by T. GormanPosted on Posted in SECActions

The key role of compliance threads through the continuing saga of Jefferies & Co. trader Jesse Litvak as well as a series of similar cases. Mr. Litvak is one of a number of traders who were indicted by the U.S. Attorney’s Office for allegedly making misstatements to counterparties while trading residential mortgage backed securities or RMBS. Although those markets are largely opaque, the traders and counterparties are highly sophisticated, employing complex pricing models to guide their transactions. Mr. Litvak, who was initially indicted in 2013, was just freed from prison following the second reversal of his conviction by the Second Circuit Court of Appeals. U.S. v. Litvak, No. 17-1464 (2nd Cir. May 3, 2018).

Trader Litvak was initially indicted on eleven counts of securities fraud, one count of TARP fraud and four counts of making false statements. The transactions took place over about a two year period beginning in 2009. Mr. Litvak’s book of business had been declining. The indictment alleged that the trader lied to his clients to induce them to enter into transactions that profited him and his firm by about $2 million. U.S. v. Litvak, No. 13 cr-00019 (D. Conn. Filed Jan. 25, 2013).

The victims, according to the indictment, included the U.S. Treasury through its Securities Public Private Investment Program or PPIP, part of the TARP bailout program. They also included other sophisticated funds and investors. The transactions involved complex discussions in which the parties went back and forth. Those discussions were conducted by the trader, the counterparties, their supervisor and others in many instances.

In February 2014 Mr. Litvak went to trial for the first time. The jury return guilty verdicts on all counts after a fourteen day trial. Jesse Litvak was sentenced to serve twenty-four months in prison, three years of supervised release and pay a $1.75 million fine. An appeal to the Second Circuit was filed. Mr. Litvak remained at liberty on bond.

The Second Circuit reversed.The Court focused on two key issues: 1) Materiality; and 2) the exclusion by the trial judge of certain expert testimony. First the Court addressed the question of materiality relating to the TARP fraud charges, reversing the convictions on those counts. The definition of materiality under those statutes differs from the traditional “total mix” definition of TSC Industries which centers on what may be of importance to a reasonable investor making an investment decision.

To establish a violation under the TARP counts the government was required to prove that the defendant: 1) knowingly and willfully 2) made a material false, fictitious or fraudulent statement 3) in relation to a matter within the jurisdiction of the department or agency of the U.S. and 4) with knowledge that it was false or fictitious. The key element here is the second. The definition of materiality for that element is a statement that “has a natural tendency to influence, or be capable of influencing, the decision making body to which it was addressed. Here the decision making body was the Department of the Treasury. Since the Department structured the decision making process for these transactions in a manner which shielded the decision maker from any statements made by a trader such as Mr. Litvak, the Court conclude his statements could not have been material to its decision. Each TARP count was reversed.

Second, the Court held that the exclusion of the expert testimony constituted reversible error. That testimony would have informed the jury about the “rigorous valuation procedures” used by traders in the RMBS market which is opaque and the sophisticated procedures employed to evaluate the price of the securities because the markets are not efficient. The Court concluded that excluding such testimony was reversible error.

Mr. Litvak was retried in January 2017. Only the first eleven counts (absent number 7) were submitted to the jury – the TARP and false statement counts were dropped. Prior to trial Mr. Litvak made a motion in limine to bar counterparty representatives from testifying that they believed he was acting as their agent. This assertion was in accord with a representation made by the government at oral argument before the Second Circuit – all parties agreed that in fact Mr. Litvak was not an agent of the counterparties and thus had no fiduciary duty.

Despite that admission, the district court, at the urging of the government, permitted testimony by two counterparty witnesses stating that in their view the trader was an agent. Yet the compliance department for one of the witnesses had instructed him to the contrary – that is, the trader was not an agent but a principle. During final argument the government told the jury that the agency issue was a “red herring.” Rather, the critical point of the testimony on the agency issue was “’to establish a relationship of trust to lead them [counterparties] all to think that he [the trader] was trustworthy.’” The jury instructions stated that the trader was not an agent of the counterparties.

The jury returned a verdict of not guilty on all counts except one of securities fraud. Mr. Litvak was sentenced to serve 24 months in prison followed by three years of supervised release, the same sentence he had initially received. He was also ordered to pay a $2 million fine, up from the $1.75 million imposed after the first trial. A request for bail pending appeal was denied.

The Second Circuit again reversed. In the first appeal, the Court stressed the importance of the agency relationship to the materiality issue. Testimony on the agency issue was relevant “because it might cause a jury to ‘construe [Litvak’s misstatements] as having great import to a reasonable investor if coming from the investor’s agent.’” (emphasis original).

At the retrial, however, it was undisputed that Mr. Litvak did not act as the agent of the counterparty on the transaction for which he was convicted. Nevertheless, the testimony on agency was admitted at the urging of the government which claimed that if “trust exists . . . a jury could interpret misstatements by appellant as more likely to be material.” Yet the materiality standard is an objective one based on a hypothetical, reasonable investor. “It can hardly be the law that the ‘point of view’ . . . of an investor who is admitted to be wrong . . . is relevant to prove what a reasonable investor . . .would have deemed important. The agency issue raised by the government’s proffer of Norris’s [counterparty witness] testimony was indeed an irrevelant ‘red herring,’” the Court found. “While the individual views of a counterparty trader may usually be relevant to the nature of the market involved . . . a reasonable investor would not misperceive the role of a broker-dealer in the RMBS market.” The fact that the compliance department of the firm at which the witness was employed instructed him that the trader was not an agent but rather was acting as a principle confirms this point, the Court found.

Under the circumstances of this case, the “government’s concept of subjective trust as evidence of materiality became a back door for the jury to apply the heightened expectations of trust that an agency relationship carries. The government’s argument similarly ignores the settled law that those at either end of an arms-length transaction are acting only in their own self-interest.” Accordingly, the admission of the testimony was error and, in view of the verdict on the one count, it cannot be harmless. This is particularly true in view of the fact that on the counts where the jury returned verdicts of acquittal there either was no counterparty testimony or those parties testified that the statements of the trader were viewed with suspicion. “We conclude that the district court’s error in admitting testimony on agency was not harmless and requires a vacatur.” The judgment of conviction was reversed, Mr. Litvak ordered released on an appropriate bond, and the case remanded for further proceedings.

Comment

Litvak is one of a number of criminal cases brought by the U.S. Attorney’s Office, at times paralleled by the SEC, tied to trading in RMBS or similar securities in opaque markets as discussed here. Typically those cases centered on claims by the government that the trader made misrepresentations to the counterparties which constituted fraud. While the relationship among the traders and counterparties, as here, was critical in each instance, the role of compliance was also key.

In the second appeal by Mr. Litvak the fact that compliance confirmed the lack of an agency relationship was important to the Court’s decision. In other cases in this group (here), compliance apparently enabled the traders who believed that the department knew and tolerated the “wild west” and “anything goes” kind of tactics often used in these markets which are at the center of all the cases. This more than suggests that the real point of all these cases is not so much the statements made by traders to counterparties but the role of compliance. Better, more effective compliance could have prevented the wild west atmosphere and avoided all of the government enforcement actions – compliance should be the first line of defense for a firm and its employees, not, as here, the last.

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by T. GormanPosted on Posted in SECActions

Speeches were key this week. Steven Pelkin, Co-Director of the SEC’s Enforcement Division delivered remarks focused on the Wells process, offering suggestions for defense counsel. Deputy Attorney General Rod Rosenstein delivered two speeches in on day discussing new policies in white collar cases and regarding the FCPA. Essentially, Mr. Rosenstein noted that the FCPA cooperation policy adopted last year was intended to facilitate responsible corporate conduct while other policy changes were designed to facilitate coordination with law enforcement partners while avoiding piling on in resolving matters.

SEC Enforcement centered on two key topics this week. One was asset valuation at investment advisers. In two separate cases the advisers were charged with using false prices for difficult to value securities. The second was insider trading. In one case arising out of Singapore two brothers, one of whom had previously been enjoined for insider trading by the Commission, were involved in trading in advance of a takeover, although only one brother was named as a defendant.

SEC

Remarks: Steven Pelkin, Co-Director, Division of Enforcement, delivered the Keynote Address at the New York City Bar Association’s 7th Annual White Collar Crime Institute, New York, New York (May 9, 2018). The remarks provided a series of insights into how to prepare for, and make an effective Wells presentation (here).

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the SEC filed 4 civil injunctive cases and 5 administrative proceedings, excluding 12j and tag-along proceedings.

Unregistered broker: In the Matter of Jason J. Lee, Adm. Proc. File No. 3-18478 (May 10, 2018) is a proceeding which names as Respondents Mr. Lee, an attorney, and his law firm, Law Offices of Jason J. Lee. From 2013 through 2015 Mr. Lee earned commissions from one EB-5 Investment Officer totaling at least $275,000. During the period Respondents solicited investors for the program and effected the transactions in the securities. Respondents directed the commissions be paid to a foreign bank account held by a relative. The Order alleges violations of Exchange Act section 15(a)(1). To resolve the proceedings Respondents each consented to the entry of a cease and desist order based on the section cited in the Order. In addition, they will pay disgorgement of $275,000, prejudgment interest of $25,000 and a penalty of $37,500.

Valuation: SEC v. Premium Point Investments, LP, Civil Action No. 24138 (S.D.N.Y. Filed May 9, 2018) names as defendants the firm, a registered investment adviser, Anilesh Ahuja, its CEO and CIO, and Jeremy Shore, a former partner and portfolio manager. From September 2015 through March 2016 the firm struggled with poor performance and redemptions. To forestall the redemptions Mr. Majidi sought to conceal the fund’s poor performance. To effect this Defendants first arranged to obtain inflated price quotes from a broker in exchange for brokerage for valuing certain bonds. Second, while the firm used an imputed method to value certain securities by essentially using the midpoint on the spread, it began using the method to further inflate the prices. Overall prices were inflated about 14% during the period. The scheme collapsed when the firm could not sell its holdings at the inflated prices to meet redemptions. The complaint alleges violations of Securities Act Section 17(a)(1) and (3), Exchange Act section 10(b) and Advisers Act sections 206(1), 206(2) and 206(4). The case is pending. See Lit. Rel. No. 24138 (May 9, 2018). The Manhattan U.S. Attorney’s Office filed a parallel criminal action.

Muni offerings: In the Matter of Barcelona Strategies, LLC, Adm. Proc. File No. 3-18476 (May 9, 2018) names as Respondents the firm and Mario Hinojosa. The firm was a registered municipal advisor. It is wholly owned by Mr. Hinojosa, an employee of a law firm, who set it up. Respondents acted as municipal advisers on three offerings between January 2013 and December 2014 for the La Joya Independent School District, earning $386,876.51. To secure the position they misrepresented their experience as municipal advisers – they had none. Defendants also failed to disclose the conflict arising from the fact that Mr. Hinojosa, the sole employee of the firm, worked for the law firm. The Order alleges violations of Exchange Act Section 15B and MSRB Rule G-17. To resolve the matter each Respondent consented to the entry of a cease and desist order based on the section and rule cited in the Order. Respondents will pay, jointly and severally, disgorgement of $362,606.91 and prejudgment interest of $19,514.37. The firm will also pay a penalty of $160,000. Mr. Hinojosa will pay a penalty of $20,000. He is also barred from the securities business.

Valuation/insider trading: In the Matter of Visium Asset Management, L.P., Adm. Proc. File No. 3-18473 (May 8, 2018). Visium was a registered investment adviser with more than $7.8 billion of assets under management. Two related investment vehicles were involved here: Visium Credit Master Fund, LT. – the Credit Fund – and Visium Balanced Master Fund Ltd. – the Balanced Fund. In May 2009 the adviser launched the Credit Fund. It focused on higher risk investments such as thinly traded corporate debt instruments issued by healthcare companies. As redemptions increased Respondents sought to stem the cash drain by bolstering performance.

From July 2011 to December 2012 portfolio managers Christopher Plaford and Stefan Lumiere engaged in a mismarking scheme to falsely value certain securities held by the Credit Fund and improperly inflate the NAV and apparent performance. The scheme was implemented by obtaining falsified prices from outside brokers. Defendants also obtaining inside information from the Office of Generic Drugs or OGD at the Federal Food and Drug Administration through two different consultants who formerly worked for the government. The Order alleges violations of Securities Act section 17(a), Exchange Act section 10(b), and Advisers Act sections 204A, 206(1), 206(2), 206(4), and 207. To resolve the proceedings, Respondent undertook to return all investor funds no later than one year from the date of the Order and filed a Form ADV-W to withdraw its registration as an investment adviser. Respondent also consented to the entry of a cease and desist order based on the sections cited in the Order as well as a censure. The firm will pay disgorgement of $4,755,223 and prejudgment interest of $720,711. In addition, Respondent will pay a penalty equal to the amount of the disgorgement. See also In the Matter of Steven Ku, Adm. Proc. File No. 3-18474 (May 8, 2018)(proceeding against CFO for failure to supervise two portfolio managers re valuation; resolved with the suspension of Respondent from the securities business for a period of twelve months and the payment of a $100,000 civil penalty).

Boiler room: SEC v. Houlihan, Civil Action No. 9:18-cv-80585 (S.D. Fla. Filed May 4 2018) is an action which names as a defendant Keith Houlihan, the operator from 2009 through 2015 of a nationwide boiler room that sold shares of Sanomedics. Over 700 investors purchased shares in the firm based on false representations that the stock was being sold at a deep discount and without being told that large portions of their investment would go to commissions and Mr. Houlihan. The complaint alleged violations of Securities Act section 17(a) and Exchange Act section 10(b), 13(a) and 15(a). Previously, Mr. Houlihan was charged in a criminal case in which he was ordered to serve 111 months in prison and pay restitution of about $21 million. He resolved the Commission’s action by consenting to the entry of a permanent bar and a penny stock bar. See Lit. Rel. No. 24137 (May 9, 2018).

Insider trading: SEC v. Rungraungnavarat, Civil Action No. 18-cv-03196 (N.D. Il. Filed May 4, 32018) is an action which names the resident of Bangkok, Thailand as a Defendant. The brother of Defendant, Badin, was enjoined in a Commission enforcement action for insider trading in June 2013. This case centers on the acquisition of Smithfield Foods, Inc. by Shuanghui Holdings International, announced before the opening of the markets on May 29, 2013. The deal represented a 31% premium to market. Prior to the announcement date Investment Banker, who worked on the deal at Thai Investment Bank, was involved in the transaction. He was also a longtime friend of Defendant. Investment Banker told Defendant about the deal by no later than May 3, 2013, according to the complaint. Subsequently, Defendant purchased 75,000 shares of Smithfield stock, 3,000 Smithfield call options and 2,580 Smithfield single-stock futures contracts through four different accounts at firms in Singapore. The transactions were done in coordination with his brother as reflected in emails. The purchases were executed on U.S. based exchanges. Defendant had illicit proceeds of about $3.8 million following the deal announcement. See also Lit. Rel. No. 24136 (May 7, 2018).

Insider trading: SEC v. Zimliki, Civil Action No. 1:18-cv-00947 (M.D. Pa. Filed May 4, 2018) is an action which names as defendants David Zimliki, a dentist, and Russel Schiefer, an energy trader. The action centers on the acquisition of Golden Enterprises, Inc. by Utz Quality Foods, LLC, announced on July 19, 2016. The deal was priced at a 60% premium to market. Prior to the deal announcement Mr. Zimliki misappropriated inside information about the transaction from a close personal friend who was a Banker working on the deal for Utz. He furnished the information to his friend, Mr. Schiefer, who also knew Banker. Both men purchased shares. After the deal announcement Mr. Zimliki had profits of $9,319 while Mr. Schiefer had profits of $5,877. The complaint alleges violations of Exchange Act Section 10(b). Each Defendant settled, consenting to the entry of a permanent injunction based on the section cited in the complaint. Each also agreed to pay disgorgement in the amount of their profits, prejudgment interest and a penalty equal to the amount of their disgorgement. See Lit. Rel. No. 24134 (May 4, 2018).

Custody rule violation: In the Matter of Winter, Kloman, Moter & Repp, S.C., Adm. Proc. File No. 3-18466 (May 4, 2018) is a proceeding which names as Respondents the audit firm and two of its partners, Curtis W. Disrud, CPA and Paul R. Schmer, CPA. The audit firm was retained by Voit Fund GP, LLC, an affiliate of Voit & Company, LLC, a registered investment adviser. Their assignment was to audit the financial statements of six pooled investment vehicles that Voit advised for purposes of the custody rule. There were also engaged to audit the Funds. Voit was unaware that the two partners on the engagement failed to meet the requirements of the custody rule. First, they were not independent because they had prepared the financial statements for the Funds in 2014 and 2015. Second, the firm was not subject to regular inspection by the PCAOB. Accordingly, Respondents caused violations of the custody rule. They also engaged in unprofessional conduct by failing to properly plan the engagement and ensure that the engagement team had the proper technical training. To resolve the proceedings each Respondent consented to the entry of a cease and desist order based on Section 206(4) of the Advisers Act. Each Respondent is also denied the privilege of appearing and practicing before the Commission. The firm and Mr. Schmer may each apply for reinstatement after one year while Mr. Disrud may apply after two years. The firm will also pay disgorgement of $17,531, prejudgment interest of $1,317 and a penalty of $15,000.

FINRA

Suitability: The regulator fined Fifth Third Securities, Inc. $4 million and required that about $2 million in restitution be paid for improper transactions with regard to variable annuities. Specifically, the regulator found that the firm failed to properly consider and accurately disclose the costs and benefits of variable annuity exchanges and made recommendations without a reasonable basis to believe the exchanges were suitable. The firm also failed to properly train its staff regarding the instruments. The firm failed to comply with the terms of its 2009 settlement with regard to variable annuities, in addition to the current violations.

Criminal Cases

Remarks: Rod J. Rosenstein, Deputy AG delivered remarks at the New York City Bar White Collar Crime Institute, New York, New York (May 9, 2018). The remarks focused on recent policy changes which center on coordinating with other law enforcement agencies (here).

Offering fraud: U.S. v. Cranney, No. 1:14-cr-10276 (D. Mass. Verdict May 8, 2018) names as a defendant John W. Cranney. Defendant Cranney was found guilty by a jury following a two week trial on three counts of wire fraud, 12 counts of mail fraud and three counts of money laundering. From 2001 through 2012 he solicited investor funds from those with whom he had personal and business relationships. He represented that investor funds would be invested. To facilitate this he set up a number of different shell companies and fake IRA and 401k retirement plans. In fact he diverted the investor funds to his personal use. The scheme collapsed in early 2012 when he could not obtain new investment money and investors began demanding a return of their investment. Sentencing is scheduled for August 2, 2018.

Offering fraud: U.S. v. Trolice, No. 2:17-cr-00120 (D.N.J) is an action in which James Trolice previously pleaded guilty to a two count information charging him with securities fraud and transacting in criminal proceeds. He was sentenced this week to serve 19 months in prison followed by three years of supervised release. In addition, the court directed that he pay $5,000,512.65, representing the proceeds of the fraudulent scheme. Previously, co-defendant Lee Vaccaro pleaded guilty and was sentenced to serve 78 months in prison. The scheme centered on Trolice Consulting Services LLC and eAgency, a California based firm that developed mobile security products. The two defendants sold investors interests in the consulting firm and others controlled by Mr. Vaccaro. Investors were falsely told that the companies held warrants for eAgency. By January 2011 the dollar amount of the interests the two defendants sold in the firms surpassed the dollar amount of valid warrants held by the entities. Investors were never told that any interest they acquired was being diluted. The two men defrauded investors out of about $5 million.

Offering fraud: U.S. v. Holdaway, No. 3:16-cr-00250 (N.D. Cal.) is an action in which a jury found defendant Kevin Kyes guilty on one count of conspiracy to commit wire fraud, and two counts of money laundering. The charges were based on an investment fraud in which almost $7 million was raised by Defendant Keys and his co-conspirator, John Holdaway, who previously pleaded guilty. From December 2012 through July 2015 the two men targeted a group of Japanese investors, convincing them to invest in their firm Money Management Strategies which supposedly engaged in high speed trading. The investors were assured their funds were safe because they would remain in a bank account and be used only to collateralize a line of credit to fund the trading. In reality the operation was a Ponzi scheme. Investors were given false documents to conceal this fact. Sentencing is scheduled for August 17, 2018.

Insider trading: U.S. v. Blaszczak, No. 1:17-cr-00357 (S.D.N.Y. Verdict May 4, 2018). The Defendants convicted are: David Blaszczak, a political intelligence consultant and former CMS employee; Christopher Worrall, an employee of CMS since 1999 and longtime friend of Mr. Blaszczak; and Theodore Huber and Robert Olan, partners and analysts at Deerfield Management Company, L.P., a healthcare-focused hedge fund in New York. Previously, Jordan Fogel, also a health care analyst at Deerfield, pleaded guilty to criminal charges and settled claims with the SEC. He entered into cooperation agreements with the U.S. Attorney’s Office and the SEC. The case centered on alleged tips of inside information by Mr. Worrall to Mr. Balaszczak about three significant rate changes at CMS between May 2012 and November 2013, according to papers in the criminal case and the SEC’s complaint. In each instance Deerfield traded profitably, reaping $3.9 million in illicit trading profits. See also SEC v. Blaszczak, Civil Action No. 1:17-cv-03919 (S.D.N.Y. Filed May 24, 2017).

Anti-Corruption/FCPA

Remarks: Rod J. Rosenstein, Deputy AG, delivered remarks at the American Conference Institute’s 20th Anniversary New York Conference on the Foreign Corrupt Practices Act, New York, New York (May 9, 2018)(here). The remarks focused on the purpose of the policy on cooperation adopted last November which is to encourage responsible corporate behavior. At the same time DOJ is coordinating with other enforcement agencies to avoid “piling on” in resolving matters (here).

Circuit Courts

Variabedian v. Emulex Corporation, No. 16-55099 (9th Cir. Filed April 20, 2018) is a securities class action based on Exchange Act Section 14(e) and Section 20(a) centered on the tender offer by Avago Technologites Wireless Manufacturing, Inc. for Emulex Corporation, announced on February 25, 2015. Following the deal announcement a punitive class action was brought alleging that the tender offer materials contained a material omission because they did not summarize a Premium Analysis prepared by one of the investment bankers in the deal which would have shown that the premium to market offered was below market. The District Court dismissed the complaint with prejudice, concluding that Section 14(e) required scienter which plaintiff failed to plead.

The Circuit Court reversed, concluding that one of the two parts of Section 14(e) only requires that a securities law plaintiff plead and prove a cause of action based on negligence: “We now hold that Section 14(e) of the Exchange Act requires a showing of negligence, not scienter. This holding is, as the Court acknowledged, contrary to decisions in five other circuits.

The Ninth Circuit’s decision is based on the statutory text, bolstered by its purpose and history. The statute states in pertinent part: “It shall be unlawful for any person (1) to make any untrue statement of a material fact or omit to state any material fact . . . or (2) to engage in any fraudulent, deceptive, or manipulative acts or practices . . .” (emphasis added). The use of the word “or” separates the two clauses of the Section, the Court stated, and is significant. This shows that there are two different offenses proscribed by the statute. The first focuses on misstatements and omissions. The second, on manipulative acts and practices.

Careful consideration of the Supreme Court’s decisions parsing the language of Section 10(b) of the Exchange Act demonstrates that there are important distinctions between that provision and section 14(e). When the Supreme Court began its examination of rule 10b-5’s language in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) it initially focused on the phrase stating that “It shall be unlawful . . . [t]o make any untrue statement of a material fact or omit to state any material fact . . .” That passage, the Court allowed, could be read as proscribing any type of material misstatement, regardless of intention. In Hochfelder the Court held, however, that section 10(b) and the rule require proof of scienter. That conclusion was based on the fact that the rule could not be broader than the Section which in fact requires scienter: “Rule 10b-5 requires a showing of scienter because it is a regulation promulgated under Section 10(b) of the Exchange Act, which allows the SEC to regulate only ‘manipulative or deceptive device[s].’”

Three years later the Supreme Court decided Aaron v. SEC, 446 U.S. 680 (1980) which considered the knowledge requirement of Section 10(b) and Securities Act Section 17(a) in the context of an SEC enforcement action. There the Court reaffirmed its decision in Hochfelder as to section 10(b). As to Securities Act section 17(a)(2) however, the Court reached a different conclusion. That subsection prohibits “’any untrue statement of a material fact or any omission to state a material fact . . .’” In view of this language the Aaron Court held “that Section 17(a)(2) does not require a showing of scienter.” (emphasis original).

The language of Section 17(a)(2) is substantially similar to that of the first part of Section 14(e). Both prohibit misrepresentations and omissions. Under these circumstances Aaron compels the conclusion that the first part of section 14(e) only requires proof of negligence. The Court bolstered its conclusion, citing the purpose and history of section 14(e). While the Court acknowledged that five other circuits had reached a contrary result, three of those decisions were prior to Aaron. The other two posted dated that decision but failed to analyze it.

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