4th Circuit hears ex-SEC lawyer’s appeal

RICHMOND, Va. — A former Securities and Exchange Commission lawyer’s conviction in a series of multimillion dollar pump-and-dump stock fraud schemes should be thrown out because of improper testimony by expert witnesses at his trial, the man’s attorney told a federal appeals court Friday.

Phillip Offill Jr.’s attorney, George Kostolampros, told a panel of the 4th U.S. Circuit Court of Appeals that a professor and a Texas securities commissioner offered legal opinions about Offill’s actions when they should have been limited to explaining how securities law works.

Judge J. Harvie Wilkinson III, however, said “the line is really kind of hazy” in such a complicated case.

“How in the world do you give any kind of legal background without inadvertently saying something that could be construed as a legal opinion?” Wilkinson asked.

He said that if the court adopts Offill’s position, “I think it would be very, very hard to try a complex securities fraud case.”

Justice Department attorney Patrick F. Stocks denied that the witnesses offered any legal conclusions.

“The experts provided background,” he said. “It would have been impossible for this case to go on without it.”

Offill, who worked at the SEC for 15 years before taking a job at the Godwin Gruber law firm in Dallas, aided a scheme that by conservative estimates cheated more than 1,500 investors out of at least $2.4 million. The conspirators would pump up the value of dubious penny stocks and then sell the shares at inflated prices to unwitting buyers.

U.S. District Judge Liam O’Grady in Alexandria sentenced Offill to eight years in prison — substantially more than the terms given to several conspirators who entered plea bargains. One leading participant, Las Vegas blackjack dealer-turned-securities lawyer David Stocker, was sentenced to less than three years.

Korstolampros argued that Offill’s sentence was excessive compared to Stocker’s. However, Wilkinson noted that Stocker pleaded guilty and received credit for taking responsibility. Offill, on the other hand, went to trial and O’Grady blasted the defendant’s testimony as “one of the biggest pack of lies I’ve ever heard.”

Wilkinson said the way Offill and Stocker handled the charges against them “couldn’t have been more different.”

The appeals court usually takes several weeks to rule.