By Sarah N. Lynch
WASHINGTON, (Reuters) - The U.S. Securities and Exchange Commission scored a partial victory on Tuesday after a jury found hedge fund manager Marlon Quan liable for helping to facilitate a $3.65 billion Ponzi scheme.
But the Minneapolis jury produced a mixed verdict on whether Quan knowingly committed fraud, finding that under one law he did intentionally commit fraud, but under another he didn't.
It was the second time in less than two weeks that conflicting jury verdicts have led both the SEC and defendants to declare victory.
The SEC alleged that Marlon Quan, of Greenwich, Connecticut, and several funds he controlled invested millions of dollars with Thomas Petters, a Minnesota businessman who was convicted of running a Ponzi scheme in 2009. When Petters's Ponzi scheme began to unravel and he started to default on his payouts, the SEC said Quan executed a "series of convoluted transactions" to hide the defaults from investors.
Petters is currently serving a 50-year prison term for perpetrating the Ponzi scheme, which lasted for over a decade.
"We're very pleased the jury found Marlon Quan liable for securities fraud and that he will be held accountable for his deception in funneling several hundred million dollars of investor money into the Tom Petters Ponzi scheme," the SEC's enforcement director, Andrew Ceresney, said in a statement.
Bruce Coolidge, an attorney with Wilmer Hale who represented Quan, saw the verdict in a much different light.
"The jury unanimously found that the SEC prevailed on one of its securities fraud claims, and it unanimously found that Mr. Quan prevailed on the other securities fraud claim for the same conduct," he said.
Since a verdict has to be unanimous in order for a defendant to be liable, the SEC essentially failed to sustain its claims, Coolidge said.
Earlier this month, a jury in Texas issued a split verdict on whether Life Partners Holdings was liable for intentional fraud, with the SEC losing on eight of its 12 claims.
This time around, the SEC won on the majority of its claims, but still lost on a few crucial claims.
The verdict underscores how difficult it can be for the SEC to obtain clear-cut victories in complex securities cases.
SEC Chair Mary Jo White, a former federal prosecutor, recently pledged that her trial unit stands ready to try more cases. Her comments came after she said the SEC would try to extract admissions of wrongdoing in some cases, an act she acknowledged could lead to more trials.
Despite White's background as a litigator and the hiring of a handful of other ex-prosecutors, the SEC in recent months has suffered a string of both full-blown defeats and mixed verdicts.
The cases lost so far all began well before White joined the SEC, and many in the legal community are watching to see whether White can help bullet-proof more of the cases that go to trial.