Banking

Charlotte accountant wins first round in SEC case

The Securities and Exchange Commission headquarters in Washington, D.C.
The Securities and Exchange Commission headquarters in Washington, D.C. Bloomberg

A Charlotte accountant has won the first round in a fraud case brought in September by Securities and Exchange Commission enforcement lawyers.

An administrative law judge last month dismissed part of the case against Paul Edward “Ed” Lloyd Jr., while leaving a remaining issue to be heard at a hearing that starts Monday in Charlotte.

The case involved investments in land conservation easements designed to create tax deductions. In a blow to the SEC’s enforcement division, Administrative Law Judge Carol Fox Foelak ruled Feb. 27 that the investments were not securities, meaning Lloyd could not have violated certain securities laws.

“The Court’s order dismissed all claims for securities fraud under both the 1933 and 1934 acts, because conservation easements simply are not securities,” Lloyd’s attorney, Rick Sharpless, said in a statement. “The Court vindicated our position, which we provided to the Enforcement Division from the start, that there was no security.”

The remaining issue to be heard starting Monday relates to allegations that Lloyd didn’t invest all the money he collected from clients, which he disputes.

Lloyd, 52, a CPA and tax planner, has consistently told SEC lawyers there was no evidence of fraud, Sharpless said.

“Although a limited number of claims remain to be decided at a hearing, we are confident that Mr. Lloyd will be vindicated,” he said. “The claims left concern investment advisory clients, and every one of them has already testified that they were pleased with the service received and that they received exactly what they were promised.”

Bill Hicks, the SEC’s associate regional director in Atlanta, did not immediately respond to a request for comment.

The case is an example of how SEC lawyers are increasingly turning to the agency’s own administrative law judges to hear its cases, rather than federal judges in U.S. District Court. Defense attorneys have noted that the SEC’s lawyers have a better record in front of administrative law judges.

In the fiscal year ended Sept. 30, the SEC’s enforcement division was 12-0 in administrative proceedings, compared with 11-5 in jury trials. In the current fiscal year, SEC attorneys are 1-0 in administrative proceedings and 2-0 in jury trials.

Rothacker: 704-358-5170; Twitter: @rickrothacker

  Comments