For all its drama — the tearful testimony, the corporate conspiracy theories, the government’s fully victorious verdict — Brian Watson’s civil fraud trial ended quietly last month.
“The next phase will now happen on paper,” U.S. Securities and Exchange Commission attorney Terry Miller told U.S. District Judge Gordon Gallagher in a courtroom downtown.
Watson, the once-prominent Denver developer behind Northstar Commercial Partners, and his firm were found by nine jurors to have defrauded investors in 11 real estate projects in Colorado and beyond by pledging to invest 5% of their own equity and then not doing so.
The allegations against Watson were civil, rather than criminal, so the punishment he will be dealt may include fines or restitution, along with a ban on the future selling of securities, but not time behind bars. The process for deciding those penalties is unusually convoluted.
In the summer of 2024, the U.S. Supreme Court ruled that defendants in civil SEC enforcement actions have the right to a trial by jury, as criminal defendants do. That has forced the SEC to make its case to laypeople, as it did in Watson’s case, rather than administrative judges.
“I am just so thankful to be in front of a nine-person jury today instead of the federal government,” Watson told jurors Jan. 29, the fourth day of the five-day trial.
Unlike in a typical civil trial, jurors were not tasked with deciding how much money the defendant must pay. That will fall on the judge, as it would in a criminal case.
But not yet. First, SEC commissioners must vote on Watson’s punishment. The five-person board has two vacancies, so three commissioners will decide on fines and whether to seek a ban on selling investments. Like Watson, the three commissioners are Republicans.
The board’s decision is expected in late March or April, according to Miller. Gallagher will then make his sentencing decision, which Watson could appeal to a higher court.
Watson’s attorney, Paul Vorndran at Jones & Keller, declined to comment on the process.
Meg Ryan, the SEC’s enforcement director, said in a news release: “We are pleased with the jury’s verdict holding Mr. Watson and Northstar liable for fraud for making material misrepresentations to investors in multiple real estate projects. This case demonstrates the SEC’s continued commitment to protecting investors and holding accountable those who seek to mislead and defraud them. I thank the trial team for its hard work and professionalism.”
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