Securities Law

SEC Sues Lawyers for Aiding Alleged Scheme

A civil lawsuit filed yesterday against two lawyers yesterday by the Securities and Exchange Commission may be a legal first.

The suit is apparently the first time the agency has sought damages from lawyers for their legal work rather than their stock trades, the New York Times reports.

The suit claims the lawyers participated in a “pump and dump” scheme to help company principals dump shares of a failing company into the market, according to a press release.

The SEC contends Arizona lawyer David Stocker wrote legal opinion letters to justify the issuance of shares in the failing company, AVL Global. It also contends that Texas lawyer Phillip Offill Jr. set up a sham company so the stock sales did not need to be registered with the SEC.

Most of the shares were transferred from the sham company to a company principal who sold them in the open market, the suit says.

The Times was not able to reach lawyers for Stocker and Offill for comment.

“This case shows that the commission will pursue not only those who perpetrate penny stock fraud but also those who facilitate such schemes,” Linda Chatman Thomsen, the commission’s director of enforcement.

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