Chadbourne & Parke LLP v. Troice (12-79)

argument 12-79

Chadbourne & Parke LLP v. Troice

Supreme Court of the United States 54 min 6 speakers 8 chapters transcribed 4 days ago official recording ↗

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What is the central fraud allegation in Chadbourne & Parke v. Troice?

John G. Roberts 0:02

We'll hear argument next this morning in case twelve seventy nine, Chadboard and Park versus uh Troyce and the consolidated cases. Mr Clement.

Ted B. Olson 0:12

Mr. Chief Justice, and may it please the court, the Stanford-Ponzi scheme was a massive fraud, but that fraud clearly included material misrepresentations about transactions in covered securities. The complaints in this case bear that out. Plaintiffs allege specifically that their money was there were misrepresentations about how their money would be invested in covered securities, that the misrepresentation was material, and that indeed the security of the underlying investments was the most important factor in securing plaintiffs' own investments in the C D.

Antonin Scalia 0:49

I I think there's some problem with whether or not this was covered securities, but I also think that's not in the case anymore.

Ted B. Olson 0:58

Well I certainly agree with you in the latter assumption, Your Honor, which is both lower courts decided this on the case that the complaint specific referred to covered securities specifically enough. I don't want to belabor the point because I don't think it's in the case, but I will say I I do think there's a reason that that was not a contested issue because if you think about the securities that were referred to, strong multinational corporations, major international banks, those are companies that are traded on US national exchanges. Also, if you get into the details of the record, I mean I if you want to look at something, joint appendix page seven forty six is an attachment to the Willis complaint.

Ted B. Olson 1:33

And there there's a reference to the New York Stock Exchange and it's a translated letter to investors, and you could read it more than one way, but I sure think the whole point of that paragraph is to lead the plaintiffs to think that their stocks they're buying an interest in stocks that we traded on the New York Stock Exchange particularly. So

John G. Roberts 1:51

So if if if I'm trying to get a home loan. And they ask you what assets you have, and I list a couple of stocks, and in fact it is fraudulent, I don't own them. That's a covered transaction, that is a 10 B five violation?

Ted B. Olson 2:04

Well, I don't know, Mr. Chief Justice. That would depend on the answer to a question that I don't think the Court has to decide in this case, which is whether a reference to your stock holdings would be sufficient to to to come with the.

Anthony M. Kennedy 2:19

by selling some stockholdings eventually.

Ted B. Olson 2:22

Yeah, I I think that probably would be covered, Your Honor, and I don't think that's any great surprise. I mean this court held in a case called Rubin against the United States that if you pledge securities that are and tell the bank that they're valuable and they in fact aren't, that that's covered by the securities law. In that case it wasn't just in connection with it was actually considered a constructive sale or transfer of the securities.

Unknown 2:45

I mean you're you're pledging covered securities to the bank and make a repr misrepresentation about them, right?

Ted B. Olson 2:52

Well well well that's right. I'm just saying though that I don't think the fact that you can have a misrepresentation in connection with a loan application or something like that is all that surprising in the sense that the way that both Ten B Ten B five and SLUSA are structured the in connection with requirement can take something that might otherwise be plain fraud, and if there is a misrepresentation in connection with a security or a covered security, that makes it security for the government. My

Stephen G. Breyer 3:17

goodness, are there cases that where they brought such things? I mean every State has laws uh that forbid fraud. And mortgages are uh probably and loans are probably made in the billions every year. And all it takes is someone to say on his sheet of listing assets to have a covered security and say, Don't worry, I'll hold these. I'll hold them. Or don't worry, I will uh sell this one and buy that one. Don't worry. I'll buy another one. I won't I won't put up a security my sprinkler system. I will sell the sprinkler system and use it to buy uh a a a covered exchange.