Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, May 19, 2008

SEC v. Berry

As attorneys are well aware, the SEC has been bringing enforcement actions against inhouse counsel, particularly with respect to backdating stock options.  Since there are, to date, few opinions, every one is of interest.  Recently, the federal district court for the Northern District of California granted in part a motion to dismiss by Lisa Berry, a former General Counsel at two public corporations who, the SEC alleges, backdated options at both corporations.  The court found that the five-year statute of respose was applicable to the SEC's request for civil penalties (but not to its requests for other kinds of relief), but that the SEC could amend its complaint to allege equitable tolling because of the attorney's fraudulent concealment.  The court also held that the SEC's conclusory pleading that the attorney reviewed, discussed and finalized corporate filings was insufficient to plead scienter.  The court also rejected  the defendant's argument that the SEC could not bring aiding and abetting charges against her, since it did not charge any primary violators.  "While the argument may have some equitable appeal, it has no legal basis."  SEC v. Berry, 2008 WL 2002537 (N.D.Cal. May 7, 2008).

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