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In re Bocchino

United States Court of Appeals, Third Circuit

July 23, 2015

IN RE: STEVEN S. BOCCHINO, aka Steven Silvio Bocchino aka Steven Bocchino aka Steven S Bocchino, III aka Steven Silvio Bocchino, III aka Steven Bocchino, III, Debtor; U.S. Securities and Exchange Commission
v.
Steven S. Bocchino, Appellant

Submitted  June 24, 2015 Pursuant to Third Circuit LAR 34.1(a).

On Appeal from the United States District Court for the Middle District of Pennsylvania. (D.C. Civil No. 3-14-cv-00662). District Judge: Honorable James M. Munley.

J. Zac Christman, Esq. Newman, Williams, Mishkin, Corveleyn, Wolfe & Fareri, Stroudsburg, PA, Counsel for Appellant.

Tracey Hardin, Esq., Josephine T. Morse, Esq. United States Securities & Exchange Commission, Washington, DC; Patricia H. Schrage, Esq. United States Securities & Exchange Commission, New York, NY, Counsel for Appellee.

Before: CHAGARES, KRAUSE and VAN ANTWERPEN, Circuit Judges.

OPINION

Page 377

VAN ANTWERPEN, Circuit Judge.

Steven S. Bocchino appeals the final decision of the District Court for the Middle District of Pennsylvania affirming the Bankruptcy Court's order of nondischargeability of civil judgment debts pursuant to 11 U.S.C. § 523(a)(2)(A). Bocchino v. SEC, No. 3-14-cv-00662, 2014 WL 4796425 (M.D. Pa. Sept. 26, 2014). For the reasons that follow, we will affirm the decision of the District Court.

I. Factual Background and Procedural History

Bocchino limits his appeal to two discrete legal rulings and does not challenge the Bankruptcy Court's or the District Court's factfinding.[1] Therefore, the following facts are undisputed.

Page 378

Bocchino worked as a stockbroker. The nondischargeability order at issue relates to civil judgments against Bocchino for two private placement investments he solicited in 1996 while affiliated with a brokerage firm.[2] The first investment involved an entity known as Traderz Associates Holding, Inc. (" Traderz" ). Bocchino learned from a superior that Traderz " might go public" and that the endeavor was supported by " some commitment" from a popular fashion model. In re Bocchino, 504 B.R. 403, 407 (Bankr. M.D. Pa. Dec. 23, 2013). Based solely on these facts, and without any other independent investigation into the quality of the entity, Bocchino immediately sought investment from clients. Bocchino received over $40,000 in commissions from Traderz sales. The second private placement involved Fargo Holdings, Inc. (" Fargo" ). The exact source of Bocchino's information regarding Fargo is unclear. Bocchino claimed that he knew about Fargo from an associate at the brokerage firm. Bocchino also claimed that he initially learned of Fargo by meeting a day trader affiliated with the entity. Nevertheless, Bocchino only obtained cursory documentation about the entity before soliciting sales. He did not conduct any independent investigation into the quality of the investment. This lack of investigation occurred despite Bocchino's awareness that Fargo's principal's " full-time 'job' was law student." In re Bocchino, 504 B.R. at 408. Bocchino received $14,000 in commissions for his clients' stock purchases in Fargo.[3]

Both Traderz and Fargo turned out to be fraudulent ventures. The principals of each entity were criminally convicted, and the anticipated value of the investments vanished. In the early 2000s, the Securities and Exchange Commission (" SEC" ) brought two civil law enforcement actions in the U.S. District Court for the Southern District of New York against those who sold investments in the entities. SEC v. Goldman Lender & Co. Holdings et al., 98-CV-7525 (JGK) (" Goldman Action " ) and SEC v. Nnebe et al., 01-CV-5247 (KMW) (" Nnebe Action " ). The Goldman Action alleged that Bocchino had violated Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Securities Exchange Act for inducing investors via high pressure sales tactics and material misrepresentations. The court entered a default judgment ordering Bocchino to pay $35,090.00 in disgorgement, $14,779.70 in prejudgment interest, and $35,090.00 in civil penalties. Similarly, the Nnebe Action alleged Bocchino violated Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b), 15(a), and Rule 10b-5 of the Securities Exchange Act. The court entered a default judgment consisting of $14,800.00 in disgorgement, $4,207.85 in prejudgment interest, and $75,000.00 in civil penalties. In total, Bocchino was liable for $178,967.55.

After Bocchino filed for Chapter 13 bankruptcy protection in 2009, the SEC petitioned the Bankruptcy Court for a judgment that the Goldman Action and Nnebe Action judgments were nondischargeable. The SEC argued that the funds were " obtained by . . . false pretenses, a false representation, or actual fraud" under ...


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