Judge Laura Taylor Swain
In its civil enforcement action under §17(a) of the Securities Act of 1933 and §10(b) of the Securities Exchange Act of 1934, the SEC alleged that O’Meally deceptively hid "market timing" practices from 60 mutual fund companiesthus defrauding the companies and fund shareholders. The jury’s verdict found O’Meally liable for negligently violating Securities Act §§17(a)(2) or (3) with respect to six mutual fund companies’ shares. Partly granting the SEC’s motion, the court ordered O’Meally to disgorge $444,836 plus prejudgment interest calculated at the IRS tax underpayment rate, from Oct. 1, 2003. It also ordered him to pay a $60,000 civil penalty. However, the court denied the SEC’s motion to permanently enjoin O’Meally’s further violation of federal securities laws. The jury found O’Meally acted without scienter. The jury’s finding that O’Meally did not engage in intentional or reckless illegal conductand the relative magnitude of O’Meally’s conduct as determined by the juryweighed against injunctive relief. Further, noting O’Meally’s sworn declaration that he does not trade mutual funds, the court, citing SEC v. Pros Int’l, found O’Meally’s current management of a hedge fund insufficient to warrant an injunction’s issuance.