By Dean Seal

Law360 (October 27, 2020, 7:38 PM EDT) -- A Connecticut federal judge said he will not grant a new trial to an investment adviser accused by the U.S. Securities and Exchange Commission of defrauding clients, even if one of the juror's post-trial comments about the adviser and his wife were "tasteless and mean-spirited."

U.S. District Judge Jeffrey Alker Meyer handed down an order on Monday denying a bid by Westport Capital Markets LLC and its owner, Christopher McClure, to either get a new judgment or a new trial on claims from the SEC that McClure generated roughly $780,000 in undisclosed markups and fees.

McClure had argued that the evidence presented at his March trial should not have reasonably led the jury to find in the SEC's favor and that an issue with the verdict form, bias revealed in a post-trial letter from one of the jurors to the SEC's counsel, and the looming coronavirus pandemic all contributed to a "miscarriage of justice."

Judge Meyer rejected each of those arguments as having "no merit," saying the SEC's "highly convincing evidentiary showing" supported the jury's finding, Westport and McClure didn't object to the verdict form back when the trial was ongoing, and the jury never raised any concerns about the COVID-19 pandemic before rendering its verdict.

And one juror's "congratulatory and gossipy handwritten letter" to an SEC attorney a week after the trial concluded, which stated that the defense "didn't have a chance" and remarked on the posh footwear of McClure's wife, does nothing to suggest the juror had a pre-existing bias in favor of the SEC or the government, the judge said.

"Whether jurors believed the shoes to be Priceline or Prada, their beliefs about the value of the shoes stemmed from the 'internal … general body of experiences' of one or more jurors, experiences that fall outside the exception … for extraneous prejudicial information," Judge Meyer said. "In short, notwithstanding that Juror #5's comments about McClure and his wife were tasteless and mean-spirited, I conclude that the juror's letter does not furnish any appropriate grounds for me to conduct a hearing or further inquiry to question the validity of the jury's verdict."

After a five-day trial in March, McClure and his firm were found liable for sticking their clients with risky securities without their knowledge and leveraging relationships with investment banks to sell discounted securities at undisclosed markups.

The SEC notched a pretrial win in the case in October 2019, when Judge Meyer found on summary judgment that Westport and McClure had violated the Investment Advisers Act by failing to disclose conflicts of interest.

The only question left for trial was whether McClure and his firm broke the law on purpose. Jurors concluded they did, finding McClure took unfair advantage of his clients' accounts and boosted his compensation with practices he never disclosed.

Westport and McClure filed a motion on April 27 for a new judgment in their favor, arguing there was insufficient evidence upon which a reasonable jury could find that the defendants had willfully made false statements and that the design of the jury verdict form suggested the case had already been largely decided.

On top of that, Westport and McClure said, a letter written to the SEC after the trial by "juror number five" displayed a clear bias against the investment adviser that must have affected deliberations. And the outbreak of COVID-19 revved up during the trial, a unique factor that only amplifies the questionability of the verdict, Westport and McClure argued.

The SEC responded in May that the coronavirus argument was a red herring and there was no error in having the verdict form "pre-marked" to show the summary judgment finding against Westport and McClure — an attribute the defense never questioned until after the verdict against it.

Judge Meyer agreed, writing in his order Monday that the defense has waived its objection to the verdict form by not raising it during trial and that no jurors had requested excusal based on the pandemic or gave any indication that a fear of the virus caused them to rush their verdict.

Westport and McClure had also taken issue with a juror's letter to the SEC after the trial, in which the juror thanked the SEC for its public service, congratulated it on its trial win, and stated that the defendants "didn't have a chance." The letter also noted McClure's wife wore expensive shoes at the trial, which was apparently noticed by members of the jury.

But Judge Meyer found that the letter does not suggest the juror was dishonest about being fair and impartial or had "decided from the outset to rule against Westport and McClure because of their wealth" — it simply demonstrates the juror's impressions of what was presented to him at trial.

"In no sense was the physical appearance of McClure's wife 'extraneous' in view of her personal presence at trial and McClure's choice to highlight her presence when he testified," the judge said. "Nor was the alleged $3,000 price tag for McClure's wife's shoes a piece of extraneous prejudicial information."

The SEC and counsel for Westport Capital and McClure did not immediately respond to requests for comment Tuesday.

The SEC is represented in-house by Michael C. Moran and Kathleen Burdette Shields.

Westport Capital and McClure are represented by Richard Levan and Jon-Jorge Aras of Levan Legal LLC and Brian E. Spears of Spears Manning & Martini LLC.

The case is SEC v. Westport Capital Markets LLC et al., case number 3:17-cv-02064, in the U.S. District Court for the District of Connecticut.

--Additional reporting by Jack Queen. Editing by Janice Carter Brown.

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