Court Rejects Defendant's Spoliation Claim and Grants Plaintiff's Motion for Summary Judgment

In Securities and Exchange Commission v. Gonzales [pdf], No. 10-CV-5268 (N.D. Ill. Dec. 28, 2011), U.S. District Court Judge Arvin E. Aspen granted the plaintiff’s motion for summary judgment, rejecting the defendant’s argument that alleged spoliation by the plaintiff was sufficient to defeat summary judgment given the SEC failed to demonstrate bad faith by the plaintiff or that the destroyed information was relevant to the case.

The SEC brought this insider trading action against the defendants who profited from large returns on investments (more than 1000%) in a relatively risky and obscure series of one-week trades.  The plaintiff filed a motion for summary judgment and the SEC countered that circumstantial evidence related to the trade and the plaintiff’s spoliation of evidence was sufficient to defeat summary judgment.  Earlier in the case, the court ordered the plaintiff to preserve relevant information that existed in his laptop and desktop computers.  Both computers were inspected by a forensic expert pursuant to the parties’ stipulation. The expert found that several files had been deleted after the court’s order to preserve and that the plaintiff had installed file optimization software that had deleted approximately 200 files from the plaintiff’s temporary internet history and recycle bin.  The court rejected the SEC’s position that the file optimization software evidenced “bad faith” destruction of evidence.  Further, the SEC failed to establish that any of the deleted files were relevant to the case or that the SEC had suffered any prejudice as a result of the deletion.