Monday, November 2, 2009

Securities Fraud Disbarment

The New York Appellate Division for the First Judicial Department held that a federal felony conviction for conspiracy to commit securities fraud triggered the automatic disbarment provisions of the law:

A conviction of a federal felony does not trigger automatic disbarment unless the offense would constitute a felony under the New York Penal Law (see Matter of Kim, 209 AD2d 127, 129 [1995]; Judiciary Law § 90[4][e]). The federal felony need not be a mirror image of the New York felony, precisely corresponding in every detail, but it must be essentially similar (Matter of Margiotta, 60 NY2d 147, 150 [1983]).

The underlying federal felony of conspiracy to commit securities fraud has no direct felony analog under New York law. Nevertheless, the requisite essential similarity may be established by reading the admissions made under oath during respondent's plea allocution in conjunction with the federal information.

During his plea allocution, respondent admitted that he was a consultant specializing in mergers and acquisitions of publicly traded companies. On or about December 2, 1998, respondent became a shareholder of Global Datatel, Inc. Respondent admitted that in 1999, he conspired with others to disseminate or cause the dissemination of false and misleading information about Global and its subsidiary in order to induce the investing public to purchase shares of the company. This activity caused Global's stock prices to artificially rise and its market capitalization to increase. Respondent further admitted that his actions were designed to violate federal securities laws for the purpose of enriching himself and others.

Here, respondent's admitted conduct would constitute a class E felony under General Business Law § 352-c(5) or (6) which both involve fraud in inducing or promoting the sale or purchase of securities. Automatic disbarment is, therefore, proper.

(Mike Frisch)

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