The opinion of the court was delivered by: WILLIAM C. CONNER
This action was brought by the Securities and Exchange Commission (the "Commission") on February 6, 1992 against defendants Oxford Capital Securities, Inc. ("Oxford Capital"), Oxford Consolidated Corporation ("Oxford Consolidated"), James A. Sehn, Samuel O. Forson, Leonard C. Donner, and Guillermo P. Tolosa, charging violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 [ 15 U.S.C.§§ 77e(a), (c), 77q(a)], Sections 10(b), 15(c)(1), and 17(a) of the Securities Exchange Act of 1934 [ 15 U.S.C. §§ 78j(b), 78o(c)(1), 78q(a)], and Commission Rules 10b-5, 15c1-2, and 17a-5 [17 C.F.R.§§ 240.10b-5, 240.15c1-2, 240.17a-5], in connection with defendants' alleged fraudulent offer and sale to investors of more than $ 2.0 million of unregistered debt securities. This action is presently before the Court on the Commission's motion for an order holding defendants in civil contempt of this Court's February 14, 1992 order and imposing sanctions pursuant to Rule 70, Fed. R. Civ. P.,
the inherent powers of the Court, and Rule 43 of the Civil Rules of the United States District Court for the Southern District of New York.
On the same day the Commission filed its Complaint in this action, United States District Judge Kevin T. Duffy, sitting in Part 1, ordered, among other things, that defendants be temporarily restrained from violating the securities laws, that defendants' assets be frozen, and that each defendant provide the Commission with an accounting within three business days. On February 11, 1992, the day the accountings were due, defendants consented to Final Judgments of Permanent Injunction (the "Judgments"). On February 14, 1992, this Court signed the Judgments without modification. Among other things, the Judgments permanently enjoin defendants from violating the federal securities laws and continue the freeze of defendants' assets, but reserve the issues of disgorgement and civil penalties.
In addition, the Judgments require that each of the defendants provide an accounting. The accountings were to be served on the Commission and filed with the Court no later than February 19, 1992, and expressly require five distinct types of financial information:
1. All money, assets, funds, securities, and real or personal property currently held directly or indirectly by or for the benefit of any of the defendants, including but not limited to bank accounts, brokerage accounts, investments, business interests, and real and personal property wherever situated, describing each asset, its current location and amount;
2. All money, assets, funds, securities, and real or personal property received by any of the defendants, or for their direct or indirect benefit, in or at any time from January 1, 1989, to the date of the accounting, describing the source, amount, disposition and current location of each of the items listed;
3. All money, assets, funds, securities, and real or personal property of investors in the Oxford debt securities transferred to or for the benefit of any of the defendants from January 1, 1989, through the date of the accounting, and the disposition by the defendants of such assets, funds, securities, real or personal property;
4. The names, last known addresses, and account identifying information of all financial institutions, bailees, debtors, and other persons and entities that are currently holding any money, assets, funds, securities or real or personal property of the defendants; and
5. The names, last known addresses and telephone numbers of all investors in the Oxford debt securities, as well as, the amount and date of each investment and the amounts and dates of payments of principal and/or interest to each investor by the defendants.
Defendants Sehn, Forson, Donner, and Tolosa provided the Commission with sworn statements, dated February 19, 1992, concerning their present financial status. Donner has also provided the Commission with information required pursuant to the third part of the accountings. In addition, defendants appear to have at least partially complied with the fifth part of the accountings -- the Commission has received an investor list from defendants' counsel, with a supplement from Donner, dated April 10, 1992.
Now facing possible contempt citations, defendants do not dispute that they have failed to comply fully with the order. See Declaration in Response of Noah Lipman, dated April 24, 1992, at PP 1, 2; Aff. of Leonard C. Donner, dated April 27, 1992, at 1. Instead, they offer the Court several explanations for the insufficiency of their accountings: (1) the officers of Oxford Capital and Oxford Consolidated are concerned that their production and signature of the accountings may be used against them in a criminal prosecution to establish their use of the corporations as corrupt criminal enterprises; (2) Sehn, Forson, and Tolosa now assert their Fifth Amendment privilege against self-incrimination in light of the criminal investigation conducted by the District Attorney's Office for the County of New York ("District Attorney") into the activities of individuals employed ...