whether defendants have admitted wrongdoing. Id. (quoting United States
v. Carson, 52 F.3d 1173, 1184 (2d Cir. 1995)).
After consideration of these factors, I permanently enjoin defendant
Cannon from further violating the securities laws in connection with
ESI. Cannon has an extensive history of criminal and regulatory
violations, including securities fraud. He was the principal architect of
the scheme to conceal his involvement with ESI. Further, Cannon still has
the ability to affect the activities of ESI through his ownership
interest in the Gibraltar entities, which continue to own hundreds of
thousands of shares of ESI stock. Pursuant to the October 12, 2000,
Consent Judgment, ESI disclosed Cannon's role as a promoter in subsequent
SEC filings, but Cannon continues to deny any ownership interest in the
Gibraltar entities. These circumstances suggest a substantial likelihood
of further violations and warrant injunctive relief.
Solomon has no history of criminal violations, fraud or other
misconduct and this is his first experience running a public company. The
Commission has not demonstrated that Solomon is likely to commit further
violations. Accordingly, a permanent injunction against Solomon is not
The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
(the "Remedies Act"), 15 U.S.C. § 78u(d)(3) prescribes three tiers
of penalties for violations of the securities laws. The second tier
provides for a maximum penalty of $50,000, if the violation "involved
fraud, deceit, manipulation, or deliberate or reckless disregard of a
regulatory requirement." 15 U.S.C. § 78u(d)(3)(B) (ii). The third
tier provides for a maximum of $100,000, if, in addition, the violation
"directly or indirectly resulted in substantial losses or created a
significant risk of substantial losses to other persons." Id., §
The Commission has established that defendants' 10(b) violations
involved fraud and deceit, and, as to Cannon, that his violations
resulted in substantial losses to other persons. Second tier statutory
penalties are warranted against Solomon, and third tier against Cannon.
Accordingly, Cannon is directed to pay a statutory penalty of $100,000,
and Solomon is directed to pay a statutory penalty of $10,000.
The foregoing shall constitute my findings of fact and conclusions of
law pursuant to Fed. R. Civ. P. 52(a). The Clerk of the Court shall
enter judgment in favor of the Commission and against defendants John
Solomon and Herbert Cannon. Cannon is permanently enjoined from
committing further violations of the securities laws in connection with
ESI, and is ordered to disgorge $1,000,000 in illicit profits and to pay
a statutory penalty of $100,000. Solomon is ordered to pay a statutory
penalty of $10,000.