public interest. The Government argued that the cases completely overlapped, criminal charges had been brought, no party opposed a stay, and pausing the civil case would protect restrictions on criminal discovery.

Ruling

Judge Victor Marrero granted the Government’s request to intervene and stayed the civil proceedings until resolution of the related criminal case. The available order endorsement states “GRANTED.” The opinion text does not separately explain the court’s reasoning beyond the Government’s submitted arguments.

Effect

The Government became an intervening participant in the civil action, and proceedings in that action were paused while the related criminal case continued. The order did not decide the underlying allegations against Mekawy or Seidel.