A lawyer who’s been fighting securities fraud allegations for over seven years can’t force the SEC to turn over all documents related to his case, a federal judge said Feb. 19.
Mitchell J. Stein doesn’t have a right to examine all of the Securities and Exchange Commission’s records on his case because much of the material is privileged and could come up in his ongoing legal proceedings, according to a U.S. District Court for the District of Columbia opinion.
Stein, formerly counsel for purported medical device firm Heart Tronics Inc., drew the SEC and Justice Department’s attention in late 2011 for an $8 million scheme to falsely inflate the company’s stock price.
He was convicted of wire fraud, securities fraud, and moneylaundering and initially sentenced to 17 years in prison and $5.3 million in fines, but had his sentence reduced after several rounds of appeals. The U.S. Supreme Court in 2017 declined to review his conviction.
Among the others swept up in the investigations were former Chicago Bears wide receiver Willie Gault—Heart Tronics’ CEO at the time—and Stein’s chauffeur, who paid the SEC a combined $2.6 million.
Stein filed a Freedom of Information Act request in 2015 seeking the SEC’s records from its proceedings against him. Stein wanted everything described in the agency’s privilege log for his case and everything related to the agency’s investigation into the identities he allegedly “fabricated” during his fraud, the opinion said.
But the agency was right to refuse to hand over the material from the privilege log because there’s still a “potential for interference” with Stein’s appeals in his criminal case, the opinion said. A Stein victory in the criminal case could reopen the SEC’s civil case, too, the judge said.
The SEC already gave Stein two documents related to the identities it accused him of creating to further the fraud, the opinion said. He said the agency didn’t do enough to find other material related to his request because some digital documents might not have been searchable.
But the agency’s “search was evidently comprehensive and resource-intensive” based on the digital search terms used and the number of physical documents examined, the opinion said. Although some searches might not find all responsive material, Stein “offers nothing specific” to show that happened here, especially since the search terms returned two documents, the judge said.
Judge John D. Bates wrote the opinion.
David S. Harris of Miami represented Stein.
The case is Stein v. SEC, 2019 BL 53635, D.D.C., No. 15-1560, 2/19/19.