[ by Melanie Gretchen ] SEC attorneys can expect to face lower legal standards for establishing the burden of proof in so-called "aiding and abetting" claims, thanks to a New York federal appeals court.  Earlier this week, the 2nd U.S. Circuit Court of Appeals in New York overturned a 2010 decision by a Connecticut federal judge. The Case at Hand. On Wednesday, the appeal court revived an SEC civil case against Joseph Apuzzo, a former chief financial officer of heavy equipment maker Terex Corp, over his role in an alleged accounting fraud.  Apuzzo had been accused in December 2007 of assisting in 2 "sale-leaseback" transactions in 2000 and 2001 to help his counterpart at equipment rental company United Rentals Inc, an important Terex customer, inflate profit and recognize revenue sooner.  The former United Rentals CFO, Michael Nolan, was sentenced to 3 years probation after he pled guilty in 2007 to 1 criminal count of making a false SEC filing, court records show.  He also settled a related SEC civil case. Game Changer. Writing for a 3-judge panel of the appeals court, U.S. District Judge Jed Rakoff said the SEC can show a defendant provided "substantial assistance" to a fraud by demonstrating that the person associated himself with the misconduct and through his actions tried to make it succeed.  In addition, the judge said the SEC must show a defendant "in some sort associated himself with the venture, that he participated in it as something that he wished to bring about, and that he sought by his action to make it succeed." The earlier decision by the lower court judge, U.S. District Judge Alvin Thompson in New Haven, Connecticut, concluded that a defendant must be the "proximate" cause of harm to be liable as an aider and abettor, which Judge Rakoff said gave the SEC little leverage:

"Many if not most aiders and abettors would escape all liability if such a proximate cause requirement were imposed, since, almost by definition, the activities of an aider and abettor are rarely the direct cause of the injury brought about by the fraud, however much they may contribute to the success of the scheme." -- Judge Rakoff for the panel, which returned Apuzzo's case to the Connecticut court.

Case Details. SEC v. Apuzzo, 2nd U.S. Circuit Court of Appeals, No. 11-696. John Avery is representing the SEC;  Seth Taube of Baker Botts represents Apuzzo. For further details, go to [Reuters, 8/8/12].