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IN RE CRIMINAL & CIV. CONTEMPT PROCEEDINGS

October 8, 1986

IN RE CRIMINAL AND CIVIL CONTEMPT PROCEEDINGS AGAINST ARTHUR N. ECONOMOU; SECURITIES AND EXCHANGE COMMISSION, Plaintiff
v.
THE AMERICAN BOARD OF TRADE, INC., ARTHUR N. ECONOMOU, PHYLLIS H. ECONOMOU, and THE AMERICAN BOARD OF TRADE SERVICE CORP., Defendants



The opinion of the court was delivered by: KRAM

MEMORANDUM OPINION AND ORDER

SHIRLEY WOHL KRAM, U.S.D.J.

 This criminal and civil contempt proceeding arises out of a civil action brought by the Securities and Exchange Commission ("SEC") against the American Board of Trade, Inc. ("ABT"), Arthur Economou, Phyllis Economou, and the American board of Trade Service Corp. ("ABTS") to enjoin the sale of unregistered commercial paper by the defendants. The Court brought on this proceeding sua sponte after mr. Economou made statements to the Court and to the Interim Receiver indicating that he had violated Court orders.

 On September 2, 1986, this Court gave notice to Mr. Economou, pursuant to Fed. R. Crim. P. 42(b), that it would conduct a hearing on September 8, 1986, to determine whether to hold him in criminal contempt for violation of this Court's orders. 18 U.S.C. § 401(3). Specifically, the Court charged Mr. Economou with violating two of its orders. First, it charged Economou with violating its order of May 30, 1986 prohibiting ABT from redeeming commercial paper. Second, it charged Economou with violating its order of August 15, 1986 prohibiting the expenditure of ABT's commercial paper assets without approval from then Special Master Milton Gould. The Court also informed Mr. Economou that it would consider at the hearing whether to hold him in civil contempt as well. Mindful that Mr. Economou had been proceeding pro se in the civil action brought by the SEC, the Court also suggested that Mr. Economou retain counsel to defend himself against the contempt charges. Mr. Economou, however, told the Court he preferred to proceed pro se.

 On September 81, 1986, the morning the contempt proceedings were scheduled to begin, Mr. Economou informed the Court he did not understand the nature of the proceedings against him. The Court again informed Mr. Economou that he had a right to be represented by counsel, and suggested that he retain counsel. The Court also told Mr. Economou that it could appoint a lawyer to represent him if he could not afford counsel. Mr. Economou stated he could afford counsel but asked that counsel be appointed for him. He argued that since the Government had brought the civil action out of which this contempt proceeding arose, it was obliged to provide him with counsel in the contempt proceeding. *fn1" Mr. Economou also indicated that even if counsel were appointed, he would only use counsel to "assist" him, and would continue to represent himself pro se. *fn2" The Court agreed to adjourn the hearing, and sent Mr. Economou to the Magistrate's part to seek CJA counsel. *fn3"

 Mr. Economou, however, failed to disclose information about the value of his assets of the CJA affidavit. The Court held a conference on September 9, 1986, and informed Mr. Economou that since he had refused to fill out the affidavit, CJA counsel would not be appointed for him. The Court adjourned the contempt hearing once again, and advised Mr. Economou that if he did not retain counsel, he would have to proceed pro se.

 The hearing on the contempt charges finally commenced on September 11, 1986. *fn4" Mr. Economou appeared without counsel, and once again, the Court informed him that he should retain counsel to represent himself. The Court also described the ways in which counsel could assist Mr. Economou. Once again, however, Mr. Economou stated that he desired to proceed pro se. The Court, after further questioning Mr. Economou about his decision, found that his desire to proceed pro se was knowing and voluntary. The Court then informed Mr. Economou of his Fifth Amendment rights, the burden of proof in a criminal case, and his rights to introduce or object to evidence and to confront any witnesses against him.

 The Court conducted the hearing on September 11, 16, 17, and 22, 1986. The Court heard extensive testimony from Mr. Economou, Mrs. Economou and Benjamin Bayoneto, ABT's accountant. *fn5" The Court had an opportunity to observe their demeanor and assess their credibility. The following constitutes the Court's findings of fact and conclusions of law.

 First, Mrs. Economou, who is a defendant in the civil action, had been represented therein first by Paul Batista and then by the law firm of Comer and Myerson, both of whom were released and relieved as counsel prior to the contempt hearing. She thus began to represent herself pro se. When the Court learned Mrs. Economou planned to testify on Mr. Economou's behalf, the Court advised her to retain counsel. She did not, however, retain counsel, and she testified without counsel on September 16, 1986. On September 17, Mrs. Economou notified the Court that she wished to retain counsel. The Court agreed to adjourn her cross-examination until September 18, so that she could hire an attorney. On September 18, Mrs. Economou appeared in Court with an attorney, who requested a further adjournment of the hearing so that he could prepare. The Court granted the adjournment until September 22. On September 22, Mrs. Economou's counsel requested that her testimony be stricken from the record since she was not represented by counsel when she gave it. The Court denied that request, ruling first, that because Mrs. Economou was not a defendant in the contempt proceeding, she was not entitled to counsel, and second, that she had waived any right to have counsel present during her direct testimony by testifying after the Court advised her to retain counsel. Finally, in the middle of Mrs. Economou's cross-examination, her attorney suggested she should assert her Fifth Amendment privilege. The Court ruled that if she did assert such a privilege, the Court would not compel her to testify. Nevertheless, Mrs. Economou continued to answer questions.

 Second, Mr. Economou sought to examine several witnesses during the course of the contempt proceedings, including Receiver Milton Gould, his associate, his secretary, and various SEC attorneys. The Court asked Mr. Economou for a proffer of evidence as to each witness, and found that the testimony would be irrelevant, and prohibited the testimony.

 Third, during the course of the proceedings, the Court learned that Mr. Economou sent a third Bulletin to commercial papers holders disparaging the Court. The Court warned Mr. Economou that even though he is not an attorney, he is representing himself in this case, and the Court would hold him to the same standards expected of an attorney. The Court warned Economou to cease the disparaging communications. Based on the Court's awareness of Mr. Economou's derogatory statements, Mr. Economou asked the Court to recuse itself in the contempt proceeding. The Court refused, indicating that these remarks did not prejudice the Court's consideration of the charges against him and that the Court was not trying Mr. Economou for making the disparaging remarks. Fed. R. Crim. P. 42(b).

 Fourth, Mr. Economou has released counsel for ABT and ABTS, the corporate defendants in the underlying civil action. He has not retained new counsel for them. In light of these actions, the Receiver has indicated that he will either retain counsel for the corporate defendants or represent their interests himself.

 I. CRIMINAL CONTEMPT

 In order to determine whether Mr. Economou is guilty of criminal contempt, the Court must find beyond a reasonable doubt that the Court gave Mr. Economou a clear order, that Mr. Economou had actual knowledge of the order, that Mr. Economou violated the order, and that ...


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