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NOT FOR PUBLICATION
`
`UNITED STATES COURT OF APPEALS
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`FOR THE NINTH CIRCUIT
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`
`FILED
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`
`AUG 11 2022
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`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
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`
`
`
`
`
`
` Plaintiff-Appellee,
`
`
`
`
`No. 21-55437
`
`
`D.C. No.
`5:15-cv-02387-SVW-KK
`
`
`
`MEMORANDUM*
`
`U.S. SECURITIES & EXCHANGE
`COMMISSION,
`
`
`
` v.
`
`
`ROBERT YANG; et al.,
`
`
`
` and
`
`
`CLAUDIA KANO; et al.,
`
`
`
` v.
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`
`CELTIC BANK,
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` Third-party-defendant,
`
`
`
`
`______________________________
`
`
`STEPHEN J. DONELL,
`
`
`
`
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`
`
`
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` Defendants-Appellants,
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`
`
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`
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` Defendants,
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`
`
`
`
`
`
` Receiver.
`
`
`
`Appeal from the United States District Court
`for the Central District of California
`
`
`*
` This disposition is not appropriate for publication and is not precedent
`
`
`except as provided by Ninth Circuit Rule 36-3.
`
`
`
`
`
`
`
`

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`Page 2 of 6
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`
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`Stephen V. Wilson, District Judge, Presiding
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`Argued and Submitted July 29, 2022
`Pasadena, California
`
`Before: PAEZ and WATFORD, Circuit Judges, and BENNETT,** District Judge.
`
`
`Defendant Robert Yang and relief defendants Yanrob’s Medical, Inc.
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`(Yanrob), HealthPro Capital Partners, LLC (HealthPro), and Suncor Care, Inc.
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`(Suncor Care) appeal from the district court’s judgment imposing disgorgement
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`and civil penalties pursuant to consent agreements with each of the defendants.
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`We affirm.
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`1. The district court did not abuse its discretion in ordering disgorgement
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`against relief defendant HealthPro. HealthPro argues that the district court erred
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`by holding that relief defendants are not permitted to deduct “legitimate expenses”
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`under the Supreme Court’s decision in Liu v. SEC, 140 S. Ct. 1936, 1950 (2020).
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`But even assuming that Liu requires the deduction of legitimate expenses in this
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`case, HealthPro’s expenses do not qualify.
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`HealthPro used funds raised from investors in the Suncor Lynwood project
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`to pay down a construction loan related to a different project, the Suncor Fontana
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`facility. This expenditure of investor funds on another project was prohibited by
`
`
`
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`** The Honorable Richard D. Bennett, United States District Judge for
`
`
`the District of Maryland, sitting by designation.
`
`
`
`

`

`
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`the Suncor Lynwood offering documents and contravened the purpose for which
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`the funds were invested. These expenses were therefore illegitimate under Liu.
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`The fact that the other project was also engaged in the development of a nursing
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`Page 3 of 6
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`home facility does not change this result.
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`2. The district court did not abuse its discretion in holding Yang jointly and
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`severally liable with Yanrob. Yang misappropriated investor funds and transferred
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`them to Yanrob, an entity that he owned and controlled and through which he ran
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`his personal medical practice. Yanrob had no connection to the Suncor projects,
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`and Yanrob’s various uses for these funds do not qualify as legitimate expenses.
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`Thus, Yang is liable as a wrongdoing defendant for the entire amount of the
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`misappropriated funds that he dissipated by transferring them to his medical
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`practice. See SEC v. Platforms Wireless Int’l Corp., 617 F.3d 1072, 1098 (9th Cir.
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`2010). In this situation, there is no concern that the district court held Yang liable
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`for profits “that have accrued to another,” Liu, 140 S. Ct. at 1945, and the SEC was
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`not required to show that Yanrob’s expenditure of the misappropriated funds
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`benefited Yang directly.
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`3. The district court did not abuse its discretion in holding Yang
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`individually liable for disgorgement of $1,414,250. Yang contends that the district
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`court’s order violated the consent agreement, which requires that the allegations of
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`the Amended Complaint be accepted as true for the purposes of determining
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`
`
`

`

`
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`disgorgement. The Amended Complaint in turn alleges that Yang misappropriated
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`Page 4 of 6
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`“approximately $1.14 million” of Suncor Fontana funds to pay off loans from
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`friends and family. But the consent agreement does not state that the parties
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`agreed to limit Yang’s disgorgement liability to $1.14 million. It instead provides
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`that the district court “may determine the issues raised in the [disgorgement]
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`motion on the basis of affidavits, declarations, excerpts of sworn deposition or
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`investigative testimony, and documentary evidence.” The district court did not
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`abuse its discretion in determining that the evidence presented supported a
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`disgorgement amount of $1.4 million. Furthermore, judicial estoppel does not
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`apply, as there is no indication that the district court was misled by the SEC’s
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`initial allegation that Yang misappropriated approximately $1.14 million of
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`investor funds.
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`4. The district court did not abuse its discretion in imposing a $1,938,600
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`civil penalty equal to Yang’s “gross amount of pecuniary gain.” 15 U.S.C.
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`§§ 77t(d)(2)(C), 78u(d)(3)(B)(iii). The court determined that it had the authority to
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`impose the SEC’s requested penalty of approximately $6 million but concluded
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`that an amount equal to Yang’s pecuniary gain was “appropriate.” Yang contends
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`that the SEC’s requested amount was forbidden by the relevant statutes and that the
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`district court would have imposed an even lower penalty if it had recognized that
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`$1.9 million was the statutory maximum.
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`
`
`

`

`
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`Even assuming that each of Yang’s 39 victims did not count as a separate
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`Page 5 of 6
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`“violation” for purposes of calculating the maximum allowable penalty, this
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`argument fails. The district court did not indicate that the three Murphy factors
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`that favored Yang dictated a particular reduction from the SEC’s proposed $6
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`million penalty. See SEC v. Murphy, 626 F.2d 633, 655 (9th Cir. 1980). Instead,
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`the court determined that a gross pecuniary gain penalty was appropriate in light of
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`all the Murphy factors, the particular facts and circumstances of the case, and the
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`need for deterrence. The court also noted that district courts frequently impose
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`civil penalties equal to the amount of disgorgement. A penalty based on Yang’s
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`disgorgement liability was not an abuse of discretion even if it was the maximum
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`amount permitted by statute, and even if three of the five Murphy factors indicated
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`a lower “likelihood of future violations.” Id.
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`Nor did the district court abuse its discretion in evaluating the Murphy
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`factors. Yang correctly notes that the Amended Complaint does not specify that he
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`was more than negligent in making false and misleading statements and omissions
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`in the offering documents. Nonetheless, the district court properly found that
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`Yang’s specific actions—including falsifying escrow documents and making false
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`statements to mislead investors even after he began misappropriating their funds—
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`established “some degree of intentional or conscious misconduct.” SEC v. Rubera,
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`350 F.3d 1084, 1094–95 (9th Cir. 2003) (internal quotations and citation omitted).
`
`
`
`

`

`
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`The district court also properly found recurrent conduct based on Yang’s three
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`Page 6 of 6
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`separate securities offerings over the course of a year and a half, even though Yang
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`had no prior securities law violations. See Murphy, 626 F.2d at 655.
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`5. The $1.9 million civil penalty imposed by the district court was not
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`unconstitutionally excessive. The court’s analysis of the Murphy factors indicates
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`that a substantial penalty was necessary “to achieve the desired deterrence.”
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`United States v. Mackby, 261 F.3d 821, 830 (9th Cir. 2001). Yang’s fraudulent
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`scheme also caused substantial harm, with his investors losing more than $13
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`million. See United States v. Bajakajian, 524 U.S. 321, 339 (1998). In these
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`circumstances, a $1.9 million penalty, equal to Yang’s wrongful pecuniary gain, is
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`not “grossly disproportional” to the gravity of his offense. Id. at 337.
`
`AFFIRMED.
`
`
`
`

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