United States District Court, D. Utah
MARK F. BURTON, SR., as Trustee of the BRENDA H. BURTON TRUST; MARK F. BURTON, individually; and BRENDA H. BURTON, individually, Movants,
UNITED STATES SECURITIES AND EXCHANGE COMISSION, Respondent.
MEMORANDUM DECISION AND ORDER DENYING MOVANTS'
MOTION TO QUASH
Stewart United States District Judge.
matter is before the Court on Movants' Motion for Order
Pursuant to Customer Challenge Provisions of the Right to
Financial Privacy Act of 1978, which the Court interprets as
a motion to quash. For the reasons discussed below, the Court
will deny Movant's request to quash the SEC's
subpoenas seeking Movants' financial information.
April 25, 2017, the SEC served three subpoenas seeking access
to Movants' financial records from Zions Bank. The SEC
sent a copy to Movants via overnight mail on the same day. 12
U.S.C. § 3410(a) provides, “[w]ithin ten days of
service or within fourteen days of mailing of a subpoena . .
. a customer may file a motion to quash.” On May 15,
2017, Movants filed a motion under 12 U.S.C. § 3410 to
quash the subpoenas. While the document was not filed until
May 15, it was dated May 9, and the attached certificate of
mailing bears the same date. The ten-day deadline expired on
May 8 and the fourteen-day deadline expired on May 9.
the motion is dated May 9, the statute clearly states that a
motion to quash must be filed within the deadline.
Some courts have found that a failure to timely file a motion
to quash under 12 U.S.C. § 3410 deprives the court of
subject-matter jurisdiction. Movants' failure to comply
with the procedural requirements of Section 3410 is a
sufficient basis for the Court to deny Movants' Motion.
the Motion were timely, the government has made a sufficient
showing under Section 3410(c) to support the enforcement of
the subpoenas. In response to a customer challenge, the
government must show: (1) “a demonstrable reason to
believe that the law enforcement inquiry is
legitimate”; and (2) “a reasonable belief that
the records sought are relevant to that
it is clear that these subpoenas arise in the course of a
legitimate law enforcement inquiry. The SEC issued a Formal
Order in this investigation pursuant to Section 20(a) of the
Securities Act, 15 U.S.C. § 77t(a), and Section 21(a) of
the Exchange Act, 15 U.S.C. § 78u(a). The SEC is allowed
by statute to conduct investigations by the use of certain
powers, including the issuance of subpoenas.
Private Placement Capital Notes II, LLC (“PPCN”)
allegedly received money from Total Wealth Management, Inc.,
which allegedly misappropriated millions of dollars in
investor funds. In a Southern District of California case
involving Total Wealth Management, the court stated that
there were indications that payments made by PPCN to
investors may have been made through a Ponzi-like
scheme. Congress has endowed the SEC with broad
power to ferret out violations of federal securities laws,
the Court finds that the government has shown a demonstrable
reason to believe that the present law enforcement inquiry is
the Government has connected millions of dollars of PPCN
investments to an island resort where the Burtons have a
significant financial interest. The SEC has obtained
documents indicating that the Burtons received substantial
amounts of money from an escrow account for the resort on
multiple occasions under unusual circumstances. In addition,
both the Burtons and PPCN personnel were copied on numerous
emails discussing the financial woes of the resort. The
Government claims that the Burtons' bank records are
particularly important in determining whether the Burtons
received PPCN investor funds, and how they disbursed funds
received from the resort. The Court finds that there is a
reasonable belief that the Movants' bank records are
relevant to that inquiry.
the government has established that the subpoena is relevant
to a legitimate law enforcement inquiry. There are no grounds
on which to quash the subpoenas issued to Zions Bank, and the
subpoena must therefore be enforced.
that Respondent's Motion for Leave to File Excess Pages
and Memorandum in Support (Docket No. 6) is GRANTED. It is
further ORDERED that Movant's Order Pursuant to Customer
Challenge Provisions of the Right to Financial Privacy Act of
1978 (Docket No. 2) is DENIED. The Clerk of Court is directed
to close this matter.
See, e.g., Lund v. United
States, No. 6:14-MC-00048-AA, 2014 WL 2041825, at *1 (D.
Or. May 8, 2014) (unpublished) (collecting cases);
Gutierrez v. Soc. Sec. Admin. Office of Inspector
Gen., No. 2:15-MC-0075-TLN-KJN, 2015 WL 5138105, at ...