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United States District Court, S.D. New York

October 13, 2005.


The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge


The plaintiff, the Securities and Exchange Commission (hereinafter, the "SEC"), seeks an Order to incarcerate defendant Joseph Contini (hereinafter, "Contini") following this Court's earlier Order finding Contini in civil contempt for his failure to pay a final judgment issued by this Court in 1995. For the reasons set forth below, the SEC's application is denied.

Contini is ordered to increase his monthly payments from $1000.00 to $2000.00. Contini's compliance with this condition will cause the pending civil contempt order against him to be withdrawn. Should Contini demonstrate that he is financially unable to comply with this increase in monthly payments, the Court may review the matter at that time. Prior Proceedings

  By an order of this Court dated April 21, 2004, Contini was found in civil contempt for his failure to comply with a previous judgment of this Court, entered on May 17, 1995, mandating Contini to pay $2.3 million in civil penalties. Subsequent to finding Contini in civil contempt, a hearing was scheduled to evaluate whether further relief, including incarceration, was warranted.

  In advance of the hearing, Contini proposed that the Court permit him to enter into an agreement with the SEC to make periodic payments "consistent with his ability to pay and which [would] satisfy the interests of justice." The SEC objected to Contini's proposal, alleging that Contini had substantial assets which he failed to disclose, and the hearing went forward on September 29, 2004.

  During the hearing, the parties were directed to develop a payment schedule under which Contini would make an initial lump-sum payment and regular contributions as a percentage of his income thereafter. The Court instructed that upon entry of such an agreement as an order by the Court, the pending contempt finding would be withdrawn. On December 1, 2004, the parties appeared before the Court again, and it was concluded that the matter would be adjourned, subject to the approval of a panel of officers at the SEC (hereinafter, "the Commission"), provided that Contini satisfied the following conditions: a $20,000 down-payment, 10% of Contini's net income, and verification of Contini's gross income through the production of his tax returns.

  On March 29, 2005, the SEC renewed its application to incarcerate Contini. The SEC informed the Court that it would not be recommending the above-described payment schedule to the Commission for approval due to a dispute concerning the total amount of equity carried by Contini in his current residence coupled with Contini's continued failure to provide his tax returns. Contini opposed the SEC's application. The matter was marked fully submitted on May 18, 2005.


  The core issue in this matter is whether Contini has made sufficient effort to pay the remaining balance of the $2.3 million judgment levied against him by this Court. When Contini was held in civil contempt by this Court in April 2004, he had demonstrated no effort to make any payments towards his civil penalty after his release from prison in June 1996. Since April 2004, however, Contini has provided the Court and the SEC with pieces of financial information regarding his current income and available assets and has begun making payments to satisfy his outstanding civil penalty.

  Specifically, Contini asserts that he earns approximately $160,000.00 annually and incurs an estimated $11,000.00 in monthly expenses, which he details for the Court, as he supports his wife and two small children. As of February 2005, he has furnished a $20,000.00 lump-sum payment towards the outstanding balance and has been making regular monthly payments in the amount of $1000.00. The SEC does not contest these facts.

  Despite these efforts, however, Contini has failed to provide his tax returns for recent years and offers no explanation as to why the Internal Revenue Service has no record of his filings from 1998 to 2003. Additionally, he has not produced any documentation to evidence his total annual earnings inclusive of cash-earnings, commission-based earnings, or other earnings arising out of independently contracted work. While Contini admits that he does generate income through commission and other forms of non-salaried employment, he does not identify or cap an approximate figure for the Court. Absent this information, no record of Contini's total earned income has been submitted to establish that his current monthly payment of $1000.00 is the maximum he can afford to pay without suffering undue financial burden. Furthermore, no documentation verifies the amount of money earned by Mrs. Contini, if any at all. She acknowledges that she was working when she first met Contini, but the record is silent as to whether she continues to work and, if so, how much she earns. Without this information, the Court cannot assess what, if any, other resources are available to the Contini family should Contini need to pay a greater percentage of his earned income towards the outstanding balance.

  Finally, the SEC argues that Contini possesses significant equity in his current home, which is valued at approximately half a million dollars. However, Contini has provided adequate documentation to demonstrate that he does not carry a substantial amount of equity in the home as a consequence of two loans, a conventional mortgage in the amount of $250,000.00 and a credit line (which only requires interest payments) in the amount of $289,000.00. Both loans are being paid off monthly and are included in the family's monthly expense sheet previously described. Since Contini has minimal equity in the home, selling the home at this time would not produce a significant payment towards the remaining balance of the civil penalty. Conclusion

  Given Contini's recent $20,000.00 lump-sum payment (which was made possible by a credit line obtained by Contini through a bank) and his regular monthly payments made towards the outstanding judgment, this Court's April 21, 2004 order finding him in civil contempt is withdrawn. Contini must continue to make monthly payments but is instructed to increase those payments to $2000.00 per month. Should this increase cause Contini undue financial hardship which he can evidence through adequate documentation of his total earned income, his available assets and the family's total annual income, the Court may consider further adjustment of these monthly payments at that time.

  It is so ordered.


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