Fort Lauderdale-based BBX Capital Corp. said it won its appeal of a 2014 court judgment against the company and its former chairman and CEO Alan Levan in a case brought by the Securities and Exchange Commission.
In reversing the district court’s judgment, the Eleventh Circuit Court of Appeals also reversed monetary penalties of $4.55 million against publicly held BBX and $1.3 million against Levan that a district court had imposed.
The Eleventh Circuit also overturned the district court’s two-year ban on Levan’s participation in any publicly held company as an officer or director.
Levan resigned as chairman and chief executive officer of BBX Capital last December, and the company appointed his son Jarett as acting chairman and CEO .
“I am determined to clear my name and BBX’s name from the false claims that have been asserted in this case,” Levan said in a press release issued by BBX.”The decision today by the Eleventh Circuit brings me closer to that goal.”
“While the decision leaves open the possibility of a new trial, it decimates any ability of the SEC to win,” BBX legal counsel Eugene Stearns said the company’s press release. “In light of this decision we would certainly hope that the SEC will recognize the futility and unreasonableness of further pursuit of this litigation, and if it is pursued, we have little doubt about the outcome.”
A jury trial ended in 2014 with a verdict that Levan and the corporate predecessor of BBX, an FDIC-insured bank called BankAtlantic, made fraudulent statements in 2007 about the bank’s loan losses. In 2012, BankAtlantic sold its network of bank offices and other assets to regional bank holding company BB&T, and its remaining assets, including real estate holding, are now owned by BBX.
U.S. District Judge Darrin Gayles presided over the trial.
The judge made two pre-trial rulings granting partial summary judgment in favor of the SEC. The court ruled that Levan lied during a July 2007 conference call with stock analysts about the health of the loan portfolio of publicly held BankAtlantic. In a second pre-trial ruling, the district court agreed with the SEC’s contention that BankAtlantic should have classified loans held for sale as loans held for investment
The Eleventh Circuit reversed both pre-trial rulings. No witness during the appeal testified that Levan made false statements during the 2007 conference call, not even the SEC’s expert witness. The appellate court also found that BBX’s corporate predecessor BankAtlantic was entitled to rely on its accounting firm PricewaterhouseCoopers for advice on loan classification The company’s 2007 financial statements never required restatement.