Mr. Butler sought to overturn a guilty verdict on 3 felony charges - including securities fraud - in part, by claiming double jeopardy - after he acknowledged his conviction of a crime.

To determine whether sanctions under Section 15(b) of the Exchange Act and Section 203(f) of the Advisers Act are in the public interest, the SEC considers 6 factors: (1) egregiousness of respondent’s actions;  (2) whether violations were isolated or recurrent; (3) degree of scienter; (4) sincerity of respondent’s assurances against future violations; (5) respondent’s recognition of the wrongful nature of his or her conduct; and (6) likelihood that respondent’s occupation will present opportunities for future violations.

Admin Law Judge Robert Mahony Addresses the Factors.  

Butler’s conduct was egregious and recurrent as he was found guilty of three felonies, including conspiracy to commit securities fraud and securities fraud.  He actively engineered a scheme to invest clients’ funds in assets riskier than those which he told his clients he would invest in, and manipulated documents to cover it up. Consistent with a vigorous defense, Butler continues to deny the allegations ultimately resulting in his felony convictions. However, a jury found that Butler engaged in a criminal conspiracy over the course of several years, indicating recurrent conduct. Such conduct involved a high degree of scienter, as knowing participation in the scheme is a required showing for this conspiracy charge. Butler has provided some assurance against future violations by stating that he does not intend to work in the securities industry. However, absent a bar, the risk of Respondent’s future violations is strong, as nothing would preclude him from reentering the industry.

    The SEC's Case.   The Commission issued its Order Instituting Administrative Proceedings ("OIP") on 7/30/10, which alleges, on 1/22/10, Eric Butler was sentenced to five years imprisonment, with three years supervised release, and ordered to pay a $5 million fine and forfeit $250,000. It alleges that Butler was convicted by a jury on 8/17/09, of one count of conspiracy to commit securities fraud, one count of securities fraud, and one count of conspiracy to commit wire fraud.

    Eric Butler, 39, a resident of NYC, had worked for Credit Suisse Securities from November 2003 to August 2007.  While there, he carried out the misconduct underlying the civil and criminal cases against him.  Butler denied being an RR at Credit Suisse and denied that Credit Suisse was registered with the Commission as BD/IA during the time of his employment. He was found wrong on each of the 3 points. 

    In his Sixth Affirmative Defense ... Butler assert that the instant proceeding is barred by double jeopardy.  Because this administrative proceeding is civil, not criminal, in nature, that affirmative defense is dismissed. See Kornman v. SEC, 592 F.3d 173, 188 (D.C. Cir. 2010)(citations omitted). In his Seventh Affirmative Defense, Butler asserts, “The Commission has not adequately made its investigative file available to Respondent for inspection and copying, pursuant to Rule 230 of the Commission’s Rules of Practice.” (Answer at 5.) At the August 30, 2010, prehearing conference counsel for Respondent admitted that he had received notice of his client’s right to inspect and copy the Commission’s investigative file. (Prehearing Conf. Tr. 10-11.) Moreover, counsel for Respondent agreed to the briefing schedule adhered to by the parties during the course of the prehearing conference. (Id. at 14-16.) During the prehearing conference, the undersigned invited counsel for Respondent to apprise him if difficulties arose during his attempts to inspect and copy the investigative file (id. at 13); and, since the filing of Respondent’s Answer counsel for Respondent has not at any time advised the undersigned of any difficulty in exercising his client’s right to inspect and copy the Commission’s investigative file. Therefore, I find Butler has waived his Seventh Affirmative Defense.

For further details, go to:   [SEC Initial Decision No. 413, 1/19/11]