Judge John Koeltl
Broker-dealer Arjent’s principal DePalo also played a key role in Pangaea Trading Partners. SPK principal Lerman is an Arjent associate. Pangaea, SPK and DePalo were named in the SEC’s investigation alleging DePalo’s and Lerman’s misappropriationand subsequent transferof funds invested in Pangaea and SPK. At issue in Lerman, DePalo, and wife Rosemarie’s bid to quash SEC subpoenas requiring Citibank’s production of account records pursuant to §1110 of the Right to Financial Privacy Act (RFPA) was whether the Citibank records were relevant to the SEC’s investigation of Arjent. The court denied Lerman’s and DePalo’s quash motions. The SEC showed a reasonable belief that DePalo’s bank statements were relevant to its legitimate investigation into Arjent. However, it did not provide evidence that the information it sought as to Rosemarie’s accounts could not be obtained through a more narrowly drafted subpoena. Further, it was possible that Rosemarie’s bank records fell outside the heightened scrutiny of McVane v. FDIC because she was a target or because she was involved in wrongdoing other than having her account used as the repository of funds transferred from her husband.
