The opinion of the court was delivered by: SUGARMAN
By order to show cause filed February 6, 1959, the United States of America moves pursuant to F.R.Crim.P. 42(b), 18 U.S.C.A., and 18 U.S.C.A. § 401 for an order adjudging Robert Maurice Sherwood to be in criminal contempt for not obeying a final decree of permanent injunction entered against him on consent in the action entitled Securities and Exchange Commission v. Canadian Javelin Limited, Robert Maurice Sherwood et al., Civ. 138-85.
The application for the order to show cause alleges inter alia that:
'1. On September 23, 1958 the Securities and Exchange Commission filed in this Court a complaint * * * This action complained of sales of the common capital stock of Canadian Javelin Limited in violations of both the registration and fraud provisions of the Securities Act of 1933 and the anti-market manipulation provisions of the Securities Exchange Act of 1934.
'2. On November 24, 1958, United States District Judge Sidney Sugarman, sitting in the Southern District of New York, issued a permanent injunction enjoining Robert Maurice Sherwood and others from, among other things, * * * violations of the registration provisions of the Securities Act of 1933, in the offer and sale of common shares of Canadian Javelin Limited.
'3. On November 24, 1958, Robert Maurice Sherwood through his American Counsel, Simpson Thacher and Bartlett, by Albert C. Bickford, a partner, consented to the entry of this final decree of permanent injunction. * * *'
'4. It was clearly stated both in open court and in conferences leading to the acceptance of the consent, that all of the Canadian Javelin Limited shares received by Robert Maurice Sherwood from Canadian Javelin Limited, the issuer, or from John Christopher Doyle, a control person of the issuer, were and would remain control shares in Sherwood's hands, and could not be offered and sold without full registration with the Securities and Exchange Commission or, at the very least, without a request for and receipt of a so called no action letter from the Securities and Exchange Commission, based on an acceptable change of circumstances, which letter in turn would be required to be filed with the Court as a basis for an application for modification of the permanent injunction, to release any shares covered in such no action letter.
'5. No registration statement covering shares of Canadian Javelin Limited has ever been filed with the Securities and Exchange Commission, and none has ever been in effect.
'6. * * * no request for modification of the permanent injunction was ever addressed to this Court.
'7. Since November 24, 1958 * * * Robert Maurice Sherwood has offered and sold more than 8,000 shares of Canadian Javelin Limited, by orders executed in the United States, to members of the public in the United States for about $ 125,000, in an almost daily marketing operation. More than 4,000 additional shares were offered and sold in Canada during this same period by the defendant Robert Maurice Sherwood.
'8. These shares were all shares received by Robert Maurice Sherwood from John Christopher Doyle who in turn received them from the issuer. * * *'
Of the quoted facts alleged in the petition herein the trial of the contempt prosecution established these: the civil action for injunction commenced by the Securities and Exchange Commission; the consent of the defendant Sherwood to a final injunction; sales of numerous shares of Canadian Javelin Limited in the United States by the defendant Sherwood without the filing of a registration statement with the Securities and Exchange Commission.
The prosecution's contentions are basically that:
1) Sherwood, by consenting to the injunction of November 24, 1958 undertook not to sell in the United States, until a registration statement was filed, the Canadian Javelin Limited shares which he did thereafter sell.
2) Even if the defendant's undertaking was not to sell the shares he took through Doyle unless and until a registration thereof was required and filed, such registration thereof was required and Sherwood is in contempt for selling ...