Securities Law Prof Blog

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

Monday, November 26, 2012

Attorney Liable for Aiding Securities Fraud by Drafting False Opinion Letter

A federal district court (S.D.N.Y.)recently granted the SEC partial summary judgment against attorney Virginia K. Sourlis for aiding and abetting securities fraud by issuing a false legal opinion that certain of her co-defendants used to obtain illegally more than six million shares of unrestricted stock of Greenstone Holdings, Inc.  Securities and Exchange Commission v. Greenstone Holdings, Inc. et al.

According to the SEC's summary judgment motion, in early 2006, Sourlis intentionally authored a materially false and misleading legal opinion, which Greenstone used to illegally issue over six million shares of stock in unregistered transactions. Among other things, Sourlis falsely described promissory notes, note holders, and communications with those holders, none of which actually existed. The SEC asserted that, contrary to Sourlis' fraudulent opinion letter, the stock issuance did not qualify for an exemption from registration under the federal securities laws.

The Court held Sourlis liable for aiding and abetting securities fraud under Section 10(b) of the Securities Exchange Act of 1934 but denied the SEC summary judgment against Sourlis for primary liability under Section 10(b). The Court also reserved decision on the SEC's non-fraud claim that Sourlis violated Section 5 of the Securities Act of 1933.

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