Joseph Apuzzo, the former chief financial officer of Westport, Connecticut-based Terex Corp., must defend a U.S. Securities and Exchange Commission lawsuit claiming he aided an accounting fraud, an appeals court said.
The U.S. Court of Appeals in Manhattan reinstated a lawsuit that a federal judge in Connecticut dismissed in 2010 because, he said, the SEC hadn’t adequately alleged that Apuzzo provided substantial assistance to the scheme.
“The SEC is not required to plead or prove that an aider and abettor proximately caused the primary securities law violation,” the appeals court said in an opinion today reversing the lower court. “The complaint plausibly alleges that Apuzzo provided substantial assistance to the primary violator in carrying out the fraud.”
Terex manufactures equipment primarily for use in construction, infrastructure and surface mining industries, according to the opinion. Apuzzo was CFO from 1998 to 2002. According to the SEC, United Rentals Inc., an equipment leasing company, carried out two fraudulent sale and leaseback transactions with Apuzzo’s help.
Today’s opinion in favor of the SEC was written by U.S. District Judge Jed Rakoff, who was sitting on the appeals court for the case and has previously been critical of the SEC. Two appeals court judges joined him in the decision.
Seth Taube, a lawyer for Apuzzo, said by e-mail that the decision “may set forth some new theories of liability” and “that we are reviewing the opinion and our options.”
The appeals court didn’t rule on the merits and said only that the case may go forward.
In 2008, United Rentals agreed to pay $14 million to settle regulatory claims. Michael Nolan and John Milne, both former United Rentals finance chiefs, have pleaded guilty to criminal charges in the case.
The case is SEC v. Apuzzo, 11-696-cv, U.S. Court of Appeals for the Second Circuit (Manhattan).