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SEC v. KAPLAN

July 2, 1975

In the Matter of an Application to Enforce an Administrative Subpoena Duces Tecum of the SECURITIES AND EXCHANGE COMMISSION, Applicant,
v.
Dr. Manuel KAPLAN, Respondent



The opinion of the court was delivered by: BRAMWELL

MEMORANDUM AND ORDER

 BRAMWELL, District Judge.

 This matter comes before the Court on the application of the Securities and Exchange Commission ("Commission" or "SEC") for an order pursuant to Section 22(b) of the Securities Act of 1933, 15 U.S.C. § 77v(b), and Section 21(c) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u(c), directing Dr. Manuel Kaplan to appear and to testify pursuant to a subpoena duces tecum and to produce various documents called for pursuant to the said administrative subpoena.

 I

 In the instant case, the Commission seeks enforcement by this Court of an administrative subpoena duces tecum issued on May 12, 1975, by the staff of the Commission pursuant to Section 20(a) of the Securities Act of 1933, 15 U.S.C. § 77t(a), and § 21(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u(a). By the aforementioned statutory provisions, the Commission is empowered to conduct investigations into possible violations of the Federal Securities laws.

 The facts of this matter as they have been developed before this Court may be briefly summarized as follows: The Commission issued an order dated June 1, 1973, directing a private investigation and designating certain named officers of the Commission to take testimony In the Matter of I.T.S. Industries, Ltd., ("I.T.S."). By this order, the SEC directed that a private investigation be instituted to determine, inter alia : whether in the course of the offer and sale of I.T.S. securities certain persons offered and sold unregistered securities, made false and misleading statements of material facts, omitted to state material facts necessary in order to make the statements made not misleading, concerning inter alia, the activities, operations and subsidiaries of I.T.S.; and to determine whether certain persons manipulated the price of I.T.S. stock by the creation of an artificial market for such stock which included a false and misleading appearance of trading activity in I.T.S. securities, in contravention of Sections 5 and 17 of the Securities Act of 1933 (15 U.S.C. § 77e and 77q) and Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and the Rules and Regulations promulgated thereunder. *fn1"

 The SEC's Order provided, consistent with Section 19(b) of the Securities Act, (15 U.S.C. § 77s(b)), and Section 21(b) of the Securities Exchange Act, (15 U.S.C. § 78u(b)), for the designation of several members of the SEC's staff as officers of the Commission empowered, inter alia, to subpoena witnesses, to take evidence, and to require the production of books and records deemed relevant and material to the investigation.

 On May 12, 1975, pursuant to the Commission's Order, a subpoena duces tecum was issued to Dr. Manual Kaplan, directing him to appear and to produce various documents at the offices of the SEC on May 20, 1975, in Washington, D.C. where the investigation was being conducted. Pursuant to mutual agreement, Dr. Kaplan's appearance was adjourned to May 27, 1975. The subpoena duces tecum required Dr. Kaplan to produce the following eight categories of documents:

 
"1. All correspondence, written or otherwise transcribed concerning purchases or sale of stock or any other securities by Mr. Kaplan, for which Arnold Nelson had either recommended the purchase or sale, became aware of the purchase or sale or had any interest (financial, controlling or as an independent contractor) in the issuer of the security.
 
2. Any investments made in any companies or with any persons by Mr. Kaplan for his own account or for any accounts over which he had or still retains a beneficial interest or discretionary control, which were recommended by Arnold Nelson or for which Mr. Kaplan spoke with Arnold Nelson.
 
3. All loans made to Arnold Nelson or any persons or companies Arnold Nelson recommended to Mr. Kaplan for a loan from his own account or from any accounts over which Mr. Kaplan had or still retains beneficial or discretionary control.
 
4. All loans, collateralized or uncollateralized, received by Mr. Kaplan, personally and/or by companies over which Mr. Kaplan had or still retains beneficial or discretionary control from any source during this period.
 
5. Any bank accounts, domestic or foreign over which Mr. Kaplan had or still retains any beneficial or controlling interest, including but not limited to, checking, savings or special accounts.
 
6. All cancelled checks, (front and back), deposit slips, savings books, credit memoranda, debit memoranda, relating to ...

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