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Steven Altman v. United States Securities and and Order Exchange

March 8, 2011


The opinion of the court was delivered by: Richard J. Holwell, District Judge:


Attorney Steven Altman sues the United States Securities and Exchange Commission ("SEC" or the "Commission"), its Chairwoman Mary L. Schapiro, and its secretary Elizabeth M. Murphy, seeking injunctive relief including that this Court (1) stay SEC administrative proceedings against him and (2) compel the SEC to vacate its decision sanctioning Altman with a lifetime ban. After an administrative hearing and cross-appeal, on November 10, 2010, the SEC found that Altman had offered to have his client obstruct justice and perjure herself before it in return for financial benefits, and banned Altman from practice before the SEC for life. Altman's initial application to this Court for a preliminary injunction and temporary restraining order was denied at oral argument on December 8, 2010, at which time the parties agreed to treat the filings then to date as cross-motions for summary judgment. The Court now dismisses this case because it lacks jurisdiction to hear the action under Section 25 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78y.


The following background material is taken from the parties' papers and exhibits. The facts are undisputed unless otherwise noted.

In 2003, the SEC was investigating a company called Harrison Securities, Inc. ("Harrison"). (Compl. Ex. A (SEC's Nov. 10, 2010 Decision and Order (hereinafter "Nov. 10 Decision")) at 3.) Harrison shared office space with another company called Nextgen Inc. ("Nextgen"). (Id.) Harrison's chief executive officer, Frederick C. Blummer, and Nextgen's owner, Jay Adoni, were close business associates. (Id.) Eventually, the SEC instituted administrative proceedings that year against Harrison and Blummer alleging violations of the Exchange Act relating to records-keeping. (Id. at 4.) Harrison and Blummer sought excuse from any wrongdoing by arguing that they could not maintain their records properly because their systems and files were corrupted by a computer virus. (Id.) During the proceedings, Harrison and Blummer were represented by a lawyer named Irving Einhorn. (See id. at 5.)

Also in 2003, one Bonnie Rosen was employed by Nextgen as an administrative assistant, at a $60,000 salary. (Id. at 3.) Though employed by Nextgen, Rosen spent half her time working for Blummer and had co-signed two car leases for him. (Id.) Adoni, however, fired Rosen in October 2003. (Id.) Having trouble obtaining severance pay, she contacted Altman, a high school friend and New York licensed lawyer, who agreed to represent her gratis. (Id. at 3-4 & n.8.) Altman contacted Adoni regarding Rosen's severance and the Blummer car leases, but Adoni refused all requests to pay the severance or to help in removiong Rosen's name from the leases. (Id. at 3-4.) Then in January 2004 Rosen called the National Association of Securities Dealers ("NASD")*fn1

with information damaging to Harrison and Blummer's computer virus defense.*fn2 The NASD alerted the SEC, and the SEC attempted to contact Rosen to obtain her testimony. (Id. at 4.) Rosen refused the SEC's requests and referred them to Altman, whom she identified as her lawyer. (Id.) Altman would not commit Rosen to cooperate-Rosen, apparently, was hesitant because she feared that if Blummer were penalized or convicted, then she would be stuck paying off his car leases. (Id. at 4-5.)

Instead of cooperating with the SEC, Altman called Einhorn at least six times between January 28, 2004, and February 10, 2004. (Id. at 5.) Einhorn tape recorded five of the conversations. (Id.) During these talks, Altman allegedly represented that if Harrison and Blummer would pay Rosen's severance from Nextgen and would release Rosen from Blummer's car leases, then in return Rosen would agree to evade the SEC and, if subpoenaed, testify that she could not remember anything regarding their alleged computer virus. (Id. at 5-15.) For example, Altman and Einhorn had the following exchange:

ALTMAN: [Rosen] will testify that there was no virus in the computer, and I suspect once they start peeling it away, some other very, very unhelpful stuff with respect to the books and records of the firm . .. . . . .

EINHORN: Well, suppose she gets a subpoena to appear at the hearing? ALTMAN: . . . I, of course, can't advise her to evade the process but. . . [m]emory fades and the like. . . .

EINHORN: So, what you are saying is if they reach some agreement, she would be more favorably inclined?

ALTMAN: That would be my guess as to what her recollection would be. (Id. at 6-8 (transcribing the first taped call).) And later:

ALTMAN: [Rosen] is going to go in [to the SEC] next week. . . .

ALTMAN: If there's not some other way to figure out some last clear chance to get out of it, ...

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