sec opp glisson motion bifurcate liability damage show_temp

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JOHN B. BULGOZDY, Cal Bar No. 219897 E-mail: [email protected] DAVID J. VAN HAVERMAAT, Cal. Bar No. 175761 E-mail: [email protected] Attorney for Plaintiff Securities and Exchange Commission Rosalind R. Tyson, Regional Director Michele Wein Layne, Associate Regional Director John W. Berry, Regional Trial Counsel 5670 Wilshire Boulevard, 11th Floor Los Angeles, California 90036 Telephone: (323) 965-3998 Facsimile: (323) 965-3908

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. MARCO GLISSON,

Defendant

Case No. 2:09-cv-00104-LDG-GWF PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S OPPOSITION TO DEFENDANT GLISSON’S MOTION TO BIFURCATE LIABILITY AND DAMAGE ISSUES FOR TRIAL

Case 2:09-cv-00104-LDG-GWF Document 91 Filed 11/30/11 of 12

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I. INTRODUCTION

Plaintiff Securities and Exchange Commission (“Commission”) opposes

defendant Marco Glisson’s (“Glisson”) motion to bifurcate liability and damages

issues for trial, because bifurcation will not provide convenience to the Court,

avoid prejudice, or expedite or economize these proceedings. To the contrary,

bifurcation will require two trials, two decisions by the Court, and will require the

parties to present duplicative testimony and evidence from the same witnesses.

Defendant Glisson would be required to testify at each trial, as would the

Commission’s summary witness. The same evidence of Glisson’s numerous stock

transactions, including bank records, are necessary to prove liability and remedies.

While defendant argues that it would be inconvenient and inefficient to prepare for

trial as to both liability and damages (Motion at page 4, lines 20-21), in fact, the

parties have already submitted, and the Court has signed, a Joint Pretrial Order

which covers liability and damages. (See Joint Pretrial Order, entered April 22,

2011 (Docket No. 67).) Bifurcation at this late stage would require the parties to

amend the Joint Pretrial Order and carve it into two parts, which would waste

resources and time.

Defendant asserts that the liability portion of the case “can be tried to the

Court in a single day,” (Bretz Decl. at ¶ 3), so it would be most convenient for the

Court to hear the entire case all at once in a few days, rather than hearing it twice at

different times. Rather than expediting and economizing these proceedings,

bifurcation would prolong and complicate this case. Therefore, Glisson’s motion

to bifurcate should be denied.

II. FACTS

In support of his motion, under the heading “Argument,” Glisson makes

numerous unsupported and inaccurate statements of fact, unsupported assertions


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concerning arguments that Glisson seems to believe the Commission may make,

and substantive arguments concerning the liability portion of the case. (See

Motion at pages 6-12.) Glisson’s argument of the merits of his case are ostensibly

to convince the Court that there is a “high probability that Plaintiff will be unable

to prove the ‘liability’ component of its broker/dealer registration case” which he

believes “weighs in favor of bifurcation.” (Motion at page 11, lines 17-19.) To

address that factual contention, the Commission offers its view of some of the

relevant facts.

In late 2005, Glisson was a resident of Janesville, Wisconsin.1 Sometime

after April 2004, Glisson became aware of CMKM through the Internet, and

purchased CMKM securities in his Ameritrade account. Glisson monitored the

performance of his CMKM securities via the Internet and CMKM press releases,

and visited and participated in Internet chat rooms that discussed CMKM. Glisson

used the screen name “Deli Dog” or “Deli” when participating in Internet chat

rooms. Glisson knew the principal of CMKM, and had even catered an event for

CMKM.

Glisson learned in October 2005 that the Commission had revoked the

registration of CMKM securities and that it was delisted from trading. After

CMKM’s registration was revoked and it was delisted, Glisson could not buy or

sell CMKM securities through his accounts at Ameritrade or E-Trade, and CMKM

1 In his Motion, Glisson incorrectly states: “Defendant, at the time of the conduct at issue, was a full-time assembly line worker living in Wisconsin.” (Motion at page 9, lines 3-4.) The trading in CMKM securities occurred from late 2005 through mid 2007. In fact, Glisson’s retirement as an assembly line worker was effective in October 2006, at which time he moved to Las Vegas where he met his current wife, Thidarat Tungwongsathong; the two of them spent some time traveling the country in a luxury motor coach, and eventually settled in Florida where they invested in their own propane gas business.


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securities could not be bought or sold on any national exchange. As far as Glisson

knew, his CMKM holdings at the time – which at the time consisted of a few

million shares, were worthless.

In December 2005, Glisson contacted Helen Bagley, of Las Vegas, Nevada,

whom he knew to be the owner of 1st Global Stock Transfer LLC – which was the

stock transfer agent for CMKM. Glisson asked if 1st Global would perform

transfer agent services for him with respect to purchases and sales of CMKM stock

and, in response, 1st Global agreed to cancel and re-issue CMKM stock certificates

in accordance with Glisson’s instructions.2

Beginning in December 2005, through April 2007, Glisson found buyers and

sellers of CMKM securities through his visits to various CMKM chat rooms.

Glisson talked to CMKM shareholders every day, met with them face to face, on

the computer, and on the telephone. In the Internet chat rooms, Glisson posted that

he was buying CMKM stock, or that he was selling CMKM stock, and posted his

telephone number. Glisson typically offered to buy CMKM stock for “trip one,” or

$0.0001 per share, although he sometimes paid more. Glisson used written

agreements to set forth the terms of his purchases of CMKM stock, which were

titled “Stock Sell-Purchase Agreement.” Glisson also had sellers execute letters

waiving all rights to any dividends or cash settlements associated with the CMKM

stock he purchased. The fact that Glisson had his own contracts and forms

2 In listing his proposed issues on the damages portion of the case, Glisson refers to his “reliance on counsel” affirmative defense. (Motion at page 13, lines 27-28.) In fact, Glisson did not consult with an attorney for advice about whether it was legal to purchase and sell CMKM stock before he began to engage in such transactions in December 2005. Glisson cannot assert a reliance on counsel defense if he did not consult with counsel.


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suggests that his activities were more than those of a day trader who executes

trades through a registered broker-dealer on a national exchange.

When Glisson was contacted by a prospective purchaser, Glisson typically

provided prospective purchasers with (1) his contact information, (2) a price

schedule for CMKM securities setting prices of between $0.0003 to $0.00025 per

share, depending on the number of shares being purchased, and (3) payment

instructions including wire transfer information and an address for mailing

payment. Glisson required payment before he would arrange to have a certificate

issued to a purchaser, and he charged a fee of $50 a certificate. Glisson received

the certificates from 1st Global, made a copy of the certificates, and sent them to

his purchasers. Again, the fact that Glisson had a price list and self-executed and

cleared trades for his customers differentiates his conduct from that of an

individual simply making trades for their own account through a registered broker.

When Glisson began his business of buying and selling CMKM stock in

December 2005, there were approximately five accounts at Blackhawk Community

Credit Union, located in Janesville, Wisconsin, associated with Glisson, his then

wife Alma Padilla, and/or the Deli Dog House restaurant. In late 2005 through

May 2006, Glisson used two of these accounts – the 8307 Account and 3788

Account – for his CMKM transactions. In May 2006, Glisson separated from

Padilla, closed the 8307 Account, and opened a new account in his name at

Blackhawk – the 7650 Account. From May through about December 2006,

Glisson instructed persons who purchased CMKM stock to wire funds to the 7650

Account, and Glisson deposited checks he received into that account.

Shortly after moving to Las Vegas in October 2006, Glisson met Thidarat

Tungwongsathong at a Starbucks. In November 2006, Tungwongsathong

designated Glisson as a Payable on Death (“POD”) beneficiary on her bank


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accounts held at Bank of America, and changed the address for the account

statements to the address of Glisson’s apartment in Las Vegas. Glisson then

transferred $105,000 from his 7650 Account to Tungwongsathong’s account.

Beginning in November 2006, Glisson told his clients to make payments to

Tungwongsathong by check or money order, or to wire funds to one of her

accounts at Bank of America, the 9145 Account.

During the period from December 2005 through May 2006, and again from

September 2006 through April 2007, Glisson regularly communicated with 1st

Global – the transfer agent for CMKM stock – through the mails and using

telephones, for the purpose of arranging transfers of the ownership of CMKM

stock. Glisson, or his assistants including Tungwongsathong, visited 1st Global’s

offices to drop off and pick up certificates. In some cases, Glisson arranged for all

of a seller’s shares to be re-issued directly in the name of a purchaser; in some

cases, some of the seller’s shares were re-issued directly to purchasers and some

were re-issued to Glisson; and in some cases, Glisson was the seller or provided

some of the shares being sold. During his periods of activity, Glisson arranged

numerous transfers of CMKM securities: for example, during three month period

between October 16, 2006 and January 16, 2007, Glisson instructed 1st Global to

re-issue 1,366 certificates to persons other than Glisson or Tungwongsathong – or

over 15 certificates a day.3

3 Glisson claims that he “sporadically traded the stock for his own account on a high frequency basis and was fortunate enough to make a substantial amount of money from trading such stock.” (Motion at page 9, lines 19-20.) In fact, Glisson regularly engaged in transactions in CMKM stock on an almost daily basis. Glisson’s explanation of “sporadic” “high-frequency” trading is difficult to grasp in view of the fact that Glisson was self-executing and self-clearing each and every trade, because CMKM was not traded on a national exchange or through any registered broker or dealer.


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To arrive at a reasonable estimation of Glisson’s ill-gotten gains, the

Commission added up the deposits into the four accounts Glisson used for his

CMKM transactions during 2005 through 2007 – which totaled approximately $4.3

million, and subtracted expenditures to obtain CMKM stock – which were

approximately $1.4 million, to arrive at a net profit of approximately $2.8 million.

It should be remembered that Glisson did not actively engage in his CMKM

business during the entire period. In fact, between May and September 2006,

Glisson ceased his activities after being contacted by state and federal authorities.

For the twelve months that he was active, Glisson averaged revenues per month of

around $358,000, and monthly profits of about $233,000.

III. LEGAL ARGUMENT

A. Bifurcation Will Not Provide Convenience, or Expedite and

Economize These Proceedings

Federal Rule of Civil Procedure 42(b) affords a court broad discretion to

conduct separate trials of discrete issues or claims if it finds that such bifurcation

would be “[f]or convenience, to avoid prejudice, or to expedite and economize….”

The decision whether to exercise such discretion is made on a case by case basis.

See David & Cox v. Summa Corp., 751 F.2d 1507, 1517 (9th Cir. 1985).

The substance of Glisson’s argument is that he believes he has a “high

probability” of convincing the Court that he did not violate the federal securities

laws, so that it would be easier to try liability first. The Commission does not

agree with Glisson’s assessment of the merits of its liability case. However,

whether or not a party can convince the Court that it has a high probability of

success is not, in the end, something to be addressed in a motion for bifurcation.

Glisson provides no authority for the proposition that the Court should weigh the

merits of a case on a bifurcation motion, and there is none.


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1. Because of the Overlap of Evidence and Witnesses,

Bifurcation is Not Convenient or Economical

To prove liability, the Commission will introduce evidence from Glisson and

others concerning Glisson’s transactions in CMKM securities, including bank

records showing where the proceeds from sales were deposited. For the period

after mid-January 2007, Glisson did not produce transfer letters or emails,

purportedly because his computers were lost or stolen, so that bank records

showing deposits from purchasers are the evidence of his activity. As Glisson

states, this is not contested: “Glisson does not contest that he sold the shares and

realized proceeds from the sales or where the proceeds were deposited.” (Motion

at page 18, lines 15-17.)4 The Commission will also introduce evidence from a

summary witness, who will provide summary information on the number of

certificates cancelled and re-issued at Glisson’s direction, and on activity relating

to CMKM transactions in the various Glisson-related bank accounts. These same

witnesses and evidence would be introduced in support of the Commission’s

request for remedies, so there is a direct overlap of the evidence and proof relating

to liability and damages.

4 This statement contradicts Glisson’s position as stated in the Joint Pretrial Order, where Glisson proposes to prove: “Glisson never had any joint ownership, or any signatory power or control, over any of Thidarat Tungwongsathong’s bank accounts, including her account(s) at the Bank of America opened in Las Vegas, Nevada.” See Joint Pretrial Order at page 36, ¶ 98. Glisson is making expedient and inconsistent arguments that are contradicted by the facts and his other positions in this case. However, the Commission has moved in limine for admission of bank records of these accounts, which motion should be granted in view of Glisson’s statement to the Court that he does not dispute where and when he deposited the proceeds of his transactions in CMKM stock.


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In cases where there is an overlap of witnesses and evidence on issues of

liability and damages, courts have typically exercised their discretion and refused

to bifurcate because it will not serve judicial economy. For example, in Lincoln

Benefit Co. v. Frangos, No. 2:09-cv-1466-RLH-PAL, 2010 WL 3613915 (D. Nev.

Sept. 8, 2010), Chief Judge Hunt denied a motion to bifurcate and stay discovery

because evidence about various issues was interrelated that such a procedure would

compound the costs and time for the Court and the parties. In Lindsay v. Lindsay,

No. 3:05-cv-00305-LRH (RAM), 2007 WL 201160 (D. Nev. Jan. 23, 2007), the

Court denied a motion to bifurcate because the same evidence would need to be

heard on the different issues before the Court, which “would result in witnesses

having to testify at two separate proceedings. This potential duplication of

evidence and proceedings is likely to increase the litigation costs and delay the

final resolution of this case.” Id. at *2.

Similarly, in other cases where the issue of liability is not separable from the

issue of damages such as this one, courts have exercised their discretion against

bifurcating such interrelated issues. In Matter of Sortwell, Inc., No. 8-05167 JW,

2011 WL 4896475 (N.D. Cal. Oct. 12, 2011), the Court determined that there was

an overlap between evidence relating to liability and evidence of damages, which

“‘counsel[s] against bifurcation.’” Id. at *2 (citations omitted). See also

Spellbound Development Group, Inc. v. Pacific Handy Cutter, Inc., No. SACV 09-

951 DOC, 2011 WL 1810961, at *4 (C.D. Cal. May 12, 2011) (“Two separate

trials will be unduly consumptive of the Court’s and the parties’ resources, and will

prejudice [non-movant] in forcing it to conduct two trials. Furthermore, these

issues are sufficiently related to justify one trial.”); Onyx Pharm., Inc. v. Bayer

Corp., No. C-09-2145 EMC, 2011 WL 4527402, at *4 (N.D. Cal. Sept. 21, 2011)

(finding bifurcation would not be more efficient or convenient because it would be


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difficult for Court to maintain its trial schedule, parties would have to parse the

evidence for the different issues, some witnesses would have to testify twice, and

there was no showing of prejudice by the movant).

The overlap of the evidence and witnesses -- including testimony from

defendant Glisson -- on the issues of liability and damages counsels against

bifurcation.

2. Bifurcation at This Late Date Will Prejudice Plaintiff and

Waste Resources

Glisson incorrectly argues that there is no prejudice to the Commission if the

Court orders bifurcation at this late date; however, Glisson ignores the fact that the

parties have invested substantial resources in preparing for a single trial addressing

all the issues in the case, and to that end, prepared and submitted a Joint Pretrial

Order for a single trial. The Court signed and entered the Joint Pretrial Order for a

single trial. The parties and the Court are therefore prepared to proceed to address

all the issues in a single trial. Glisson’s proposal to bifurcate would delay the trial

and require the parties to submit a revised Joint Pretrial Order for the Court’s

consideration. Glisson fails to address the fact that the case is already prepared for

trial on liability and damages, so that bifurcation will not expedite, economize, or

provide any convenience to the Court or the parties.

3. Glisson’s Contentions About the Complexity of Remedies

are Incorrect and Not Supported by Precedent

In support of his motion, Glisson posits a series of questions and issues that

he believes need to be resolved with regard to remedies; however, Glisson provides

no legal support for the convoluted and complicated process he envisions. In fact,

precedent establishes that the Commission’s request for disgorgement is not

subject to the standards Glisson proffers to the Court. Glisson’s motion is


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predicated on a misstatement of the applicable law regarding remedies; in fact,

remedies are intimately tied into liability and not so complex as Glisson would

argue, which also counsels against bifurcation.

“The district court has broad equity powers to order the disgorgement of ‘ill-

gotten gains obtained through the violation of the securities laws.” SEC v. First

Pacific Bancorp, 142 F.3d 1186, 1191 (9th Cir. 1998). The purpose of

disgorgement is to deprive a wrongdoer of unjust enrichment, and to deter others

from violating the securities laws by making violations unprofitable. Id. at 1191.

The Commission “has the initial burden of establishing that ‘its disgorgement

figure reasonably approximates the amount of unjust enrichment.’” SEC v. Hughes

Capital Corp., 917 F. Supp. 1080, 1085 (D.N.J.), aff’d 124 F.3d 449 (3d Cir. 1997)

(quoting SEC v. First City Financial Corp., 890 F.2d 1215, 1232 (D.C. Cir. 1989)).

To meet this burden, the Commission is not required to trace “every dollar of

proceeds” obtained from the illegal activity. First Pacific Bancorp, 142 F.3d at

1192 n.6 (“The district court was not required to trace every dollar of the offering

proceeds fraudulently retained by Sands”). Rather, the amount ordered in

disgorgement need only be a “reasonable approximation of the profits causally

connected to the violation. Id; see also SEC v. First Jersey Securities, Inc., 101

F.3d 1450, 1474-75 (2d Cir. 1996).

Any risk of uncertainty in calculating disgorgement must fall on the

wrongdoer who created the uncertainty in the first instance. SEC v. Hughes

Capital Corp., 124 F.3d 449, 455 (3d Cir. 1997) (“Very often defendants move

funds through various accounts to avoid detection, use several nominees to hold

securities or improperly deprived profits, or intentionally fail to keep accurate

records and refuse to cooperate with investigators in identifying illegal profits.


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Hence, ‘the risk of uncertainty should fall on the wrongdoer whose illegal conduct

created that uncertainty.’” (quotations omitted)).

Once the Commission establishes that the disgorgement amount it seeks is a

reasonable approximation of defendant’s unlawful profits, the burden shifts to the

defendant to demonstrate that the amount sought is not a reasonable estimate of

their profits. Hughes Capital Corp., 917 F. Supp. at 1085. The amount of

disgorgement may properly include all proceeds obtained as a result of the illegal

activity. SEC v. Manor Nursing Centers, 458 F.2d 1082, 1104 (9th Cir. 1972).

Thus, under the applicable law, the Commission is not put to the onerous

and complex inquiry proposed by Glisson. In fact, the question of disgorgement

can be resolved simply by looking at the total proceeds of the illegal activity. The

fact that assessing the amount of disgorgement is not as complex as Glisson would

have it also counsels against bifurcation. In fact, most of the evidence relating to

remedies, such as the nature of the conduct and assurances against future

violations, are intimately bound up with the liability question, so that bifurcation

would needlessly complicate the resolution of this matter.

IV. CONCLUSION

For the foregoing reasons, the Court should deny Glisson’s motion to

bifurcate the trial into two trials, separately addressing liability and remedies.

Date: November 30, 2011 Respectfully submitted,

/s/ John B. Bulgozdy John B. Bulgozdy David J. Van Havermaat Attorneys for Plaintiff Securities and Exchange Commission


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PROOF OF SERVICE I am over the age of 18 years and not a party to this action. My business address is: [X] U.S. SECURITIES AND EXCHANGE COMMISSION, 5670 Wilshire

Boulevard, 11th Floor, Los Angeles, California 90036-3648 Telephone No. (323) 965-3998; Facsimile No. (323) 965-3908. On November 30, 2011, I caused to be served the document entitled PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S OPPOSITION TO DEFENDANT GLISSON’S MOTION TO BIFURCATE LIABILITY AND DAMAGE ISSUES FOR TRIAL on all the parties to this action addressed as stated on the attached service list:

[ ] OFFICE MAIL: By placing in sealed envelope(s), which I placed for

collection and mailing today following ordinary business practices. I am readily familiar with this agency’s practice for collection and processing of correspondence for mailing; such correspondence would be deposited with the U.S. Postal Service on the same day in the ordinary course of business.

[ ] PERSONAL DEPOSIT IN MAIL: By placing in sealed

envelope(s), which I personally deposited with the U.S. Postal Service. Each such envelope was deposited with the U.S. Postal Service at Los Angeles, California, with first class postage thereon fully prepaid.

[ ] EXPRESS U.S. MAIL: Each such envelope was deposited in a

facility regularly maintained at the U.S. Postal Service for receipt of Express Mail at Los Angeles, California, with Express Mail postage paid.

[ ] HAND DELIVERY: I caused to be hand delivered each such envelope to

the office of the addressee as stated on the attached service list. [ ] UNITED PARCEL SERVICE: By placing in sealed envelope(s)

designated by United Parcel Service (“UPS”) with delivery fees paid or provided for, which I deposited in a facility regularly maintained by UPS or delivered to a UPS courier, at Los Angeles, California.

[ ] ELECTRONIC MAIL: By transmitting the document by electronic mail

to the electronic mail address as stated on the attached service list. [X] E-FILING: By causing the document to be electronically filed via the

Court’s CM/ECF system, which effects electronic service on counsel who are registered with the CM/ECF system.

[ ] FAX: By transmitting the document by facsimile transmission. The

transmission was reported as complete and without error. I declare under penalty of perjury that the foregoing is true and correct. Date: November 30, 2011 /s/ John B. Bulgozdy John B. Bulgozdy

Case 2:09-cv-00104-LDG-GWF Document 91-1 Filed 11/30/11 Page 1 of 2

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SEC v. MARCO GLISSON United States District Court - District of Nevada

Case No. 2:09-cv-00104-LDG-GWF (LA-3028)

SERVICE LIST

Frederick A. Santacroce, Esq. 706 South Eighth Street Las Vegas, NV 89101 Email: [email protected] Attorney for Marco Glisson Robert H. Bretz, Esq. 578 Washington Boulevard, Suite 843 Marina del Rey, CA 90292 Email: [email protected] Attorney for Marco Glisson

Case 2:09-cv-00104-LDG-GWF Document 91-1 Filed 11/30/11 Page 2 of 2

sec opp glisson motion bifurcate liability damage show_temp

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