[T]he Government called thirty-eight witnesses, including victims who testified about their dealings with S3 Partners and their losses; Kathryn Comer, the bookkeeper for S3 Partners, who testified about money flow; Stafford, who pled guilty to conspiracy with Shields and Sims and testified about the S3 Partners' dealings; and Thomas Carocci, an attorney with the Financial Industry Regulatory Association ("FINRA"), a private organization funded by the securities industry that investigates and regulates white collar crime.
Tweed argues that the Hearing Panel erred in finding that the statute of limitations does not apply because, according to Tweed, "FINRA disciplinary decisions are appealable to the Securities and Exchange Commission and the United States Courts of Appeal[s], which make them governmental or, at the very least, quasi-governmental actions subject to "the statute of limitations. The SEC previously has considered and rejected this argument, finding that FINRA is not a governmental entity and therefore not bound by any statutory limitations period. See, e.g., William J Murphy, Exchange Act Release No. 69923, 2013 SEC LEXIS 1933, at *92-93 (July 2, 2013) ("But [Section] 2462 does not apply to FINRA disciplinary proceedings because FINRA is not a government entity. Indeed, we have repeatedly held that 'the disciplinary authority of private self-regulatory organizations (`SROs') such as [FINRA] is not subject to any statute of limitation."), aff'd sub nom. Birkelbach v. SEC, 751 F.3d 472 (7th Cir. 2014).
Shawn Kristi Dicken, ("Petitioner"), confined at the Huron Valley Women's Correctional Facility in Ypsilanti, Michigan, filed a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 through her attorney F. Randall Karfonta. Petitioner challenges her conviction for conducting a criminal enterprise, Mich. Comp. Laws § 750.159i(1); embezzlement from a vulnerable adult, $50,000 or more but less than $100,000, Mich. Comp. Laws § 750.174a(6)(a); and seven counts of obtaining money by false pretenses, $1,000 or more but less than $20,000, Mich. Comp. Laws § 750.218(4)(a). Petitioner was sentenced to concurrent prison terms of 140 months to 20 years for the criminal enterprise conviction, 23 months to 5 years for each false pretenses conviction, and 71 months to 15 years for the embezzlement conviction. For the reasons that follow, the petition for writ of habeas corpus is DENIED WITH PREJUDICE.
Petitioner seeks a writ of habeas corpus on the following grounds:I. In a fraud case where the issue was Defendant's disclosure to clients and unlawful and illegal intent, Defendant was denied fundamentally fair discovery of the investigation of the business entities in the case including a clearly intentionally and important Brady v Maryland violation.II. Improper expert opinion as to evidence that "is not a defense" and opinion as to the meaning of federal statu[t]es and regulations is plain error[.]III. Recordings of Shawn Dicken's testimony before the FINRA state investigative agency are required evidence showing her lack of intent to defraud.IV. Where the charge is embezzlement from a vulnerable adult, prosecutorial arguments and evidence that the power of attorney in the case was the equivalent of legal incapacity denied Defendant a fair trial and due process of law.
Petitioner next contends that the trial judge violated her right to present a defense when he refused to allow defense counsel to play petitioner's entire seventy five minute tape recorded interview with state investigators with the Financial Industry Regulatory Authority [FINRA]. Petitioner claims that this tape recording would show that she cooperated with state investigators, so as to negate any criminal intent on her part. Petitioner also claims that the statements that she made during the interview showed that she did not have the intent to defraud her victims.
Eighty-one years ago, the 1938 Maloney Act launched the self-regulation of Wall Street -- first by the National Association of Securities Dealers ("NASD") and now, in part, by the Financial Industry Regulatory Authority ("FINRA"). From its inception, the Act was criticized as an opportunity for Wall Street "to set up our rules of business conduct." After all, in those days, many blamed Wall Street for the deprivations of the Great Depression. A devil's bargain seemed to have been struck in which the securities industry did, indeed, set up its own regulatory rules that envisioned so-called "business" rather than "criminal" penalties. It was a fascinating experiment in a private-sector-public-sector partnership. My appraisal is that it failed, and did so miserably, and continues to fail in its core mission of both protecting public investors and ensuring that purported industry rules of conduct are fairly enforced and reasonably sanctioned.Some have criticized, perhaps some still do, the kind of regulation envisioned here, in view of the Commission's supervisory powers, Yet they could hardly have expected repeal of the Securities Exchange Act as it relates to our business, and that is what an unsupervised form would have represented. Let us be realistic. We have an opportunity here to set up our rules of business conduct under a system of business penalties -- far preferable, is it not, to Commission regulations covering the same field, enforceable through criminal penalties, The process, I think you will find, is parallel to the governmental supervision now existing over the stock exchanges. Governmental controls, moreover, must provide the essential safeguards to prevent discriminatory, monopolistic, or other unfair tendencies.
All of those in the FINRA community must accept the symbiotic need to police the industry, to root out the bad actors, to empower regulatory staff with the prerogatives and tools to fairly investigate and prosecute misconduct, and, in the end, to persuade the public for whom the industry exists that, yes, the private sector is a more nimble and effective regulator than big government. If you re-read the Special Notice, you will not find a single reference to the appropriate influence of associated persons, public customers, issuers, and other market participants. Who stands for those stakeholders? Who speaks out on their behalf? When do those market participants get to raise concerns about the inappropriate influence of FINRA's larger firms and of FINRA itself?I urge FINRA to reinvent itself as a "private sector regulatory organization" ("PSRO") and to expand and enhance its mission from one for the broker-dealer industry towards one for the larger private sector served by the financial services community. In furtherance of that change, the PSRO would serve in a holding-company role that oversees each of three regulatory divisions dedicated to Small member firms (smallest 25% of broker-dealers), Mid-sized member firms (50% of broker-dealers measured from midpoint), and Large member firms (largest 25% of broker-dealers). Pursuant to that restructuring, each division would draft a rulebook responsive to the unique needs of its constituency. The PSRO would fully enfranchise associated persons, and provide for the proportionate representation for such stakeholders as public customers, issuers, and regulators. Without question, a PSRO Board seat should be set aside for an investors' advocacy group such as PIABA.As part of reimagining the SRO into a more expansive PSRO, all industry registration and continuing education should be undertaken directly by an applicant through the PSRO holding company and not through the member firms. FINRA should establish an Anti-Fraud Fund whereby all defrauded public customers would obtain restitution in the event that member firms or associated persons fail to timely honor any awards for compensatory damages, costs, and fees. Finally, I would abolish mandatory arbitration for customers and associated persons.