1. At one point in the opinion (not included here), the court noted that “there is no evidence in the record that the Gebharts ever intended to defraud anyone.” Why, then, did the court conclude that the Gebharts had acted with scienter?

2. According to the court, if the evidence before an agency is “susceptible to more than one rational interpretation,” the court “may not substitute its judgment for that of the agency.” Why do the courts show such deference to agency rulings?

In 1994, [Alvin Gebhart] began working at Mutual of New York (MONY) in San Diego, where he sold annuities and mutual funds. While at MONY, Gebhart met Jack Archer, a fellow MONY salesperson. In 1995, Archer told Gebhart about a business venture, Community Service Group (CSG), run by James Scovie. CSG was in the business of converting mobile home parks to resident ownership. CSG purchased parks from the owners and then assisted residents in purchasing them. In late 1996, Scovie and another person, David Mounier, created MHP Conversions, LLC (MHP), to facilitate the conversion process. MHP issued promissory notes that were sold to individual investors to raise funds for CSG’s purchase of the parks. The MHP notes had one-year terms with fixed interest rates of 18 percent for new investments and 14 percent for reinvested funds. Each note stated that it would “ultimately be secured by a deed of trust” on the particular park to be purchased with the funds, but that “until such time as said deed of trust is recorded, the sole asset of [the issuer] will be a deed of trust for the property known as Eastern Trailer Park.”