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SEC v. MUSELLA

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


October 29, 1992

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
DOMINICK MUSELLA, et al., Defendants.

Grubin

The opinion of the court was delivered by: SHARON E. GRUBIN

REPORT AND RECOMMENDATION TO THE HONORABLE KIMBA M. WOOD

SHARON E. GRUBIN, United States Magistrate Judge:

 This is a report and recommendation on the motion filed herein by plaintiff, the Securities and Exchange Commission, for an order holding defendant Albert DeAngelis in civil contempt.

 BACKGROUND

 On August 8, 1989 your Honor filed an Opinion after trial that DeAngelis had violated the federal securities laws by trading on inside information and ordered that he was to disgorge all profits together with prejudgment and postjudgment interest. A Final Judgment and Order was entered on September 28, 1989 (hereinafter "Judgment"). Payment was due within 30 days. The amount of profit was $ 362,536.01 and prejudgment interest came to $ 253,382.81, for a total of $ 615,918.82. Although DeAngelis did not seek a stay of the Judgment nor make payment of any kind, he appealed the decision. The Second Circuit affirmed your Honor's Judgment, and DeAngelis filed a petition in the United States Supreme Court for a writ of certiorari which was denied on October 1, 1990.

 The SEC filed its instant motion for contempt on November 16, 1990 and DeAngelis responded by claiming an inability to pay, and your Honor thereafter referred the matter to me. On October 8, 1991, an evidentiary hearing was held at which DeAngelis presented himself as his only witness and his tax returns for 1988 through 1990 as his only documentary evidence. After the hearing I indicated that, because he was unable to present any meaningful explanation of his financial circumstances, DeAngelis had failed to sustain his burden of showing an inability to make any payment. DeAngelis then requested the opportunity to present further evidence, and the hearing was resumed on January 23, 1992. *fn1"

 At the resumed hearing testimony was given by the attorney who had represented DeAngelis in the trial before your Honor, by DeAngelis's son-in-law who has prepared his tax returns since 1983 and by DeAngelis's wife, and further documentary evidence was received. Thereafter, a report on the value of the house owned by DeAngelis and his wife was made by a court-appointed real estate expert. DeAngelis submitted supplemental material in August to which the SEC responded last month. The SEC now proposes on the basis of the evidence presented that DeAngelis be found in contempt and ordered to make a lump sum payment of $ 100,000 and continuing monthly payments of $ 2,000. The SEC also requests that he be enjoined from selling or encumbering his home without further order of the court. Because I find, for the reasons set forth below, that the relief requested is warranted and, indeed, quite reasonable, I recommend that it be granted.

 FACTS

 DeAngelis is a 69-year-old retiree who goes daily to his Union headquarters to act as a delegate. He receives no salary, but does receive $ 150 per week from the Union as "automobile reimbursement" to cover his car expenses for traveling daily to the Union. *fn2" He lives with his wife and supports her. A 22-year-old grandson lives with them who, although gainfully employed, does not contribute to household expenses. DeAngelis's income consists annually of his pension of $ 49,365, Social Security of about $ 7,000, payments on the sale of Motel Montreal, which is a property in eke George that had been partly owned by him, of $ 17,333 in principal and $ 10,920 in interest, and the $ 7,800 in automobile reimbursement. Mrs. DeAngelis also receives her own Social Security of about $ 5,000. *fn3" DeAngelis claims to have no savings and to have lost all the profits he made on his insider trading through subsequent stock market transactions prior to entry of the Judgment. Broken down monthly, the total household income from the above sources is $ 8,152 per month. DeAngelis's listing of household expenses totals $ 82,939 annually, or $ 6,911 per month. Based on the foregoing, DeAngelis contends that the difference between income and expenses, which comes to available cash of $ 1,241 per month, is insufficient to enable him to comply with the Judgment in the manner proposed by the SEC. He proposes that his obligation be met by simply continuing the $ 1,500 monthly payment he is now making pursuant to my order last October which, he contends, already creates a great hardship. I find his position untenable.

 DISCUSSION

 I.

 A party may be held in civil contempt for the failure to comply with an order of the court if (1) the order was clear and unambiguous, (2) proof of noncompliance is clear and convincing, and (3) the party has not been reasonably diligent and energetic in attempting to do what was ordered. See EEOC v. Local 580, Int'l Ass'n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeyman Educ. Fund, 925 F.2d 588, 594 (2d Cir. 1991); New York State Nat'l Org. for Women v. Terry, 886 F.2d 1339, 1351 (2d Cir. 1989), cert. denied, 495 U.S. 947, 109 L. Ed. 2d 532, 110 S. Ct. 2206 (1990); EEOC v. Local 638 . . . Local 28 of Sheet Metal Workers' Int'l Ass'n, 753 F.2d 1172, 1178 (2d Cir. 1985), aff'd, 478 U.S. 421, 92 L. Ed. 2d 344, 106 S. Ct. 3019 (1986); Powell v. Ward, 643 F.2d 924, 931 (2d Cir.) (per curiam), cert. denied, 454 U.S. 832, 70 L. Ed. 2d 111, 102 S. Ct. 131 (1981).

 There is no doubt here that DeAngelis is in contempt of your Honor's Final Judgment and Order. Its requirement of disgorgement was clear and unambiguous, and it is not in dispute that he paid not one penny of the amount until my order last year requiring $ 1,500 monthly. What DeAngelis appears to argue is that he has been "reasonably diligent and energetic," see EEOC v. Local 580, Int'l Ass'n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeyman Educ. Fund, 925 F.2d at 594, in attempting to comply with the Judgment to the best of his ability. He contends that since the time of the Judgment he has been unable financially to comply with it but has acted in good faith through his attorneys to resolve the matter. He says that he believed his attorneys would work something out with the SEC and that the matter was therefore under control. According to DeAngelis's attorney, shortly after the Judgment was entered, he contacted the SEC, told it DeAngelis could not pay the amount required, and offered to pay $ 50,000 over five years in full satisfaction of the $ 615,918.82. That offer was refused by the SEC. After the Second Circuit rejected DeAngelis's appeal of this Court's decision, his attorney made the same offer of $ 50,000 again. The offer was again rejected outright by the SEC. Then, DeAngelis's petition for certiorari was denied by the United States Supreme Court, and when the SEC staff attorney contacted DeAngelis's attorney asking about payment, the same $ 50,000 offer was made. DeAngelis's attorney says the matter was left open at that point, although the SEC claims otherwise -- that, as previously, the offer was rejected. (The SEC's position on what happened at this point is, of course, far more plausible, since there is no apparent reason why it would have taken under consideration, after all avenues of appeal for DeAngelis had been exhausted, an offer that it had seen fit to reject soundly earlier.) In any event, DeAngelis was told by his attorney that the offer had not been accepted, yet DeAngelis did nothing further because, he claims, he thought his attorney would "work it out," so he simply waited to hear from him.

 Even accepting the foregoing explanation by DeAngelis, it is insufficient to avoid a finding of contempt. The party seeking a finding of contempt need not show that violation of the order was willful, and good faith is not a defense. Nor may the alleged contemnor rely on his own inadvertence, misunderstanding or advice from counsel. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 93 L. Ed. 599, 69 S. Ct. 497 (1949); EEOC v. Local 638 . . . Local 28 of Sheet Metal Workers' Int'l Ass'n, 753 F.2d at 1178; Donovan v. Sovereign Sec., Ltd., 726 F.2d 55, 59 (2d Cir. 1984); NLRB v. Maine Caterers, Inc., 732 F.2d 689, 690 (1st Cir. 1984); TWM Mfg. Co. v. Dura Corp., 722 F.2d 1261, 1273 (6th Cir. 1983), cert. denied, 479 U.S. 852, 93 L. Ed. 2d 117, 107 S. Ct. 183 (1986); NLRB v. Blevins Popcorn Co., 212 U.S. App. D.C. 289, 659 F.2d 1173, 1183, 1184, 1186 (D.C. Cir. 1981); Commodity Futures Trading Comm'n v. Premex, Inc., 655 F.2d 779, 785 n.11 (7th Cir. 1981); NLRB v. J.P. Stevens & Co., 563 F.2d 8, 16 (2d Cir. 1977), cert. denied, 434 U.S. 1064, 55 L. Ed. 2d 765, 98 S. Ct. 1240 (1978); Oil, Chemical & Atomic Workers Int'l Union v. NLRB, 178 U.S. App. D.C. 278, 547 F.2d 575, 581 (D.C. Cir. 1976), cert. denied sub nom. Angle v. NLRB, 431 U.S. 966, 53 L. Ed. 2d 1062, 97 S. Ct. 2923 (1977); NLRB v. Ralph Printing & Lithographing Co., 433 F.2d 1058, 1062 (8th Cir. 1970), cert. denied, 401 U.S. 925, 27 L. Ed. 2d 829, 91 S. Ct. 883 (1971). In NLRB v. J.P. Stevens & Co., the Second Circuit explained as follows:

 

Respondents argue, however, that, even if there were violations of the order, the violations were not willful, and they maintain that they should not be found in civil contempt unless they acted with deliberate or careless disregard of our prior order. This contention . . . misconstrues the purpose of a civil contempt proceeding where the contemnor is offered the opportunity to purge himself of contempt by complying with prescribed purgation conditions.

 

In this context, the longstanding rule is that good faith or lack of wilfulness is not a defense that the petitioner must negate. The rule is a salutary one, for the purpose of a motion for civil contempt . . . "is not to punish intentional misconduct, but rather to enforce compliance with an order of the court and to remedy any harm inflicted on one party by the other party's failure to comply."

 563 F.2d at 16 (quoting Oil, Chemical & Atomic Workers Int'l Union v. NLRB, 547 F.2d at 581 (citations omitted)). DeAngelis appears to claim that his belief that it was sufficient to pay nothing while awaiting further negotiations by his attorney was based on his attorney's advice. But advice of counsel has never been a defense to contempt. In United States v. Goldfarb, 167 F.2d 735 (2d Cir. 1948) (per curiam), the defendant failed to appear to testify in response to a grand jury subpoena, although, at the designated time, his attorney appeared at the grand jury room and informed the Assistant United States Attorney that the defendant could not be there because of an important business engagement but was willing to appear on another day. The defendant was held in contempt and, on appeal, the Second Circuit affirmed the holding, noting that the defendant's expectation that his attorney would obtain an adjournment was an insufficient defense:

 

. . . Although he may have expected the attorney to obtain a continuance he voluntarily took the risk of not obtaining one. Even advice of counsel is not a defense to an act of contempt although it may be considered in mitigation of punishment.

 167 F.2d at 735. See also TWM Mfg. Co. v. Dura Corp., 722 F.2d at 1273 ("advice of counsel and good faith do not relieve from liability for a civil contempt, although they may affect the extent of the penalty" (quoting Proudfit Loose Leaf Co. v. Kalamazoo Loose Leaf Binder Co., 230 F. 120 (6th Cir. 1916))); SEC v. First Financial Group of Texas, Inc., 659 F.2d 660, 670 (5th Cir. 1970) ("Reliance upon advice of counsel may be considered in mitigation of the sanction but does not constitute a defense to contempt of court."); Nasco, Inc. v. Calcasieu Television & Radio, Inc., 583 F. Supp. 115, 120 (W.D. La. 1984) ("Whether respondents acted upon advice of counsel is no defense to civil contempt.") Indeed, the Second Circuit has recently expressly rejected good faith reliance on advice of counsel even as a defense to the specific intent requirement in the criminal contempt context. United States v. Remini, 967 F.2d 754, 757-58 (2d Cir. 1992) ("It is the established law of this circuit that 'advice of counsel is not a defense to [an] act of contempt, although it may be considered in mitigation of punishment.'" (quoting United States v. Goldfarb, 167 F.2d at 735)).

 It is additionally worth noting, though, that DeAngelis's behavior does not evidence either good faith or diligence in attempting to comply with your Judgment or with prior orders of this Court. In January 1983, shortly after this action was filed, a preliminary injunction was issued by Judge Haight on consent, requiring that pending the final determination of the action DeAngelis and his agents "hold and retain within their control, and otherwise prevent any disposition or dissipation of, funds or other assets with a net value of $ 360,425 [the amount then thought to represent his direct profits from illegal trading]" in securities in his two brokerage accounts. It required that he preserve the equity in his house to the extent of the difference between $ 360,425 and the net value of his brokerage accounts. It further provided that DeAngelis not engage in certain types of activities, including the purchase or sale of options, to lessen the risk of dissipation of the profits. However, subsequent trial testimony of brokerage account executives revealed that DeAngelis withdrew tens of thousands of dollars from the accounts in 1985 and 1986 and then he engaged in options trading in 1988, eventually dissipating all the assets so that there remained no funds for collection.

 His actions with respect to his residence are another example of the cavalier attitude with which DeAngelis skirts his obligations to the Court. The record shows that at trial before your Honor in 1989 after the SEC proposed to present certain testimony concerning the dissipation of the funds in DeAngelis's brokerage account, his counsel, to obviate the testimony, represented after consultation with DeAngelis that his equity in his home was sufficient to cover the $ 360,425 required to be preserved for disgorgement:

 

The house that is indicated as item B in this order, located at 50-28 65th Street in Woodside New York is here, it is in Mr. DeAngelis's possession. It is worth approximately between 350 and 400,000. I believe it is a very small mortgage of eight or ten thousand left on it and -- eight thousand, and that is very much available, it has not been transferred, it is in Mr. DeAngelis's name, it is not encumbered other than to the amount, and it seems to me that we can have an appraisal done, obviously, but it seems to me that it would more than cover the amount stated in this order.

 Trial transcript at 311 (emphasis added). Two years later, after the Judgment was entered, in opposing the instant motion for contempt, DeAngelis stated:

 

My property consists of a modest family home located in Woodside Queens. . . . I estimate that my equity in my home would be worth approximately $ 100,000.00 (One Hundred Thousand Dollars) in a strong market. The value of my home in this depressed market diminishes the value of my equity.

 Declaration of Albert J. DeAngelis in Opposition to Motion of Securities and Exchange Commission to Hold Defendant in Contempt of Court, dated February 13, 1991, at P 4. What is significant -- apart from the fact that his estimate of the value of his equity decreased far more than the conditions of the real estate market would appear to warrant -- is as follows. As set forth above, in 1983 he offered his home as sufficient to satisfy any eventual order requiring disgorgement of profits, in 1989 he reiterated its availability, representing that "it is in [his] possession" and "it is in [his] name," and last year he continued to represent it as one of his assets, albeit at a greatly reduced value. In addition, at the initial hearing before me last year, DeAngelis began his testimony by answering the question posed by his lawyer of what action he took following entry of the Judgment:

 

Probably the next day or the day after or two days. Right then, I says, Settle it, I says. If you have to, I says, Look, I'll pay. I'll mortgage the house. I have the house. I didn't sell my house. I'll mortgage it and give it to them.

 Transcript, October 8, 1991, at 3. At that hearing it was learned, however, that, contrary to his representations two years earlier, he was not the sole owner of the house but rather owned it jointly with his wife since its purchase about 30 years ago. He did, however, reiterate his intention to mortgage the house as his method of paying what he could of the Judgment (see, e.g., id. at 15). After that hearing, the SEC made a proposal of what amount DeAngelis should be ordered to pay based, in large part, upon the understandable assumption that DeAngelis would obtain a substantial amount of money by procuring a mortgage on the house. However, in DeAngelis's memorandum submitted in response, DeAngelis balked. He argued that he should be required to pay no more than the $ 1,500 per month I had ordered as an interim measure and, for the first time, raised numerous reasons why obtaining a mortgage on the house (that he suddenly portrayed as some unreasonable, "improper" proposed idea dreamed up by the SEC (Answering Memorandum, dated October 22, 1991, p. 10)) would not be forthcoming. He thus contended, with no evidence whatsoever to support his arguments, inter alia, that no bank or other lending institution would give a mortgage for more than 50-70% of the amount of equity in any real estate; and that it was "merely speculation" as to whether he would be able to obtain a mortgage at all both because he might be deemed a bad credit risk, given the $ 615,918.82 Judgment against him herein, and because his wife would own half the interest in the house and could not be legally compelled to mortgage or sell her half-interest in the house. He also speculated that the value of the house had decreased even more. Id. at 10-11. Based on these unsubstantiated contentions, among others, he reasoned, apparently, that he should not be required even to apply for a mortgage, and he argued he was financially unable to pay more than the monthly $ 1,500.

 It was after the foregoing submission that I told DeAngelis he had failed to meet his burden of showing his financial inability because all his arguments were speculation in the absence of evidence such as information from any lending institutions and an appraisal of the house. It was thereafter that he requested the hearing be reopened. Lo, at the resumed hearing, DeAngelis submitted a letter he had obtained from an officer of the bank which held the original mortgage on the house stating that the bank would not issue a mortgage on his half-interest in the property but required all owners of record to execute it, and he presented Mrs. DeAngelis's testimony that she would not consent to turning over her half-interest for a mortgage to the bank. *fn4"

 Finally, with respect to DeAngelis's purported good faith and diligence in attempting to meet his payment obligation, I note that it is also belied by the fact that, since entry of the Judgment, he has continued to live what is, in essence, a quite comfortable lifestyle with no apparent thought of cutting back to meet some of his obligation. If, indeed, he had been simply awaiting word from his attorney concerning payment, one would expect that he, at the least, would have been saving whatever money he could for when the day came. There is no reason he could not have shown his diligence by sending any small amounts into the Clerk of Court until the matter was resolved. To the contrary, the evidence shows that the DeAngelises drive two late-model luxury automobiles, maintain three videocassette recorders in their home, and house and feed an adult grandson who is fully capable of supporting himself. They own a fully-furnished condominium in Florida which is used solely as a vacation home for them and their children. DeAngelis's attitude is further evidenced by the fact that he frequents Atlantic City on a regular basis for the purpose of gambling where, according to his testimony, "the losses always exceed the gains." Transcript, October 8, 1991, at 53. He claims he goes to Atlantic City one or two days per month; his testimony is contradicted by his wife, however, who estimated he goes about six times per month (See Transcript, October 8, 1991, at 65 and Transcript, January 23, 1992, at 45.)

 II.

 While it is correct that a finding of civil contempt is not proper for the failure to pay a money judgment when the alleged contemnor is financially unable to make any payment, see, e.g., Badgley v. Santacroce, 800 F.2d 33, 37 (2d Cir. 1986), cert. denied, 479 U.S. 1067, 93 L. Ed. 2d 1003, 107 S. Ct. 955 (1987); Donovan v. Sovereign Sec., Ltd., 726 F.2d 55, 59 (2d Cir. 1984), the burden of proving that compliance is impossible "plainly and unmistakably" rests with the contemnor, see, e.g., In re Marc Rich & Co., 736 F.2d 864, 866 (2d Cir. 1984); Donovan v. Sovereign Sec., Ltd., 726 F.2d at 59, who must demonstrate it "categorically and in detail." Glover v. Johnson, 934 F.2d 703, 708 (6th Cir. 1991); Donovan v. Mazzola, 716 F.2d 1226, 1240 (9th Cir. 1983), cert. denied, 464 U.S. 1040, 79 L. Ed. 2d 169, 104 S. Ct. 704 (1984); Aspira of New York, Inc. v. Bd. of Educ., 423 F. Supp. 647, 654 (S.D.N.Y. 1976). DeAngelis has hardly satisfied that burden.

 

This burden is satisfied by making "in good faith all reasonable efforts to comply." We construe this requirement strictly. "Even if the efforts he did make were 'substantial,' 'diligent' or 'in good faith, '. . . the fact that he did not make 'all reasonable efforts' establishes that [respondent] did not sufficiently rebut the . . . prima facie showing of contempt. The . . . use of a 'some effort' standard for measuring the strength of [the] defense [would be] an abuse of discretion."

 Combs v. Ryan's Coal Co., 785 F.2d 970, 984 (11th Cir.), cert. denied sub nom. Simmons v. Combs, 479 U.S. 853, 93 L. Ed. 2d 120, 107 S. Ct. 187 (1986) (citations omitted). DeAngelis, however, has "displayed an evident sense of nonurgency bordering on indifference," Aspira of New York, Inc. v. Bd. of Educ., 423 F. Supp. at 654, and, in the face of evidence showing that he is able to make substantial payment, continues to claim financial inability. *fn5"

 The SEC's proposal of a lump sum payment of $ 100,000 and monthly payments of $ 2,000 can easily be met by DeAngelis in a number of ways. First, he can sell his interest in the Motel Montreal or transfer it to the SEC. The remaining principal due to him over the next five years is $ 86,665 and an additional amount in interest is at least $ 35,000, for a total of over $ 120,000 at a minimum. It should be noted that, although DeAngelis claimed that when he receives the checks on the motel payments he gives them to his wife and she deposits them in the bank and uses them for household expenses, Mrs. DeAngelis testified that she never sees that money:

 

Q. What happens to that money?

 

A. He keeps it.

 

Q. Do you know that he does with it?

 

A. I guess he buys stock. I don't know; that's my problem with him.

 

Q. He doesn't give it to you?

 

THE COURT: Does it go into the Citibank account?

 

THE WITNESS: When he gets the check he just cashes it after 7 days. I don't know what he does; that I have nothing to do with it. That's true. I don't even know.

 

Q. That has been happening every year since he sold it?

 

A. Yes.

 Transcript, January 23, 1992, at 28-29. Insofar as it is quite clear that Mrs. DeAngelis pays all household expenses out of the Citibank account and the Social Security checks, one can only speculate as to the uses to which DeAngelis has been putting the Motel Montreal payments. *fn6"

 Second, the condominium in Florida can be sold or rented. It sits vacant but for a few weeks a year when Mrs. DeAngelis and/or her children vacation there. DeAngelis's son-in-law estimates its worth to be at least $ 135,000. Moreover, if it were sold, a minimum of $ 5,400 now spent annually for its maintenance, taxes and utilities would be additionally available, and, if rented, presumably these expenses would be covered and some income made as well. A third possibility is that Mrs. DeAngelis sell the jewelry store she owns, DeAngelis Jewelers, to her daughter and son-in-law now instead of in the future. *fn7" Its value is estimated at $ 70,000. At the very minimum, they could take some of the income out of it to apply to household expenses. *fn8" It is worth noting that DeAngelis used substantial funds "borrowed" from DeAngelis Jewelers to finance his illegal trading. See SEC v. Musella, 748 F. Supp. at 1033, 1039. Fourth, they could rent out the fully equipped second-family apartment in their house that is currently being occupied by their grandson or they could require him to pay a fair market rental for it. *fn9" Fifth, they can generally cut down on their lifestyle in any number of ways, such as no longer lavishing gifts on their grandchildren for a while, *fn10" getting rid of the second unnecessary telephone in their house and driving less expensive automobiles that will also be less expensive to maintain. It may be noted, in any event, that the loan on one of the cars for which they pay $ 384 monthly will be fully paid off in less than a year. *fn11" In addition, the small remaining mortgage on the house, currently costing $ 435 per month, should be fully paid within about two years, ending that monthly expense. *fn12" And, beyond doubt, DeAngelis can cease his frequent trips to Atlantic City where he gambles and loses money that is owed to investors and the government. *fn13"

 DeAngelis apparently believes that he is entitled simply to continue living in the style to which he has accustomed himself and, if so doing consumes all his current income, that he is absolved of paying his debt because he is rendered financially unable to do so. This view of the law cannot be condoned. Needless to say, his obligation to this Court's Judgment must be met even if it would require some real sacrifice. As shown above, however, to meet the SEC's current payment proposal, no real sacrifice is even necessary. Any number of combinations of the methods suggested above would more than meet that proposal without requiring all of them. *fn14" DeAngelis seems to have lost sight of the fact that he has been found to have broken the law and harmed innocent investors by engaging in insider trading. Your Honor's Judgment requiring disgorgement is not to be treated as a contribution to one's favorite charity that one makes if and when one feels able to do so. The SEC's disgorgement program is important, because, as your Honor noted, "By prohibiting insider traders from profiting from their wrongdoing, disgorgement facilitates enforcement of the federal securities laws." SEC v. Musella, 748 F. Supp. at 1042.

 CONCLUSION

 For all of the foregoing reasons, the SEC's motion should be granted and DeAngelis found in contempt of this Court's Final Judgment and Order of September 28, 1989. To purge his contempt, the following should be required.

 First, DeAngelis shall pay to the Clerk of Court $ 100,000 within ninety (90) days from the date your Honor will be entering an order. In the alternative, he may transfer to the SEC within ten (10) days his entire right to principal and interest on the Motel Montreal mortgage note he owns.

 Second, he shall pay to the Clerk of Court $ 2,000 at the end of each month commencing with the month in which your Honor's order will be entered. These payments shall continue until further order of the Court.

 Third, he shall be enjoined from disposing of or encumbering in any way his interest in his home without further order of the Court. *fn15"

 Finally, DeAngelis shall provide a financial statement to the Court, with a copy to the SEC, every six months, under oath, showing household income and expenses and shall also provide his yearly tax returns. As DeAngelis's disgorgement obligation is a continuing one, either party shall retain the right to apply to the Court for modifications of the payment requirements in the event of changing financial circumstances. *fn16"

 The parties are hereby directed that if you have any objections to this Report and Recommendation you must, within ten (10) days from today, make them in writing, file them with the Clerk of the Court and send copies to the Honorable Kimba M. Wood, to the opposing party and to the undersigned. Failure to file objections within ten (10) days will preclude later appellate review of any order that will be entered by Judge Wood. See 28 U.S.C. ยง 636(b)(1); Rules 6(a), 6(e) and 72(b) of the Federal Rules of Civil Procedure; Thomas v. Arn, 474 U.S. 140, 88 L. Ed. 2d 435, 106 S. Ct. 466 (1985); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989) (per curiam); Wesolek v. Canadair Ltd., 838 F.2d 55, 58 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir. 1983) (per curiam).

 Dated: New York, New York

 October 29, 1992

 Respectfully submitted,

 SHARON E. GRUBIN

 United States Magistrate Judge


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