RECEIV APR 08 2013 UNITED STATES OF AMERICA CEOFT before the SECURITIES AND EXCHANGE COMMISSION ADMINISTRATIVE PROCEEDING File No. 3-15003 In the Matter of RESPONDENT JASON T. GREEN'S PROPOSED CONCLUSIONS OF DANIEL BOGAR, LAW AND FACT AND INITIAL BERNERD E. YOUNG, and POST-HEARING BRIEF JASON T. GREEN Respondents. George C. Freeman, III David N. Luder BARRASSO USDIN KUPPERMAN FREEMAN & SARVER, L.L.C. 909 Poydras Street, 24th Floor New Orleans, Louisiana 70112 Telephone: (504) 589-9700 Facsimile: (504) 589-9701 ATTORNEYS FOR RESPONDENT JASON T. GREEN TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................................. i TABLE OF AUTHORITIES ................................................................................................ iv, v, vi I. INTRODUCTION ............................................................................................................... ! II. FACTUAL BACKGROUND .............................................................................................. 3 A. Background of Respondent Green ........................................................................... 3 B. The Stanford Group of Companies and the SIB CD Product.. ................................ 5 1. Corporate Overview of the Stanford Companies ............................................... 5 2. Green's Education About and Knowledge of SIB and the SIB CDs ............................................................................................................. 6 3. SIB's Money Management Strategies and SIB's Returns Reminded Green of Other Successful Money Managers He Was Following ................................................................................................. IO 4. Green Diligently Kept Abreast of News About the U.S. Accredited Investor CD Program Throughout His Tenure at SGC .................................................................................................................. l2 5. Green's Favorable View of SIB and the SIB CDs Was Validated by Numerous Internal and External Sources ................................... 13 C. Green Reasonably Relied on the Disclosures in SIB's Offering Documents, Which Had Been Drafted, Vetted, and Approved by Both the Legal and Compliance Departments of SIB and SGC ....................................................................................................................... 20 1. The Offering Documents Disclosed the Material Risks of Investing in the SIB CDs and Green, in turn, Disclosed Those Risks to Customers ................................................................................ 20 2. The Self-Serving Testimony of the Division's Investor Witnesses Does Not Support the OIP's Allegations that Green Misled Them ......................................................................................... 26 (a) Dore's Testimony Does Not Support the Division's Allegations ................................................................................................. 26 853442_1 (b) Stegall's Testimony Does Not Support the Division's Allegations ................................................................................................. 31 (c) Smith's Testimony Does Not Support the Division's Allegations ................................................................................................. 32 (d) The Division Failed to Call Moran to Testify and Failed to Support the Allegations He Supposedly Made Against Green that Are Quoted in the OIP ................................................ 34 D. Green's SIB CD Sales Training Presentations Were Approved by Legal and Compliance, Were Substantively Consistent Over Time, and Were Not Misleading ............................................................................ 35 1. In 2004, Green Offered to Help Educate SGC Financial Advisors About the SIB CDs ........................................................................... 35 2. Green Prepared a Consistent Set of Training Materials That Legal and Compliance Approved .................................................................... 36 3. The Division Repeatedly Cited and Relied on Slide Presentations Green Never Prepared or Used .................................................. 37 4. The OIP's Allegations Against Green Regarding Specific Misrepresentations He Purportedly Included in His Presentations Are Misguided ........................................................................... 39 (a) The Division's Assertions About Liquidity Are Unfounded .................................................................................................. 39 (b) The Division's Assertions About Insurance Are Unfounded .................................................................................................. 41 (c) The Division's Assertions About Suitability Are Unfounded .................................................................................................. 44 5. Green Neither Created Nor Used the Training and Marketing Manual ............................................................................................ 46 E. Green was Neither Involved in Nor Consulted About Any Regulatory Matters ................................................................................................. 48 III. LEGAL ARGUMENT ....................................................................................................... 50 A. Green Did Not Misrepresent the "Safety" of the SIB CDs as Alleged in the OIP ................................................................................................. 51 1. Green Did Not Represent to Investors or Financial Advisors That SIB CDs Were Safe .................................................................. 51 11 853442_1 2. The Record Does Not Support a Finding of Scienter or Negligence ....................................................................................................... 52 3. The Written Risk Disclosures in the Offering Documents Render Any Alleged Ambiguities or Inaccuracies in Green's Verbal Disclosures Immaterial. .......................................................... 54 B. Green Did Not Misrepresent the Insurance Features of the SIB CDs as Alleged in the OIP ........................................................ , ............................ 56 1. Green Did Not Represent to Investors or Advisors that the SIB CDs Were Protected by Insurance ............................................................ 56 2. The Record Does Not Support a Finding of Scienter or Negligence ....................................................................................................... 57 3. The Written Insurance Disclosures in the Offering Documents Render Any Ambiguities or Inaccuracies in Green's Verbal Disclosures Immaterial ........................................................... 58 C. Green Did Not Misrepresent the Referral Fees and Other Compensation Regarding the SIB CDs as Alleged in the OIP .............................. 59 1. Green Did Not Misrepresent the Referral Fees and Other Compensation to SIB CD Investors ................................................................. 59 2. The Record Does Not Support a Finding of Scienter or Negligence ....................................................................................................... 59 3. The Written Disclosures Regarding Fees and Compensation in the Offering Documents Render Any Ambiguities or Inaccuracies in Green's Verbal Disclosures Immaterial.. ................................ 60 D. Green Did Not "Fail" to Require SOC to Disclose That It Was Unable to Confirm SIB's Representations About SIB's Portfolio as Alleged in the OIP .............................................................................. 61 E. Contrary to Allegations in the OIP, Green Acted Reasonably in Discussing the Liquidity of SIB's Portfolio with Investors ................................... 65 F. The Record Does Not Support a Finding of Either "Aiding and Abetting" Or "Causing" Liability .......................................................................... 66 CONCLUSION .............................................................................................................................. 67 CERTIFICATE OF SERVICE ...................................................................................................... 68 Ill 853442 I TABLE OF AUTHORITIES Cases Acme Propane, Inc. v. Tenexco, Inc., 844 F.2d 1317 (7th Cir. 1988) .................................................................................................. 55 Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 0118(VM), 2010 WL 3341636 (S.D.N.Y. Aug. 18, 2010) ................................... 65 Basic v. Levinson, 485 U.S. 224 (1988) .................................................................................................................. 54 Broad v. Rockwellint 'l Corp., 642 F.2d 929 (5th Cir. 1981) .................................................................................................... 53 Brown v. E. F. Hutton Group, Inc., 735 F. Supp. 1196 (S.D.N. Y. 1990) .......................................................................................... 55 Carr v. Cigna Sees., Inc., 95 F .3d 544 (7th Cir. 1996) ...................................................................................................... 54 Cf Davidson v. Wilson, 973 F.2d 1391 (8th Cir. 1992) .................................................................................................