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Securities and Exchange Commission v. Capital Solutions Monthly Income Fund, Lp

United States District Court, D. Minnesota

December 18, 2014

Securities and Exchange Commission, Plaintiff,
v.
Capital Solutions Monthly Income Fund, LP, f/k/a Hennessey Financial Monthly Income Fund, LP; Transactional Finance Fund Management, LLC; and Todd A. Duckson, Defendants.

Benjamin J. Hanauer, Esq., Daniel J. Hayes, Esq., Eric M. Phillips, Esq., and Marlene B. Key, Esq., counsel for the United States Securities and Exchange Commission.

Bryant D. Tschida, Esq., and Lawrence J. Field, Esq., Stinson Leonard Street LLP, counsel for Defendants Capital Solutions Monthly Income Fund, LP, and Transactional Finance Fund Management, LLC.

Scott R. Carlson, Esq., DC Law Chartered, counsel for Todd A. Duckson.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on Defendant Todd A. Duckson's ("Duckson") Motion for a New Trial. (Doc. No. 395.) For the reasons set forth below, the Court denies the motion.

BACKGROUND

The Securities and Exchange Commission ("SEC") commenced this action in September 2010, asserting a number of claims relating to alleged fraud in the offer and sale of certain investments.

A number of claims were dismissed on summary judgment, however, the SEC proceeded to trial in September 2013 on the remaining securities violations claims. At the time of trial, Defendants included Capital Solutions Monthly Income Fund, LP (the "Fund"), the Fund's investment manager, Transactional Finance Fund Management, LLC ("TFFM"), and attorney Duckson, who formed, owned, and controlled TFFM (collectively, "Defendants"). The trial included approximately five weeks of testimony and the admission of more than 300 exhibits. ( See Doc. No. 358.) The jury returned a verdict finding the Fund, TFFM, and Duckson liable on Counts I, II, and III of the Second Amended Complaint. (Doc. No. 355 ("Special Verdict Form").)

The Special Verdict Form separately addressed two time periods: (1) March 2008 through late October 2008 ("Period 1"); and (2) October 2008 through December 2009 ("Period 2"). ( Id. ) Specifically, with respect to Period 1, the jury found liability for the following: (1) direct violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, promulgated thereunder ("Section 10(b) & Rule 10b-5"), by the Fund; (2) aiding and abetting the Fund's violations of Section 10(b) & Rule 10b-5 by Duckson; and (3) direct violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") by Duckson and the Fund. ( Id. ) With respect to Period 2, the jury found liability for the following: (1) direct violations of Section 10(b) & Rule 10b-5 by Duckson, the Fund, and TFFM; and (2) direct violations of Section 17(a) of the Securities Act by Duckson and the Fund.[1] ( Id. ) Additionally, the jury, as finder of fact, concluded that, during Periods 1 and 2, Duckson and the Fund's direct violations of Section 17(a) were made knowingly, with recklessness, and negligently. ( Id. ) The jury also necessarily found that Defendants' violations of Section 10(b) & Rule 10b-5 were made knowingly or with reckless disregard. (Doc. No. 354 ("Jury Instructions").)

In November 2013, the SEC sought remedial relief from the Court ( see Doc. No. 362), which the Court largely granted ( see Doc. No. 392). Specifically, the Court ordered the following: (1) that the Fund, TFFM, and Duckson be permanently enjoined from committing any future violations of the Exchange Act and the Securities Act, and from aiding and abetting violations of any securities laws; (2) that Duckson be barred from serving as an officer or director of a publicly traded corporation for a period of ten years from the date the judgment in this action was entered; (3) disgorgement by the Fund in the amount of $12, 063, 430, plus prejudgment interest in the amount of $2, 519, 751; (4) joint and several disgorgement by Duckson and TFFM in the amount of $2, 960, 771, plus prejudgment interest in the amount of $340, 862; (5) additional disgorgement by Duckson in the amount of $709, 500 and $210, 855 prejudgment interest on that amount, $466, 343 and $63, 209 prejudgment interest on that amount, and $275, 000 and $31, 430 prejudgment interest on that amount; and (6) civil penalties against Duckson and TFFM in the amounts of $50, 000 and $15, 000, respectively.

Duckson now seeks a new trial or, alternatively, an amended judgment. (Doc. No. 396.)

DISCUSSION

I. Legal ...


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