The U.S. Securities and Exchange Commission (SEC) has dropped its enforcement case against a former CEO that it had accused of orchestrating an accounting fraud scheme — after he was acquitted in a parallel criminal case.
In 2019, the SEC filed a civil enforcement action against Neil Cole — the former CEO of brand management company, Iconix Brand Group Inc. — along with the company itself and two other executives, alleging that they participated in fraudulent scheme to create fictitious revenue for the company in the second and third quarters of 2014.
At the same time, Cole and another executive were also charged criminally by the U.S. attorney’s office for the Southern District of New York (SDNY).
The other executive charged in the case pleaded guilty, and also settled the SEC’s case against him. The company, and the third executive, settled with the regulator too, without admitting or denying the allegations. As part of its settlement, the company agreed to injunctive relief and to pay a US$5.5-million penalty.
In both the criminal and regulatory proceedings, litigation continued against Cole, who was ultimately acquitted of the charges against him after three trials.
In 2021, a jury failed to reach a verdict in his first trial. But, in 2022, he was convicted on charges of securities fraud, making false filings to the SEC, and improperly influencing audits — and he was sentenced to 18 months in prison.
On appeal, those convictions were overturned in a decision of the U.S. Court of Appeals, second circuit, which agreed with Cole that he never should have been retried based on the doctrine of “double jeopardy” — which prevents a person from being tried more than once for the same charges.
According to the court, Cole argued that the first jury had acquitted him of conspiracy, and so he shouldn’t have been tried a second time, as the first jury had effectively rejected the theory underlying the government’s case.
The appeal court agreed in a decision handed down last October — it vacated the convictions and dismissed the indictment against him.
On Monday, the SEC announced that it filed a notice in the U.S. district court for the SDNY to dismiss its case against Cole too.
“The commission’s decision to seek dismissal of this enforcement action is an exercise of its discretion and does not necessarily reflect the commission’s position on any other case,” it said in the court filing.