By R. Jason Howard, J.D.
A federal district court in Massachusetts has entered a final judgment against a former partner in a California law practice for his part in defrauding investors in CitySide Tickets, Inc., a Massachusetts-based ticket brokering business (SEC v. Weed, June 22, 2018, Gorton, N.).
CitySide. The final judgment, stemming from a complaint filed in 2014, alleged that the former partner used reverse mergers to structure CitySide into a publically traded company and then used backdated promissory notes and false legal opinions to allow for the former partner and a co-conspirator to obtain million in unrestricted shares in CitySide.
The pair then sold the shares to investors after pumping up the company with false representations. By touting the company as a “budding national leader in the ticket selling industry,” the pair realized illicit profits of roughly $3 million.
On May 25, 2018, the Massachusetts District Court granted partial summary judgment against the former partner by “declaring that the defendant’s previous criminal fraud conviction collaterally estopped his re-litigation of this civil case.”
Penalties. The judgment imposes a permanent injunction against further violations, a penalty of $150,000 and a permanent bar from serving as an officer or director of a public company and from participating in penny stock offerings.
In May 2016, as part of a parallel criminal proceeding, the former partner was sentenced to 4 years in prison and 3 years of supervised release. He was ordered to pay a fine of $100,000 and to forfeit $90,000.
The case is No. 1:14-cv-14099-NMG.