UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


SEC

v.

BANNER FUND INTL


98-5235a

D.C. Cir. 2000


*	*	*


Ginsburg, Circuit Judge: The district court entered a  summary judgment
against the appellant, Eddie R. Blackwell,  and against Lloyd R.
Winburn and Swiss Trade & Commerce  Trust, Ltd., on the complaint of
the Securities and Exchange  Commission that the defendants violated
the anti-fraud and  registration provisions of the securities laws of
the United  States. The district court enjoined the defendants from 
committing further violations, and ordered them to disgorge  $6.5
million plus prejudgment interest, to provide a sworn  accounting of
their assets and of financial activities related to  the Banner Fund
Program, and to repatriate assets received  from investors.


On appeal Blackwell argues that: the district court lacks  subject
matter jurisdiction over the case and personal juris- diction over
him; the district court should have abstained  under principles of
international comity; he did not violate  the securities laws of the
United States because the interests  Swiss Trade sold were not
securities; and neither summary  judgment nor the relief granted the
SEC are warranted.  Some of Blackwell's arguments are not properly
before this  court; the others are without merit. We therefore affirm
the  judgment of the district court.


I. Background


Blackwell and Winburn created Banner Fund International  as a unit
trust under the laws of the Jersey Islands in 1992.  At about the same
time, they began actively operating Swiss  Trade, a limited liability
company they had organized under  the laws of Aruba. In 1993 they
moved Swiss Trade to Belize  City, where they established it as a
Belizean International  Business Company. Winburn served as Chairman


Board and President of Swiss Trade and managed its daily  operations,
while Blackwell oversaw operations at several of  Banner Fund's
investments, including a shrimp farm located  in southern Belize,
where he spent most of his time.


Swiss Trade solicited funds from investors in the United  States by
means of a brochure and a one-page application  form touting the "Off
Shore Banner Fund International Arbi- trage Program." Upon receiving
an application and a check  representing funds for investment, Swiss
Trade exchanged  the investor's money for a beneficial interest in
Banner Fund.  Instead of issuing the beneficial interest to the
investor  directly, however, Swiss Trade placed it in an irrevocable 
individual trust created under Belizean law (which Swiss  Trade
branded an "Endeavor Trust") naming Swiss Trade as  the Trustee,
Banner Fund as the settlor, and the investor as  the beneficiary. The
individual investor was not a party to  the Endeavor Trust agreement
and was not ordinarily ap- prised of the terms of the trust
arrangement prior to invest- ing. Swiss Trade had absolute control
over the trust assets,  including the right to refuse to return the
investor's money.  Swiss Trade did not register the beneficial


The brochure advertising Banner Fund, drafted by Win- burn and reviewed
by Blackwell, was directed at low income  individuals to whom
Blackwell privately referred as "Joe  lunch bag[s]." Their brochure
represents that the Banner  Fund Program will use leverage, which it
describes as "bor- rowing against your assets at good multiples on
favorable  terms and [at] low interest," and arbitrage, which it
describes  as "the art of purchasing in one market for the [sic]
immedi- ate resale in another market," to "allow[ ] the little guy to 
take advantage of" deals previously available only to "insid- er[s]."
Claiming that Banner Fund is an independent invest- ment fund with
"strong bank connections, knowledge of the  market and the workings of
the insider's [sic] deals," the  brochure promises to "put[ ]
individual small investors togeth- er with others to leverage their
funds to a point where they  can participate." The brochure ends with
a catalogue of the  purported benefits of the Banner Fund Program,


promise that Banner Fund would return any investment  "[a]ny time after
the first 180 days," and a hypothetical  demonstration of how $5,000
invested in Banner Fund could  grow to more than $25,000 in one


Initially Swiss Trade disseminated the brochure through  Opportunity
Seekers, an organization whose members are  engaged in multilevel
marketing in the United States. Later  Winburn established the
Fulfillment Center in Beaumont,  Texas, which was organized as a trust
under the laws of  Delaware, to distribute brochures and other
information re- lated to Banner Fund. An investor in Banner Fund
received  $50 for each new participant he recruited, plus 20% of the 
new recruit's earnings from Banner Fund. Swiss Trade,  which received
10% of each new recruit's earnings, sold  packets of brochures and
applications to investors who were  interested in soliciting new
members for the Banner Fund  Program.


In order to help launch the referral system, Blackwell  signed a letter
(which he says Winburn wrote) urging each  investor in Banner Fund to
recruit ten new participants; he  also aided the marketing team by
giving them a chart show- ing how a $200 investment in Banner Fund
could grow to  $1,741 in one year. The marketing efforts reached
people in  48 states, the District of Columbia, and several foreign
coun- tries. Eventually, Banner Fund attracted approximately  10,000
investors, mostly from the United States, and raised  about $6.5


Swiss Trade sent monthly newsletters and account state- ments to
investors. In the newsletters it emphasized Banner  Fund's liquidity,
stating, for example, that "[t]he investment  staff know that they
must have funds in easily liquidated  instruments in anticipation of
any needs [an investor] might  have to withdraw." Swiss Trade also
used the newsletters to  reassure investors that the Fund would be
"leveraging to the  maximum" by the end of 1993.


Swiss Trade deposited funds received from investors in the  Banner Fund
Program into its bank accounts in California,  where they were
commingled with Swiss Trade's general 


operating funds; that is, Swiss Trade used the same accounts  to pay
creditors and investors. Although Blackwell, Win- burn, and Swiss
Trade have refused on the basis of Belizean  trust law to provide an
accounting of the investors' funds, the  SEC has traced more than $4.7
million of those funds. Three  examples of its findings are
particularly relevant to this  appeal because they demonstrate
Blackwell's involvement in  the Banner Fund scheme.


First, Swiss Trade lent investors' money to Commonwealth  Overseas,
Ltd., a Belizean company, which in turn purchased  the shrimp farm.
After Blackwell had moved to the farm and  well after the district
court had ordered Swiss Trade to freeze  its assets, Winburn and
Blackwell caused Commonwealth  Overseas to sell the farm to Sweetwater
Investments, A.V.V.,  a company owned by Blackwell, for $3.2 million
payable to  Swiss Trade over five years. Second, a trust in which
Swiss  Trade had invested money intended for the Banner Fund  Program
lent $4,500 to Blackwell's daughter for college tu- ition; neither
Blackwell nor his daughter ever repaid the  loan. Finally, Swiss Trade
put $120,000 into a trust that  Blackwell controlled and that he used
to purchase the house  in which his family resides in Texas. Although
Blackwell  signed a note for the $120,000, he has not made any pay-


In February 1994 the SEC brought suit in the district  court against
Blackwell, Winburn, Swiss Trade, and several  other defendants
involved in the Banner Fund venture. The  district court entered a
temporary restraining order directing  the defendants to freeze their
assets, to account for and to  repatriate funds received as part of
the Banner Fund Pro- gram, and to stop soliciting or accepting new
investors. One  day later the SEC obtained from the district court a
Letter of  Request asking the courts of Belize to help in getting
discov- ery of documents and of witnesses. On March 2, 1994 the  SEC's
attorney in Belize obtained an ex parte order from a  Belizean court
implementing the Letter of Request, as a  result of which many
documents relating to Banner Fund  were placed in the custody of the
Belizean court. On March  7 the district court issued a preliminary


the relief granted in the temporary restraining order. Con- trary to
the orders of the district court, Swiss Trade contin- ued to solicit
investors and to pay creditors, clients, and  employees.


Blackwell and his co-defendants challenged the ex parte  order of the
Belizean court and in January 1995 the court  reversed its decision
implementing the Letter of Request.  The Belizean court ordered that
the documents remain in its  custody, however, pending the outcome of
the SEC's appeal.  In December 1995, Blackwell and Winburn obtained a
Belize- an court order appointing Unicorn Trust, Ltd., a Belizean 
company, the successor to Swiss Trade as trustee for all the  Endeavor
Trusts, and directing Unicorn Trust to dissolve the  trust of any
beneficiary who so desired.


Meanwhile back in district court the SEC and Blackwell  filed cross
motions for summary judgment. The district  court held that Blackwell
and his co-defendants had violated  s 10(b), the antifraud provision
of the Securities Exchange  Act of 1934, 15 U.S.C. s 78j(b), and Rule
10b-5, 17 C.F.R.  s 240.10b-5, promulgated thereunder; ss 5(a), 5(c),
and  17(a), the antifraud and registration provisions of the Securi-
ties Act of 1933, 15 U.S.C. ss 77e(a), 77e(c), 77q(a); and  s 7(d),
the prohibition of unregistered foreign public offer- ings, of the
Investment Company Act of 1940, 15 U.S.C.  s 80a-7(d). Accordingly,
the district court granted summary  judgment in favor of the SEC and
enjoined Blackwell and his  co-defendants from further violations. The
court also or- dered the defendants to disgorge $6.5 million plus
prejudg- ment interest, provide an accounting of their assets,
repatri- ate any assets belonging to investors in Banner Fund, and 
refrain from disposing of or otherwise transferring their  assets.
Blackwell and Winburn appealed but we dismissed  Winburn's appeal
when, after having been convicted of con- spiracy to defraud the


II. Analysis


Blackwell raises a plethora of objections, none of which  need long
detain us. He contends that the district court lacks 


subject matter and personal jurisdiction and that, in any  event, the
court should have abstained under principles of  international comity.
Additionally, Blackwell attacks the sub- stance of the district
court's order on the grounds that he did  not violate the securities
laws of the United States because  neither he nor his co-defendants
sold securities; the SEC was  not entitled to summary judgment upon
the issue of his  intent; and the court should not have entered an
injunction  against him because he was not an active participant in
the  Banner Fund scheme. He also maintains that this court  should set
aside the disgorgement order insofar as it applies  to him because he
no longer has access to assets related to  Banner Fund. We begin, of
course, with Blackwell's chal- lenge to the subject matter
jurisdiction of the district court.


A. Subject Matter Jurisdiction


Blackwell contests the court's jurisdiction upon two  grounds. First,
he contends that the securities laws of the  United States do not
apply to his activities because they took  place primarily in Belize.
Second, he argues that the district  court cannot adjudicate the SEC's
claim because the Belizean  courts have exclusive jurisdiction over
the res of the Banner  Fund.


1. Connection to the United States


Whether a federal district court has subject matter juris- diction over
an action arising under the securities laws of the  United States is a
question of congressional intent, subject  only to "the broad limits
set by the due process clause."  Zoelsch v. Arthur Andersen & Co., 824
F.2d 27, 29 (D.C. Cir.  1987). In the absence of evidence to the
contrary, however,  we presume that congressional "legislation ... is
meant to  apply only within the territorial jurisdiction of the United
 States" because the "Congress is primarily concerned with  domestic
conditions." Id. at 31 (in part quoting Foley Bros v.  Filardo, 336
U.S. 281, 285 (1949)). With these principles in  mind, we conclude
that the district court's exercise of jurisdic- tion in this case was
fully justified and consistent with the  intent of the Congress.


(a) 1934 Act. The Congress has not indicated clearly  whether s 10 of
the Securities Exchange Act of 1934 is  applicable to cases involving
predominantly foreign securities  transactions effected to some degree
from outside the United  States.* See Zoelsch, 824 F.2d at 29-30. We
have previously  indicated (in a dictum) that a United States court
would have  jurisdiction under the 1934 Act "whenever any individual
is  defrauded in this country, regardless of whether the offer 
originates somewhere else." Id. at 33 n.4. The Second  Circuit has
gone further, unambiguously holding that "the  anti-fraud provisions
of the federal securities laws ... [a]pply  


__________

n * Section 10 of the Exchange Act provides in pertinent part as 
follows:


It shall be unlawful for any person, directly or indirectly, by  the
use of any means or instrumentality of interstate commerce  or of the
mails, or of any facility of any national securities  exchange-- * * *
(b) To use or employ, in connection with the purchase or sale  of any
security registered on a national securities exchange or  any security
not so registered, any manipulative or deceptive  device or
contrivance in contravention of such rules and regula- tions as the
Commission may prescribe as necessary or appro- priate in the public
interest or for the protection of investors. 15 U.S.C. s 78j. Rule
10b-5, in turn, provides:


It shall be unlawful for any person, directly or indirectly, by  the
use of any means or instrumentality of interstate com- merce, or of
the mails or of any facility of any national  securities exchange,


(a) To employ any device, scheme, or artifice to defraud,


(b) To make any untrue statement of a material fact or to  omit to
state a material fact necessary in order to make the  statements made,
in the light of the circumstances under which  they were made, not
misleading, or (c) To engage in any act, practice, or course of
business  which operates or would operate as a fraud or deceit upon
any  person,  in connection with the purchase or sale of any


17 C.F.R. s 240.10b-5.


to losses from sales of securities to Americans resident in the  United
States whether or not acts (or culpable failures to act)  of material
importance occurred in this country...." Bersch  v. Drexel Firestone,
Inc., 519 F.2d 974, 993 (1975); see also  Europe & Overseas Commodity
Traders, S.A. v. Banque  Paribas London, 147 F.3d 118, 128 n.12 (2d
Cir. 1998) (reaf- firming test announced in Bersch but stating "U.S.
residence  of individual investors--not American nationality--must be 
the focus of the ... test"). Because Blackwell and his co- defendants
operated to a significant degree from within the  United States,
however, when they defrauded United States  investors, we need not
decide today whether to adopt the  Bersch test for extraterritorial
jurisdiction. Instead, we hold  only that when a resident of the
United States is allegedly  defrauded in the United States in
connection with the sale of  securities, the courts of the United
States have jurisdiction  under the 1934 Act.


Under this test, the district court properly asserted juris- diction
over the claims arising under s 10(b) of the Exchange  Act and Rule
10b-5. The allegations of the SEC clearly  make out a case in which
Blackwell and his co-defendants  defrauded investors who resided in
the United States. Swiss  Trade mailed brochures advertising Banner
Fund to those  investors, first through members of Opportunity Seekers
 operating as Swiss Trade's agents in the United States, and  later
from Swiss Trade's own affiliate in the United States,  the
Fulfillment Center. Swiss Trade's agents in the United  States
deposited investors' funds in banks located in the  United States. In
short, doing little more offshore than  composing solicitations to be
mailed to United States resi- dents from locations in the United
States, Blackwell and  company defrauded thousands of investors
resident in the  United States. It requires no stretch of the
imagination to  conclude, as we do, that the Congress intended s 10(b)
of the  1934 Act to apply to a case such as this, in which domestic 
investors were defrauded in large part by means of culpable  acts


(b) 1933 Act. The district court's exercise of jurisdiction  over the
claim of fraud in violation of s 17(a) of the Securities  Act of 1933
was also proper.* Section 17(a) is in substance  almost identical to s
10(b) of the 1934 Act and to Rule 10b-5,  and we see no reason to
think--in light of our conclusion that  the district court properly
asserted jurisdiction over the  claims arising under those
sections--that subject matter jur- isdiction over the s 17(a) claim is
any less proper, again,  considering the domestic locus of the offer
and sale of the  securities and of the purchasers.


The range of transactions to which the registration require- ments of s
5 of the 1933 Act apply is, however, more circum- scribed. The SEC has
limited the reach of that section as  follows:


For the purposes only of section 5 of the Act ... the  terms offer,
offer to sell, sell, sale, and offer to buy ...  shall be deemed not
to include offers and sales that occur  outside the United States.


17 C.F.R. s 230.901. Reasoning that the Congress passed  the
registration requirements to "assure full and fair disclo- sure in
connection with the public distribution of securities,"  the Second
Circuit has interpreted this regulation to permit  


__________

n * Section 17(a) reads:


It shall be unlawful for any person in the offer or sale of any 
securities by the use of any means or instruments of transpor- tation
or communication in interstate commerce or by the use  of the mails,
directly or indirectly--


(1) to employ any device, scheme, or artifice to defraud, or


(2) to obtain money or property by means of any untrue  statement of a
material fact or any omission to state a material  fact necessary in
order to make the statements made, in the  light of the circumstances
under which they were made, not  misleading, or


(3) to engage in any transaction, practice, or course of  business
which operates or would operate as a fraud or deceit  upon the
purchaser.  15 U.S.C. s 77q(a).


the exercise of subject matter jurisdiction over actions based  upon
"offers of unregistered securities that tend to have the  effect of
creating a market for unregistered securities in the  United States."
Europe & Overseas Commodity Traders,  147 F.3d at 126.


Through their extensive advertising and recruiting efforts,  the
defendants clearly created a market in the United States  for
beneficial interests in Banner Fund. Not only, as we have  seen, did
thousands of investors throughout 48 states and the  District of
Columbia purchase these interests, but many of  those investors were
recruited to sell interests to others.  The result can fairly be
described, for the purposes of the  1933 Act, as "tend[ing] to have
the effect of creating a  market" for interests in Banner Fund. We
hold in part II.D,  below, that those interests are securities, and
Blackwell does  not dispute that they are not registered with the SEC.
The  district court therefore properly exercised jurisdiction over 
the claims arising under s 5 of the Securities Act.


(c) 1940 Act. The district court's exercise of jurisdiction  over that
portion of the SEC's claim arising under s 7(d) of  the Investment
Company Act of 1940 was also proper. By its  terms, s 7(d) regulates
the activities of foreign investment  companies operating in the
United States.* Here, the SEC 




__________

n * Section 7(d) reads:


No investment company, unless organized or otherwise created  under the
laws of the United States or of a State, and no  depositor or trustee
of or underwriter for such a company not  so organized or created,
shall make use of the mails or any  means or instrumentality of
interstate commerce, directly or  indirectly, to offer for sale, sell,
or deliver after sale, in  connection with a public offering, any
security of which such  company is the issuer. Notwithstanding the
provisions of this  subsection ... the Commission is authorized, upon
application  by an investment company organized or otherwise created 
under the laws of a foreign country, to issue a conditional or 
unconditional order permitting such company to register under  this
title and to make a public offering of its securities ....


15 U.S.C. s 80a-7(d).


alleges, and Blackwell does not dispute, that Blackwell and  his
co-defendants used the mails to offer to sell unregistered  interests
in Banner Fund, a foreign entity, without having  gotten an order from
the SEC permitting such offers. The  actions as alleged clearly come
within the condemnation of  s 7(d) of the 1940 Act and the district
court correctly assert- ed subject matter jurisdiction over those
aspects of the SEC's  complaint arising under that Act.


2. In Rem and Quasi In Rem Jurisdiction


Various proceedings concerning the res of the Banner Fund  trust have
been going on in Belize almost since the SEC filed  this suit in the
district court. Because of the potential for the  two court systems to
issue conflicting orders, Blackwell  claims that the district court
lacks jurisdiction until the  Belizean proceedings are concluded. The
SEC responds  tersely to this argument, stating only that this "is not
an in  rem proceeding. It is [an] enforcement action" directed at 
Blackwell and his co-defendants. We reject Blackwell's chal- lenge in
part for that reason and in part because, to the  extent that there
may be a conflict between the courts of  Belize and those of the
United States, the district court  asserted jurisdiction first and was
therefore justified in adju- dicating the case to its conclusion.


To a large extent, the SEC is correct that the suit in the  district
court is an enforcement action directed at Blackwell  and his
co-defendants rather than at the res of Banner Fund.  Much of the
relief the district court granted the SEC does  not affect the res
and, therefore, does not even potentially  interfere with any orders
the courts of Belize might issue  concerning that res. Certain aspects
of the district court's  order do, however, concern the res.
Specifically, the district  court ordered Blackwell and his
co-defendants: (1) not to  dispose of any of their assets, including
assets related to  Banner Fund; (2) to repatriate all funds solicited
for invest- ment in Banner Fund; and, of less certain but arguable 
relevance to the res, (3) not to alter or otherwise dispose of  any
documents relating to transactions involving Banner  Fund or the


Insofar as these aspects of the relief implicate the res, we  observe
that, according to longstanding precedent and prac- tice, the first
court seized of jurisdiction over property, or  asserting jurisdiction
in a case requiring control over proper- ty, may exercise that
jurisdiction to the exclusion of any other  court. This doctrine arose
first in the context of Our Feder- alism, with its dual court


Where the judgment sought is strictly in personam,  for the recovery of
money or for an injunction compelling  or restraining action by the
defendant, both a state court  and a federal court having concurrent
jurisdiction may  proceed with the litigation, at least until judgment
is  obtained in one court which may be set up as res  adjudicata in
the other. But if the two suits are in rem  or quasi in rem, requiring
that the court or its officer  have possession or control of the
property which is the  subject of the suit in order to proceed with
the cause and  to grant the relief sought, the jurisdiction of one
court  must of necessity yield to that of the other. To avoid 
unseemly and disastrous conflicts in the administration of  our dual
judicial system, and to protect the judicial  processes of the court
first assuming jurisdiction, the  principle, applicable to both
federal and state courts, is  established that the court first
assuming jurisdiction over  the property may maintain and exercise
that jurisdiction  to the exclusion of the other.


Penn General Casualty Co. v. Pennsylvania, 294 U.S. 189,  195 (1935)
(citations omitted); see Colorado River Water  Conservation Dist. v.
United States, 424 U.S. 800, 818 (1976);  see also Princess Lida v.
Thompson, 305 U.S. 456, 466 (1939).  This first-in-time rule has since
been applied to federal cases  as to which there were cognate
proceedings in the courts of  another country. See Dailey v. NHL, 987
F.2d 172, 175-78  (3d Cir. 1993) (district court must yield to
Canadian court,  which was first to assert quasi in rem jurisdiction);
Chesley  v. Union Carbide Corp., 927 F.2d 60, 66 (2d Cir. 1991)
("[T]he  rule [is] equally applicable to requested interference by 
American courts with a res under the jurisdiction of a foreign 


In the cited cases the courts of the United Stated yielded to  the
earlier asserted in rem jurisdiction of a foreign court, but  we are
aware of no reason for applying the rule asymmetri- cally, that is,
only in cases where the foreign court is first to  assume jurisdiction
over the property. True, we cannot  require a foreign court to yield
when the United States court  was the first to assume jurisdiction,
but neither can we  acquiesce in a rule under which the United States
court  recedes regardless of its priority in time. That rule would 
empower a defendant in the United States to oust our courts  of in rem
jurisdiction merely by filing its own action in the  courts of any
hospitable country--of which there would be no  shortage if that were


Even to the extent that this case is in rem, however, the 
first-in-time rule of jurisdiction offers Blackwell no comfort:  The
record reveals that the district court was the first to  assert
jurisdiction. The SEC filed this suit on February 24,  1994 and the
next day the district court issued a temporary  restraining order
granting much of the relief that the court  made permanent when it
entered summary judgment for the  SEC. By Blackwell's own account of
events, the courts of  Belize did not begin any proceeding related to
Banner Fund's  assets until, at the earliest, March 2, 1994--and that
was at  the instance of the SEC, which asked the Supreme Court of 
Belize to implement the Letter of Request issued by the  district
court. We therefore reject Blackwell's challenge to  the subject
matter jurisdiction of the district court.


B. Comity


Although the international aspect of this case does not  deprive the
district court of jurisdiction, it does raise a  concern with comity
among nations. For that reason, Black- well argues that the district
court should have stayed its hand  pending the conclusion of
proceedings in the courts of Belize,  and that certain aspects of the
district court's order offend  the notion of comity by requiring the
defendants to take  actions that violate the laws of Belize. The SEC
urges us to  reject both arguments because, it asserts, accepting
either  argument "would allow fraudfeasors effectively to nullify 


United States [securities] law by conducting some part of  their scheme
overseas." We do reject Blackwell's comity  arguments but upon grounds
significantly more narrow than  that urged by the SEC.


As we have explained before, comity "summarizes in a brief  word a
complex and elusive concept--the degree of deference  that a domestic
forum must pay to the act of a foreign  government not otherwise
binding on the forum." Laker  Airways, Ltd. v. Sabena, Belgian World
Airlines, 731 F.2d  909, 937 (1984). "Comity ordinarily requires that
courts of a  separate sovereign not interfere with concurrent
proceedings  based on the same transitory claim, at least until a
judgment  is reached in one action, allowing res judicata to be pled
in  defense." Id. at 939. Whether a case raises a concern with  comity
is inherently fact-dependant. Nonetheless, there are  some general
guidelines available to structure and to cabin  the inquiry, including
this one: "[A] domestic forum is not  compelled to acquiesce in pre-
or postjudgment conduct by  litigants which frustrates the significant
policies of the domes- tic forum." Id. at 915. With these principles
in mind, we  turn first to Blackwell's contention that the district
court  should have abstained pending the outcome of proceedings in 


The record discloses two such proceedings, the first of  which, as we
have said, was begun by the SEC on March 2,  1994 as part of its
effort to obtain discovery. Through local  counsel the SEC asked a
Belizean court for assistance pursu- ant to the Letter of Request
issued by the district court,  which sought production and examination
of documents and  witnesses. Ultimately the Belizean court declined to
help  with the discovery request, from which order the appeal of  the
SEC is pending. Even if the SEC succeeds on appeal,  however, its
application for judicial assistance from the courts  of Belize is not
a ground for abstention by the district court  because there is no
potential for conflict between any orders  the two courts might


The second proceeding, which Blackwell and Winburn insti- tuted in
Belize, resulted in the substitution of Unicorn for 


Swiss Trade as the trustee of the Endeavor Trusts. While  this
proceeding does conflict with the action in the district  court, it
does not require the district court to abstain. As  stated above,
conduct by a litigant designed to frustrate a  significant policy of
the United States is not a ground for  abstention on the basis of
comity. Here, Blackwell and  Winburn acted specifically to defeat the
orders of the district  court, which were issued in order to remedy
the massive  fraud that Blackwell and Winburn perpetrated against
thou- sands of investors in the United States. If comity required  the
district court to defer to the Belizean court proceeding  that
Blackwell and Winburn initiated solely for the purpose of  avoiding
justice in the courts of the United States, then it  would be a


Blackwell also complains that some of the relief ordered by  the
district court conflicts with the Trusts Act, 1992 of Belize.  He
asserts, for example, that the accounting requirement in  the orders
of the district court conflicts with the confidentiali- ty requirement
of the Trusts Act. We have been quite clear,  however, that "one who
relies on foreign law assumes the  burden of showing that such law
prevents compliance with  the court's order," In re Sealed Case, 825
F.2d 494, 498 (1987)  (citing Ohio v. Arthur Andersen & Co., 570 F.2d
1370, 1374  (10th Cir. 1978)), and this Blackwell has failed utterly
to do.  Indeed, to the extent there is anything in the record relating
 to this issue, it appears that it is Blackwell and his co-
defendants, not the laws of Belize, who prevent compliance  with the
orders of the district court. Section 4(4) of the  Trusts Act provides
that a trust agreement may allow the  trustee to change the governing
law from that of Belize to  that of another jurisdiction, and the
Endeavor Trust agree- ment contains just such a permissive clause.
Therefore,  Blackwell and his co-defendant Winburn, who together owned
 and controlled Swiss Trade, which was the trustee for the  Endeavor
Trusts, could have changed the governing law to  that of the United
States and thus avoided any conflict with  Belizean law. That is not
to say that Blackwell had a legal  duty to prevent a potential
conflict between the Trusts Act  and the orders of the district court;


because he could have avoided any such conflict but chose not  to do
so, comity does not require the district court to stay its  hand.


C. Personal Jurisdiction


In a fleeting passage in his opening brief, Blackwell asserts  his
affirmative defense that the district court lacks personal 
jurisdiction over him because he was never properly served  with
papers. His specific objection is that the "SEC was  bound by the
dictates of the Hague Convention in its efforts  to serve Swiss Trade
in Belize, as well as himself, in Belize,  which it did not." This
argument concerning personal juris- diction is not burdened by any
explanation of or citations to  the relevant provisions of the Hague
Convention. Any doubt  about the considered nature of Blackwell's
failure to develop  the argument more fully is dispelled by his
silence, both in his  reply brief and at oral argument, in response to
the SEC's  detailed arguments demonstrating that Belize is not a
signa- tory to the Hague Convention, and that the service of process 
upon Blackwell did in any event comply with the require- ments of that


Federal Rule of Appellate Procedure 28(a)(9)(A) requires  that the
appellant's argument "contain [his] contentions and  the reasons for
them, with citations to the authorities and  parts of the record on
which the appellant relies." We have  repeatedly held that we will not
address an "asserted but  unanalyzed" argument because "appellate
courts do not sit as  self-directed boards of legal inquiry and
research, but essen- tially as arbiters of legal questions presented
and argued by  the parties before them." Carducci v. Regan, 714 F.2d
171,  177 (D.C. Cir. 1983); see United States v. Watson, 171 F.3d 
695, 699 n.2 (D.C. Cir. 1999) (declining to address "asserted  but
unanalyzed" argument); United States v. Clarke, 24 F.3d  257, 262
(D.C. Cir. 1994) (same); International Bhd. of  Teamsters v. PeNa, 17
F.3d 1478, 1487 (D.C. Cir. 1994)  (same).


Blackwell's less than half-hearted effort upon the issue of  personal
jurisdiction is insufficient to put his objection before 


this court. We therefore decline to address Blackwell's argu- ment
concerning personal jurisdiction.


D. Sale of Securities


The sections of the 1933, 1934, and 1940 Acts that the  district court
found Blackwell to have violated apply only to  transactions involving
"securities." See 15 U.S.C. s 77e(a)  (1933 Act, regulating "[s]ale or
delivery after sale of unregis- tered securities"); 15 U.S.C. s 77e(c)
(1933 Act, prohibiting  offers to sell or to buy unregistered
security); 15 U.S.C.  s 77q(a) (1933 Act, outlawing fraudulent
practices in connec- tion with sale of any security); 15 U.S.C. Sec.
78j(b) (1934 Act,  prohibiting manipulative or deceptive practices in
connection  with sale of any security); 15 U.S.C. s 80a-7(d) (1940
Act,  prohibiting investment company from offering for sale "any 
security of which such company is the issuer"). All three  statutes
define "security" to include an "investment contract,"  see 15 U.S.C.
s 77b(a)(1); 15 U.S.C. s 78c(a)(10); 15 U.S.C.  s 80a-2(a)(36). An
investment contract is, for these pur- poses, anything that investors
purchase with "(1) an expecta- tion of profits arising from (2) a
common enterprise that (3)  depends upon the efforts of others." SEC
v. Life Partners,  Inc., 87 F.3d 536, 542 (D.C. Cir. 1996) (citing SEC
v. W.J.  Howey Co., 328 U.S. 293, 298-99 (1946)).* The SEC main-
tains, and Blackwell denies, that the beneficial interests in  Banner
Fund, which Swiss Trade sold, are investment con- tracts.


1. Expectation of Profits


The first element in the definition of an investment contract  requires
only that "the expected profits must, in conformity 




__________

n * Howey arose under the 1933 Act. Because the definition of 
"security" is "virtually identical" in the 1934 Act, the Supreme 
Court has held that "the coverage of the two Acts may be consid- ered
the same." Reves v. Ernst & Young, 494 U.S. 56, 61 n.1 (1990) 
(citation omitted). Inasmuch as the definition of "security" in the 
1940 Act, see 15 U.S.C. s 80a-2(a)(36), is in turn virtually identical
 to the cognate definitions in the two earlier Acts, we hold that the 
elements of Howey are also applicable to the 1940 Act.


with ordinary usage, be in the form of a financial return on  the
investment, not in the form of consumption." Life Part- ners, Inc., 87
F.3d at 543. Advertisements for Banner Fund  clearly led potential
investors to expect a "financial return"  on their capital outlays.
For example, the brochure distribut- ed to potential investors gave,
as one of the main reasons to  invest, that Banner Fund offered "major
returns and multi- ples in profits." Furthermore, Banner Fund's
referral sys- tem induced others to recruit investors by promising
recruit- ers 20% of any new investor's earnings from the Banner  Fund
Program. We think it obvious, therefore, that investors  were induced
to purchase beneficial interests in Banner Fund  with the expectation
of a financial return on their invest- ments.


2. Common Enterprise


The second element of the definition, that the investment  be in a
"common enterprise," is ordinarily met by a showing  of horizontal
commonality, see Life Partners, Inc., 87 F.3d at  543 (citing Revak v.
SEC Realty Corp., 18 F.3d 81, 87 (2d Cir.  1994)), which requires that
there be a "pooling of investment  funds, shared profits, and shared
losses." Id. The Banner  Fund Program putatively pooled investment
funds by, in its  own words, "put[ting] individual small investors
together with  others to leverage their funds to a point where they
can  participate." The very premise upon which Swiss Trade  marketed
the program was that Banner Fund would combine  funds from small
investors so that they could participate in  deals requiring large
capital outlays. Indeed, the brochure  advertising the program ends by


Perhaps the only thing that keeps you out of the market  is money ...
money in sufficient amounts to be "respect- able" in the market place.
In Banner Fund Internation- al you can, working with others, with an
accumulative  amount sufficient to do the job.


Simply placing investors' funds into individual trusts before  pooling
them did not, as Blackwell contends, change the  pooled nature of the
Banner Fund Program.


Equally apparent are the profit and loss sharing aspects of  the Banner
Fund Program. Each investor received a portion  of Banner Fund's
monthly earnings based upon the amount of  his investment. In
addition, the referral program allocated  10% of each investor's
earnings to Swiss Trade and 20% of  those earnings to whomever
recruited the investor for Banner  Fund. Banner Fund's pooling of
investors' money and its  spreading of profits and losses among
investors, recruiters,  and Swiss Trade demonstrate horizontal
commonality suffi- cient to meet the second element of the definition


3. Efforts of Others


The third element of the definition requires that "profits be 
generated ... 'predominantly' from the efforts of others," not 
counting purely "ministerial or clerical" efforts. Life Part- ners,
Inc., 87 F.3d at 545 (citing SEC v. International Loan  Network, Inc.,
968 F.2d 1304, 1308 (D.C. Cir. 1992)). Again,  the Banner Fund Program
meets this requirement. An  individual investor in Banner Fund was
supposed to receive  returns without exerting any effort himself.
According to the  brochure advertising the program, Swiss Trade was to
man- age all funds in its capacity as trustee. Although an investor 
separately could earn $50 for each new person he recruited  into the
program, the return from his financial investment  was to come from
the "arbitrage and leveraging" transactions  Banner Fund was


In sum, the Banner Fund Program has all the elements of  an "investment
contract." Accordingly, we hold that benefi- cial interests in Banner
Fund are securities.


E. Summary Judgment


Blackwell argues that because he denied the SEC's allega- tions that he
made false and misleading statements in connec- tion with the sale of
securities, the district court should not  have disposed of the
securities fraud claims on summary  judgment. We review de novo the
district court's grant of  summary judgment, see Jackson v. Finnegan,
Henderson,  Farabow, Garrett & Dunner, 101 F.3d 145, 150 (D.C. Cir. 


1996), but because Blackwell did not properly controvert the  SEC's
statement of undisputed facts before the district court  we will not
now consider his arguments predicated upon there  being a dispute over
those facts. After reviewing the evi- dence properly presented to the
district court, we conclude  that the SEC was entitled to summary
judgment.


Under Federal Rule of Civil Procedure 56(c), the district  court is to
grant a motion for summary judgment "if the  pleadings, depositions,
answers to interrogatories, and admis- sions on file, together with
the affidavits ... show that there  is no genuine issue as to any
material fact and that the  moving party is entitled to a judgment as
a matter of law." A  party opposing such a motion on the ground that
there are  material facts in dispute must "set forth [the] specific
facts  showing that there is a genuine issue for trial." Fed. R. Civ. 
P. 56(e). In the United States District Court for the District  of
Columbia, a party opposing a motion for summary judg- ment must also
comply with Local Rule LCvR 7.1(h), which  provides in relevant


An opposition to ... a motion [for summary judgment]  shall be
accompanied by a separate concise statement of  genuine issues setting
forth all material facts as to which  it is contended there exists a
genuine issue necessary to  be litigated, which shall include
references to the parts of  the record relied on to support the
statement .... In  determining a motion for summary judgment, the
court  may assume that facts identified by the moving party in  its
statement of material facts are admitted, unless such  a fact is
controverted in the statement of genuine issues  filed in opposition


If the party opposing the motion fails to comply with this  local rule,
then "the district court is under no obligation to sift  through the
record" and should "[i]nstead ... deem as admit- ted the moving
party's facts that are uncontroverted by the  nonmoving party's Rule
[LCvR 7.1(h)] statement." Jackson,  101 F.3d at 154.


Although he filed a statement pursuant to Rule LCvR  7.1(h) in support
of his own motion for summary judgment, 


Blackwell did not follow the rule in opposing the SEC's  motion for
summary judgment; instead he filed a response  and an affidavit,
neither of which pointed to specific parts of  the record
controverting the SEC's lengthy statement of  undisputed facts. The
district court was therefore fully justi- fied in treating as admitted
the SEC's statement of material  facts. Those facts, only some of
which we have recounted  above, detail at length Blackwell's role in
preparing state- ments, which he knew were false and misleading, and
in  sending them to investors and potential investors. We there- fore
affirm the district court's grant of summary judgment.  Cf. Jackson,
101 F.3d at 154 ("It was irrelevant [once the  court struck the
opposing party's Rule 7.1(h) statement]  whether the record could have
supported a finding of a  genuine issue of material fact").


F. Injunctive Relief


Blackwell argues that because he was not an "active partic- ipant" in
Banner Fund's "financial dealings," the district court  committed
reversible error by entering an injunction against  him. We review the
district court's grant of an injunction  only for abuse of discretion;
that is we will not "disturb [its]  remedial choice unless there is no
reasonable basis for the  decision." SEC v. First City Financial
Corp., Ltd., 890 F.2d  1215, 1228 (D.C. Cir. 1989).


The essence of Blackwell's argument is that Winburn man- aged Swiss
Trade's daily operations and Winburn did not  provide Blackwell with
access to client account records.  Even if this be true, it does
nothing to undermine the district  court's grant of injunctive relief
against Blackwell. There is  abundant evidence in the record
documenting Blackwell's  extensive involvement with the Banner Fund
scheme. He  reviewed the brochure advertising the Banner Fund Pro-
gram. He signed a letter urging investors to recruit new  members. He
used investors' funds to purchase a house for  his family and to pay
his daughter's college tuition. He  helped Winburn substitute Unicorn
for Swiss Trade as the  trustee for the Endeavor Trusts, thereby
flouting the district  court's order directing him to freeze Swiss


Although Blackwell may have played Cassius to Winburn's  Brutus--the
record does not reveal whether he has a lean  and hungry look--he was
far from a passive bystander in the  securities law violations
committed in connection with the  Banner Fund Program. Therefore, the
district court did not  abuse its discretion in entering injunctive
relief against Black- well.


G. Disgorgement


The final dispute before us concerns the district court's  order
requiring Blackwell and his co-defendants to "disgorge  $6.5 million,
plus prejudgment interest in the amount of  $2,697,303.84 representing
their unjust enrichment from their  violations of the statutes set
forth above." Blackwell main- tains that he cannot comply with the
order because he does  not have access to any assets related to Swiss
Trade or to  Banner Fund. The SEC in turn contends that Blackwell 
does control some of Banner Fund's assets and that, in any  event, the
disgorgement order imposes an obligation upon  Blackwell personally,
which he may satisfy using his own  assets. Because disgorgement is an
equitable obligation to  return a sum equal to the amount wrongfully
obtained, rather  than a requirement to replevy a specific asset, we
reject  Blackwell's challenge and affirm the district court.


An order to disgorge is not a punitive measure; it is  intended
primarily to prevent unjust enrichment. See, e.g.,  First City
Financial Corp., Ltd., 890 F.2d at 1231. Accord- ingly, a court "may
exercise its equitable power [of disgorge- ment] only over property
causally related to the wrongdoing."  Id. As the SEC points out, the
requirement of a causal  relationship between a wrongful act and the
property to be  disgorged does not imply that a court may order a
malefactor  to disgorge only the actual property obtained by means of
his  wrongful act. Rather, the causal connection required is  between
the amount by which the defendant was unjustly  enriched and the
amount he can be required to disgorge. To  hold, as Blackwell
maintains, that a court may order a  defendant to disgorge only the
actual assets unjustly received  would lead to absurd results. Under


for example, a defendant who was careful to spend all the  proceeds of
his fraudulent scheme, while husbanding his other  assets, would be
immune from an order of disgorgement.  Blackwell's would be a
monstrous doctrine for it would per- petuate rather than correct an


Blackwell's approach also conflicts with longstanding prece- dent. In a
securities fraud case dealing with disgorgement,  the Second Circuit
upheld an order directing the defendant to  disgorge his "paper
profits." See SEC v. Shapiro, 494 F.2d  1301, 1309 (1974). The
defendant in that case had purchased  stock without disclosing
material, non-public information, in  violation of s 10(b) of the 1934
Act and of SEC Rule 10b-5.  Id. at 1307. Had the defendant sold the
stock promptly after  the information became public, he would have
made a hand- some profit; in the event, however, he held the stock too
long  and sold it at a lesser gain. Id. at 1309. The district court 
nevertheless ordered him to disgorge all the profits he would  have
made had he sold the stock at the higher price. The  court of appeals


The district court's approach was reasonable. A violator  of the
securities laws should disgorge profits earned by  trading on
non-public information. Once public disclo- sure is made and all
investors are trading on an equal  footing, the violator should take
the risks of the market  himself.


Id.; see also SEC v. UNIOIL, 951 F.2d 1304, 1306 (D.C. Cir.  1991)
(Edwards, J., concurring). As the Second Circuit deci- sion makes
clear, an order to disgorge establishes a personal  liability, which
the defendant must satisfy regardless whether  he retains the selfsame
proceeds of his wrongdoing. We  therefore reject Blackwell's challenge
to the disgorgement  order.


III. Conclusion


For the forgoing reasons the judgment of the district court  is in all
respects


Affirmed.