United States SEC v. Camarco

United States SEC v. Camarco

Opinion

ORDER AND JUDGMENT¹

This appeal asks us to determine the extent to which a husband and a family trust must disgorge the benefits of a wife's fraudulent activities. Sonya Camarco ("Sonya")² worked as a financial advisor for LPL Financial, embezzling over $2 million in client funds between 2004 and August 2017. Over the course of those years, Sonya deposited client funds into her personal accounts and an account belonging to Camarco Investments, Inc. ("CI"). From her [*2]  and CI's accounts, Sonya dispersed money to the Camarco Living Trust ("CLT"), financed the purchases of real properties that were eventually titled to CLT, and purchased furniture, artwork, and home improvement items for the real properties. Sonya also used funds from the accounts to purchase vacations for herself and her husband, Paul Camarco ("Paul").

In August 2017, the Securities and Exchange Commission ("SEC") commenced this disgorgement action against Sonya, CI, CLT, and Paul. The statute of limitations permitted the SEC to seek disgorgement of funds taken by Sonya during the five years prior to commencement of this action. After holding a remedies hearing at which Michael Hennigan testified as an accounting expert on behalf of the SEC, the district court ordered Paul to pay $109,927.95. The district court also ordered CLT to pay $865,000.00 in disgorgement, for which it was jointly and severally liable with Sonya. Further, the district court ordered the sale of the furnishings and artwork, but it did not credit the sale price of those items to the disgorgement amount owed by CLT. Additionally, the district court's order made LPL Financial eligible to receive disgorged monies [*3]  based on its reimbursement of some impacted investors.

Paul and CLT appeal, arguing the district court (1) exceeded its equitable powers in formulating its judgment; and (2) erred by designating LPL Financial a victim eligible to recover disgorged monies because, under 15 U.S.C. § 78u(d), a court may grant "equitable relief that may be appropriate or necessary for the benefit of investors." After outlining a court's equitable authority to order disgorgement and discussing whether the SEC must trace misappropriated funds to accounts and/or property held by a relief defendant, we conclude the SEC did not offer a permissible basis to support disgorgement in the amount of $865,000.00 as against CLT or the $109,927.95 as against Paul. Accordingly, we affirm in part and reverse in part, remanding for the district court to enter an order consistent with the disgorgement amounts proven by the SEC, as outlined in this opinion.

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