Byline: Derek Hawkins
7th Circuit Court of Appeals
Case Name: Securities and Exchange Commission v. Gary S. Williky
Case No.: 19-1243
Officials: BAUER, BRENNAN, and ST. EVE, Circuit Judges.
Focus: Abuse of Discretion Judgment
Gary Williky appeals a judgment in favor of the Securities and Exchange Commission ("SEC") that followed a bifurcated settlement agreement regarding Williky's fraudulent conduct while working for the Indiana based company Imperial Petroleum, Inc. ("Imperial"). This court addressed the details of Imperial's fraudulent scheme in United States v. Wilson, 879 F.3d 795 (7th Cir. 2018). Imperial fraudulently purchased finished biodiesel and resold it while claiming government incentives and tax-credits available to companies producing biodiesel from raw feedstock. Jeffery Wilson, Imperial's ex-CEO, hired Williky to artificially inflate Imperial's stock through a series of "wash and match trades" and "scalping" emails. In the 1990s, Williky similarly engaged in a pattern of "wash and match trades" for another company led by Wilson. As part of Imperial, Williky acquired millions of shares of its stock but failed to lawfully report his ownership levels when his shares surpassed five percent. At issue in this appeal is Williky's conduct once the Imperial fraud unraveled. By July 2011, Williky knew Imperial misrepresented the source of its biodiesel to investors and, by November, knew the complete extent of Imperial's fraud. Williky sold off the entirety of his Imperial shares by February 27, 2012, and avoided a loss of $798,217.
The SEC sued to permanently enjoin Williky from violating federal securities law, to enjoin Williky from acting as an officer or director of a public company, and to disgorge his financial gains. The SEC...