The opinion of the court was delivered by: OWEN
These are cross motions for summary judgment. Plaintiff Securities and Exchange Commission (hereinafter the "Commission") seeks a permanent injunction against certain alleged conduct of defendant Robert L. Ingis (hereinafter "Ingis") pursuant to Rule 56 of the Fed. R. Civ. P. Ingis seeks summary judgment in his favor to the contrary. The motion of the plaintiff is granted and that of the defendant is denied.
In this enforcement action the Commission seeks preliminary and permanent injunctions against defendants Kalvex, Inc., Emanuel L. Wolf, and Robert L. Ingis enjoining them from further violations of Sections 13(a) and 14(a) of the Securities Exchange Act of 1934. Defendants Kalvex and Wolf contemporaneously with the filing of the complaint consented, without admitting or denying the allegations of the complaint, to the entry of judgment granting the relief requested. Only defendant Ingis remains an active party.
As it pertains to him, this action involves a scheme to funnel money through a dummy corporation for the purpose of secretly receiving kickback payments from a Kalvex supplier. Defendant Ingis does not deny that he engaged in such conduct, but asserts that he acted at the behest and direction of defendant Wolf and is thus insulated from responsibility for his actions.
In addition to his participation in a kickback scheme, the S.E.C. also charges that Ingis siphoned off corporate funds from Kalvex for personal use by submitting expense vouchers and obtaining reimbursements therefor from Kalvex for expenses unrelated to any corporate purpose. At all relevant times, the defendant Ingis was a director of Kalvex
and was executive vice-president and chief operational officer of Kalvex until September 10, 1974, when he was removed as an officer and employee by the board of directors. Ingis was also a director of Allied Artists Pictures Corporation ("Allied Artists") until September 12, 1974, when he was removed. Ingis was also vice-president and chief financial officer of Allied Artists until September 25, 1974, when he was removed as an officer and employee by the board of directors of Allied Artists.
The facts are that in March or April 1973, Ingis was approached by one Stanley Halper, a friend, with the idea of starting a computer company which would provide computer services for Kalvex, Allied Artists and other companies. The principals of the computer company were to include Halper and Alfred A. Armocida.
On April 2, 1973, the computer company known as Shared Computer and Personnel, Inc. ("SCP") was incorporated in the State of Delaware and Halper, Armocida and Ingis were elected as directors. Subsequently, in July 1973, Ingis suggested to Wolf that Kalvex invest $150,000 as seed money in SCP. In consideration for this investment, Kalvex was to receive an interest-bearing convertible note of SCP (convertible into 18% of the outstanding common stock of SCP). According to Ingis, the advantages of the investment by Kalvex would be to provide Kalvex and Allied Artists with needed computer services and, at the same time, if SCP did well, provide Kalvex with an equity interest in SCP.
In July 1973, Wolf told Ingis he would approve the arrangement whereby Kalvex loaned $150,000 to SCP in return for the convertible note provided that he, Wolf, received: (1) 10% of the monthly billings received by SCP from Kalvex and Allied Artists, (2) $23,000 of the monies to be received by SCP for the original systems design for Kalvex and Allied Artists, and (3) 10% of the equity interest in SCP.
Armocida agreed to comply with Ingis' demands on behalf of Wolf, and on August 17, 1973, the Kalvex investment in SCP was consummated.
Thereafter, in March 1974, Wolf demanded that Ingis obtain a partial payment from SCP for him. Consequently, Ingis requested that Armocida tender a partial payment to Wolf, and as a result, Armocida issued an SCP check dated March 7, 1974 for the sum of $3,000. Pursuant to Ingis' instructions the payee of this check was left blank. The $3,000 check was subsequently co-signed by Ingis because all SCP checks in an amount greater than $2,500 had to be jointly signed by Armocida and either Ingis or another named officer of Kalvex. Ingis subsequently inserted the name Royalty Management Corp. ("RMC") as the payee on the $3,000 check and endorsed the check "For deposit only Royalty Management Corp." and deposited the check into an RMC bank account later on April 26, 1974. After Ingis received the $3,000 check from SCP, he met with Armocida on March 21, 1974 and asked him if he would commit to writing what he had orally promised to give Wolf in July 1973. Armocida agreed and Ingis drew up two documents which were signed by Armocida, obligating SCP to (1) pay RMC $20,000 for services rendered and (2) issue RMC 15,000 shares of its (SCP) common stock for services rendered. RMC, however, did not render any services to SCP, and was, in fact, a dummy corporation utilized by Ingis as a depository for the kickback payments from SCP.
Subsequently, on April 18, 1974, Armocida advised Ingis that he had another $3,000 for Wolf. Wolf suggested that they open an RMC bank account to deposit this and future checks received from SCP. Previously, it had been contemplated that Ingis and Halper would participate in a joint venture whereby they would invest in certain companies using RMC as the vehicle for this venture. However, this joint venture was abandoned and RMC was left a dummy corporation.
Thus, on April 18, 1974, Armocida issued a check for $3,000 on behalf of SCP which, pursuant to Ingis' instructions, was made payable to the order of RMC. Ingis then co-signed and endorsed the check, deposited both this $3,000 check and the $3,000 check dated March 7, 1974 into the bank account he had opened in the name of RMC.
Finally, on May 7, 1974, Armocida issued another check on behalf of SCP to the order of RMC for the sum of $2,500, and Ingis co-signed, endorsed and deposited that check in the RMC bank account. Thus, within two months (March 7 to May 7, 1974), Ingis received $8,500 from SCP pursuant to the terms of the scheme.
On September 10, 1974, after being charged with the illicit activities described above, Ingis was removed as an officer and employee of Kalvex by the board of directors. Further, on September 12, 1974, Kalvex, the majority shareholder of Allied Artists preferred shares, removed Ingis as a director of Allied Artists and on September 25, 1974, after again being charged with the illicit activities described above, ...