A federal appeals court reinstated a U.S. Securities and Exchange Commission lawsuit against the former CFO of Westport-based Terex Corp., overturning a previous decision by a district judge in New Haven.
Legal experts say the ruling could expand the SEC”™s ability to pursue cases involving allegations of accounting fraud against executives who claim they did not play an active role in any deceptive practices.
Joseph Apuzzo faced SEC accusations in 2007 that he aided a pair of sale-leaseback transactions with United Rentals Inc., allowing the Greenwich-based company to improperly inflate profits in 2000 and 2001. URI uses Terex construction vehicles and equipment in its fleet.
The U.S. Court of Appeals for the Second District in New York reversed U.S. District Judge Alvin Thompson”™s earlier decision in the case and remanded the case for further proceedings.
“Although the district court found that the (SEC) plausibly alleged that Apuzzo had actual knowledge of the primary violation, it concluded that the complaint did not adequately allege ”˜substantial assistance,”™” the appeals court wrote in its decision. “We hold that to satisfy the ”˜substantial assistance”™ component of aiding and abetting, the SEC must show that the defendant in some sort associated himself with the venture, that he participated in it as in something that he wished to bring about, and that he sought by his action to make it succeed ”¦ Applying that test, we hold that the complaint plausibly alleged that Apuzzo aided and abetted the primary violation.”
