Central Bank of Denver v. First Interstate Bank of Denver


  • The Colorado building authority issued bonds to finance public improvements for a residential and commercial development.
  1. The Central Bank petitioner was the trustee for the bond issues.
  • The bonds were secured with land and the central bank of Denver required that the land be evaluated every year to show an assessment value of at least 160% of the outstanding bond principal and interest. Amwest Development was to do this assessment annually.
  • Land values in the relevant area declines and the Central Bank wrote to Amwest expressing concerns that test wasn’t being met, after receiving information that the last assessment was 16 months old.
  • Amwest and the Center Bank spoke about conducting an independent audit and agreed to delay the audit until the end of the year (1988).
  • Before that time the bonds defaulted.
  • First Interstate sued the Central Bank of Denver for “aiding and abetting” Amwest.

Applicable Law:

  • 10(b) Elements:
  1. There was a primary violation of 10(b)
  2. “recklessness by the aider and abettor as to the existence of the primary violation”
  3. “substantial assistance given to the primary violator by the aider and abettor”


  • “Whether private civil liability under section 10(b) of the Securities Exchange Act of 1934 extends … to those who do not engage in the manipulative or deceptive practice but who aid and abet the violation.”


  • No, reversed.


  • Aiding and abetting for securities under 10(b) does not extend to those who produce misstatements or omit critical information.
  • There is a difference between primary violators and aiders and abettors.
  1. Primary violators are those who “directly” misstate or omit important pieces of information that are eventually relied upon by the investor.
  2. Aiders and abettors are those who assist primary violators in some reasonably linked capacity.
  • 10(b)5 liability requires specifically that the harmed parties or the investors “rely” on the misstatement or omission. Therefore, liability cannot be extended to an aider and abettor of the primary who actually makes the misstatement.
  1.  “Were we to allow the aiding and abetting action proposed in this case, the defendant could be liable without any showing that the plaintiff relied upon the



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