UNITED STATES COURT OF APPEALS FOR THE …. 08-17116 _ UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _ SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. INDIGENOUS

No. 08-17116____________________________________

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT____________________________________

SECURITIES AND EXCHANGE COMMISSION,Plaintiff-Appellee,

v.

INDIGENOUS GLOBAL DEVELOPMENT CORPORATION,Defendant;

DENI G. LEONARD, Defendant-Appellant.

____________________________________

On Appeal from the United States District Courtfor the Southern District of California

____________________________________

BRIEF OF THE SECURITIES AND EXCHANGECOMMISSION, APPELLEE

____________________________________

DAVID M. BECKERGeneral Counsel

MARK D. CAHNDeputy General Counsel

JACOB H. STILLMANSolicitor

CHRISTOPHER PAIKSpecial Counsel

Securities and Exchange Commission100 F Street, N.E., Washington, D.C. 20549202-551-5187 (Paik)

Case: 08-17116 03/24/2010 Page: 1 of 33 ID: 7276650 DktEntry: 13

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

COUNTERSTATEMENT OF JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1

COUNTERSTATEMENT OF THE ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

COUNTERSTATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. Nature of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

a. Misrepresentations About the Agreements IndigenousHad With Other Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . 5

b. Misrepresentations About the Ability of Other Companiesto Perform Their Putative Agreements . . . . . . . . . . . . . . . . . . . 6

c. Misrepresentations About Indigenous’ Purchase andAbility to Use Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2. Sales of Indigenous Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

C. Proceedings in the District Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. The Commission’s Motion For Summary Judgment . . . . . . . . . . . . 10

a. Leonard’s Violations of Section 17(a), Section 10(b)and Rule 10b-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

b. Leonard’s Aiding and Abetting of Indigenous’ Section 13(a) violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12


ii

TABLE OF CONTENTS (CONTINUED)

Page

c. Leonard’s Violations of Rule 13a-14 under theExchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

d. Leonard’s defense that the Commission discriminatedagainst him on the basis of race . . . . . . . . . . . . . . . . . . . . . . 13

e. Leonard’s defense that his conduct was not subject to thefederal securities laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2. The Remedies Ordered By the Magistrate Judge . . . . . . . . . . . . . . . 14

STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

THERE IS NO BASIS FOR APPELLANT LEONARD’S ASSERTIONTHAT THE COMMISSION HAS ENGAGED IN MISCONDUCT. . . . . . . . . . 16

I. LEONARD HAS NOT ADEQUATELY ALLEGED, MUCH LESSSHOWN, THAT THE COMMISSION HAS ENGAGED IN RACIALDISCRIMINATION AGAINST HIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

II. LEONARD HAS NOT SHOWN THAT THE COMMISSIONADVISED HIM NOT TO RETAIN AN ATTORNEY. . . . . . . . . . . . . . . . 20

III. LEONARD HAS NOT SHOWN THAT THE COMMISSIONENGAGED IN IMPROPER CONDUCT IN ITS INVESTIGATIONAND DURING DISCOVERY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24


iii

CERTIFICATE OF COMPLIANCE WITH F.R.A.P. 32(a)(7) . . . . . . . . . . . . . . 25

STATEMENT OF RELATED CASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27


iv

TABLE OF AUTHORITIES

Cases Page

Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) . . . . . . . . . . . . . . . . . . . . . 19

Moss v. U.S. Secret Service, 572 F. 3d 962 (9 Cir. 2009) . . . . . . . . . . . . . . . . .th 19

Qwest Corp. v. City of Surprise, 434 F.3d 1776 (9 Cir. 2006) . . . . . . . . . . . . . .th 14

SEC v. Follick, No. 00-civ.-4385, 202 U.S. Dist. LEXIS 24112 Fed. Sec. L. Rep. (CCH) ¶92,270 (S.D.N.Y. Dec. 18, 2002) . . . . . . . . . . . . . . 20

United States v. Flores-Montano, 424 F.3d 1044 (9 Cir. 2005) . . . . . . . . . . . . .th 22

Statutes and Rules

Securities Act of 1933, 15 U.S.C. 77q, et al.

Section 17(a), 15 U.S.C. 77q(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Section 22, 15 U.S.C. 77v . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Securities Exchange Act of 1934, 15 U.S.C. 78q, et al.

Section 10(b), 15 U.S.C. 78j(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Section 13, 15 U.S.C. 78m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 12Section 21(b), 15 U.S.C. 78u(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Section 27, 15 U.S.C. 78aa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

28 U.S.C. 636(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3, 10

28 U.S.C. 1291 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


v

TABLE OF AUTHORITIES (CONTINUED)

Statutes and Rules (Continued) Page

Rule Under the Securities Exchange Act of 1934, 17 C.F.R. 240.01, et seq.

Rule 10b-5, 17 C.F.R. 240.10b-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Rule 13a-14, 17 C.F.R. 240.13a-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 12

Federal Rules of Appellate Procedure

Rule 4(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Federal Rules of Civil Procedure

Rule 34(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Miscellaneous

In re Indigenous Global Development Corp., Initial Decision Release No. 325, Administrative Proceeding File No. 32-12414 (January 12, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


No. 08-17116____________________________________

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

____________________________________

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellee,

v.

INDIGENOUS GLOBAL DEVELOPMENT CORPORATION,

Defendant;

DENI G. LEONARD,

Defendant-Appellant. ____________________________________

On Appeal from the United States District Courtfor the Southern District of California

____________________________________

BRIEF OF THE SECURITIES AND EXCHANGE COMMISSION, APPELLEE

____________________________________

COUNTERSTATEMENT OF JURISDICTION

The district court had jurisdiction pursuant to Section 22 of the Securities

Act of 1933, 15 U.S.C. 77v, and Section 27 of the Securities Exchange Act of

1934, 15 U.S.C. 78aa. A final judgment was entered on July 21, 2008. Appellant

Deni G. Leonard timely filed a notice of appeal on September 17, 2008, pursuant


1/ The district court granted the Commission a default judgment againstIndigenous.

2

to F.R. A.P. 4(a)(1)(B). This Court has jurisdiction pursuant to 28 U.S.C. 1291.

COUNTERSTATEMENT OF THE ISSUE

Whether a defendant in a Securities and Exchange Commission law

enforcement action can assert Commission misconduct as a defense, where there is

no factual or legal support for the claim of misconduct.

COUNTERSTATEMENT OF THE CASE

A. Nature of the Case

The Securities and Exchange Commission brought this civil law

enforcement action against appellant Deni G. Leonard (“Leonard”) and against a

publicly-held company he controlled, Indigenous Global Development

Corporation (“Indigenous”). The Commission alleged that Leonard and

Indigenous had made numerous misrepresentations concerning Indigenous in

violation of antifraud and other provisions of the federal securities laws. The

district court, acting through a magistrate judge pursuant to 28 U.S.C. 636(c), as

consented to by the parties, granted the Commission summary judgment against

Leonard. 1/

As relief, the district court, acting through the magistrate judge, issued a


3

permanent injunction against future violations by Leonard of the antifraud and

other securities law provisions and also ordered him to disgorge his illlegally-

obtained profits and to pay a civil monetary penalty. It issued orders prohibiting

Leonard from serving as an officer or director of a publicly-traded company and

prohibiting Leonard from participating in offerings of penny stock.

On appeal, Leonard does not challenge any of the magistrate judge’s

conclusions as to Leonard’s violations; nor does he challenge any of the relief that

was ordered. Rather, he argues that the Commission engaged in misconduct,

including discrimination against American Indians (Leonard is an American

Indian). See Informal Brief. As we explain in this brief, there is no basis for

Leonard’s contentions regarding the Commission’s conduct, which are in any

event not relevant to the magistrate judge’s determinations as to violations and

remedies.

B. Statement of Facts

The facts set forth in this section are taken from the order of the magistrate

judge who, pursuant to 28 U.S.C. 636(c), decided the Commission’s motion for

summary judgment. The magistrate judge noted that there was no dispute between

Leonard and the Commission as to most of the facts (where there was a dispute,


2/ “SA__” refers to the Supplemental Appendix of the Securities andExchange Commission, Appellant.

4

the magistrate judge so noted). SA 2. 2/ On appeal, Leonard once again does not

dispute the facts. See Informal Brief.

Leonard was the Chairman, Chief Executive Officer and Chief Financial

Officer of Indigenous, a start-up company that claimed to be involved, inter alia,

in the purchase and sale of natural gas. SA2. The shares of Indigenous were listed

for trading on the Bulletin Board of the National Association of Securities Dealers

over-the-counter-market. Id.

1. Misrepresentations

Leonard and Indigenous made a number of misrepresentations to the public

regarding Indigenous’s business. These misrepresentations fall into three

categories: (a) misrepresentations that other companies had entered into legally

binding agreements to provide either funding or natural gas to Indigenous when

the other companies had only signed non-binding letters of intent; (b)

misrepresentations about the other companies’ ability to provide natural gas to

Indigenous; and (c) misrepresentations about Indigenous’ actual purchase of

nature gas and its ability to use natural gas in electrical generating plants. Leonard

and Indigenous made these misrepresentations between May 2003 and September


5

2005 in a series of press releases and in filings with the Commission.

a. Misrepresentations About the Agreements Indigenous HadWith Other Companies.

Leonard and Indigenous made the following misrepresentations about the

agreements Indigenous had with other companies:

-- In a May 23, 2003 press release, Indigenous and Leonard claimed that

a company named Native America FLC had invested $5 million in

Indigenous when in fact Native America FLC had only signed a letter

of intent that specifically disclaimed any legally binding obligations,

SA3-4;

-- In a March 3, 2004 press release, Indigenous and Leonard stated that

Indigenous had signed an agreement with Cree Energy, LP, to buy

and sell natural gas when in fact there was only a letter of intent that

specifically disclaimed any legally binding obligations, SA5-6;

-- In a Form 10K-SB filed on October 14, 2004, Indigenous and

Leonard stated that a contract with Cree Energy, LLC, would allow it

“to purchase and sell” more than 90 billion cubic feet of natural gas

per year when in fact the contract in question did not provide that any

specific amount of gas would be sold, SA6-7;


6

-- In a Form 10Q-SB filed on May 27, 2005, Indigenous and Leonard

stated that Indigenous had obtained a $12 million line of credit from a

private fund when in fact, before the filing of the Form 10Q-SB, the

fund that had provided the line of credit had sent a notice of default to

Indigenous, demanded repayment of all outstanding amounts, and

threatened and filed a legal action against Indigenous, SA8-9;

-- In a September 20, 2005 press release Indigenous and Leonard stated

that Indigenous had received “an investment package of $100 million

by a[n] Asian Investment Energy Group” when in fact the investment

group in question had only sent a letter of intent that did not create

any contractual obligations and did not contain any reference to an

intent to invest money in Indigenous, SA9-10.

b. Misrepresentations About the Ability of Other Companies toPerform Their Putative Agreements

Leonard and Indigenous made the following misrepresentations about the

ability of other companies to perform their putative agreements:

-- In a March 23, 2004 press release, Indigneous and Leonard stated that

Indigenous had signed an agreement with Cree Energy, LP, to buy

and sell natural gas when in fact the company with which Indigenous


7

had an agreement, Cree National Natural Gas, did not own any

natural gas, had never sold any natural gas, and, to Leonard’s

knowledge, did not have any agreement to buy natural gas, SA5-6;


Leonard stated that a contract with Cree Energy, LLC, would allow

Indigenous (a) “to purchase and sell” more than 90 billion cubic feet

of natural gas per year, and (b) to purchase natural gas “at a

significant discount to the U.S. spot market” for the next 25 years,

when in fact although a company controlled by Leonard named First

Indigenous Depository Company, or FIDC, did have an agreement

with a company called Cree Energy, Ltd. pursuant to which Cree

Energy, Ltd. would sell Canadian natural gas to FIDC (FIDC

purportedly would have provided the gas it purchased to Indigenous),

Cree Energy, Ltd in fact did not own any natural gas, SA 6-7.

c. Misrepresentations About Indigenous’ Purchase and Ability toUse Natural Gas

Leonard and Indigenous made the following misrepresentations about

Indigenous’s purchase and use of natural gas:

-- In a March 23, 2004 press release, Indigenous and Leonard stated that


8

Indigenous would use natural gas purchased from Cree Energy, Ltd.

in electrical generating plants “scheduled to start this year,” when in

fact Indigenous did not own or operate electrical generating plants,

SA5-6.


Leonard stated that Indigenous planned “to increase the purchase and

transport of Canadian natural gas into the U.S. nine-fold each quarter

and [was] hoping to reach revenues from $36 million to $108 million

in the first full year of natural gas sales” when in fact, although a

company controlled by Leonard named First Indigenous Depository

Company, or FIDC, did have an agreement with Cree Energy, Ltd.

pursuant to which Cree Energy, Ltd. would sell Canadian natural gas

to FIDC (FIDC purportedly would have provided the gas it purchased

to Indigenous), that agreement did not provide that Cree Energy, Ltd

would sell any specific amount of gas to FIDC, SA6-7.

-- In a November 19, 2004 press release, Indigenous and Leonard

announced “sales and transport of Canadian natural gas [from Cree]

into the U.S,” in addition to Indigenous’ current purchases of $3

million of natural gas per month; according to the release,


9

Indigenous’ purchase would “increase to $6 million by the next

quarter and increase to $9 million of natural gas per month within 18

months,” when in fact at the time of the press release Indigenous was

not purchasing $3 million of gas per month but only “plan[ned]” to

make such purchases and in fact Indigenous had at that time never

purchased more than $200,000 worth of gas in a single month, SA7-8.

2. Sales of Indigenous Stock

Between May 2003 and December 2004, Indigenous issued 43.5 million

shares of common stock. These shares were: (a) issued in connection with the

settlement of a lawsuit or as collateral for a loan; (b) sold directly to the public; or

(c) given in exchange for services rendered. The values placed on the stock varied

from one cent to $1.00. The total value of the shares was approximately $6.2

million. SA10-11.

Leonard participated in the sale of the stock by Indigenous to investors,

talking with them about “‘the major issues of the company.’” SA10 (quoting

Leonard’s testimony). Leonard told one person who purchased stock that the price

would increase from about 18 cents per share to $2.00 or $3.00 per share. SA11.

Leonard also sold Indigenous stock for his own benefit, receiving $249,

793.68 from these sales. Id.


10

C. Proceedings in the District Court

The Commission filed this action against Leonard and Indigenous on

September 13, 2006, alleging that they had violated the antifraud provisions of

Section 17(a), of the Securities Act, 15 U.S.C. 77q(a), and Section 10(b) of the

Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5.

The Commission also alleged that Indigenous had violated the reporting

provisions of Section 13 of the Exchange Act, 15 U.S.C. 78m, and rules

thereunder. The Commission further alleged that Leonard had aided and abetted

Indigenous’s violations of Section 13 and rules thereunder and had himself

violated the certification provisions of Rule 13a-14, 17 C.F.R. 240.13a-14.

A default was entered against Indigenous and subsequently a default

judgment.

1. The Commission’s Motion For Summary Judgment

The Commission moved for summary judgment against Leonard. As noted

supra, p. 4, the parties consented, pursuant to 28 U.S.C. 636(c), to have a

magistrate judge decide the motion. The magistrate judge granted the summary

judgment motion, concluding that there were no genuine issues of material fact

with regard to: (a) the Commission’s claims that Leonard had violated the

antifraud and other provisions; (b) Leonard’s defense that the Commission


11

discriminated against him on the basis of race; or (c) Leonard’s defense that his

conduct was not subject to the federal securities laws.

a. Leonard’s Violations of Section 17(a), Section 10(b) and Rule10b-5

The magistrate judge found that the undisputed evidence showed that

Leonard had made a series of false and misleading statements in connection with

the purchase and sale of securities. SA17. The magistrate judge found that the

statements were material “because they involved significant financing and

purchasing agreements, each at a point in time when [Indigenous] had no other

significant source of financing and no other agreements for the purchase and sale

of natural gas.” SA19.

The magistrate judge found that Leonard had acted with scienter “because

[Leonard’s] statements were reckless in light of the circumstances in which they

were made” and because “Leonard’s conduct was highly unreasonable given what

Leonard knew about the surrounding circumstances.” Id. The magistrate judge

found that the “undisputed evidence show[ed] that Leonard himself negotiated the

various agreements referenced in the false statements” and that “it would have

been entirely obvious to a reasonable person that the claims made in the

statements did not accurately reflect the true facts but rather, were baseless.” Id.


12

b. Leonard’s Aiding and Abetting of Indigenous’ Section 13(a)violations

The magistrate judge found that Leonard had aided and abetted Indigenous’

violations of its obligations under Section 13(a) to file quarterly and annual

reports that were truthful and complete. The magistrate judge found that the June

30, 2004 10K-SB and the March 31, 2005 Form 10Q-SB contained materially

false statements, thus constituting violations by Indigenous, and that Leonard had

aided and abetted those violations because he knew that the statements were false

and he had “substantially assisted in the violations by signing the certifications

stating that the reports did not contain any material misstatements of omissions.”

SA22.

c. Leonard’s Violations of Rule 13a-14 under the Exchange Act

The magistrate judge found that Leonard had violated the Rule by signing,

in his capacities as principal executive and principal financial officer of

Indigenous, certifications included with Indigenous’ quarterly and annual reports

that those reports, to the best of Leonard’s knowledge, included no material

misstatements and omitted no material information. Id.


13

d. Leonard’s defense that the Commission discriminated againsthim on the basis of race

The magistrate judge treated Leonard’s claim that the Commission

discriminated him on the basis of race as an “unclean hands” defense and ruled

that such a defense could be asserted against a governmental entity such as the

Commission only where the alleged misconduct “‘was egregious and the resulting

prejudice to the defendant rise[s] to a constitutional level.’” SA23, quoting SEC v.

Follick, 2002 WL 31833868 * 8 (S.D.N.Y. Dec.18, 2002). The magistrate judge

found that Leonard’s claims of racial discrimination were “vague and conclusory”

and lacked any “specific facts or evidence.” SA23. Furthermore, the magistrate

judge found, Leonard has not shown any “conduct on that part of the government

that has resulted in any actual prejudice.” The magistrate judge therefore ruled

that Leonard’s unclean hands defense “fail[ed] as a matter of law.” Id.

e. Leonard’s defense that his conduct was not subject to thefederal securities laws

Leonard argued that, because FIDC, the non-defendant company that he

controlled and that he used in some of his dealings with Indigenous, was a “tribal

company” located on an Indian reservation, the Commission could not bring

claims against him or Indigenous for violations of the federal securities laws. The

magistrate judge ruled that Leonard had cited no authority “for the proposition that


14

a company whose shares are publicly traded is immune from the securities laws

because it did some of its business through a tribal-owned company,” and also that

the court was unaware of any such authority. The magistrate judge therefore

rejected the defense. Id.

2. The Remedies Ordered By the Magistrate Judge

The magistrate judge, in imposing remedies for Leonard’s violations,

ordered: (a) that he be enjoined from future violations of the antifraud and other

provisions, SA24-25; (b) that he disgorge profits from his sale of Indigenous stock

in the amount of $249,739.68 and that he pay prejudgment interest of $37,586.84,

SA25-26; (c) that Leonard pay a civil monetary penalty of $208,000, SA26-27; (d)

that he be prohibited from serving as an officer or director of a publicly-traded

company, SA27-28; and (e) that he be prohibited from participating in future

penny stock offerings, SA28.

STANDARD OF REVIEW

This Court reviews a grant of summary judgment de novo, and may affirm a

summary judgment on any ground supported by the record. See Qwest Corp. v.

City of Surprise, 434 F.3d 1176, 1180 (9 Cir. 2006).th


15

SUMMARY OF ARGUMENT

Although Leonard makes vague and conclusory allegations that the

Commission engaged in racial discrimination, he does not refer to any specific

statements or acts by Commission employees showing racial animus, much less

cite to any evidence showing that any such statements or acts actually occurred.

The magistrate judge therefore did not err when he concluded that there were no

genuine issues of fact with regard to Leonard’s defense that the case against him

was motivated by racial discrimination.

Similarly, Leonard does not point to any evidence supporting his contention

that he was advised by an Administrative Law Judge of the Commission not to

retain an attorney; in any event, any such advice, even if it had been given by the

Administrative Law Judge, would have been in connection with a separate

administrative proceeding before the Commission involving an issue not present

in this case, namely, the issue whether the registration of his company’s stock

should be suspended or revoked.

Finally, the Commission’s conduct during investigation and discovery that

Leonard claims to have been improper was entirely correct. First, as Leonard

concedes, the Commission allowed Leonard access to all documents he requested

and permitted him to copy them; this was all it was required to do. Second, the


16

Commission properly treated the written questions Leonard sent to it as

interrogatories to which its attorneys responded in due course. Third, during its

investigation, the Commission properly issued subpoenas seeking documents

relating to a company Leonard controlled, FIDC; there is no basis for Leonard’s

contention that a company owned by American Indians is exempt from

Commission investigative subpoenas.

ARGUMENT

THERE IS NO BASIS FOR APPELLANT LEONARD’S ASSERTIONTHAT THE COMMISSION HAS ENGAGED IN MISCONDUCT.

Leonard argues that the final judgment of the district court should be

vacated because the Commission engaged in misconduct in three respects. First,

he argues that the Commission engages in racial discrimination against American

Indians. See Informal Brief, pp. 3, 4, 5. Second, he argues that the Commission

advised him not to retain an attorney and thus handicapped him in this action.

Informal Brief, pp. 3, 5. Third, he argues that the Commission engaged in

improper conduct in its investigation and discovery by: (a) not making documents

readily accessible to him when the Commission required him either to make copies

of the documents or read the documents in the Commission’s offices, Informal

Brief, p. 2; (b) not making its Commissioners available to him for questioning


3/ By “Tribal Company,” Leonard appears to mean a company that is wholly-owned by Indians. See Informal Brief, p. 2 (reference to “wholly ownedTribal business entit[ies]”). FIDC may have been such a company;Indigenous, which was publicly traded, was not. Leonard thus appears toobject to the Commission’s access to FIDC documents but not to theCommission’s access to Indigenous documents.

Leonard also argues that the Commission improperly gave information tothe San Francisco Chronicle, Informal Brief, p. 4. Any such release ofinformation would not serve as a basis for vacating the Final Judgment andLeonard does not argue that it would.

Leonard argues that the Commission improperly refused to investigatecertain alleged conspiracies against Leonard by his employees and potentialinvestors. Informal Brief, pp. 1, 2. Even if these employees and/orinvestors had been conspiring against Leonard – and there is no proof thatthey were – , that would be no ground for vacating a judgment againstLeonard based on his securities law violations.

17

rather than answering his interrogatories through staff attorneys, Informal Brief, p.

2; and (c) improperly requesting production of documents from a“Tribal

company”(apparently referring to FIDC), Informal Brief, p. 3. 3/ There is no

basis for any of his contentions.

I. LEONARD HAS NOT ADEQUATELY ALLEGED, MUCH LESSSHOWN, THAT THE COMMISSION HAS ENGAGED IN RACIALDISCRIMINATION AGAINST HIM.

The magistrate judge rejected Leonard’s claims that the Commission had

engaged in racial discrimination on the ground that those claims were “vague and

conclusory” and lacked any “specific facts or evidence.” Supra, p. 13. On appeal,


4/ Even in the district court, Leonard did not allege any specific instances ofracist behavior or language by Commission employees; rather, he onlyalleged that “staff attorneys for the SEC San Francisco office useddisgruntled employees [of Indigenous], individuals who made racialstatements against Mr. Leonard.” Leonard’s Answer to CommissionMotion for Summary Judgment, Dkt. No. 71, p. 2; see also pp. 3, 5 . Thus,to the extent Leonard has ever alleged in this case that any individuals wereracist, it was his own employees (and even with regard to these employees,Leonard does not allege any specific instances of racist behavior orlanguage, see id., pp. 2, 3, 5). The alleged racism of the Indigenousemployees cannot be attributed to the Commission, even assuming thatLeonard’s allegations about the employees are true and that the Commissiondid in fact use information that the employees provided.

18

Leonard’s claims are no more specific. He does not identify any specific

statements or acts by Commission personnel that evidence a racial animus, and he

does not identify any particular individuals employed by the Commission who

purportedly either harbor an animus or have engaged in any acts of racial

discrimination against him. 4/ Rather, he makes the conclusory statement, in the

form of a question, that “Is there evidence of institutional discrimination by the

SEC regarding Indian Tribes and have they discriminated against Tribal

government relative to municipal bond designations?” Informal Brief, p. 2. This

case, of course, has nothing to do with the issuance of municipal bonds and in any

event Leonard provides no specific evidence of any Commission discrimination

with regard to municipal bonds.

Leonard also argues that the Commission engaged in a form of racial


19

discrimination he calls “Predatory Cognition” when it allegedly advised him not to

retain an attorney and when it improperly refused to make copies of certain

documents for him. Informal Brief, pp. 1, 2. Even if there were any merit to his

claims that the Commission advised him not to retain an attorney and improperly

refused to make copies for him (as shown infra, pp. 20-23, there is not), these acts,

absent any evidence of the motivation for them, would not have constituted racial

discrimination.

Vague and conclusory allegations of racial discrimination such as Leonard

makes cannot serve as the basis for sanctioning a government agency for

misconduct. As this Court has stated, citing the recent Supreme Court decisions in

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129

S.Ct. 1937 (2009), “‘bare assertions . . . amount[ing] to nothing more than a

“formulaic recitation of the elements” of a constitutional discrimination claim’ . . .

are not entitled to an assumption of truth.” Moss v. U.S. Secret Service, 572 F.3d

962, 969 (9 Cir. 2009). This Court pointed out that, in Iqbal, the Supreme Courtth

“assigned no weight to [a] conclusory allegation” of discrimination on the basis of

religion, race, and/or national origin. Id. Leonard’s allegations of racial

discrimination on the part of the Commission are just such conclusory allegations.

Furthermore, as the magistrate judge ruled, when the subject of a


20

governmental law enforcement action complains that the governmental agency in

question is motivated by racial animus, the agency is sanctioned only where the

conduct was not only specifically alleged and proved but was, inter alia,

“egregious.” See supra, p. 13; see also SEC v. Follick, No. 00-civ-4385, 2002

U.S. Dist. LEXIS 24112, *22-*23, Fed. Sec. L. Rep. (CCH) ¶92,270 (S.D.N.Y.

Dec. 18, 2002). Leonard’s brief on appeal lacks even the semblance of any

allegation of such conduct.

II. LEONARD HAS NOT SHOWN THAT THE COMMISSIONADVISED HIM NOT TO RETAIN AN ATTORNEY.

Leonard contends that an Administrative Law Judge of the Commission

advised him not to retain an attorney. Informal Brief, pp. 1, 3. To the

Commission’s knowledge, this contention has no basis, and indeed Leonard does

not cite any evidence that this advice was given to him: in his brief, he makes the

unsworn statement that he received the advice but does not cite any evidence. See

Informal Brief, p. 1. Because of the lack of any evidence to support the

contention, this Court should reject it.

Even if an Administrative Law Judge had advised Leonard that he did not

need an attorney, as Leonard contends, it would be irrelevant to this case. No

Commission Administrative Law Judge had any role in this civil enforcement


21

action brought in a district court; the only contact Leonard would have had with a

Commission Administrative Law Judge would have been in connection with an

entirely different proceeding, an administrative proceeding that the Commission

brought to determine whether, in view of the fact that Indigenous has ceased to file

annual and quarterly reports with the Commission, the registration of Indigenous

stock should be suspended or revoked. See In re Indigenous Global Development

Corp., Initial Decision Release No. 325, Administrative Proceeding File No. 32-

12414 (January 12, 2007). Any advice Leonard received or understood to have

received in that administrative proceeding would have nothing to do with this

district court enforcement action.

III. LEONARD HAS NOT SHOWN THAT THE COMMISSIONENGAGED IN IMPROPER CONDUCT IN ITS INVESTIGATIONAND DURING DISCOVERY.

As previously noted, supra, pp. 16-17, Leonard argues that the Commission

engaged in improper conduct by: (a) requiring him either to make copies of

documents in the Commission’s possession or read the documents in the

Commission’s offices, Informal Brief, p. 2; (b) not making its Commissioners

available to him for questioning rather than answering his interrogatories through

staff attorneys, Informal Brief, p. 2; and (c) improperly requesting production of

documents from FIDC, Informal Brief, p. 2, 3. None of the Commission’s


22

conduct, however, was improper.

With regard to issue (a), Leonard’s access to documents in the

Commission’s possession, Leonard did not raise this issue in his opposition to the

Commission’s summary judgment motion. See Dkt. No. 71. By not raising the

issue in the district court, Leonard has waived it. See United States v. Flores-

Montano, 424 F.3d 1044, 1047 (9 Cir. 2005). th

Even if Leonard had not waived the issue, it would have been entirely

correct for the Commission to require him either to make copies of documents in

the Commission’s possession or read the documents in the Commission’s offices.

Such access to documents fully complies with federal discovery requirements,

which require only that a party requesting documents be permitted to “inspect”

and “copy” the documents. Fed. R. Civ. P. 34(a).

With regard to issue (b), whether the Commission was obligated to make its

Commissioners available in person so that Leonard could question them, the

Commission’s conduct also was proper. Leonard propounded certain questions to

the Commissioners; the Commission staff treated these questions as

interrogatories and responded to them, asserting objections where the staff

believed them to be appropriate. See Informal Brief, p. 2 (the Commissioners “had

the San Francisco SEC office staff attorney respond for them”). Leonard did not


23

seek court orders to compel the Commission to answer those questions to which it

had objected or even to compel individual Commissioners to appear for

deposition. Having responded to Leonard’s interrogatories, the Commission was

not obliged to take any further steps.

With regard to issue (c), whether the Commission improperly requested

documents from FIDC, Leonard again failed to raise the issue in his opposition to

the Commission’s summary judgment motion and thus waived it. See Dkt. No. 71;

supra, p. 22. In any event, it was entirely proper for the Commission, as it did, to

seek access to FIDC documents through subpoenas issued in connection with its

investigation of Leonard and Indigenous, which subpoenas were issued under the

authority granted the Commission by 15 U.S.C. 78u(b). Leonard does not cite any

authority for the proposition that companies, like FIDC, that are wholly-owned by

Indians, are exempt from Commission investigative subpoenas and we are not

aware of any.


24

CONCLUSION

For the foregoing reasons, the order of the district court granting the

Commission summary judgment and ordering relief against defendant Deni

Leonard should be affirmed.

Respectfully submitted,

DAVID M. BECKERGeneral Counsel

MARK D. CAHNDeputy General Counsel

JACOB H. STILLMANSolicitor

s/Christopher PaikCHRISTOPHER PAIKSpecial Counsel

Securities and Exchange Commission100 F Street, N.E.Washington, D.C. 20549202-551-5187 (Paik)

March 2010


25

CERTIFICATE OF COMPLIANCE WITH F.R.A.P. 32(a)(7)

I, Christopher Paik, hereby certify that the Brief of the Securities and

Exchange Commission, Appellee in Securities and Exchange Commission v.

Indigenous Global Development Corporation, No. 08-17116, complies with

F.R.A.P. 32(a)(7). The brief, exclusive of tables, contains approximately 4700

words, as counted by the word processing program Coral WordPerfect 11.

s/Christopher Paik


26

STATEMENT OF RELATED CASES

There are no related cases


27

CERTIFICATE OF SERVICE

I, Christopher Paik, hereby declare that on March 24, 2010 I caused to be

served by Federal Express copies of the Brief of the Securities and Exchange

Commission, Appellee and of the Supplemental Appendix of the Securities and

Exchange Commission, Appellee in Securities and Exchange Commission v.

Indigenous Global Development Corporation, No. 08-17116, on Deni Leonard,

2130 Fillmore Street, Apt. 184, San Francisco, California 94115, pro se. I believe

that this is Mr. Leonard’s current address, as it is the return address on

correspondence I have recently received from him. This address is not the address

on file with the Court. I did not use the address on file, as mail sent to that address

is returned to sender.

I do not have an e-mail address for Mr. Leonard, and consequently have not

sent an electronic copy of the Brief to him.

s/Christopher Paik


Documents

UNITED STATES COURT OF APPEALS FOR THE …. 08-17116 _____ UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _____ SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. INDIGENOUS

UNITED STATES COURT OF APPEALS FOR THE …. 08-17116 _ UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _ SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. INDIGENOUS