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Fr. Emmanuel Lemelson Files Opposition in SEC Fight Over Ligand Pharmaceuticals (NASDAQ: LGND)
Fr. Emmanuel Lemelson Files Opposition in SEC Fight Over Ligand Pharmaceuticals (NASDAQ: LGND)
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SECURITIES AND EXCHANGE COMMISSION, )
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Plaintiff )
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v. )
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GREGORY LEMELSON and LEMELSON CAPITAL )
Civil Action No. 1:18-cv-11926-PBS
MANAGEMENT, LLC, )
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Defendants, )
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and )
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THE AMVONA FUND, LP, )
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Relief Defendant )
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TABLE OF CONTENTS
Pages
TABLE OF AUTHORITIES...................................................................................... ii
I. INTRODUCTION........................................................................................... 1
III. ARGUMENT………………………………………………………………… 13
IV. CONCLUSION……………………………………………………………… 20
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TABLE OF AUTHORITIES
Pages
Cine SK8, Inc. v. Town of Henrietta, 507 F.3d 778 (2d Cir. 2007)…………………... 17
Mosdos Chofetz Chaim, Inc. v. Village of Wesley Hills, 701 F. Supp. 2d 568
(S.D.N.Y. 2010)………………………………………………………………………. 18
Perkins v. Brigham & Women's Hosp., 78 F.3d 747 (1st Cir. 1996)…………………. 17, 18
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I. INTRODUCTION
The Commission’s argument for partial summary judgment on Fr. Emmanuel’s bias and
selective enforcement defense is based on the false premise that the Commission “regularly
pursues market manipulation cases similar to this one.” SEC’s Memorandum in Support of
Motion for Partial Summary Judgment, ECF No. 122 at 4-5. It does nothing of the sort. Even a
cursory review of the supposedly similar cases upon which the Commission relies proves that the
current action is unprecedented. Indeed, these cases do not refute a showing of bias and selective
enforcement but instead affirm it. As discussed in more detail in Defendants’ Motion for
Summary Judgment, this case lacks all the hallmarks of an actual short-and-distort claim, as Fr.
Emmanuel disclosed his short position in Ligand Pharmaceuticals, published his reports in his
own name, held on to his short position for months, and cited the bases for his opinions—all of
which were publicly available. Further, there is no evidence that the challenged statements had
any impact on Ligand’s stock price. No prior case brought by the Commission is remotely
The undisputed facts support Defendants’ contention that the Commission lost all
objectivity in its investigation and subsequent enforcement action against Fr. Emmanuel, both
improperly inserting itself in the shoes of Ligand, which was trying to quash Fr. Emmanuel’s
free speech rights, and improperly injecting Fr. Emmanuel’s religious practices into a case where
his priesthood is—or should have been—entirely irrelevant to the Commission’s claims.
After the publication of Fr. Emmanuel’s first Ligand report, internal Ligand
communications show that its personnel were extremely angry, levied personal insults against Fr.
Emmanuel, made offensive attacks on his religious vocation, and ultimately adopted a strategy of
using high-powered law firms and politicians to persuade the Commission to silence Fr.
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Emmanuel’s criticism of the company rather than make any public statements to address it
directly. Defendants’ Statement of Undisputed Material Facts in Support of its Motion for
Summary Judgment, ECF No. 126 ¶¶ 90-116; Defendants’ Statement of Additional Material
To further its goal of silencing Fr. Emmanuel, in September 2014, Ligand and its counsel
met with the Commission’s Boston Regional Office (Fr. Emmanuel was a Massachusetts
resident at the time) and made baseless accusations that Fr. Emmanuel engaged in “affinity
fraud,” had a “questionable personal history,” and misrepresented the performance of his fund.
ECF No. 126 ¶¶ 95-96. The Boston Regional Office subsequently informed Ligand that it would
not be following up with an investigation of Fr. Emmanuel. ECF No. 126 ¶ 104. As a result,
Ligand hired new counsel with connections to the Commission, and thereafter received VIP
treatment from the Commission (especially when compared to Defendants’ counsel). ECF No.
126 ¶ 105-108; Opp. SOF ¶¶ 24-25, 34. At the request of its new counsel, Ligand received a
second meeting with the Commission—this time with headquarters in Washington, D.C, where
there was no geographical connection to Ligand or Fr. Emmanuel but was, not coincidentally,
the location where Ligand’s new counsel previously worked as a high-ranking Commission
employee. Opp. SOF ¶¶ 24; ECF No. 126 ¶¶ 106-107. In contrast, after the Commission’s
enforcement staff indicated it would be recommending bringing a novel Investment Advisers Act
claim, Fr. Emmanuel’s counsel was denied even a first meeting with the Commission on the
grounds that predecessor counsel had previously been afforded a meeting to discuss other
After the Commission’s Washington, D.C. regional office decided to move forward with
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communication with the Commission, receiving information about the pending investigation in
violation of Commission policy. Opp. SOF ¶¶ 28-29, Plaintiff’s Statement of Undisputed Facts
in Support of Its Motion for Partial Summary Judgment, ECF No. 123 ¶ 41. And while unable to
identify the source of the leaked information, the news of a pending investigation (which should
have been confidential) was publicly reported in the media. Opp. SOF ¶ 31.
During the Commission’s investigation, the enforcement staff deposed Fr. Emmanuel on
three consecutive days for a total of nearly 27 hours. Opp. SOF ¶ 32. Demonstrating its bias
email between Fr. Emmanuel and his legal counsel, the Commission asked Fr. Emmanuel if he
After refusing to meet with Fr. Emmanuel’s counsel to discuss the novel claims, the
Commission filed a Complaint in this Court that contained objectively false information. Opp.
SOF ¶¶ 35-37; ECF No. 126 ¶¶ 39-40, 70-73. Even after having been alerted to these factual
errors, the Commission refused to remove the false information from the public record when it
filed its Amended Complaint. Id. Moreover, demonstrating the Commission’s bias, the
Complaint shockingly touted and promoted the then-current stock price of Ligand, boasting that
it was trading above $250/share. 1 Opp. SOF ¶ 38. It is notable that Ligand’s stock price
Contrary to the Commission’s assertion in its motion, during discovery, it was the
Commission (and not Fr. Emmanuel) that again brought Fr. Emmanuel’s religious vocation into
1
That is, the Commission promoted Ligand’s stock price in its Complaint, which was riddled with objectively false
information, which dramatically overstated the financial condition of the company. Ironically, this is precisely the
nature of its alleged market-manipulation claims the Commission brought against Fr. Emmanuel.
2
Ligand’s stock price was as high as $278.62 per share (on October 1, 2018), but dropped as low as $57.24 per
share (on March 17, 2020). Opp. SOF ¶ 39.
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play, asking him repeated questions during his deposition about his priesthood, his rank, his
bishop, and his history of service. Opp. SOF ¶ 44. In addition, the Commission told the
undersigned that it intended to subpoena the Greek Orthodox Archdiocese in Boston for
purposes of determining whether Fr. Emmanuel was lying about his status as a Greek Orthodox
bringing it directly on behalf of Ligand as opposed to the market as a whole. The Commission
no longer even tries to hide this impropriety, referring to Ligand as a victim in its papers, despite
the fact that this is not a private defamation case but instead a purported Commission-brought
market manipulation case. Opp. SOF ¶ 47. Under no meaningful definition of such a case can
Ligand be considered a victim. In fact, because Ligand authorized a share repurchase 3 during the
time of Fr. Emmanuel’s reports, the company would have actually benefitted from any artificial
reduction in the share price, because Ligand could have purchased back shares at the
(supposedly) artificially low price and then reaped the benefit of the market correction to the
In sum, the Commission has treated Fr. Emmanuel differently than every other similarly
situated financial analyst; i.e., analysts who disclosed their short position, expressed their
opinions while citing publicly available data for the basis of those opinions, and held on to their
short positions for a significant period of time after making the statements. As recognized by
Magistrate Judge Cabell when twice denying the Commission’s attempt to block discovery
related to Fr. Emmanuel’s selective enforcement and bias defense, at minimum, evidence exists
3
Defined as “a transaction whereby a company buys back its own shares from the marketplace,” which is typically
done when management considers their shares to be undervalued. Opp. SOF ¶ 61.
4
Of course, no such artificial reduction to Ligand’s share price occurred, as the Commission failed to present
evidence that any of the alleged misstatements materially impacted Ligand’s stock price. ECF No. 125 at 15-21.
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supporting the notion that this disparate treatment is grounded in an effort to punish Fr.
Emmanuel for criticizing a company with whom the Commission appears to be unusually cozy,
in violation of his free speech rights and/or based on his religious vocation. Opp. SOF ¶¶ 40-43.
Accordingly, if Defendants’ motion for summary judgment is not granted, a jury should be
permitted to consider the facts underlying Defendants’ bias and selective enforcement defenses.
From June to August 2014, Fr. Emmanuel published five reports, consisting of 56 pages,
and gave two internet radio interviews expressing why he believed Ligand was overvalued. ECF
No. 126 ¶¶ 6-10, 21-25, 35-36, 58-59, 62-63; Opp. SOF ¶ 1-2. In all of the reports and
interviews, Fr. Emmanuel disclosed he had taken a short position in Ligand. ECF No. 126 ¶¶ 8-
10, 25, 36, 59, 63. The reports also contained disclaimers that the contents reflected Fr.
Emmanuel’s opinions, which may change without additional publications on the topic. Id.
Internal Ligand communications show that the company was angry over Fr. Emmanuel’s
commentary, and its high-ranking personnel repeatedly insulted Fr. Emmanuel. For example,
Ligand personnel referred to Fr. Emmanuel as “lamelson,” “part pit bull,” “a quack,” and a “DB”
(the author later admitted this was short for “douchebag”). Opp. SOF ¶¶ 4-7. Bruce Voss,
Ligand’s Investor Relations representative and a critical witness in this case, engaged in his own
“narcissistic psychopath,” and that openly mocked his religion, writing things such as, “lordy,
lordy” and “does being a priest make that ok?” Opp. SOF ¶ 8. In another email, Mr. Voss
wrote, “BTW, Lemelson is an ordained Eastern Orthodox priest, and is constantly photographed
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in in his priestly robes and collar. It would be funny if it wasn’t my client!” Opp. SOF ¶ 9.
Similarly, Ligand personnel mocked Fr. Emmanuel’s religious beliefs and demonstrated
their desire to prevent him from expressing his opinions freely rather than seek to publicly
counter any of his commentary. For example, John Higgins, Ligand’s CEO, received an email
that said: “We may want to enter into a group with God. Any thoughts you have are welcome.
We want to pray for the success of this holy company. Thank you for being the true voice.” Mr.
Higgins replied: “Every time I see the report, I feel I should go to the River Jordan to be
cleansed.” Opp. SOF ¶ 10. One Ligand executive mocked a Wall Street Journal article
commenting on Fr. Emmanuel’s house, stating, “I now covet his earthly possessions. Do you
think he would give them to me, because they mean nothing to him?” Opp. SOF ¶ 11. In
commenting on this article, Mr. Voss stated, “I wish they [sic] were more dirt on him in this
article then [sic] simply saying he’s pushing it by being both a priest and a wealthy hedge fund
manager.” Opp. SOF ¶ 12. Ligand tried to find such “dirt” on Fr. Emmanuel by attempting to
identify any relatives that might have engaged in misbehavior to show that Fr. Emmanuel
In addition to the insults and religious bigotry, Ligand also pressured media outlets not to
publish Fr. Emmanuel’s analysis. Opp. SOF ¶¶ 15-19. For example, the day after Fr.
Emmanuel’s first report, Ligand’s CEO requested that Mr. Voss contact USA Today and
“undress” the publication for writing about it. Opp. SOF ¶ 15. Ligand discussed trying to have
SeekingAlpha block Fr. Emmanuel’s future publications. Opp. SOF ¶ 16. Ligand’s CEO also
instructed Mr. Voss to take BioWorld “to task” for printing information about Fr. Emmanuel’s
analysis. Opp. SOF ¶ 17. After Mr. Voss followed the CEO’s demand and confronted
BioWorld, the reporter there supposedly promised not to publish anything else about Fr.
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Emmanuel or his analysis of Ligand, “regardless of what he hears.” Id. BioWorld apparently
made this promise even though its representative said he typically allowed readers to sort out the
opinions of others, which is consistent with the free right to exchange ideas under the First
Amendment. Id. Ligand discussed other options, including stock surveillance, hiring a private
investigator and editing Lemelson Capital Management’s Wikipedia page. Opp. SOF ¶¶ 18-19.
Ultimately, Ligand never responded publicly to any of Fr. Emmanuel’s statements. Opp.
ECF No. 126 ¶¶ 90-92. However, it engaged in an effort to lobby the Commission to bring an
enforcement action to “silence” him. 5 Indeed, Ligand succinctly stated its goal to its Board of
Directors that “[w]e continue to work with our attorneys to lean on the SEC to get an injunction
Ligand initially hired a large international law firm and together with its counsel met with
the Commission’s Boston Regional Office in September 2014. ECF No. 126 ¶ 93. Ligand made
a 60-slide PowerPoint presentation to the Commission, in which it falsely claimed that Fr.
Emmanuel “[u]ses religious credentials to inspire false confidence and raise money,” despite the
fact that none of Amvona’s investors were, are, or ever have been Fr. Emmanuel’s
parishioners. ECF No. 126-36 at LGND_0080695; Opp. SOF ¶ 23. The presentation also
included photographs of Fr. Emmanuel in his priestly robes in church and baldly claimed that Fr.
Affinity Fraud.” Opp. SOF ¶ 22. The PowerPoint presentation further falsely claimed that Fr.
5
Emblematic of this approach is an internal email between Ligand personnel, dated August 22, 2014 (the date of Fr.
Emmanuel’s final report), in which one Ligand employee, referring to Fr. Emmanuel, wrote: “He needs to be
silenced for good.” Opp. SOF ¶ 20.
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Emmanuel misrepresented the Amvona Fund’s performance, even though Ligand had no basis in
fact to make such accusations. ECF No. 126 ¶ 96, 110; Opp. SOF ¶ 25. The presentation also
included a slide falsely alleging that Fr. Emmanuel’s calculation of Ligand’s debt-to-tangible-
equity ratio was wrong because he had failed to include the proceeds from a debt offering as
equity in his calculation. ECF No. 126 ¶¶ 99. At some point after this meeting, the Boston
Regional Office told Ligand that it would not pursue an investigation. ECF No. 126 ¶ 104.
Subsequently, Ligand changed counsel, hiring Cahill Gordon & Reindel attorney Bradley
Bondi, who previously served on the executive staff of the Commission. ECF No. 126 ¶¶ 105-
106. In or around early May 2015, Mr. Bondi reached out to a former colleague at the
Commission in Washington, D.C. to refer this matter for investigation, despite the fact that there
On June 8, 2015, several Ligand representatives and its counsel met with the Commission
staff in Washington, D.C. to again advocate for an enforcement action against Fr. Emmanuel
based on his reports that pre-dated the first such meeting. ECF No. 126 ¶ 108-109. Ligand made
a PowerPoint presentation to the Commission that was similar to the one Ligand presented nine
months earlier to a different Commission office. ECF No. 126 ¶ 108. Among other things,
Ligand again appeared to question Fr. Emmanuel’s investment returns—apparently having taken
no steps to verify them, which, if it had, would have demonstrated their veracity. 6 Opp. SOF ¶¶
25-26. The second presentation contained the same false allegation about Fr. Emmanuel’s debt-
6
Both Ligand’s CEO and CFO testified that they did not know whether the statements that Ligand listed in its
presentation to the Commission as misrepresentations by Fr. Emmanuel were true or not and were unaware of any
efforts by Ligand to investigate the veracity of these accusations. Opp. SOF ¶ 25. This information could have
easily been verified by reviewing the 2012-2016 audit reports for the Amvona Fund that were publicly available on
the Amvona Fund’s website. Opp. SOF ¶ 26.
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to-tangible equity ratio. ECF No. 126 ¶ 113. Notably, Ligand’s efforts to pressure the
Commission to bring unprecedented and baseless charges against Fr. Emmanuel did not stop
with hiring a former high-ranking Commission attorney. On the same day Ligand and its
counsel met with Commission staff in Washington, Ligand used its sway with Congress and had
now-disgraced United States Congressmen Duncan Hunter send a letter to the Commission,
Emmanuel. The Commission’s policies prevent its staff from disclosing the existence of its
investigations prior to bringing an enforcement action. Opp. SOF ¶ 28. “Because SEC
investigations are generally nonpublic, Enforcement will not confirm or deny the existence of an
investigation unless the SEC brings charges against a person or entity involved.” Id. Despite
this policy, emails between the Commission and Ligand’s counsel make clear that the
Commission informed Ligand’s counsel of the existence of its non-public investigation. Opp.
SOF ¶ 29. On September 15, 2017, Ligand’s counsel wrote to Commission staff to further
complain about Fr. Emmanuel’s public comments concerning Ligand. Id. On September 18,
2017, Commission staff responded in writing: “Unfortunately we cannot share information about
our nonpublic investigation in the matter of Trading in the Securities of Ligand Pharmaceuticals,
Inc. beyond what we shared last time, i.e., that the investigation is ongoing.” Id. (emphasis
added). The Commission staff then provided proposed times for a telephone call with Ligand’s
7
In March 2020, Hunter was sentenced to 11 months in federal prison for stealing campaign funds. Opp. SOF ¶ 27.
8
Curiously, during the time period of this email exchange (September 16-18, 2017), when Ligand’s counsel was
continuing efforts to persuade the Commission to bring an enforcement action against Fr. Emmanuel, a Wikipedia
user who had never before created a Wikipedia page created three new ones. Opp. SOF ¶ 30. Two of the pages
were created for the then-Co-Heads of the Commission’s Enforcement Division. Id. The third page this Wikipedia
user created was for Ligand’s counsel, Mr. Bondi. Id. In the three-plus years since that time, this Wikipedia user
has created only a single additional page (for a former U.S. naval officer). Id.
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On March 18, 2016, Bloomberg published an article titled, “Hedge Fund Priest’s Trades
Probed by Wall Street Cop.” Opp. SOF ¶ 31. In revealing the Commission’s non-public
investigation, the article quoted “people with knowledge of the matter.” Id. It stated, “The
Securities and Exchange Commission is examining whether the Reverend Emmanuel Lemelson
of Massachusetts made false statements about companies he was shorting, said the people who
asked not to be named because the probe isn’t public.” Id. While the Commission and Ligand
have denied leaking the existence of the investigation to the media, it is difficult to imagine that
the source of the leak to the media was anyone else, unless the Commission improperly disclosed
During its investigation, the enforcement staff of the Commission deposed Fr. Emmanuel
over three days for approximately 27 hours and asked questions related to his religion. Opp.
SOF ¶ 32. The Commission asked: “Gandhi and the son of God. Are you comparing yourself to
them?” Opp. SOF ¶ 33. The Commission continued this offensive line of questioning by asking,
“Did Socrates, Martin Luther King, Gandhi or the son of God have a financial incentive to cause
investors to sell stock in a particular company to bring the price down?” Id.
Further demonstrating its disparate treatment of Fr. Emmanuel, the enforcement staff of
the Commission refused to meet with undersigned counsel to discuss its recommendation that the
Commission bring a novel Investment Advisers Act claim. Opp. SOF ¶ 34. The stated reason
for denying this meeting was that the Commission had already met with predecessor counsel,
even though Ligand was able to arrange a second meeting with new counsel at an unrelated
regional office to lobby for the investigation in the first place. ECF No. 126 ¶ 107; Opp. SOF ¶
34. While the Commission asserts in a footnote that Defendants were able to avail themselves of
the Wells submission process, ECF No. 122 at 10 n.9, the Commission conspicuously omits that
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it expressly denied Defendants’ current counsel a requested Wells meeting after the Commission
indicated it would be adding a new claim for the first time. Opp. SOF ¶ 34.
misstatements. While it is never expected that the Commission will make objectively false
allegations in a Complaint, it was all the more shocking here, because the Complaint followed a
three-year investigation. For example, the Commission erroneously alleged that the $245
million in proceeds that Ligand received from a debt offering constituted equity, and therefore
Fr. Emmanuel’s debt-to-tangible equity calculation was knowingly false. ECF No. 126 ¶ 70. In
fact, it was the Commission’s allegation that was patently false, and the Commission has
presented no evidence of an accounting principle to support this claim. 9 ECF No. 126 ¶ 71. The
Commission’s false assertion was taken directly from Ligand’s presentations, and overstated
finances that investors might have reviewed and taken as true. ECF No. 126 ¶¶ 70, 99, 113.
Additionally, in purporting to set forth Fr. Emmanuel’s alleged false statements in his
reports, the Commission cited to language from private, draft reports that were never publicly
disseminated. Opp. SOF ¶¶ 35-37. In an attempt to bolster its claim that Fr. Emmanuel’s
statements concerning Viking were somehow material to his Ligand short (a required element of
the Commission’s claims), the Commission falsely alleged, both in its Original Complaint and
its Amended Complaint, that at the time Fr. Emmanuel made those statements, Ligand owned
just under half of Viking. ECF No. 126 ¶¶ 39-40. In fact, Ligand owned none of Viking at that
9
The Court dismissed this challenged statement, and the Commission amended the claim to allege that, despite
being mathematically correct, Fr. Emmanuel’s calculation was somehow misleading. ECF No. 126 ¶¶ 72-73.
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point in time, a fact readily ascertainable from both Ligand and Viking’s public filings. Id.
Ultimately, the Commission challenged four alleged misstatements contained in the five
reports and two interviews between June and August 2014. ECF No. 126 ¶ 119. Ligand’s stock
price went up on each of the days the alleged misstatements were published, except one (which
even the Commission’s rebuttal expert agreed was not statistically significant), and the
Commission has offered no admissible evidence that Fr. Emmanuel’s alleged misstatements had
any impact on Ligand’s stock price. 10 ECF No. 126 ¶¶ 34, 57, 64-65, 129-133. All the
interviews and reports disclosed that Fr. Emmanuel had a short position in Ligand. ECF No. 126
¶ 8-10, 25, 36, 59, 63. The reports also disclosed that the reports reflected Fr. Emmanuel’s
opinions. Id. These facts render this case entirely unprecedented and materially different than
In response to a notice for deposition pursuant to Rule 30(b)(6) of the Federal Rules of
Civil Procedure, the Commission filed a Motion for Protective Order, asking the Court to
prohibit Defendants from inquiring as to issues related to bias and selective enforcement. Opp.
SOF ¶ 40. Magistrate Judge Cabell denied the Commission’s Motion, finding Defendants made
an adequate factual showing to permit discovery on those issues. Opp. SOF ¶ 41. Not to be
dissuaded, the Commission again tried to block this discovery, filing a motion seeking a more
definite statement from Defendants concerning their selective enforcement defense. Opp. SOF ¶
42. Judge Cabell also denied the Commission’s second motion. Opp. SOF ¶ 43.
Finally, in the course of this litigation, the Commission improperly brought Fr.
Emmanuel’s religious vocation into play, asking him repeated questions about his priesthood and
10
Even certain Ligand personnel doubted that Fr. Emmanuel caused any movement of Ligand’s stock, with one
referring to some of the company’s own shareholders as “morons.” Opp. SOF ¶ 20.
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representing that it intended to subpoena the Greek Orthodox Archdiocese in Boston for
purposes of determining whether Fr. Emmanuel was lying about his status as a Greek Orthodox
Priest (he was not). Opp. SOF ¶¶ 44-45. Ultimately, the Commission asserted the baseless and
offensive claim that Fr. Emmanuel was not a Greek Orthodox Priest, casting doubt on the
veracity of his religious vocation and affiliation, and unfairly forcing Fr. Emmanuel to expend
significant resources to prove this fact to this Court. Opp. SOF ¶¶ 45-46.
III. ARGUMENT
A. The Cases the Commission Cites to Argue that It Regularly Pursues “Market
Manipulation” Cases Similar to this One are so Easily Distinguishable that it
Demonstrates the Unprecedented Nature of the Present Claims
The crux of the Commission’s argument is that the Commission regularly pursues similar
cases and has not treated Fr. Emmanuel differently than others similarly situated. The cases it
cites prove just the opposite. ECF No. 122 at 4-5. The Commission first cites an action
involving Barry Minkow, a former convicted felon. Id. at 5. The only comparison the
Commission can draw here is that the reports at issue were published on the internet, and the
defendant was allegedly a pastor. Otherwise, the Minkow matter bears no resemblance
whatsoever to this case. Minkow involved a concurrent criminal investigation and evidence that
“Minkow was hired to put economic pressure on Lennar to pay money demanded by a business
partner in a prior land deal.” ECF No. 123-8 at 1. Nothing of the sort occurred here. Further,
Minkow used his relationship with federal law enforcement agencies to cause an investigation of
Lennar, and once he succeeded, used that information to trade Lennar securities illegally. 11 Id.
In stark contrast here, Fr. Emmanuel’s statements were all based on his analysis of publicly filed
information, and he held his short position for months. Also, critically, Minkow shorted Lennar
11
Ironically, in co-opting regulatory bodies to do his bidding, Minkow engaged in similar behavior to Ligand—not
Fr. Emmanuel.
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stock prior to publishing his report “unbeknownst to the public.” Id. at 3 (emphasis added).
Here, Fr. Emmanuel openly disclosed his short position. The litany of other behavior in the
Minkow case included embezzling church funds by forging signatures, opening unauthorized
bank accounts, spending church funds on personal expenses, and running a Ponzi scheme. Id. at
2-3. In short, the Minkow matter has absolutely no similarities to this case, apart from
comparisons that can be drawn to Ligand’s conduct, and the Commission’s reliance on it only
The Commission next tries to argue that this case is similar to SEC v. Nielsen. ECF No.
122 at 5. Nielsen involved an investor who anonymously encouraged others to buy shares while
he planned to sell the shares he secretly owned. ECF No. 123-4 at 1-2. Here, Fr. Emmanuel
held a short position, disclosed that position, and then published his analysis about why he took
that position in his own name—making his situation completely inapposite to Nielsen. Further,
Nielsen engaged in “spoofing,” i.e., purchasing a large order of shares to give the impression of
high demand, and then canceling the order and falsely posting that others had caused the (fake)
The Commission’s attempt to equate this case to SEC v. Musk fares no better. Elon Musk,
a corporate insider at Tesla, announced via Twitter that he could take the company private at a
certain price despite the uncertainty of any deal existing at the time. ECF No. 123-5 at 1. Here,
Fr. Emmanuel was not a corporate insider and based all his analysis on publicly filed documents.
Fr. Emmanuel’s alleged conduct is also markedly different than defendants in SEC v.
Thompson. Fr. Emmanuel held his short position and explained why he took such a position. In
contrast, the Thompson defendants encouraged others to buy certain penny stocks while they
were selling the same stocks, and failed to disclose the compensation they received for
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promoting the stocks. ECF No. 123-6 at 1-2. Further, the Thompson defendants did not disclose
that their trading significantly contributed to the price increase and that they coordinated to drive
up the stock prices of companies by promoting them in separate promotional outlets they
controlled, while planning to sell their shares. Id. No such coordinated effort, failure to disclose
compensation, or conduct directly contradicting the published analysis exists here. Moreover,
unlike the Thompson defendants, Fr. Emmanuel did not control the sites that published his work.
Berliner, the defendant was alleged to have anonymously spread a false rumor that was picked up
by the media and caused the stock price to immediately plummet. ECF No. 123-9 at 1. Here,
the alleged misstatements were all published in Fr. Emmanuel’s name and did not consist of any
“rumors.” Further, Berliner spread the rumor between 1:10 p.m. and 1:15 p.m., and covered his
short position just four minutes later, before the market could discover it was false. Opp. SOF ¶
60. In contrast here, Fr. Emmanuel held on to the majority of his short position for months (not
defendant used an alias to issue a press release, falsely stating that (i) the Commission was
investigating the company in which he held a short position, (ii) the company’s CEO resigned,
and (iii) its earnings would be revised to report a loss. ECF No. 123-10 at 1. Within 16 minutes
of the publication of the fake press release, the stock price plummeted by over $61 per share. Id.
The defendant covered his short position immediately, and then purchased a long position that he
quickly sold at a profit as the stock price recovered after the market learned defendant’s press
release was a hoax. Id. Again, Fr. Emmanuel published his analysis in his own name, held on to
his position for months (not minutes), and disclosed his short position in his publications.
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B. The Facts Here Permit Defendants to Pursue their Bias and Selective
Enforcement Defense
Given the unprecedented nature of this case, and with no evidence of any impact to
Ligand’s stock price, any reasonable factfinder would fairly question why the Commission chose
to bring such a claim. The record evidence here supports a finding that these claims are being
enforced selectively against Fr. Emmanuel in an effort to prevent him from expressing his First
The Fourteenth Amendment of the Constitution guarantees all persons equal protection of
the law, which includes the right to be protected from the government’s selective enforcement of
the law. Lozman v. City of Riviera Beach, 39 F. Supp. 3d 1392, 1411 (S.D. Fla. 2014); Village of
Willowbrook v. Olech, 528 U.S. 562, 564 (2000). Selective enforcement is established when:
“(1) the person, compared with others similarly situated, was selectively treated; and (2) that
such selective treatment was based on impermissible considerations such as race, religion, intent
to inhibit or punish the exercise of constitutional rights, or malicious or bad faith intent to injure
The Commission argues that Fr. Emmanuel cannot identify a similarly situated person
that was treated differently. However, it is the Commission that has failed to identify any market
manipulation case brought against a person or entity that disclosed their short position, published
analysis in their own name, disclosed they were providing their opinions, and held on to their
short position for a significant period of time following the alleged misstatement. This is
because such conduct is antithetical to any fraud and, thus, the Commission has never charged
anyone who was similarly situated. If the Commission wants specific similarly situated people
identified, it need look no further than the multiple other entities that published reports critical of
Ligand between January 4, 2013 and January 16, 2019, who are not subject to a Commission
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Some of these reports included commentary about Ligand similar to Fr. Emmanuel’s.
For example, the Seven Corners Capital Management report (published in April 2018) also
criticized Ligand’s $245 million convertible note offering in August 2014, questioning whether
Ligand had enough “real dollars” to pay the debt when due. Opp. SOF ¶ 52. This is remarkably
similar to Fr. Emmanuel’s analysis, including the debt to tangible equity ratio statement that is
being challenged by the Commission. Favus Institutional Research LLC theorized that new
drugs in the liver treatment area would drive down Promacta sales, which is remarkably similar
to Fr. Emmanuel’s analysis regarding Promacta. Opp. SOF ¶ 56. Also, these reports generally
included disclosures similar to the ones that Fr. Emmanuel included in his reports, including that
the report contained the author’s opinions and disclosing what position, if any, the author held in
Ligand’s stock. See e.g., Opp. SOF ¶¶ 50, 52, 56, 58. These undisputed facts are sufficient for
the Court to deny the Commission’s motion for partial summary judgment. See Cine SK8, Inc. v.
Town of Henrietta, 507 F.3d 778, 790 (2d Cir. 2007). (“Generally, whether two entities are
12
The report published by Citron Research also noted that Grant’s Interest Rate Observer had also published a
report critical of Ligand on January 11, 2019, but that report could not be republished for copyright reasons.
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similarly situated is a factual issue that should be submitted to the jury.”); Perkins v. Brigham &
Women's Hosp., 78 F.3d 747, 751 (1st Cir. 1996) (holding such a comparator only needs to be
The Commission also argues that Defendants have the burden to show that the
Commission knew of other violations but chose not to enforce them. This argument makes no
sense, because there is no reason to believe these other entities that criticized Ligand violated any
securities laws, just as there is no actual evidence that Defendants did so. Notwithstanding the
Commission’s contention, bringing an enforcement action where there is no violation of the law
can give rise to a selective treatment defense. “Abuse of power and selective enforcement often
the government interprets and applies its own rules. How government selectively enforces its
regulations may result from a variety of reasons: political, personal, discrimination, retaliation,
arbitrary and some at whim, which may amount to abuse of power.” Norton v. Autoridad de
Acueductos y Alcantarillados, 898 F. Supp. 2d 396, 409-10 (D.P.R. 2012). See also, United
States v. Al Jibori, 90 F.3d 22, 25 (2d Cir. 1996) (noting that while prosecutors retain “broad
discretion” to enforce criminal laws, the Constitution prohibits a prosecutor from bringing
charges based on “‘an unjustifiable standard such as race, religion, or other arbitrary
classification’”) (quoting Oyler v. Boles, 368 U.S. 448, 456 (1962)); Mosdos Chofetz Chaim, Inc.
v. Village of Wesley Hills, 701 F. Supp. 2d 568, 603 (S.D.N.Y. 2010) (“the actions of
municipalities in undertaking litigation must also be consistent with the Constitution. Thus, as
relevant here, municipal officials may not pursue even potentially meritorious claims if they do
so in a discriminatory fashion”). That is precisely the case here, as the Commission echoed
Ligand’s baseless accusations and has failed to demonstrate any evidence consistent with a short-
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and-distort scheme.
The Commission also argues that its process of having enforcement staff present
precludes a finding of selective enforcement here. ECF No. 122 at 10. However, discriminatory
intent in any link in the chain of the government’s decision to prosecute a claim can be adequate
to state a selective enforcement defense. “If, for example, the investigators and police authorities
exercised discriminatory intent in Defendant's arrest and/or their referral to the United States
Attorney's Office, his selective prosecution claim may be meritorious even without a showing of
the prosecutor's intent when deciding to seek an indictment.” United States v. Tuitt, 68 F. Supp.
2d 4, 15 (D. Mass. 1999). Similarly here, selective enforcement can apply, even absent showing
Without any support, the Commission states that Ligand’s motive is irrelevant. ECF No.
122 at 12. However, the evidence here permits a factfinder to find (1) that Ligand held animus
toward Fr. Emmanuel based on his status as a priest and securities analyst, and wanted to prevent
Fr. Emmanuel from being able to freely express his opinions about the company; (2) that Ligand
used its connections to gain special treatment and consideration from the Commission to
investigate and pursue baseless claims in an effort to “silence” Fr. Emmanuel’s criticism of the
firm; (3) the Commission pursued these baseless accusations levied by Ligand for over three
years and still made demonstrably false allegations in the Complaint that parroted Ligand’s false
claims; (4) the Commission regurgitated other baseless claims about Fr. Emmanuel’s religion,
ordination as a priest and religious affiliation while simultaneously claiming it was irrelevant to
the litigation; (5) the Commission did not pursue claims against any other analysts or funds that
13
Moreover, if the staff included in its presentation to the Commissioners the same objectively false information
contained in its Complaint, the Commissioners’ vote would not serve to cleanse the staff’s bias.
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authored reports stating Ligand was overvalued; and (6) the Commission has never pursued a
claim against an analyst that published opinions in his own name, with disclosures of his
position, in which the analyst acted consistently with the opinions provided, cited publicly-
available information on which he based his opinion, and held on to the short position for months
This is sufficient to find that the Commission treated Fr. Emmanuel differently than other
analysts because of his status as a priest, that the Commission gave preferential treatment to
Ligand to effectuate the company’s goal of suppressing Fr. Emmanuel’s right to free speech, or
both. Accordingly, Fr. Emmanuel’s selective enforcement defense should survive summary
judgment. See Norton, 898 F. Supp. 2d at 409 (denying summary judgment because finder of
fact could conclude from circumstantial evidence of long lapse in time, plaintiff’s numerous
attempts to get water service, the multiple obstacles imposed in process to get water services, and
the comparative ease of neighboring properties to get water that there may have been concerted
action by agency against plaintiff); Ginorio v. Contreras, 409 F. Supp. 2d 101, 110 (D.P.R.
2006) (denying summary judgment on selective enforcement claim where plaintiff proffered
evidence of other insurers sharing commissions without being subject to intrusive investigation
and punitive order); Ginorio v. Contreras, Civ. No. 03-2317, 2008 WL 11424136, at *11 (D.P.R.
June 13, 2008) (affirming denial of summary judgment for selective enforcement defense from
2006, supra, and affirming jury verdict on selective enforcement because reasonable juror could
have found the investigation was unprecedented and plaintiffs were treated selectively).
IV. CONCLUSION
For the foregoing reasons, the Commission’s Motion for Partial Summary Judgment
should be denied.
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Respectfully Submitted,
CERTIFICATE OF SERVICE
I hereby certify that this document filed through the ECF system will be sent
electronically to the registered participants as identified on the Notice of Electronic Filing (NEF)
and paper copies will be sent to those indicated as non-participants on October 30, 2020.
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