Page 1

1 of 12 DOCUMENTS
JOHN GARDNER BLACK, PETITIONER v. SECURITIES AND EXCHANGE
COMMISSION, RESPONDENT
No. 10-1186
UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA
CIRCUIT
462 Fed. Appx. 6; 2012 U.S. App. LEXIS 3476; Fed. Sec. L. Rep. (CCH)
P96,732

February 21, 2012, Decided
PRIOR HISTORY: [**1]
On Petition for Review of an Order of the Securities and Exchange Commission.
CASE SUMMARY:
PROCEDURAL POSTURE: Petitioner filed a petition asking the Securities and Exchange Commission
(SEC) to vacate an order barring him from association with any broker, dealer, municipal securities dealer,
investment adviser or investment company. The order had been entered after the SEC filed a civil complaint
accusing petitioner of mismanaging client funds. The SEC denied the petition, and petitioner challenged that
denial.
OVERVIEW: Petitioner argued that the "mark-to-model" method he had used to value the collateral would
have been legal under a recent revision of asset valuation standards by the Financial Accounting Standards
Board. The SEC applied its multi-factor test and determined that the public interest did not support lifting the
bar, noting the great harm caused by petitioner's fraud, his scant progress toward repaying the amounts
assessed against him, his lack of remorse, and his failure to identify any unforeseen consequences or
hardship resulting from the bar. In the absence of evidence to support petitioner's claim about the Financial
Accounting Standards Board standard, and in light of the overwhelming weight of the other factors, it was not
arbitrary, capricious, or an abuse of discretion for the SEC to refuse to vacate the bar.
OUTCOME: The petition for review was denied.
CORE TERMS: collateral attack, public interest, vacate, client funds, investment adviser, abuse of discretion,
evidentiary support, mark-to-model, multi-factor, collateral, injunction, accounting, capricious, consented,
valuation, lifting, dealer
LexisNexis(R) Headnotes
Securities Law > U.S. Securities & Exchange Commission > Judicial Review > Arbitrary & Capricious
Review
[HN1] Appellate courts uphold Securities and Exchange Commission (SEC) sanctions determinations unless
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C.S. §
706(2)(A)). The SEC will lift or modify a bar order when it is consistent with the public interest and investor
protection to permit the petitioner to function in the industry without the safeguards provided by the bar. The
SEC uses a multi-factor test to determine whether the public interest supports lifting a bar, and will vacate a
bar only in compelling circumstances.

 Page 2
462 Fed. Appx. 6, *; 2012 U.S. App. LEXIS 3476, **1;
Fed. Sec. L. Rep. (CCH) P96,732
Securities Law > U.S. Securities & Exchange Commission > Judicial Review > General Overview
[HN2] The Securities and Exchange Commission, by longstanding policy, does not permit collateral attacks
in follow-on administrative proceedings. 17 C.F.R. § 202.5(e) (1998).
COUNSEL: John Gardner Black, Petitioner, Pro se, Warriors Mark, PA.
For Securities and Exchange Commission, Respondent: Christopher Paik, Randall Wayne Quinn, Jacob H.
Stillman, David M. Becker, Esquire, General Counsel, Michael Andrew Conley, Deputy General Counsel,
Securities and Exchange Commission, Washington, DC.
For Susan M. Hoffman, Appointed Amicus Curiae for Petitioner: Michael Thomas Carolan, Jennifer Ruth
Devery, Susan M. Hoffman, Crowell & Moring LLP, Washington, DC.
JUDGES: Before: TATEL, GARLAND, and KAVANAUGH, Circuit Judges.
OPINION
[*7] JUDGMENT
This petition for review was considered on the record, briefs, and oral arguments of the parties. The Court
has accorded the issues full consideration and has determined that they do not warrant a published opinion.
See Fed. R. App. P. 36; D.C. Cir. Rule 36(d). For the reasons stated below, it is
ORDERED and ADJUDGED that the petition for review be denied.
John Gardner Black managed approximately $345 million for clients, the vast majority of whom were local
school districts investing bond issue proceeds. In 1997, the Securities and Exchange Commission filed a civil
complaint accusing [**2] Black of mismanaging those funds. The complaint alleged that Black
misrepresented the value of the collateral backing a "Collateralized Investment Agreement" in which he
invested $233 million in client funds. It also alleged that Black misappropriated at least $2 million in client
funds to pay personal and business expenses. According to the complaint, Black's conduct resulted in the
loss of $71 million of his clients' principal investment. Without admitting or denying the allegations, Black
consented to a permanent injunction against further violations of federal securities laws, disgorgement of
$3.6 million, and a $500,000 civil penalty. In 1998, Black consented to a follow-on SEC order barring him
from "association with any broker, dealer, municipal securities dealer, investment adviser or investment
company." In re John Gardner Black, Investment Advisers Act Release No. 1720, 1998 SEC LEXIS 845, at
*4 (May 4, 1998).
In 2009, Black filed a petition asking the SEC to vacate the 1998 bar order. Black's petition claimed that the
"mark-to-model" method he had used to value the collateral would be legal under a recent revision of asset
valuation standards by the Financial Accounting Standards [**3] Board. The Commission, in the order under
review, denied Black's petition with respect to the bar on association with any investment adviser or
investment company. See In re John Gardner Black, Investment Advisers Act Release No. 3015, 2010
SEC LEXIS 1051, at *16 (Apr. 13, 2010). Black challenges that denial.
[HN1] This Court upholds SEC sanctions determinations unless "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." KPMG, LLP v. SEC, 289 F.3d 109, 121, 351 U.S. App.
D.C. 234 (D.C. Cir. 2002) (quoting 5 U.S.C. § 706(2)(A)). The SEC will lift or modify a bar order when "it is
consistent with the public interest and investor protection to permit the petitioner to function in the industry
without the safeguards provided by the bar." In re Ciro Cozzolino, Exchange Act Release No. 49001, 2003
SEC LEXIS 3083, at *12 (Dec. 29, 2003). The Commission uses a multi-factor test to determine whether the
public interest supports lifting a bar, and will vacate a bar only in "compelling circumstances." Id. at *12-13;
see also In re Kenneth W. Haver, CPA, Exchange Act Release No. 54824, 2006 SEC LEXIS 2735, at *7-8
(Nov. 28, 2006).

 Page 3
462 Fed. Appx. 6, *7; 2012 U.S. App. LEXIS 3476, **3;
Fed. Sec. L. Rep. (CCH) P96,732
The primary substantive argument in Black's petition was that [**4] the mark-to-model method that yielded
the $71 million overvaluation in the mid-1990s would have been legal under the FASB's post-financial crisis
standard for determining the fair value of an asset in an inactive market. The Commission's primary response
to Black's argument was to treat it as a "collateral attack" on the consent injunction and the allegations in the
injunctive complaint. [*8] See In re Black, 2010 SEC LEXIS 1051, at *8-10 & n.13. [HN2] The SEC, by
longstanding policy, does not permit such collateral attacks in follow-on administrative proceedings. See 17
C.F.R. § 202.5(e) (1998); In re Michael Batterman, 57 S.E.C. 1031, 1039 & n.18 (2004).
We need not decide here whether the SEC erred in characterizing Black's petition as a collateral attack. The
SEC also addressed his claim on the merits, albeit tersely. Specifically, the Commission said: "In any event,
Black's collateral attack is not persuasive. Although Petitioners assert that changes in applicable securities
valuation methods exonerate them, they do not provide any evidentiary support for their claim . . . ." In re
Black, 2010 SEC LEXIS 1051, at *10 n.13. Black contends on appeal that the SEC's Division of Enforcement
was [**5] obligated to rebut his "undisputed assertion" that the new FASB guidance would retrospectively
vindicate his accounting. Amicus Br. 21 (emphasis omitted). But a bald assertion without any evidentiary
support does not demand a more expansive response than the Commission provided.
The Commission applied its multi-factor test and determined that the public interest did not support lifting the
bar. See In re Black, 2010 SEC LEXIS 1051, at *12-15 & n.18 (noting the great harm caused by Black's
fraud, his scant progress toward repaying the "amounts assessed against him," his lack of remorse, and his
failure to identify any unforeseen "consequences or hardship" resulting from the bar). In the absence of
evidence to support Black's claim about the FASB standard, and in light of the overwhelming weight of the
other factors, it was not arbitrary, capricious, or an abuse of discretion for the Commission to refuse to
vacate the bar.
The Clerk is directed to withhold the issuance of the mandate herein until seven days after the resolution of
any timely petition for rehearing or rehearing en banc. See Fed. R. App. P. 41(b); D.C. Cir. Rule 41.