Petition — Sloan v. Securities & Exchange Commission

Supreme Court brief1977

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wG>' 2.

Supreme Court, U. S,

FILED

JAN 14 1977

——————————_—_——

*’

MICHAEL RODAK, JR., CLERK

IN THE

Suprene Court of the Anited States

October Term, 1976

OE iia

SAMUEL H. SLOAN individually

and d/b/a SAMUEL H. SLOAN & CO.,

-against-

Petitioner,

SECURITIES & EXCHANGE COMMISSION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SAMUEL H. SLOAN

1761 Eastburn Ave

Bronx, N.Y. 10457

(212) 299-2095

; Apt

Dick Bailey Printers

290 Richmond Ave., Staten Island, N.Y. 10302

Tel.. (212) 447-5358

PL TN eet bet titi

SP eee SO et

TABLE OF CONTENTS

Page

Opinions Below .......-- 020+ secre eee ee seer ceees 1

ee re ree ee ee 2

Questions Presented ........-- see cece eeeeeeeeeees 2

Constitutional Provisions Involved ........-+-+++++: 4

Statutes and Rules Involved .........-.-e+e+eeeeees 4

Statement of the Case ........0 2. cece eee cere ee eens 8

Reasons for Granting the Writ .......-.-++eeeeeee 27

Ce eer rrr reer rrr errr ere 42

Appendices:

A—Opinion of the United States Court of Appeals for

the Second Circuit dated May 10, 1976 .......... la

B—Order Dated December 6, 1976 Denying Petition

For Rehearing .....-...--esee rere eeeerreees 6a

C—Order Dated December 6, 1976 Denying

Suggestion That The Rehearing Be En Banc ..... 7a

D—Letter Dated October 18, 1976 ......----+e esos 8a

E—Complaint ............eeeee reece eceeneceeees 10a

F—Affidavit of Notice .......----+eee errr eee eeees 16a

G—Affidvit of Thomas J. Dolan In Support of Motion

for a Temporary Restraining Order and

Pretimimary Injunction ............ccccccuccse 18a

H—Notice of Motion to Adjudge the Defendant In

Contempt of Court

I—Affidavit of Ira B. Spindler In Support of Motion .. 24a

S—Aliidavit of Service 2... 65. ccc ccc cc cccencn, 30a

Sloan

Miller

KOPNE ES DWO eS 6 Wh bKs Ohare Ebe ow cowdk's's 34a

M—Defendants First Interrogatory To Plaintiff ...... 35a

N—Notice of Motion and Demand for Jury Trial ..... 38a

O—Affidavit of Samuel H. Sloan In Support Of Motion

TREN N GR SaAG 66h SEES Midiled nds ba edema be cas 40a

P—Plaintiff's Answers to Defendant's Interrogatories . 46a

Q—Order of Civil Contempt

R—Motion to Court of Appeals for Immunity from

Arrest and Affidavit of Service

S—-Transcript of Proceedings Of February 2, 1976 .... 59

T—Findings of Fact And Conclusions Of Law Dated

February 2, 1976 And Further Transcript of

ne nee | Re Ie Hey or eee 13a

ili

U—Transcript of Proceedings Of February 4, 1976 ... 87a

V—Motion by Plaintiff for Summary Judgment ...... 93a

W—Affidavit In Opposition ........-.+-++eeeeeee: 107a

egies mememmtamennaiet

CASES:

Bloom v. Illinois, 391 U.S. 194 (1968) .........-. 32, 37

Bray v. United States, 423 U.S. 73 (1975) .......+-- 32

Capital Co. v. Fox, 85 F. 2d 97 (2d Cir. 1936)....... 32

Cohen v. Beneficial Industrial Loan Corp., 337 U.S.

EEE cG4k cid ee cbc dStadscKeesvesvesses 32

Curtis v. Loether, 415 U.S. 189 (1974) ............ 37

Duncan v. Louisiana, 391 U.S. 145 (1968) ......... 37

Fox v. Capitol Co., 299 U.S. 105 (1936) ........... 32

General Motors Corp. v. City of New York,

S01 F. 2d 639 (2d Cir. 1974) .. 0... eee eee eee eee 41

Hanly v. S.E.C., 415 F. 2d 589 (2d Cir. 1969)... 19, 34

In Re McConnell, 370 U.S. 230 (1962) .......-+55: 31

International Business Machines Corp. v. United

States. 471 F. 2d S07 (2d Cir. 1972), Reversed en

hanc 480 F. 2d 293 (2d Cir. 1973), cert. denied 416

U.S. GOO (1974) 0 ccc crc cc cc scecccccveces 33

Jenkins v. McKeithen, U.S. 411 (1969) ........ 38

Maness v. Meyers, 419 U.S. 449 (1975) ............ 36

Nebraska Press Asso. v. Stuart, ——-U.S.— (1976) 39

Paul v. Davis, 424 U.S. 693 (1976)... 2.00... eee, 39

P.B.W. Stock Exchange v. S.E.C., 485 F. 2d 718 (3d '

Cir. 1973), cert. denied 416 U.S. 909 (1974) .... 35

Pernell v. Southall Realty, 416 U.S. 363 (1974) ..... 37

Rondeau v. Mosinee Paper Corp., 422 U.S. 29(1975) 30

SEC v. Canadian Javelin Ltd., 538 F.2d 313 (2d Cir.

1976). cert. denied Dkt. No. 76-365 (Dec. 13,

1976)

ne METTTTTTTT Tee 37

1935)

cc cccceseeteseneseenen &eheesaeneeee 39

SEC v. Sloan, 369 F. Supp. 996 (S.D.N.Y. 1974)... .. | 8

SEC v. Sloan, 535 F. 2d 679 (2d Cir. 1976) ........... I

SEC v. Sloan, 538 F. 2d 313 (2d Cir. 1976), cert. denied

Dkt. No. 76-365 (Dec. 13, 1976)..... 25, 28, 33, 36

SEC v. Stock Market Finance, 10 F. Supp. 95

(S.D.N.Y. 1935)

580 veessutébbegedbanene 39, 40

See v. City of Seattle, 387 U.S. 541 (1907).......... 27

Sheppard v. Maxwell. 384 U.S. 333 (1966) .......... 38

me re

Sibbach v. Wilson & Co., 312 U.S. 1 (1941) ........ 32

Sibron v. New York, 392 U.S. 40 (1968) ........ 32, 34

Sloan v. Mulligan, Dkt. No. 76-615............-- .25

Sloan v. S.E.C.. 535 F. 2d 676 (2d Cir. 1976), cert.

denied, Dkt. No. 76-58 (Oct. 12, 1976) ........ 25

Sloan v. Ward. Dkt. No. 75-3001 (2d Cir. Jan. 16,

i ie ee eee uepeseeese 1S

Southern Ry. v. Lanham, 408 F. 2d 348 (Sth Cir.

a SR lt RE Se 41

Taylor v. Hayes, 418 U.S. 488 (1974)... 2... 6.66 ee. 36

United States v. Ryan, 402 U.S. 530 (1971) ........ 34

United States v. Schrimsher, 493 F. 2d 842 (Sth Cir.

EG A ae 32

ee te ecccscets 31

CONSTITUTION, STATUTES AND RULES:

United States Constitution, Amendment IV 3, 4, 10, 27

United States Constitution, Amendment V .... 3, 4, 27

Securities Exchange Act of 1934

Section 17(a), 15 U.S.C. §78q(a).......... 4, 11, 13

Section 21(e), 15 U.S.C. §78ule) .........-.-. 5, 40

IB UG BIB occ cccceccccccccccccccceccccees 32

dc wawaes 22

kee reee to pisces 22

PPE voces doveveteceuetVibiieces 4, 40

y LIB ER | PPPTTTETILIRTLE TLE eee 2

PI a ctecus cdcccnckepesetecanendss 32

PS kos cede rnctcsensevseesctesnues 31

ID on bss vaudedcedenddswoeunddunds 2

SEC Rule 15e2-11, 17 CFR §240.15c. 2-11 ..... 11, 20

SEC Rule 17a-3, 17 CFR §240.17a-3............-. 11

SEC Rule 17a-4, 17 CFR §240.17a-4 ... 5,6, 11, 12,13

Rule 4(c), Fed. Ru. Civ. P.......... cece eens 23, 41

es Fee Bee Gs We ce cc cccecsccccvcewevas 23

HR OF OPITTETITITTTTT ET 21

Rule 42 (b), Fed. R. Crim. P........ ieaedpencines 37

Disciplinary Rule 7-107(b) of the Code of Professional

Responsibility of the American Bar Association .3,6 . 7

OTHER AUTHORITIES:

Ethical Consideration 7-33 of the Code of Professional

Responsibility of the American Bar Association 3,7

In the Matter of C. R. Richmond, Securities Exchange

Act Release No. 12535, 9 SEC Docket 846 (June 10,

PONE Sb CCS es Cedeeeendececeseneetetoesoees 34

9 Moore's, Federal Practice 4110.13|4]......... 29, 32

Y Moore's, Federal Practice 110.25 [1] ........... 41

9 Moore's, Federal Practice 4 110.28........... 40, 41

Samuel H. Sloan, Securities Exchange Act Release No.

11376, 6 SEC Docket 772 (April 28, 1975)... 19, 34

SEC News Digest, Vol. 6, No. 18 p. 2 (May 6, 1975) . 20

SEC News Digest, Vol. 10, No. 7 p. 2, 1; SEC Docket

er. Os EE wv ch ighcndcacvesdunsunns 39

; IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM. 1976

No.

SAMUEL H. SLOAN individually and d/b/a SAMUEL H.

SLOAN & CO..,

Petitioner,

-against-

SECURITIES & EXCHANGE COMMISSION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner respectfully prays that a writ of certiorari issue

to review the decision of the United States Court of Appeals

for the Second Circuit dated May 10, 1976 which dismissed

in part and affirmed in part an appeal from various orders

of the United States District Court for the Southhern

District of New York and to review the decisions of the

United States Court of Appeals for the Second Circuit

dated December 6, 1976 which denied a petition for a

rehearing and a suggestion that the rehearing be en banc.

OPINIONS BELOW

The decision of the United States Court of Appeals for

the Second Circuit dated May 10, 1976 is reported as

Securities & Exchange Commission v. Sloan, 535 F. 2d 679

(2d Cir. 1976) and is included as Appendix A to this

petition. The decisions of the United States Court of

Appeals for the Second Circuit dated December 6, 1976

which denied a petition for rehearing and a suggestion that

the rehearing be en banc are unreported and are included

as Appendix B and Appendix C to this petition. There were

no reported opinions by the United States District Court.

tor the Southern District of New York.

JURISDICTION

The opinion of the United States Cou

the Second Circuit was entered on May 10.1 | heen

for rehearing and a suggestion that the rehearing be en

banc was denied on December 6, 1976. Jurisdiction of this

Court is invoked under 28 U.S.C. §1254(1). The time

within which to apply for a writ of certiorari to bring this

proceeding before the Supreme Court for review is ninety

(90) days from December 6, 1976

§2101(c). pursuant to 28 U.S.C.

QUESTIONS PRESENTED

1. Is an adjudication of contem i

. pt which resulted in th

imprisonment of the petitioner and the dismissal of three

appeals filed by the petitioner a non-appealable order?

2. Did the appeal from th

t € contempt adjudicati

become moot when the United States District aioe . he

request of the respondent, declared that the petitioner had

purged his contempt and ordered his release?

j 3. Did the District Court err in adjudging the petitioner

in contempt of court based solely upon an affidavit filed b

counsel for respondent consisting of statements md

upon information and belief’ without givin the

petitioner the opportunity for a hearing, the to, rn

for a jury trial, and the Opportunity to sitb-thansinn

witnesses, at a time when the petiti

: petitioner was physi

incapable of appearing in court? —

4. Did the district jud i ili

( ge err in failing to recuse hi

trom this case on the ground that he had become aides

PO en ee aN OS ee

in a running controversy with the petitioner?

5. Are orders refusing to dismiss the action on various

grounds including inadequate service of process, granting

plaintiff a protective order as to certain interrogatories and

subsequently staying all discovery proceedings until the

defendant had purged his contempt, not appealable final

orders?

6. Did the United States District Court for the Southern

District of New York err in failing te disqualify and disbar

counsel for plaintiff and to adjudge plaintiff and its counsel

in contempt of court for issuing a press release discussing

the entry of a preliminary injunction in this action in

violation of the court’s order and in violation of

Disciplinary Rule 7-107 (G) as well as Ethical Con-

sideration 7-33 of the Code of Professional Responsibility

of the American Bar Association?

7. Does the Securities & Exchange Commission have the

statutory authority to prosecute actions in its own behalf?

8. Is an order denying a motion to enjoin plaintiff and its

counsel from harassment and annoyance of the defendant a

non-appealable order?

9. Does the right asserted by the Securities & Exchange

Commission in this action, which is the right to have

general and continuous access to the financial records of a

securities broker dealer, violate the rights guaranteed by

the Fourth and Fifth Amendments to the Constitution of

the United States?

10. Are the issues presented in this petition moot by

virtue of the dismissal as moot of this action by the United

States District Court for the Southern District of New York

on August 18, 1976 where as a collateral consequence of

certain of the orders appealed from, other appeals in this

and two unrelated cases have been dismissed and the

petitioner has been barred for life from being associated

with any broker or dealer?

CONSTITUTIONAL PROVISIONS INVOLVED

The Fourth Amendment provides:

The right of the people to be secure in their

persons, houses, papers and effects, against

unreasonable searches and seizures, shall not be

violated, and no warrants shall issue, but upon

probable cause, supported by oath or affirmation,

and particularly describing the place to be sear-

ched and the persons or things to be seized.

The Fifth Amendment, in pertinent part, provides:

No person shall be held to answer for a capital or

otherwise infamous crime, unless on a presentment

or indictment of a Grand Jury . . . nor shall any

es 0s Be ee ettem ee

pursuant to section 15 of this title, shall make, and

preserve for such periods such accounts,

correspondence, memoranda, papers, books and

other records, and make such reports as the

Commission by its rules and regulations may

proscribe as necessary or appropriate in the public

interest for the protection of investors. Such ac-

counts, correspondence, memoranda, papers,

books and other reports shall be subject at any

time or from time to time to such reasonable,

periodic, special or other examinations by

examiners or representatives of the Commission as

the Commission may deem necessary or ap-

propriate in the public interest or for the protection

of investors.

person . . . be compelled in any criminal case to ,

be a witness against himself, nor be deprived of At the time this action was commenced, Section 21(e) of

life, liberty or property without due process of the Securities Exchange Act of 1934, 15 U.S.C. § 78 ule),

law... in pertinent part, provided:

Whenever it shall appear to the Commission that

any person is engaged or is about to engage in any

acts or practices which constitute violations of this

title or of any rules or regulations thereunder it

may in its discretion bring an action in the proper

district court of the United States .. . to enjoin

such acts and practices and upon a proper showing

a permanent or temporary injunction or

restraining order shall be granted without bond.

The Commission may transmit such evidence as

may be available concerning such acts and

practices to the Attorney General, who may, in his

discretion, institute the necessary criminal

proceedings under this title.

STATUTES AND RULES INVOLVED

28 U.S.C. §516 provides:

Except as otherwise authorized by law, the

conduct of litigation in which the United States, an

agency, or officer thereof is a party, or. is in-

terested, and securing evidence therefor, is

reserved to officers of the Department of Justice,

under the direction of the Attorney General.

At the time this action was commenced, Section 17(a) of

the Securities Exchange Act of 1934, 15 U.S.C. §78 q(a),

provided:

Every national securities exchange, member

thereof, every broker or dealer who transacts a

business in securities through the medium of any

such member, every registered securities

association, and every broker or dealer registered

At the time this action was commenced, S.E.C. Rule

17a-4, 17 C.F.R. §240.17a-4, in pertinent part, provided:

(a) Every member, broker and dealer subject to

§240.17a-3 shall preserve for a period of not less

than six years, the first two years in an easily ac-

cessible place, all records required to be made

“eggs to paragraphs 1, 2, 3 and S of §240.17a-

(b) Every such member, broker and dealer shall

preserve for a period of not less than three years,

the first two years in an easily accessible place:

(1) All records required to be made pursuant to

paragraphs 4, 6, 7, 8, 9 and 10 of §240.17a-3.

(2) All check books, bank statements, cancelled

checks and cash reconciliations.

(3) All bills receivable or payable (or copies

thereof), paid or unpaid, relating to the business of

such member, broker or dealer, as such.

(4) Originals of all communications received and

copies of all communications sent by such

member, broker or dealer (including inter-office

memoranda and communications) relating to his

business as such.

(S) All trial balances, computations of aggregate

indebtedness and net capital (and working papers

In connection therewith), financial statements.

branch office reconciliations, and internal audit

working papers, relating to the business of such

member, broker or dealer, as such.

(6) All guarantees of accounts and all powers of

attorney and other evidence of the granting of any

discretionary authority given in respect of any

account, and copies of resolutions empowering an

agent to act on behalf of a corporation.

(7) All written agreements (or copies thereof)

entered into by such member, broker or dealer

relating to his business as such. including

agreements with respect to any account.

action shall not during its investigation or litigation

make or participate in making an extra-judicial

statement, other than a quotation from or

reference to public records, that a reasonable

person would expect to be disseminated by means

of public communication and that relates to:

(1) Evidence regarding the occurrence or

transaction involved.

(2) The character, credibility, or criminal record

of a party, witness, or prospective witness.

(3) The performance or results of any

examinations or tests or the refusal or failure of a

party to submit to such.

(4) His opinion as to the merits of the claims or

defenses of a party, except as required by law or

administrative rule.

(S) Any other matter reasonably likely to in-

terfere with a fair trial of the action.

Ethical Consideration 7-33 of the Code of Professional

Responsibility of the American Bar Association provides:

A goal of our legal system is that each party shall

have his case, criminal or civil, adjudicated by an

impartial tribunal. The attainment of this goal

may be defeated by dissemination of news or

comments which tend to influence judge or jury.

Such news or comments may prevent prospective

jurors from being impartial at the outset of the trial

and may also interfere with the obligation of jurors

to base their verdict solely upon the evidence

admitted in the trial. The release by a lawyer of

out-of-court statements regarding an anticipated

or pending trial may improperly affect the im-

partiality of the tribunal. For these reasons,

standards for permissible and prohibited conduct

Disciplinary Rule 7-107(G) of the Code of Professional

Responsibility of the American Bar Association provides:

A lawyer or law firm associated with a civil

of a lawyer with respect to trial publicity have been

established.

STATEMENT OF THE CASE

On May 10, 1970, Samuel H. Sloan & Co. (“Sloan &

Co."") became registered as a broker dealer with the

Securities & Exchange Commission (“S.E.C."’). Sloan &

Co. was then a partnership consisting of Samuel H. Sloan

(“Sloan”) and Harry G. Theodos (*‘Theodos"’). However,

on January 11, 1971 Theodos withdrew from the part-

nership and at that time Sloan submitted to the S.E.C. for

filing an amendment to the broker dealer registration of

Sloan & Co. to reflect this change. The S.E.C., however,

refused to accept this filing. Thereafter, Sloan made

numerous applications to change the official status of the

broker dealer registration of Sloan & Co. in such a way as

to reflect the fact that it was a sole proprietorship rather

than a partnership and to drop ““& Co.” from the words

“Sloan & Co.”” All of these applications were rejected by

the S.E.C.

On January 14, 1971, following ar inspection of Sloan's

office by an examiner of the S.E.C., an attorney in the New

York Regional Office of the S.E.C. issued an order

directing an investigation of Sloan & Co. Following the

issuance of this order, members of the S.E.C. staff made

frequent visits to Sloan's premises and these visits con-

tinued over the period of the next several years. In Sep-

tember, 1973, the S.E.C. accepted for filing a broker

dealer w.:hdrawal request from Sloan & Co. (47a)* after a

previous attempt to file such a request had been rejected.

However, the S.E.C. refused at that time to grant or deny

the request that the broker dealer registration of Sloan &

Co. be withdrawn.

In December, 1973 the S.E.C. brought to trial an action

it had filed against Sloan & Co. and Sloan in June, 1971

and which had remained dormant for about two years. This

trial resulted in a decision by United States District Judge

Robert J. Ward which was reported as S.E.C. v. Sloan. 369

* Hereafter, all such references will be to pages of the appendix included in

this petition.

F. Supp. 996 (S.D.N.Y. 1974) and which was followed by

the entry of a judgment of injunction dated January 18,

1974. By that time all active business operations of Sloan &

Co. and Sloan had ceased. The findings of fact by the

District Court, which resuited in the entry of the judgment

in that action, concerned violations of the bookkeeping and

net capital rules which three S.E.C. investigators testified

that they had found during certain of their numerous visits

to Sloan's office in 1971, 1972 and 1973.

On November 6, 1974, with Sloan's broker dealer with-

drawal request still not having been acted upon, Sloan sent

the following letter to Mr. Jerome Selvers, a staff attorney

for the S.E.C.:

November 6, 1974

Jerome Selvers

Securities & Exchange Commission

26 Federal Plaza

New York, N.Y.

Dear Mr. Selvers:

Please be advised that it is my intention to

resume activities as a dealer in over-the-counter

securities forthwith. For the purposes of mail and

other official communications by the Securities &

Exchange Commission, my address will continue

to be 120 Liberty Street, New York, N.Y. 10006.

However, my books and records are presently

located at my personal residence at 1761 Eastburn

Avenue in Bronx, N.Y. and at 917 Old Trent's

Ferry Rd. in Lynchburg, Va. with the exception of

those books and records which are at the United

States Court of Appeals for the Second Circuit as

part of the record of appeal in the appeal of S.E.C.

Thomas Taylor, Esq.

Office of General Counsel

Securities and Exchange Commission

SOO North Capitol Street

vs. Sloan, U.S.C.A. docket no 74-1436. You

should be advised, however, that I will not permit

any officer or employee of the Securities and

Exchange Commission to enter my _ personal

eee Seema Ahad

residence for any purpose in the absence of the Washington, D.C. 20549

production of a valid and properly authorized ) Re: 71 Civil 2695

search warrant. In this respect, I am asserting the |

rights which have been guaranteed to me by the On Decemter 19, 1974, the S.E.C. sent Sloan the

Fourth Amendment to the Constitution of the 7 following response:

United States. | Dear Mr. Sloan:

This correspondence is intended to notify you

Very truly yours, : that representatives of the New York Regional!

| Office of the Commission will visit the office of .

s/Samuel H. Sloan | Samuel Sloan & Co. on Thursday, December 26,

Samuel H. Sloan 1974 tor the purpose of conducting an examination

F Ne of the books «nd records of the firm relating to the

CC: United States Court of Appeals i firm's operation and market making activities.

For the Second Circuit

Foley Square

New York, N.Y.

Re: Docket No. 74-1436

As you should know, Section 17(a) of the

Securities Exchange Act of 1934 requires that every

registered broker-dealer prepare, maintain and

preserve its books and records in accordance with

the Commission's rules and regulations. Periodic,

special, or cther examinations by examiners or

other representatives of the Commission may be

made at any time, or from time to time in the

public interest or for the protection of investors.

Rule 17a-3 promulgated under the Securities

Exchange Act of 1934 sets forth, in detail, the

books and records required to be made by a

broker-dealer and Rule 17a-4 determines the

periods of time for which certain enumerated

records must be preserved for examination in an

easily accessible place. Your attention is

specifically directed to Rule 15e2-I1(c) which

requires a broker-dealer to maintain in writing. as

part of his records, that information which a

broker-dealer must have to lawfully submit

Hon. Thomas P. Griesa

United States District Court

for the Southern District of N.Y.

Foley Square

New York, N.Y.

Re: 74 Civil 2792.

Hon. Robert J. Ward

United States District Court

for the Southern District of New York

Foley Square

New York, N.Y.

Re: 71 Civil 2695

quotations (i.e., make a market) in a security

pursuant to the provisions of said Rule. These

records, like your other records of operation are

required to be preserved for examination.

lhe Commission examination team must have

access to all the books and records of the firm in

order to conduct a meaningful examination. Every

effort will be made by the examiners to complete

the examination promptly and efficiently without

interfering with the normal course of business of

the firm. The presence of a principal of the firm for

the duration of the examination is not absolutely

necessary, provided that back office personnel are

instructed to make the firm's books and records

available immediately on request and, where

necessary, answer questions relating to the form

and substance of books and records.

1 he C ommission staff is not required by statute

or policy, to notify broker-dealers of impending

examinations. This notification, however, is in-

tended to clarify the position of the staff with

respect to problems encountered in the past. and

serve as @ response to your prior communication in

which you stated, in effect. that you will not adhere

to the abovementioned rules as you will refuse to

make your records available in the absence of a

search warrant. It is hoped th j

| ; at your cooperation

will be forthcoming. ~

Very Truly Yours,

William Nortman,

Assistant Regional Administrator

On December 26, 1974, two S.E.C. staff investigators

went to Sloan's apartment in Bronx, N.Y. and demanded

that Sloan produce all of his financial records. Sloan

refused to do so in accordance with the Fourth Amendment

position previously stated and additionally on the grounds

that S.E.C. Rule 17a-4, 17CFR §240.17a-4 does not

require him to show representatives of the S.E.C. his books

and records.

On December 30, 1974, the S.E.C. instituted suit. The

complaint filed by the S.E.C. in that suit demanded that

Sloan and Sloan & Co. be enjoined:

“From removing, destroying or altering the

books and records of Sloan and Sloan & Co. . . ."(14a)

and

“That a mandatory order be issued by the Court

to permit immediate examination in an easily

accessible place by examiners or other

representatives of the Commission of the books

and records of Sloan and Sloan & Co. (or any other

broker or dealer registered with the Commission of

which defendant Sloan may become a principal or

controlling person) as required by Section 17(a) of

the Exchange Act, 15 U.S.C. 78q(a) and Rule 17a-

4 promulgated thereunder, 17 CFR 240.17a-4.”

Rather than have this case assigned by lot in accordance

with the Calendar Rules of the Southern District of New

York. the S.E.C. attorneys proceeded to the chambers of

Judge Ward, who had been the judge in the prior injunctive

action, and requested that he take jurisdiction over this

case. Judge Ward did so and the S.E.C. immediately

presented a request for a temporary restraining and a

preliminary injunction granting all of the relief requested

in the complaint. Sloan was notified by telephone that the

action had been commenced and that this application had

been made (16a) and he proceeded to Judge Ward's

chambers where one of the attorneys appearing for the

S.E.C. handed him a copy of the complaint. Sloan then

requested (1) that Judge Ward deny the application for a

temporary restraining order (2) that he disqualify himself

from proceeding further on the grounds of bias and

prejudice and on the grounds that the case was not properly

assigned to him and (3) that he order the S.E.C. not to

issue its customary press releases concerning this action.

After a lengthy colloquy which generated a 42 page

transcript. Judge Ward stated that he would recuse himself

Irom this case but that he would sign the temporary

restraining order due to the unavailability of any other

judge and the lateness of the hour.

On the question of press releases, after being advised by

one of the S.E.C. attorneys present that “it is the Com-

mission's practice, and particularly at the time an action is

commenced, to issue what is commonly referred to as a

litigation release which may or may not be picked up by

various other newspapers.” Tr. 8, Judge Ward noted

“certain strictures that have been put forth very recently by

the American Bar Association” and, after hearing from the

S.E.C. attorneys ruled:

“Mr. Sloan has asked that there be no releases

except in filed papers.

I would enter an order to the effect that that be

the case for both sides in this litigation. The media

can be referred to the papers which are on file here

at the courthouse. But if I find that either side, and

| mean this, Mr. Sloan, gives out any information

to the media, | will act on that matter with

dispatch.

Therefore, | am going to tell both sides in this

case the media can be appraised there are papers

on file here at the courthouse. They may examine

those papers and that is where it stops.

We are not going to litigate this case. either side.

in the press. The press can have free access to court

files.

[ recognize that the Commission has its own

problems as far as its budgets and its public image

is concerned. At the same time | think that the

public image of any agency is enhanced by the end

——

er ee er

work product, not oy the beginning press releases.

And | would direct both sides here to issue no

releases and that goes not only for those who are

present here but those superiors who are not

present here.

You may direct the media to all filed papers,

nothing more.”’ Tr. 9-10.

When the prohibition on press releases was vehemently

objected to by the S.E.C. attorneys, Judge Ward stated:

“The other matter | wou'd mention to you is

whatever the Commission's practice is in other

cases, the press may be referred to the filed papers

or, if you wish to give the press an exact copy of the

filed papers, you may do that.

Mr. Nortman: Yes, your Honor.

The Court: And, Mr. Sioan, the same thing goes

for you, since this was done at your request. There

is to be no materials submitted to the press other

than material filed with this court. Once you have

filed it with the court, you have the same

prerogative as the Commission does, to present this

information to any media you wish.”’ Tr. 36-37.

The temporary restraining order expired by its terms on

January 8. 1975. By that time Judge Ward had changed his

mind to the extent of deciding that he would not recuse

himself from this case. Since he was out of town, Judge

Griesa. at his request. extended the temporary restraining

order for another ten days until January 17, 1975. Sloan

then unsuccessfully requested a writ of mandamus

disqualifying Judge Ward trom this case. Sloan v. Ward.

Dkt. No. 75-3001 (2d Cir. Jan. 16, 1976) (no opinion).

Thereafter, on January 17. 1975, Judge Ward signed an

order of injunction granting all of the relief requested by

the S.E.C. without requiring the S.E.C. to call any wit-

nesses in its behalf. Sloan filed a notice of appeal from this

injunction and moved in the United States Court of Ap-

peals for the Second Circuit for a stay of the injunction and

for an expedited appeal. These motions were denied on

February 13, 1975.

In spite of having obtained two temporary restraining

orders and an injunction, each of which granted all of the

relief requested in the complaint, the S.E.C. made no

attempt to examine Sloan's financial records until March 5

and March 6, 1975, on which dates two S.E.C. in-

vestigators went to Sloan's apartment in Bronx, New York.

Sloan was not present on either date and no further at-

tempts were made to examine Sloan’s financial records. On

March 9, 1975, while a pedestrian in upstate New York,

Sloan was struck by an automobile with the result that both

of his legs were broken. Thereafter, Sloan was hospitalized

in Plattsburgh, New York (34a). The S.E.C. was notified of

this development and responded on March 25, 1975 by

moving to adjudge Sloan in contempt of court. No order to

show cause or order of arrest was obtained and personal

service of the motion papers on Sloan was not attempted by

the S.E.C. Instead, the S.E.C. mailed a copy of the moving

papers to the hospital where Sloan was recuperating and to

various other addresses for Sloan (31a).

On March 23, 1975, Sloan was transferred to his

hometown of Lynchburg, Virginia and shortly thereafter

was hospitalized at the Lynchburg General Hospital. Sloan

then advised Judge Ward by letter that the prognosis was

that he would not be able to walk for approximately six

months. (32a-33a).

The S.E.C.’s motion to adjudge Sloan in contempt was

made returnable on April 1, 1975, seven days after the

motion was filed. Due to his severe physical injuries Sloan

was unable to respond. The motion papers consisted of an

affidavit of Ira B. Spindler (“Spindler’’), which stated in

part:

“This affidavit is based upon my personal

knowledge of the facts, correspondence and other

fen ee ee tree

documents contained in the files of the Com-

mission, information received from the National

Quotation Bureau (“NQB"), information con-

tained in the pleadings, affidavits and transcripts

of hearings in this action, discussions with various

staff members of the Commission, and upon in-

formation and belief.’ (24a-25Sa).

The affidavit consisted essentially of an account of the

judicial proceedings through January 17, 1975 and then

recounted a telephone conversation between Sloan and

S.E.C. staff attorney Raiph Pernick \*Pernick’’). The

affidavit was not based upon Spindler’s personal

knowledge of what was said in this telephone conversation

but rather on a letter dated February 27, 1975 from S.E.C.

Assistant Regional Administrator William Nortman

(*Nortman™) to Sloan which had described this con-

versation. However, neither Nortman nor Spindler had

personal knowledge of this telephone conversation and the

original source for the facts set forth in the affidavit was not

stated. The affidavit concluded by recounting two visits by

Spindler to Sloan's apartment on March 5 and March 6,

1975 when Spindler found that Sloan was not present and

by stating that Sloan had been listing securities in the pink

sheets and had “failed utterly to comply with the laws

applicable to broker-dealers” by refusing to “permit an

immediate examination of his books and records.”’ Three

exhibits were annexed to this affidavit consisting of (1) the

November 6, 197-4 letter from Sloan to the S.E.C. (2) the

February 27, 1975 letter from Nortman te Sloan and (3)

sample pages from the pink sheets.

Judge Ward waited until July 22, 1975 to decide the

S.E.C.’s motion to adjudge Sloan in contempt of court and

then did so without a hearing. without receiving a response

trom Sloan, and without oral testimony of any kind. His

decision, which was endorsed by hand on the back of the

S.E.C.’s motion papers, was as follows:

“Defendant Samuel H. Sloan (‘‘Sloan’’) has

wilfully violated the preliminary injunction entered

on Jandary 17, 1975 and served personally upon

him on that date. Sloan has refused to permit

inspection of his books and_ records by

representatives of the Securities & exchange

Commission (“the Commission”) as directed by

the Court and has indicated that he will continue to

do so.

Accordingly, the Commission's motion to ad-

judge Sloan in contempt of this Court is granted

and Sloan is adjudged in civil contempt. In view of

his physical condition, the Court will not at this

time order his imprisonment or impose a fine but

will instead direct that Sloan's books and records

be removed to a place where they may be inspected

by representatives of the Commission as directed in

the preliminary injunction.

Settle order on notice.

Robert J. Ward, U.S.D.J.”’

By the time of the July 22, 197S decision, a number of

events had transpired and a number of additional motions

were pending. Several of these motions were filed by Sloan

who, although unable to walk as a result of his injuries,

nevertheless was capable of filing motions by mail along

with proof of service upon the S.E.C. Judge Ward. as he

decided these and subsequent motions, mailed a copy of his

decisions to Sloan, who remained incapacitated. All but

one of the motions pending on July 22, 1975S was decided on

that date and in each case the decision consisted of a

handwritten memorandum endorsed on the back of the

motion papers.

On March 6, 1975, three days before being injured in the

automobile accident, Sloan had moved to enjoin the S.E.C.

frora harassment and annoyance. This motion was decided

tei ee

on July 22, 1975 with the words:

‘*Motion denied. So ordered.

Robert J. Ward, U.S.D.J.”’

On April 28, 1975, the S.E.C. had issued an ad-

ministrative decision and order which (1) denied Sloan's

request to withdraw the broker dealer registration of Sloan

& Co. (2) revoked the broker dealer registration of Sloan &

Co. and (3) barred Sloan for life from being associated with

any broker or dealer. The decision of the S.E.C. stated that

it had decided to impose these penalties based on (1) the

record of an administrative hearing held from October 30

to November 1, 1972, (2) the injunctions signed by Judge

Ward on January 18, 1974 and January 17, 1975 and (3)

statements made by Sloan in papers filed in the United

States Court of Appeals for the Second Circuit in the

petition for a writ of mandamus which was denied on

January 16, 1975 and in the motion for a stay of Judge

Ward's order which was denied on February 13, 1975. The

decision of the S.E.C. is reported as Samuel H. Sloan,

Securities Exchange Act Release No. 11376, 6 SEC Docket

772 (April 28, 1975). After receiving this decision, Sloan

moved to dismiss the court action as moot and to vacate the

two injunctions previously obtained by the S.E.C. on the

grounds that since he was no longer a registered broker

dealer, he could no longer violate the rules applicable only

to brokers and dealers. On July 22, 1975, Judge Ward

decided this motion as follows:

‘In view of the revocable nature of the sanctions

imposed by the Securities & Exchange Commission

(Hamy v. Securities & Exchange Commission, 415

F. 2d 589, 598 (2d Cir. 1969) ), and in view of what

this Court considers the substantial probability

that the violations to which the permanent in-

junction was addressed may be repeated, defen-

dant’s motion to vacate the permanent injunction

and for other relief is in all respects denied.

It is so ordered

Robert J. Ward, U.S.D.J.”’

After the administrative decision of April 28, 1975, the

S.E.C., on May 6, 1975, issued a press release. See S.E. C.

News Digest Vol. 6, No. 18 p. 2 (May 6, 1975). This press

release stated:

“The Commission has revoked the broker-dealer

registration of Samuel H. Sloan & Co., of New

York City. The Commission also found it in the

public interest to bar its sole proprietor, Samuel H.

Sloan, from association with any broker or dealer.

The Commission's action was based on Sloan's

persistent, wilfull violations of the Exchange Act S

record keeping, net capital, and reporting

provisions and on injunctive decrees restraining

him from violations of the recordkeeping and net

capital provisions. The Commission concluded

that: “Sloan's violations are neither trivial nor

technical. They involve flagrant and _ !ong-

continued breaches of significant duties imposed

on persons in the securities business.”

The Commission’s opinion also noted that the

United States District Court for the Southern

District of New York has enjoined Sloan from

refusing to make his records available for

examination by the Commission's representatives

and from initiating quotations for over-the-counter

securities when he lacks the information called for

by the Commission's Rule ISe2-11. Though this

injunction is the subject of a pending appeal. the

Commission thought it of some significance “that a

court of competent jurisdiction found the second

injunction appropriate and that it did so over

Sloan's vehement opposition” and that “Sloan's

own papers in the second injunctive suit show his

continuing disposition to disregard or dety the

rules governing registered broker-dealers.

——T

ee: ee ee eee Serene ee

RE A Sti TS

Sloan then moved to adjudge the S.E.C., its Com-

missioners, its Secretary and its counsel in contempt of

court and to disbar and disqualify counsel for the S.E.C.

from appearing in this case on the grounds that this press

release violated the court's order and the Code of

Professional Responsibility of the American Bar

Association. Sloan also moved to vacate the preliminary

injunction on the grounds of failure to comply with Rule

65, Fed. R. Civ. P. and to dismiss the action. These

motions were decided on July 22, 1975 as follows:

“Motion disposed of as tollows:

That branch of the motion which seeks to vacate

the preliminary injunction is denied for lack of

jurisdiction since the validity of the injunction is

presently before the court of appeals.

That branch of the motion which seeks to hold

plaintiff, its Commissioners and other employees

in. contempt of court is denied. The release in

question did not violate this Court's oral order of

December 31, 1974. The order granted in response

to defendants’ application for a restraint on the

issuance of press releases ‘with regard to the

commencement of this action’ did not prohibit

releases such as those issued here. describing ‘the

end work product.’

The remaining branches of defendants’ motion,

some of which have heretofore been denied, have

all been reconsidered and, upon reconsideration,

are in all respects denied.

So ordered.

Robert J. Ward, U.S.D.J.”’

The single motion which remained outstanding after the

July 22, 1975 decisions was a motion by the S.E.C. for a

stay of all discovery by defendants pending the outcome of

the appeal from the injunction and for a protective order

directing that interrogatories propounded by Sloan need

not be answered by the S.E.C. On August 4, 1975, Judge

Ward decided this motion as follows:

‘Motion disposed of as follows:

That branch of the motion seeking to stay

discovery pending the outcome of defendant's

appeal of the preliminary injunction is, in the

Court's discretion denied.

That branch of the motion seeking a protective

order is granted as to Interrogatory Nos. 5, 8, 9,

10, 11, 12, 13 and 14. These interrogatories do not

appear to be relevant or reasonably calculated to

lead to the discovery of admissible evidence. It is

‘denied as to Interrogatories 1, 2, 3, 4, 6 and 7.

Answers to these six Interrogatories shall be served

and filed within 30 days of the date of this decision.

It is so ordered.

Robert J. Ward, U.S.D.J.”

After receiving the July 22, 1975 decision adjudging him

to be in contempt of court, Sloan filed a motion for (1)

reargument, (2) a hearing and/or a jury trial, (3) an order

pursuant to 28 U.S.C. §144 and 28 U.S.C. §455

disqualifying Judge Ward from proceeding further, (4) a

stay pending appeal and (5) a transfer of this case to the

District Court for the Western District of Virginia, Lyn-

chburg Division (38a). Judge Ward decided this motion on

August 18, 1975 as follows:

“Defendant having failed to present facts or

legal reasons sufficient to form a basis for the

granting of any portion of his motion, the motion is

in all respects denied.

It is so ordered.

Robert J. Ward U.S.D.J."

On September 2, 1975 the S.E.C. filed a five page

document entitled ‘Plaintiffs Answers to Defendant's

ae ee OR an een emer em ee

vel telly Mer Otte! Tener wim dal

nein Re

Interrogatories.'’ However. none of the interrogatories were

answered except one which gave an answer “upon in-

formation and belief.’’ The remaining ‘‘answers"’ stated

that the answers could be found from an examination of

documents in the possession of the S.E.C. and that under

Rule 33(c). Fed. R. Civ. P. no answer was required. (46a-49a).

On September 3, 197S Judge Ward signed an ‘‘order of

civil contempt” in which Sloan was “‘granted twenty (20)

days . . . within which to purge his contempt”’ and which

ordered Sloan to appear “for sentencing’ on September

26, 1975 and further ordered that if Sloan did not appear

for sentencing the United States Marshal was ordered to

arrest and confine him “until he permits immediate

examination in an easily accessible place . . . of the books

and records of Sloan & Co.’ On September 26, 1975, after

the Court of Appeals denied Sloan's motion for a stay and

an expedited appeal, Sloan did not appear for sentencing

and Judge Ward ordered the U.S. Marshal to arrest him.

Sloan filed a notice of appeal from the orders of Judge

Ward and filed a motion in the District Court for immunity

from arrest on the grounds that the summons and com-

plaint had never been served by the U.S. Marshal as

required by Rule 4(c) Fed. R. Civ. P. and that as a result

the court had never acquired personal jurisdiction over him

and that immunity from arrest was necessary in order to

enable Sloan to argue his appeal orally in the United States

Court of Appeals for the Second Circuit while preserving

his jurisdictional arguments. Sloan also moved to adjudge

the S.E.C. in contempt of court for failing to answer the

interrogatories as required by the court's August 4, 1975

order. The S.E.C. cross-moved for an order staying all

discovery by defendants until Sloan purged his contempt.

These three motions were decided on December 24.

1975. The motion for immunity from arrest was decided as

follows:

“Inasmuch as the complaint was handed to

Samuel H. Sloan (‘‘Sloan”’) in the presence of the

‘Court on December 30, 1974 and its receipt

acknowledged by him (see Transcript of December

30, 1974, pages 11-12), Sloan's argument that this

Court has no personal jurisdiction over him, “the

summons and complaint having never been ser-

ved,"’ and that he is therefore immune from arrest

and from service of process in the State of New

York is without merit. Accordingly, the motion is

in all respects denied.

It is so ordered.

Robert J. Ward, U.S.D.J.”

The motion to adjudge counsel for the S.E.C. in con-

tempt was decided as follows:

‘Motion denied without prejudice to renewal at

such time as defendant Samuel H. Sloan purges his

contempt by permitting examination in an ac-

cessible place by representatives of plaintiff of the

books and records of Samuel H. Sloan & Co. as

heretotore ordered by this Court.

It is so ordered.

Robert J. Ward, U.S.D.J.”

The motion by the S.E.C. tor a stay of defendant's

discovery was decided as follows:

“Motion granted. All further discovery by

defendants is stayed until defendant Samuel H.

Sloan (‘Sloan’) purges his contempt by permitting

examination in an accessible place by represen-

tatives of plaintiff of the books and records of

Samuel H. Sloan & Co. as heretofore ordered by

this Court.

It is so ordered.

Robert J. Ward, U.S.D.J.”

in December. 1975 Sloan draftec his brief in this appeal

and in an appeal which resulted in a decision reported as

re CH NM rate eA

Sloan v. S.E.C., 53S F. 2d 676 (2d Cir. 1976), cert. denied

Dkt. No. 76-58 (Oct. 12, 1976). Thereafter, as was his

custom, Sloan went to Iceland for the annual New Year's

celebration. The District Court and the S.E.C. were

notified of Sloan's change of address. Sloan then filed a

motion in the United States Court of Appeals for the

Second Circuit for immunity from arrest and a temporary

stay of Judge Ward's order which Judge Ward had denied.

(S4a). The Court of Appeals, however, never decided this

motion. Instead, on January 7, 1976 it sua sponte

dismissed Sloan's appeal from the injunction in the instant

case and simultaneously dismissed Sloan's appeals in two

other actions instituted by the S.E.C. See S.E.C. v. Sloan.

538 F. 2d 313 (2d Cir. 1976), cert. denied Dkt. No. 76-365

(Dec. 13, 1976); S.E.C. v. Canadian Javelin Lid., 538 F. 2d

313 (2d Cir. 1976), cert. denied Dkt. No. 76-365 (Dec. 13,

1976).

Upon learning of this decision, Sloan decided to return

to the United States immediately. He was unable to do so

the next day due to inclement weather conditions. As a

result, he taced dismissal of yet a fourth appeal which had

been scheduled for argument on January 27, 1976.

However, on January 26, 1976, Court of Appeals Judge

William H. Mulligan resolved that problem at Sloan's

telephone request by entering an order which adjourned

the oral argument of that appeal until Februrary 2, 1976 on

the prior cond‘tion that Sloan appear before Judge Ward

for disposition of the contempt charge. Slean did so. These

facts are set forth on pages 6-7 of a motion for leave to file a

petition for a writ of mandamus presently pending before

this Court. Sloan v. Mulligan, Dkt. No. 76-615.

When Sloan appeared betore Judge Ward, which was on

the morning of February 2, 1976, he notified the Court that

he did not possess any books and records of Sloan & Co.

and that all books and records of Sloan & Co. were in the

possession of his mother, Dr. Marjorie Sloan, at her

residence in Lynchburg. Va. and that she had called

Thomas L. Taylor Il, the S.E.C. attorney in Washington,

D.C. handling this case, and had offered to show S.E.C.

representatives all of the books and records of Sloan & Co.

but that Taylor had stated that the S.E.C. was unwilling to

undertake an examination of the books and records of

Sloan & Co. in Virginia (S8a. 80a-8la, 84a). Sloan also

notified the Court that approximately one year had

passed since the S.E.C. had last made any request of Sloan

to examine Sloan's books and records and that he had

suffered two broken legs and had been incapacitated for a

long period of time during which he would have been in-

capable of preventing the S.E.C. from examining his books

and records had any attempt been made to do so. Two

attorneys representing the New York Regional Office of the

S.E.C. appeared before Judge Ward and stated that they

had no personal knowledge of any telephone conversations

between Taylor and Sloan's mother. Judge Ward then

conducted a hearing at which Sloan and S.E.C. attorney

Pernick testified. The testimony concerned primarily a

conversation which had taken place between Sloan and

Pernick some time between September 3, 1975 and Sep-

tember 20, 1975. Sloan testified that he had called Pernick

and that Pernick had told him that the New York Regional

office of the S.E.C. had no interest in examining Sloan's

books and records. (66a). Pernick testified. to the con-

trary. that he had called Sloan and had asked Sloan what

time would be convenient for an examination of his books

and records and that Sloan had refused to allow inspection

of his books and records. Tr. 47. After hearing this con-

flicting testimony, Judge Ward made oral findings of fact

and conclusions of law. see Appendix T. remanded Sloan

to the custody of the U.S. Marshal and directed

representatives of the S.E.C. to contact Dr. Marjorie Sloan

and be prepared to proceed to Lynchburg, Va. forthwith

tor the purpose of examining Sloan's books and records.

Sloan was then confined to the Metropolitan Correctional

Center in New York City.

On February 4, 1976 Judge Ward announced at the

request of the S.E.C. that Sloan had purged his contempt

and Sloan was released from custody. See Appendix U

(88a).

On February 6, 1976 Sloan moved to reinstate the three

appeals which had been dismissed on January 7, 1976. This

motion was denied on March 15, 1976. The Court of

Appeals then scheduled the argument of the instant appeal

trom Judge Ward's orders for April 27, 1976. The

Washington, D.C. office of the S.E.C. thereafter filed a

motion in the Court of Appeals to dismiss the appeal as

moot without oral argument and almost simultaneously the

New York Regional Office of the S.E.C. filed a motion in

the District Court for summary judgment. The Court of

Appeals, however, advised the S.E.C. that it wished to hear

oral argument on the appeal. The oral argument was held

and on May 10, 1976 the Court of Appeals dismissed in

part and affirmed in part the appeal from Judge Ward's

orders. It is with respect to this decision that the petitioner

now seeks a writ of certiorari. On August 18, 1976, Judge

Ward decided the S.E.C.’s motion for summary judgment

by dismissing the action as moot. No appeal was taken

trom that decision.

REASONS FOR GRANTING THE WRIT

Prior to the commencement of this action, Sloan took the

position that no S.E.C. rule specifically required him to

show his books and records to representatives of the S.E.C.

and moreover that the Fourth and Fifth Amendments to

the Constitution prohibited the S.E.C. from requiring him

to grant general and continuous access to his books and

records. The taking of this position had, as a direct con-

sequence, the commencement of this lawsuit.

The question thus raised would seem clearly to have been

settled in Sloan's favor by this Court's decision in See v.

City of Seattle, 387 U.S. 541, 543 (1967) where the Court

discussed regulations by administrative agencies similar to

that of the S.E.C. and stated:

“The businessman, like the occupant of a

residence, has a constitutional right to go about his

business free from unreasonable office entries

upon his commercial property. The businessman.

too. has that right placed in jeopardy if the

decision to enter and inspect for violation of

regulatory laws can be made and enforced by the

inspector in the field without official authority

evidenced by a warrant.”

That decision is directly on point in this case where

S.E.C. field investigators, without evidencing any official

authority in the form of a warrant or otherwise, made

frequent visits to Sloan's office over a period of several

years in a seemingly endless search for violations of S.E.C.

rules until finally Sloan was harassed to the point of taking

the extreme position that his doors were no longer open to

S.E.C. staff investigators. As a direct consequence of

Sloan's assertion of a constitutional right to be “‘secure”™ in

his “papers and effects’ as guaranteed by the Fourth

Amendment, Sloan has since been subjected to the

prosecution of an injunctive action, has been enjoined, has

been barred for life from being associated with any broker

or dealer, has spent two days in jail and has had all avenues

of appellate review cut off by the summary dismissal of

three appeals and by technical rulings in the decision

sought to be reviewed here about what constitutes an

appealable order. The question presented to this Court is

whether this result is to be permitted. This, it is submitted.

is a question of sufficient importance as to require the

granting of certiorari.

As noted previously. a petition for a writ of certiorari

which sought review of the summary dismissals of three

appeals was denied by the Court on October 13, 1976. See

Sloan ovo S.ELC.. Dkt. No. 76-365. However.

Sm aR es ae ee ott ee Me Meese ena Ao aang Wiad

simultaneously with the filing of the instant petition, a

petition for a rehearing of the denial of that petition for a

writ of certiorari is also being filed. This is appropriate in

view of intervening circumstances, namely a decision of the

United States Court of Appeals for the Second Circuit

dated November 18, 1976, which is included as Appendix

X to this petition, and which affirmed the revocation of

Sloan's broker dealer registration and the lifetime bar

imposed on Sloan on the basis of two of the injunctions

which were the subject of the earlier petition, and a

decision dated December 6, 1976 in which the Court of

Appeals denied a petition for a rehearing and the

suggestion that the rehearing be en banc in the instant

case. It is noteworthy that the Court of Appeals took the

unusually long period of more than six months before

denying the latter petition and this would seem to indicate

that there is some doubt in the minds of the judges of the

Court of Appeals as to the correctness of this decision.

With respect to the contempt order, to which Sloan

devoted most of his 72 page brief. the Court of Appeals

ruled:

“The order from which Sloan now seeks to

appeal is both in form and in substance an order of

civil contempt. An order of civil contempt against a

party to the litigation is not an appealable final

order. 9 Moore, Federal Practice $110.13 [4].

Moreover, after filing and briefing this appeal,

Sloan purged himself of contempt, and on

February 4, 1976, Judge Ward entered an order to

that effect. Thus, no live controversy remains as to

any of the alleged errors in the contempt ad-

judication, and the appeal from the order of

contempt is moot.”

In view of the foregoing statement of the case, a number

of errors in this opinion should be apparent. First Sloan did

not purge himself of contempt. Sloan did not possess

any books and records when he entered Judge Ward's

courtroom on February 2, 1976 and had not possessed any

financial books and records for a considerable period of

time. The books and records the S.E.C. apparently was

seeking were in the possession of Sloan's mother, who had

previously notified the S.E.C. that they were available for

inspection, but the S.E.C. had chosen not to inspect them.

It is clear that during the two days from February 2, 1976

to February 4, 1976 which Sloan spent in the Metropolitan

Correctional Center in New York City, Sloan did not show

representatives of the S.E.C. the books and records which

were located in Lynchburg, Va. Thus, Judge Ward's

declaration at the request of the S.E.C. that Sloan had

purged himself of contempt was designed to do nothing

more than frustrate Sloan's right to appellate review of the

validity of the contempt order and to avoid a situation

where it would become obvious that the time and energy

spent by the District Judge and the U.S. Marshal in pursuit

of this matter had been wasted since the S.E.C., by

resorting to other measures such as a subpoena served on

Sloan's mother, could easily have obtained access to the

buvoks and records at any time during the preceding eleven

months.

The fact that the S.E.C. could have served a subpoena in

this case and chose not to do so raises another point. In

order to be entitled to an injunction, the S.E.C. was

required to demonstrate irreparable harm and_ the

inadequacy of legal remedies. Rondeau v. Mosinee Paper

Corp., 422 U.S. 29, 57 (1975). At the conference in Judge

Ward's chambers on December 30, 1974, at the time this

action was commenced, Sloan indicated that if a subpoena

were served upon him he might produce the books and

records or he might move to quash. However, the service of

a subpoena was precisely what the S.E.C. was trying to

avoid because the interests of the S.E.C. in this case were

not so much in examining Sloan's books and records on

this particular occasion as in establishing its right to

examine Sloan’s books and records and the books and

records of all persons subject to the jurisdiction of the

S.E.C. at any time without the necessity of serving a

subpoena or obtaining a warrant. However, an injunctive

action is not an appropriate proceeding to assert such a

right as evidenced by the course which this lawsuit took.

With respect to Sloan's appeal from the contempt ad-

judication, the Court of Appeals made four legal rulings.

and it can be seen that none of these are correct. It stated:

(1) the order was in form and substance an order of civil

contempt (2) an order of civil contempt as to a party in

litigation is not appealable (3) Sloan thereafter purged his

contempt and (4) as a result Sloan's appeal is moot. As to

the first, it is true that Judge Ward's order states on its face

that it is an order of civil contempt. However, that is not

enough. The power of a federal court to adjudge a person

in civil contempt is limited by statute. Jn re Mc Connell.

370 U.S. 230, 234 (1962); United States v. Temple, 349 F.

2d 116, 117 (4th Cir. 1965). Thus, for Judge Ward's order

to be valid as an order of civil contempt, it must be

authorized by a specific statute. In this case, the order does

not refer to any statute on its face and no statute has been

cited by the S.E.C. as giving Judge Ward the authority to

do what he did. Indeed, the only statute which gives a

federal court the power to adjudge a person in civil con-

tempt is 28 U.S.C. $1826 which deals with “recalcitrant

witnesses.” However, that statute clearly does not apply

here since the S.E.C. did not seek Sloan as a witness “in

any proceeding before or ancillary to any court or grand

jury” but stated that it sought to examine Sloan's books

and records in the normal course of the exercise of its

regulatory duties and ultimately did so out of Sloan's

presence. However. assuming that 28 U.S.C. §1826 could

be said to apply. that section also provides that the Court of

Appeals is required to dispose of any appeal from an order

of confinement within thirty days of the filing of the appeal.

Here the Court of Appeals did not do so and demonstrated

that it had no intention of doing so by denying Sloan's

motion for a stay and an expedited appeal on September

26, 1975.

Since it is clear that Judge Ward did not and could not

have adjudged Sloan to be in civil contempt, it follows that

he must have adjudged Sloan to be in criminal contempt.

This follows as well from the nature of the underlying order

since wilfull violation of an order of injunction is in the

nature of criminal contempt. 18 U.S.C. §401; Bray v.

United States, 423 U.S. 73, 74-75 (1975). An order finding

a party in criminal contempt is, of course, appealable,

Bloom vy. Illinois, 391 U.S. 194, 201 (1968), and such an

appeal does not become moot merely upon release of the

contemnor from confinement. United States v. Schrim-

sher, 493 F. 2d 842, 843 (Sth Cir. 1974); Sibron v. New

York, 392 U.S. 40, 51 (1968).

The Court of Appeals was also in error in ruling that a

party to litigation may not appeal from an order of civil

contempt. In support of this proposition the Court of

Appeals cited 9 Moore's Federal Practice 4110.13 [4] which

in turn relied upon Fox v. Capital Co., 299 U.S. 105

(1936). However, that case concerned nothing more than

an appeal from an order refusing to quash a witness

subpoena, see Capital Co. v. Fox, 85 F. 2d 97 (2d Cir.

1936). and the Supreme Court's statements about what

would happen if a party were found to be in civil contempt

were dictum. Indeed, in Sibbach v. Wilson & Co.. 312 U.S. °

| (1941), only five years after Fox, this Court reviewed an

order adjudging the plaintiff in civil contempt and ordered

her release.

Moreover, in Cohen vy.

Beneficial Industrial Loan

Corporation, 337 U.S. S41, 545-546 (1949) this court stated

that under 28 U.S.C. §1291 appeals may be taken from

“orders other than final judgments when they have a final

and irreparable effect of the rights of the parties.’ Im-

prisonment is a clear case of an “irreparable effect’ and it

ee Bane ow.

le eat ae —

follows that an order directing the confinement of a person

is invariably appealable. cf. J/nternational Business

Machines Corp. v. United States, 471 F. 2d S07, 512-513

(2d Cir. 1972), reversed en banc, 480 F. 2d 293 (2d Cir.

1973). cert. denied, 416 U.S. 980 (1974). See also Judge

Moore’s dissenting opinion, 480 F. 2d 299, 301-302. This is

particularly true here since Judge Ward stayed all

defendant's discovery until he had purged his contempt

with the result that Sloan could have spent the rest of his

life in jail without there ever being a trial on the merits of

the S.E.C.’s case or the right to appellate review assuming

the Court of Appeals is correct in its statement that the

contempt order here is not appealable.

Finally. the Court of Appeals rules that the entire matter

is moot. This is clearly incorrect as is demonstrated by the

fact that at the time the appeal was decided there was

pending in the District Court the S.E.C.’s motion for

summary judgment based in part on the fact that Judge

Ward had held Sloan in contempt. (102a). Moreover,

Judge Ward's contempt adjudication had as a direct

consequence the summary dismissal, without notice and

the opportunity for a hearing, of three Sloan appeals. The

brief for the S.E.C. filed in this Court in opposition to the

petition for a writ of certiorari in Sloan v. S.E.C., Dkt. No.

76-365 states:

Dismissal of the appeals in these cases seems

particularly appropriate in view of petitioner's

efforts to avoid—by going to Iceland—complying

with a lawful order of the Court in one case while

seeking review of orders in the same and related

cases.

The key word here is “lawful because if an appellate

court were to rule that Judge Ward acted unlawfully in

ordering Sloan arrested and confined for civil contempt,

which is what Sloan is asking the appellate courts to do by

prosecuting this appeal, then the position taken by the

S.E.C. would be untenable and the three appeals would be

required to be reinstated. Since Sloan has been barred for

lite from the securities industry and this decision has been

affirmed by the Court of Appeals on the basis of the in-

junctions which Sloan was seeking to have reviewed in two

of the three dismissed appeals, it follows that if those

appeals were reinstated and if Sloan were to prevail on the

merits, then Sloan would be reinstated as a broker dealer.

The S.E.C. itself has stated that it would entertain an

application to do this. /n the Matter of-C.R. Richmond.

Securities Exchange Act Release No. 12535, 9 S.E.C.

Docket 846, 847 n. 11 June 10, 1976) citing Samuel H.

Sloan, supra. In addition, a variety of collateral con-

sequences may and no doubt will result from Judge Ward's

contempt adjudication. For instance, in arguing at Sloan's

appeal from the order of the S.E.C. revoking Sloan's

broker dealer registration, counsel for the S.E.C. stated

that the contempt adjudication should form an additional

basis for affirmation of the S.E.C.’s administrative order

even though the administrative order was issued before

Sloan was held in contempt. It is thus obvious that if Sloan

reapplies for admission into the securities industry, as

under S.E.C. rules he is permitted to do, Hanly v. S.E.C..

415 F. 2d 589, 598 (2d Cir. 196%), the contempt ad-

judication will be held against him. Thus, under Sibron v.

New York, supra 392 U.S. at 53-58 this case clearly is not

moot.

It is submitted that this case presents important

questions which require plenary review by this Court. If the

present decision is allowed to stand it will create a loophole

in the law established by prior Supreme Court decisions.

For instance, in United States v. Ryan, 402 U.S. 530, 532

(1971), this Court stated that in the case of a subpoena

served in a criminal case, a party is required to disobey the

order of the court and to be held in contempt in order to

obtain appellate review of the validity of the subpoena.

Similarly, one court has expressed approval of the S.E.C.'s

en ii 2 rh et none aE AO es Rem Se ame oom

stated position that one who wishes to contest the validity of

an S.E.C. rule is required to violate the rule and wait until

the S.E.C. commences enforcement proceedings and then

challenge the rule in the enforcement proceeding. PBW

Stock Exchange v. S.E.C., 485 F. 2d 718, 725 (3rd Cir.

1973) cert. denied. 416 U.S. 969 (1974). In this case, the

S.E.C. has contended that the rule which gives it the

authority to examine the books and records of a broker

dealer is Rule 17a-4, which requires all brokers and dealers

to “preserve’’ their books and records “in an easily ac-

cessible place."’ The S.E.C. intcrprets the words “easily

accessible place’’ as meaning a place easily accessible to

representatives of the S.E.C. even though the rule says

nothing regarding the S.E.C.’s authority to inspect books

and records. As a result, the words “easily accessible

place’’ were incorporated in the original temporary

restraining order, in the injunction and in the contempt

order. This in itself was a cause of dispute because ap-

parently the S.E.C. took the position that Lynchburg, Va.

was not a place easily accessible fer representatives of the

3.e4.

However, Sloan's underlying position was that even if

there is a rule which requires all brokers and dealers to

show their books and records to the S.E.C., that rule is

unconstitutional as violative of the Fourth and Fifth

Amendments. The validity of that position has not yet been

adjudicated by the Court of Appeals and can never be

adjudicated by the Court of Appeals if the present decision

is allowed to stand. At the same time, the S.E.C. will have

an expedient means whereby it can obtain financial and

other records of every person and corporation in the United

States without having to worry about the possibility of

appellate review. Instead of serving a subpoena, the S.E.C.

will institute a suit, as it did here, for a mandatory in-

junction requiring the production of financial records. The

S.E.C. will then apply to the Court for an immediate

temporary restraining order. The judge will be able to

grant this temporary restraining order and/or a

preliminary injunction knowing that appellate review can

never be had. If the party adversely affected appeals and

produces the financial records, the appeal will be dismissed

as moot. If the party adversely affected appeals and does

not produce the financial records, he will be held in

contempt of court and the appeal from the original order

will be dismissed in accordance with S.E.C. v. Sloan. 538

F. 2d 313 (2d Cir. 1976). Thus, regardless of what the party

does, appellate review will not be available. Finally, an

appeal from the contempt order will be dismissed in ac-

cordance with the opinion in the instant case which states

that an order of civil contempt as to a party to the litigation

is not appealable. Thus, there will be no appellate torum

available to adjudicate a valid legal and constitutional

claim. This result is clearly in conflict with the procedures

for the ‘‘orderly and expeditious administration of justice”

set forth in Maness v. Meyers. 419 U.S. 449, 459-461

(1975) and consequently this petition for a writ of certiorari

should be granted.

It this Court agrees and finds that the Court of Appeals

erred in dismissing the appeal from the order adjudging the

petitioner in contempt. it will then reach questions which

the Court of Appeals failed to reach concerning whether

Judge Ward acted properly. It is submitted that the answer

to these questions is obvious and indeed the brief the

S.E.C. filed in the Court of Appeals. which was only seven

pages long. did not say a word in detense of Judge Ward's

actions. Judge Ward had clearly become embroiled in a

running personal controversy with the petitioner (see e.g.

44a, 71a-72a) and hence under Taylor v. Hayes, 418 U.S.

488. 501-503 (1974) he was disqualified from adjudging the

petitioner in contempt, a fact which the petitioner pointed

out to Judge Ward repeatedly, (see e.g. 43a-44a, 82a-84a).

Moreover, since the finding that the petitioner was in

contempt was based upon circumstances which did not

occur in the presence of the judge, the petitioner was

a vies i

19 Meek ey tae a tl

PR I lee tg nh male Mee)

entitled to a hearing, the opportunity to cross-examine

witnesses and to have the facts tried by a jury. Bloom v.

Illinois, supra. As this Court has stated ‘A right to jury

trial is granted to criminal defendants to prevent op-

pression by the Government.” Duncan v. Louisiana, 391

U.S. 145, 155 (1968). The fact that the S.E.C. couched its

complaint in this case in terms of “equitable relief’ does

not change this result since what is involved here is a

rémedy of the sort traditionally enforced in an action at

law. Pernell v. Southall Realty, 416 U.S. 363, 375 (1974);

Curtis v. Loether, 415 U.S. 189, 19S (1974); contra S.E.C.

v. Petrofunds, Inc., 420 F. Supp. 958 (S.D.N.Y. 1976).

Moreover, the Judge Ward ingored the notice and

hearing requirements and all of the other requirements of

Rule 42(b) Fed. R. Crim. P. and ignored as well all of the

applicable case law regarding contempt in respects too

numerous to be recited in detail here. In addition, in view

of Sloan's physical condition it was error not to transfer this

case to the Western District of Virginia, Lynchburg

Division, where Sloan and the books and records of Sloan

& Co. would have been within the court's bailiwick and a

meaningful opportunity for a hearing could have been

provided (45a).

(ther questions presented in this petition are of suf-

ficient importance as to require review on certiorari. There

is the question concerning S.E.C. press releases. The

S.E.C. routinely issues a press release whenever it institutes

suit and issues further press releases at various stages of the

litigation. Anyone who has been the subject of one of these

press releases is aware of the serious economic reper-

cussions that can result. Indeed, the leverage the S.E.C.

obtains as a result of its policy of issuing these press

releases probably explains the fact that most defendants

named in S.E.C. suits consent to an injunction without

admitting or denying the charges at the same time that the

action is commenced.

Sloan has been the subject of numerous S.E.C. press

releases and therefore it is not surprising that he asked

Judge Ward for an order prohibiting their issuance in

connection with this case. The issuance of an S.E.C. press

release has the effect of branding the subject of the press |

release as a criminal without a judicial trial. Indeed. it

appears that the motivation for the S.E.C. to institute as

many lawsuits as it does is the favorable publicity which the

S.E.C. receives as a result of these press releases. The

methods adopted by the S.E.C. are of a type which were

specifically condemned by this Court in Jenkins vy.

McK eithen, 39S U.S., 411, 424-428 (1969) as violating the

na rights of persons in a position similar to that

of Sloan.

After Judge Wad gave an oral order restricting the

parties press reieases, the S.E.C. issued a press release

anyway. Judge Ward, nevertheless, refused to hold the

S.E.C. in contempt. Although the Court of Appeals was

correct in Stating that Judge Ward ruled that the press

release in question did not violate his order, it is readily

apparent that Judge Ward was in error and what he in fact

did was to back down from his previous decision to restrict

press releases. The preliminary injunction obtained by the

S.E.C. on January 17, 1975 was no more “end work

product” than was the temporary restraining order which

Judge Ward signed when he restricted the parties’ press

releases in the first instance.

However, the underlying question is whether the Code of

Professional Responsibility of the American Bar

Association prohibits the issuance of the press releases

because if it does, Sloan would be entitled to the additional

relief requested, namely disqualification and disabarrment

of counsel for the S.E.C., irrespective of Judge Ward's

prior order. It is submitted that this presents an important

question which should be reviewed on certiorari. As this

Court stated in Sheppard v. Maxw

penny axwell, 384 U.S. 333, 363

Sub « bbb edie

a a

‘“Colluboration between counsel and the press as to

‘information affecting the fairness of a criminal

trial is not only subject to regulation, but is highly

censurable and worthy of disciplinary measures.”

Although this case does not involve a criminal trial,

S.E.C. injunctive actions are viewed by the general public

as a method of prosecuting so-called “white collar

criminals” and unfair publicity can have the same and

often worse economic consequences as it would have in a

criminal case. This Court recently addressed a related

problem in Paul v. Davis, 424 U.S. 693 (1976). As to the

possible problem of mootness, it is apparent from this

Court's decision in Nebraska Press Asso. v. Stuart,

U.S. . 49 L. Ed. 2d 683, 690 (1976) that the question

presented is not moot. In fact, on September |, 1976 the

S.E.C. issued a press release captioned:

“SAMUEL H. SLOAN FOUND TO HAVE

VIOLATED THE QUOTATION INITIATION

AND BOOKKEEPING RULES; INJUNCTION

DENIED” SEE S.E.C. NEWS DIGEST, VOL.

10, No. 7 p. 2; 10 S.E.C. DOCKET 397 (SEPT. 1,

1976). |

This press release, which delt with Judge Ward's

decision of August 18, 1976, was clearly false and

misleading since Judge Ward made no findings of fact, and

could noi have done so on the record before him, and

dismissed the action as moot. It is clear that if judicial

remedies are not available to stop the issuance of these

malicious press releases, irreparable harm “‘capable. of

repetitive yet avoiding service’ will continue to result to

Sloan.

Another question presented in this petition is whether

the S.E.C. has the authority to prosecute actions in its own

behalf. The case which gave the S.E.C. the authority to

represent itself in federal court is S.E. C. v. Robert Collier

& Co.. 76 F. 2d 939 (2d Cir. 1935). Prior to that decision,

the rule. as set forth in S.E.C. v. Stock Market Finance, 10

F. Supp. 95 (S.D.N.Y. 1935), was that litigation involvin

government agencies must be conducted by officers of the

Department of Justice. This question involves purely

statutory construction. The question is whether 28 U.S C

$516 which states that “except as otherwise authorized by

‘aw, the conduct of litigation in which the United States .

agency or officer thereof is a party .. . is reserved © of-

ticers of the Department of Justice’ does not apply to suits

instituted by the S.E.C. because Section 21(e) of the

Securities Exchange Act of 1934, 15 U.S.C. §78 (we, gives

the S.E.C. the authority to “biiag an action.” scoala

lhe district court, in the decisions just cited, interpreted

the statute strictly and ruled that even though the S.E.C

has the authority to bring an action, it does not have the

authority to prosecute the action after it has been filed

since that authority is reserved to the Department of

Justice. lhe Court of Appeals reversed. relying not

matters of statutory construction but on what it homer

to be the will of Congress as expressed in the testimony at

2 re hearing. In the decision of which a is

Ps “s t we, the Court of Appeals refused to overrule that

ermination. The question thus presented is one of

vbvious Importance which has never been passed upo b

this Court and which this Court is well equipped to decid ‘

It is appropriate to add that the numerous abuses of

prosecutorial discretion which occurred in this | i

would not be likely to have happened if the S.E.C spoee

had been conducted b fi 7

hediien ed by an officer of the Department of

Sescenred question presented in this petition for a writ of

Paci concerns Judge Ward's handling of certain

Iscovery matters. As Moore's Federal Practice States:

Discovery orders are virtually non-reviewable

by ordinary process. [footnote omitted|. Yet their

impact on litigants is so severe that the courts have

tolerated impermissive devices for securing review

[footnote omitted] and at least one very responsible

voice, deploring these devices, has made the

unacceptable suggestion that a very common form

of discovery order should be regarded as ap-

pealable as a final judgment. Southern Ry. v.

Lanham. 408 F.2d 348 (Sth Cir. 1969) (Brown, J.,

dissenting from denial of motion for rehearing in

banc.)."" 9 Moore, Federal Practice 4110.28

Thus. there is some authority for the proposition that

certain types of discovery orders are appealable. A

protective order and an order staying discovery can be

viewed as orders granting an injunction and therefore are

appealable. Moreover, in the case presented here, the

petitioner sought review not of a discovery order in isolation

but of a series of orders which happened to include

discovery orders. See General Motors Corp. v. City of New

York. S01 F.2d 639, 648 (2d Cir. 1974). As Moore's

Federal Practice states:

“Once a timely appeal is taken from an order made

appealable by statute, the power of a court of

appeals should be plenary to che extent that it

chooses to exercise it.’’ 9 Moore, Federal Practice

4110.25{1].

In the case presented here, Judge Ward granted a

protective order as to certain interrogatories and later

stayed all defendant's discovery until the defendant had

purged his contempt. In addition, he refused to dismiss the

action even though the summons and complaint had never

been served by the U.S. Marshal as required by Rule 4(c)

Fed. R. Civ. P. and even though no affidavit of service or

answer waiving the jurisdictional requirement of service

had been filed. It is submitted that Judge Ward's actions in

the context of this case present important questions which

should have been reviewed by the Court of Appeals and

ought to be reviewed by this Court by way of certiorari.

Finally, the petitioner seeks review of the Court of

Appeals determination that an order denying a motion to

enjoin the S.E.C. from “harassment and annoyance of the

detendant herein” is not appealable. The Court of Appeals

reasoned in a rather obscure manner that Sloan's request

for an injunction was ‘more in the nature of a request for a

protective order” and hence was not appealable. This was

clearly not the case and it is submitted that the question

presented ought to be reviewed by way of certiorari.

CONCLUSION

For all of the reasons set forth above, this petition for a

writ of certiorari should be grarted.

Dated: January 2, 1977

SAMUEL H. SLOAN

1761 Eastburn Ave. Apt. AS

Bronx, N.Y. 10457

(212) 299-2095

Te eee eet eee re nn |

APPENDIX “A”

OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND

CIRCUIT DATED MAY 10, 1976

UNITED STATES COURT OF APPEALS

For THE Seconp Circuit

No. 776—September Term, 1975.

(Argued April 27, 1976 Decided May 10, 1976.)

Docket No. 75-6106

—

SECURITIES AND Excuance ComMIssIoN,

Plaintiff-Appellee,

—against—

SamvueL H. Sxoan, individually and d/b/a

Samvuet H. Stoan & Co.,

Defendants-Appellants.

’

Before:

LumBarpD, WaTERMAN and FEINBERG,

Circuit Judges.

Appeal from various orders of United States District

Court for the Southern District of New York, Robert J.

Ward, J., entered in course of suit to enjoin violations

of SEC rules. *

Affirmed in part, dismissed in part.

noel

SamvueL H. Stioax, Pro Se, Lynchburg, Virginia,

for Defendants-Appellants.

3655

Micuign, J. Stewart, Assistant General Coun-

sel, Securities and Exchange Commissicn,

Washington, D.C. (Thomas L. Taylor, ITI,

Attorney, on the brief), for Plaintiff-.Ap-

pellee, .

Perr CuntaM:

Samuel Sloan, a securities broker-dealer who is a fre-

quent litigant in this court, see Sloan v. SEC, slip op.

2377, 2379 & nn. 2, 3 (2d Cir. March 4, 1976), and eases

there cited, appeals from a number of orders of the

United States District Court for the Southern District

of New York, Robert J. Ward, J., entered in the course

of a continuing lawsuit in which the Securities and Ex-

change Commission (SEC) seeks to enjoin him from vio-

lation of various SEC rules requiring maintenance of

proper books and records and making them accessible for

inspection by SEC officials! We affirm in part and dis-

miss in part.

The most significant order challenged by Sloan on this

appeal, to which he devotes most of his lengthy brief,

is an order dated September 3, 1975 holding him in civil

contempt for failing to comply with a preliminary in-

junction granted by Judge Ward on January 17, 1975.2

The injunction required Sloan. among other things, “to

permit immediate examination in an easily accessible place

by examiners and other representatives of the Commis-

sion of [his] books and records.” An appeal from this

1 This is not the first such action taken br the SEC against Sloan.

See SEC v. Sloan, 369 F. Supp. 996 (S.D.N.Y. 1974). appeal! di-missed,

Dkt. No. 74-1436 (2d Cir. Jan. 7, 1976).

$ The September 3 order adjudged Sloan in civil contempt and gave

him 20 days to purge himself. When he did not, a further orler of

civil contempt was entered on Septem!.cr 26. 1975 ordering Sloa.

- arrest.

3606

a. Sith li all A

ee ON a tin a

injunction was dismissed by this court on January 7,

1976. SEC vy. Sloan, Dkt. No. 75-7056."

The order froni which Sloar now seeks to appeal is

hoth in form and in substance an order of civil contempt.

An order of civil contempt against a party to the liti-

vation is not an appealable final order. 9 Moore, Fed-

era! Practice © 110,13{4]. Moreover, after filing and brief-

ing this appeal, Sloan purged himself of contempt, and

on February 4. 1976, Judge Ward entered an order to

this effect. Thus, no live controversy remains as to any

of the alleged errors in the contempt adjudication, and

the appea! from the order of contempt is moot.

Sloan also argues that the district court’s refusal to

dismiss the SEC’s complaint on various grounds, and the

evant to the SEC of a protective order as to certain in

terrogzatorics, were erroncous. Neither is an appealable

finel order. 9 Moore, Federal Practice © 110.08[1] at n.35

and eases there cited: UAW v. National Caucus of Labor

Committees. 525 F.2d 323, 324 (2d Cir. 1975), and cases

there cited. Moreover, Sloan’s notice of appeal does not

reer to the protective order, dated August 4. 1975. These

ssnects of the apneal are therefore dismissed for lack

yi jurisdiction.

Another ruling appealed from is Judge Ward's retusa!

to hold the SEC in contempt for allegedly violating an ora!

order restricting the parties’ press releases. Assuming

that such an order is appealable at all. we note that the

district judge found that the particular press release that

was the subjeet of Sloan's motion did not violate his order.

We sec no basis for substituting our judement for that of

the distriet judge in interpreting his own order.

3 We cited United States v. Sperling, 506 F.2d 1323, 1345 n.55 (2d

Cir. 1974). vert. denied, 420 U.S. 962 (1975).

BEST COPY AVAILABLE

We also affirm Judge Ward’s refusal to disqualify and

disbar counsel for the SEC. While such an order is appeal-

able, Silver Chrysler Plymoutl, Inc. vy. Chrysler Motors

Corp., 496 F.2d 800 (2 Cir. 1974) (en banc), we have held

that the supervision of attorneys is a matter primarily

for the district court, whose findings will be upset only

on a showing of abuse of discretion. Hull v. CelateseCorp.,

5138 F.2d 568, 571 (2d Cir. 1975). We see no abuse of

discretion here. Sloan also argues that the SEC attorneys

should be disqualified because the SEC lacks authority to

prosecute actions on its own behalf, and that SEC v. Rober’

Collier & Co., 76 F.2d 939 (2d Cir. 1935), which holds that

it has such authority, should be overruled. We see no

sufficient reason to overturn a persuasive decision by a

distinguished bench.

Finally, Sloan appeals from the denial of his motion to

enjoin the SEC from “harrassment and annoyance of the

defendant herein.” Sloan apparently would have us treat

this motion as in effect a complaint or counterclaim charg-

ing violations of his constitutiona! rights, and seeking a

preliminary injunction. On that theory, the order denying

the injunction would be appealable. 28 U.S.C, § 1292/a)(1).

Moreover, such a denial would have required findings of

fact.and conclusions of law under F.R. Civ. P. 52(a). which

were not made by the district court. On the other hand,

the papers do not purport to be pleadings, and in the cir-

cumstances of this litigation, the district judge apparently

considered the motion as one addressed to “the district

court's power to control the proceedings before it,” 9

Moore, Federal Practice © 110.191] at 207-08. 2nd thus

not a request for an injunction governed by the Rule and

statute cited above. We agree that the motion here was

more in the nature of a request for a protective order.

365

Site Si ies ene,

eFC) DAR ee WB ee 1 SI

a ne

;

The order denying it is therefore interlocutory and non-

anpealable.

Accordingly, as indicated above, the appeal is dismissed

as to certain of the rulings appealed from; in all other

respects, the rulings of the district court are affirmed.

5659

6a Ta

APPENDIX “B” APPENDIX “C”

ORDER DATED DECEMBER 6, 1976 : “ORDER DATED DECEMBER 6, 1976 DENYING

DENYING PETITION FOR REHEARING SUGGESTION THAT THE REHEARING BE EN BANC

At a stated term of the United States Court of

At a Stated Term of the United States Court of Appeals, in and for the Second Circuit, held at the

Appeals, in and for the Second Circuit, held at the | United States Court House, in the City of New

United States Court House, in the City of New York, on the sixth day of December, one thousand

York, on the sixth day of December, one thousand ) nine hundred and seventy-six.

nine hundred and seventy-six.

Present: | | SECURITIES AND EXCHANGE COMMISSION.

HON. J. EDWARD LUMBARD

HON. STERRY R. WATERMAN Plaintiff-Appellee,

HON. WILFRED FEINBERG

Circuit Judges v.

SAMUEL H. SLOAN,

SECURITIES AND EXCHANGE COMMISSION,

Defendant-Appellant.

Plaintiff-Appellee,

v. A petition for rehearing containing a suggestion that the

action be reheard en banc, filed June 3, 1976 and sup-

SAMUEL H. SLOAN, piemen.cd by a letter dated October 18, 1976 having been

filed herein by appellant Pro Se, SAMUEL H. SLOAN,

Defendant-Appellant. and no active judge or judge who was a member of the

panel having requested that a vote be taken on said

suggestion,

A petition for a rehearing having been filed herein by

Upon consideration thereof, it is

appellant pro-se,

, Ordered that said petition be and it hereby is DENIED.

Upon consideration thereof, it is

Ordered that said petition be and hereby is denied. s/Irving R. Kaufman

IRVING R. KAUFMAN

s/A. Daniel Fusaro Chief Judge

A. DANIEL FUSARO Clerk

iain

APPENDIX “D”

LETTER DATED OCTOBER 18, 1976

FROM SAMUEL H. SLOAN TO THREE JUDGES

OF THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT .

October 18. 19

Hon. J. Edward Lombard

Hon. Sterry R. Waterman

Hon. Wilfred Feinberg

U.S. Court of Appeals

U.S. Courthouse

Foley Square

New York, New York 10007

Re: S.E.C. v. Sloan

Dkt. No. 75-6106

ear Honorable Sirs:

On May 10, 1976 you dismissed as moot my appeal from

an order adjudging me to be in contempt of court. See

S.E.C. v. Sloan, 535 F. 2d 679, 680 (2d Cir. 1976). I

thereafter filed a petition for a rehearing accompanied by a

suggestion that the rehearing be en banc, which petition is

still pending.

Since then, the S.E.C. has briefed and argued another

appeal, Sloan v. S.E.C., Dkt. No. 75-4087, argued October

13, 1976 before Medina, Anderson and Gurfein, CCJ. That

is an appeal! from an administrative order of the S.E.C.

revoking my broker dealer registration and barring me for

lite trom being associated with any broker or dealer.

During the oral argument of that appeal, counsel for the

S.E.C. expressly stated that the Court “of Appeals should

consider the adjudication by the District Court that I was in

2 st A ate Se TEIN 2 ead. Be

hee ate

Watts wise»: Smet aise ae. R/S. lene ie oe

contempt of court as a basis for upholding the decision of

the S.E.C. revoking my broker dealer registration, etc. At

that point. | believe the S.E.C. is foreclosed from arguing

that the question of the validity of the contempt ad-

judication is moot. In other words, the S.E.C. cannot have

it both ways. claiming for the purpose of defeating my right

to appeal in 75-6106 that the case is moot and yet claiming

tor the purpose of prevailing in 75-4087 that the contempt

adjudication is a proper factor for this Court to consider.

The decision ot the United States Supreme Court in

Sibron v. New York, 392 U.S. 40. 57 (1968) clearly

establishes the correctness of the point i am making.

There, the Supreme Court held that an appeal does not

become moot unless there is no possibility that a collateral

legal consequence will arise as a result of the order from

which the appeal is taken. Clearly. a possible collateral

legal consequence has arisen here since the S.E.C. has

argued-that on the basis of the contempt adjudication, I

should be barred for life from being associated with any

broker or dealer.

] realize that the judges on the panel in the instant case

were not in the courtroom on October 13, 1976 and

therefore did not hear the attorney for the $.E.C. when he

argued this point. However, I believe the Clerk of this

Court keeps a tape recording of all oral arguments for the

henetit of the judges of this Court and therefore it can be

readily determined by vou that what | am stating is correct.

For this reason, in addition to reasons previously stated,

I believe that my petition for a rehearing should be granted

and the question of the validity of the contempt ad-

judication should be decided on the merits.

Very truly yours,

s/Samuel H. Sloan

Samuel! H. Sloan

10a

APPENDIX “E”

COMPLAINT

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, Individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

Plaintiff, Securities and Exchange Commission

(“Commission’’), for its complaint herein alleges as

follows:

1. Defendants Samuel H. Sloan (‘Sloan’) individually

and doing business as Samuel H. Sloan & Co. (‘Sloan &

Co."’) have engaged, are engaged and are about to engage

in acts and practices which constitute and will constitute

violations of Sections 15(c)(2), and 17(a) of the Securities

Exchange Act of 1934 (‘‘Exchange Act’’), as amended, 15

U.S.C. 780(c)(2) and 15 U.S.C. 78q(a). and Rules 17 CFR

240.15¢2-11 (‘Initiating Quotations in Over-the-Counter

Securities”), 17 CFR 240.17a-4 (‘Examination and

Visitation Provisions’’).

2. The Commission brings this action pursuant to

— Ve =

Ged. dhol 25 Jobe aeons lie oA

;

lla

authority conferred by Section 21(e) of the Exchange Act,

1S U.S.C. 78u(e).

3. This Court has jurisdiction under Section 27 of the

Exchange Act, 15 U.S.C. 78aa.

4. The Commission, pursuant to the authority contained

in Sections 15(c), 17(a) and 23(a) of the Exchange Act, 15

U.S.C. 780(c), 15 U.S.C. 78q(a) and 15 U.S.C. 78w(a), has

prescribed Rules 17 CFR 240.1Sc2-11, 17 CFR 240.17a-4

which are now and at all times herein relevant, were in

effect.

S. Defendant Sloan & Co. is a sole proprietorship which

maintains its principal place of business at 120 Liberty

Street, New York, New York.

6. Defendant Sloan & Co. is registered with the Com-

mission pursuant to the provisions of Section 15(b) of the

Exchange Act, 15 U.S.C. 780(b) as a broker and dealer in

securities and has been so registered since May 10, 1970.

7. Defendant Sloan is and at all times herein relevant

was the sole proprietor and manager of Sloan & Co. He

resides at 1761 Eastburn Avenue, Bronx, New York.

FIRST CAUSE OF ACTION

(Section 17(a) of the Exchange Act, 15 U.S.C.

78q(a) and Rule 17a-4 thereunder, 17 CFR

240.17a-4 (‘‘Examination and Visitation

Provisions)

8. The Commission realleges and incorporates by

reference each and every allegation set forth in paragraphs

1 through 7 hereof.

9. During the period from May 10, 1970, to the date

hereof, the defendant Sloan & Co. has been and is now a

broker and dealer in securities, engaged in the business of

12a

effecting transactions for the accounts of others and for its

own account and during the period has been and is now

making use of the mails and means and instrumentalities

of interstate commerce to effect transactions in and to

induce the purchase and sale of securities (other than an

exempted security or commercial paper, bankers’ ac-

ceptances or commercial bills) otherwise than on a national

securities exchange in the Southern District of New York

and elsewhere.

10. During the period from on or about December 26,

1974, to the date hereof, defendants Sloan and Sloan & Co.

have viclated Section 17(a) of the Exchange Act, 15 {' S.C.

78q(a) and Rule 17 CFR 240. 17a-4 in that said defendants

have refused to produce for examination and maintain in

an easily accessible place their books and records.

SECOND CAUSE OF ACTION

(Section 15(c)(2) of the Exchange Act, 15 U.S.C.

780(c)(2) and Rule 15c2-11 thereunder, 17 CFR

240.15c2-11 (“Provision for Initiating Over-the-

Counter Quotations’’)

11. The Commission realleges and incorporates by

reference each and every allegation set forth in paragraphs

1 through 10 hereof.

12. During the period from on or about December 23,

1974, to the date hereof, defendants Sloan and Sloan & Co.

have violated Section 15(c)(2) of the Exchange Act, 15

U.S.C. 780(c)(2) and Rule 17 CFR = 240.15e2-11,

thereunder, in that said defendants have submitted for

publication and have caused the publication of quotations

in a quotation medium for over-the-counter securities while

and at a time said defendants failed to possess, maintain,

preserve or make reasonably available upon request to any

person expressing an interest in a proposed transaction in

a J) seed SD

13a

the security being quoted, and/or member of the plaintiff

Commission’s staff those items of information required to

be in the possession of a broker-dealer before a broker-

dealer may lawfully publish any such quotation as require‘

by Rule 17 CFR 240.15Sc2-11 (a)(4) and (c).

REQUEST FOR RELIEF

13. The Commission repeats and realleges by reference

each and every allegation set forth in paragraphs | through

12 hereof.

14. By reason of defendants Sloan and Sloan & Co.'s

disregard of Section 17(a) of the Exchange Act, 15 U.S.C.

78q(a) and Rule 17a-4, 17 CFR 240.17a-4 promulgated

thereunder, which requires that registered brokers and

dealers produce for examination and maintain in an easily

accessible place their books and records, the Commission

cannot determine whether Sloan is in compliance with

various sections and rules of the federal securities laws as

well as an Order of Permanent Injunction issued in January

1974, against the defendants.

15. By reason of defendants Sloan and Sloan & Co.'s

violation of Section 15(c)(2) and Rule 15c2-11 thereunder,

17 CFR 240.15¢2-11, which requires that registered

brokers and dealers possess, furnish, maintain, preserve

certain information prior to submitting for publication

quotations in a quotation media for certain over-the-

counter securities, they have created a market in securities

without adequate and current information.

WHEREFORE, plaintiff respectfully demands:

1. That a Temporary Restraining Order, a Preliminary

Injunction and a Permanent Injunction be entered by the

Court restraining and enjoining Sloan and Sloan & CO.,

their agents, servants, employees, attorneys, successors

and assigns, and those persons in active concert or par-

ticipation with them (or any member or dealer registered

l4a

with the Commission of which defendant Sloan may ©

become a principal or controlling person):

1. From further violations of the examination

provisions of Section 17(a) of the Exchange Act, 15

U.S.C. 78q(a) and Rule 17a-4 promulgated

thereunder, 17 CFR 240.17a-4;

2. From removing, destroying or altering the

books and records cf Sloan and Sloan & Co.

required to be made, maintained and preserved

pursuant to Section 17(a) of the Exchange Act, 15

U.S.C. 78q(a) and Rules 1!7a-3 and 1/7a-4

promulgated thereunder, 17 CFR 240.17a-3 and

17a-4.

Il. That a Mandatory Order be issued by the Court to

permit immediate examination in an easily accessible place

by examiners and other representatives of the Commission

of the books and records of Sloan and Sloan & Co. (or any ©

other broker or dealer registered with the Commission of

which defendant Sloan may become a principal or con- —

trolling person) as required by Section 17(a) of the Ex-

change Act, 15 U.S.C. 78q(a) and Rule 17a-4 promulgated

thereunder, 17 CFR 240.17a-4.

Ill. That a Temporary Restraining Order, a Preliminary

Injunction and a Permanent Injunction be entered by the

Court restraining and enjoining defendants Sloan and

Sloan & Co., their agents, servants, employees, attorneys,

successors and assigns, and those persons in active concert

or participation with them (or any member or dealer

registered with the Commission of which defendant Sloan

may become a principal or controlling person), while and

at a time said defendants failed to possess, maintain,

preserve or make reasonably available upon request to any

person expressing an interest in a proposed transaction in

the security being quoted, and/or member of the plaintiff

Commission's staff those items of information required to

be in the possession of a broker-dealer before a broker-

Pee ee See

hail <i ads, © lt ii ih itt aes BL

per) re

15a

dealer may lawfully publish any such quotation as required

by Rule 17 CFR 240.15c2-11(a)(4) and (c).

IV. Such other and further relief as this Court may deem

necessary and proper.

Ot Counsel

William Nortman

Respectfully submitted,

s/Donald N. Malawsky

DONALD N. MALAWSKY

Associate Regional Administrator

Attorney for Plaintiff

SECURITIES AND EXCHANGE

COMMISSION

New York Regional Office

26 Federal Plaza

New York, New York 10007

Telephone No.: (212) 264-1634

Thomas R. Beirne

Jerome M. Selvers

Dated: New York, New York

December 30, 1974

16a

APPENDIX “F”

AFFIDAVIT OF NOTICE

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff, ;

-against-

SAMUEL H. SLOAN, Individually and |

d/b/a SAMUEL H. SLOAN & CO.

Defendants. —

ott oe

———

STATE OF NEW YORK )

COUNTY OF NEW YORK ) ss.:

JEROME M. SELVERS, being duly sworn, deposes and |

Says: .

1. | am an attorney employed in the New York Regional

Office by the Plaintiff, Securities and Exchange Com- |

mission (““Commission’’).

2. At approximately 3:10 p.m. on Monday, December |

30, 1974 I called defendant Samuel H. Sloan, at telephone :

number 583-8565 and advised him that an action had been |

filed by the Commission and that in connection therewith, ~

an application was being presented to Judge Ward for a

temporary restraining order brought on by an Order to

Show Cause. I further advised Mr. Sloan that said ap- ©

plication would be heard by Judge Ward in his chambers in —

Room 511 at 3:45 P.M. on December 30, 1974.

17a

s/Jerome M. Selvers

JEROME M. SELVERS

Sworn to

December 30, 1974

18a

APPENDIX “G”

AFFIDAVIT OF THOMAS J. DOLAN

IN SUPPORT OF MOTION FOR A TEMPORARY

RESTRAINING ORDER AND PRELIMINARY

INJUNCTION

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, Individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

STATE OF NEW YORK )

COUNTY OF NEW YORK ) ss.:

ae F. DOLAN, being duly sworn, deposes and

1. l am employed by the United States Securities and

Exchange Commission (“Commission”), plaintiff in the

above entitled action, in its New York Regional Office as a

Securities Compliance Examiner.

2. | make this affidavit in support of the application of

the Commission for an Order to Show Cause, Temporary

Restraining Order and Motion for Preliminary Injunction

against Samuel H. Sloan (“Sloan”), individually and doing

business as Samuel H. Sloan & Co., (“Sloan & Co."’).

19a

3. This affidavit is based upon correspondence and other

documents of defendant Sloan & Co., statements made to

or in my presence by Sloan, information received from the

NQB, information contained in the official files of the

Commission and upon information and belief.

4. Defendant Sloan & Co., a sole proprietorship, has its

principal place of business at 120 Liberty Street, New

York, N.Y.; however, maintains its books and records at

1761 Eastburn Avenue in the Bronx, N.Y. Defendant

Sloan & Co. is registered with the Commission pursuant to

the provisions of Section 15(b) of the Exchange Act, 15

U.S.C. 780(b), as a broker and dealer in securities and has

been so registered since May 10, 1970.

5. Defendant Sloan resides at 1761 Eastburn Avenue,

Bronx, New York, and at all times relevant hereto, is and

has been sole proprietor and manager of defendant Sloan

& Co.

6. Sloan was advised both by letter and telephone that

members of the staff would examine his books and records

on Thursday, December 26, 1974.

VIOLATIONS OF SECTION 17(a) OF THE

EXCHANGE ACT, 15 U.S.C. 78q(a) AND RULE

17a-4 THEREUNDER, 17 CFR 240. 17a-4

(EXAMINATION AND VISITATION

PROVISIONS)

7. On December 26, 1974 I was instructed to make an

examination of the books and records of defendant Sloan &

Co. at 1761 Eastburn Avenue, Bronx, N.Y. I was ac-

companied by Mr. Ira Spindler (“Spindler”). However,

after informing Sloan that we were to examine his books

and records, Sloan refused to produce the same. I advised

Sloan that he was required to maintain his books and

records in an easily accessible place as well as required to

make them available for examination by members of the

20a

staff of the Commission. Moreover, I personally gave Sloan

a copy of Section 17(a) of the Securities Exchange ‘Act of

1934 and Rule 17a-4 promulgated thereunder. However,

Sloan remained adamant in his refusal to allow us to

examine his books and records.

8. Sloan informed us that his books and records were

easily accessible to him but not to the Commission.

9. I asked Sloan if he was aware of the fact that he was

personally enjoined by an Order of this Court for future

violations of Section 17(a) of the Exchange Act and Rules

17a-3 and 17a-4 promulgated thereunder. He replied that

he was aware of the injunction but felt that his conduct was

not violative of the same.

10. I asked Sloan if it was his intention to refuse

examination of his books and records both at 120 Liberty

Street and at Lynchburg, Virginia. He advised me that no

books and records were maintained at 120 Liberty Street

but that he would not allow an examination of his books

and records in Lynchburg, Virginia.

NEED FOR RELIEF

!1. Defendant Sloan & Co., is in violation of the

bookkeeping provisions of the Exchange Act. By virtue of

the fact that Sloan has refused to allow an examination of

his books and records, it is impossible to determine

whether the firm was in compliance with various other

provisions of the federal securities laws.

12. For the reasons stated above, a clear and specific

showing has been made as required by Rule 9(c)(4) of the

General Rules of this Court that it is necessary for the

Commission to proceed by Order to Show Cause rather

than by Notice of Motion, to seek a Temporary Restraining

Order and Preliminary Injunction restraining and en-

joining the defendants from further violations of the Ex-

change Act as alleged in the Complaint filed herein.

21a

(

13. No previous request of this relief has been made to

this Court-or any Judge thereof, based on the facts com-

plained of herein.

s/Thomas F. Dolan

THOMAS F. DOLAN

Sworn to

December 30th, 1974

: H

A> Spy rH _ “ 7 he ri at: iS : sabe “ft .

ae ee ee ee en

UNITED STATES DISTRI

CT COUR

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

-against-

SAMUEL H SLOAN, indivi

. , Individual]

d/b/a SAMUEL H. SLOAN eg

Defendants.

Court may deem

a ‘

that order. Ppropriate to compel compliance with

23a

Respectfully submitted

s/William D. Moran

WILLIAM D. MORAN

Regional Administrator

Attorney for Plaintiff

SECURITIES AND EXCHANGE

COMMISSION

New York Regional Office :

26 Federal Plaza

New York, N.Y. 10007

Tel. No. (212) 264-1636

Of Counsel

William Nortman

New York Regional Office

Thomas L. Taylor III

Washington, D.C.

Dated: New York, New York

March 24, 1975

24a

APPENDIX “I”

AFFIDAVIT OF IRA B. SPINDLER

IN SUPPORT OF MOTION

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

STATE OF NEW YORK )

COUNTY OF NEW YORK )ss.:

IRA B. SPINDLER, being duly sworn, deposes and

Says:

1. | am employed by the United States Securities and

Exchange Commission (“Commission”), plaintiff in the

above-entitled action, in its New York Regional Office as a

financial analyst in the Branch of Market Surveillance.

which exercises regulatory responsibilities with respect to

trading in the over-the-counter markets.

2. I make this affidavit in support of the Commission's

Application for a Contempt citation and its response to the

defendant Samuel H. Sloan’s motion for an injunction

against harassment by the Commission.

3. This affidavit is based upon my personal knowledge of

the facts, correspondence and other documents contained

in the files of the Commission, information received from

the National Quotation Bureau (‘‘NQB”), information

contained in the pleadings, affidavits and transcript of

hearings in this action, discussions with various staff

members of the Commission, and upon information and

belief.

4. In a prior action entitled Securities and Exchange

Commission v. Samuel H. Sloan and Samuel H. Sloan &

Co.. No. 71 Civil 2695, this Court on January 22, 1974

entered a judgment permanently enjoining those defen-

dants from further violations of Section 15(c)(3) of the

Securities Exchange Act of 1934, 15 U.S.C. 780(c)(3), and

the net capital rule thereunder. The judgment further

permanently enjoined the defendants from violations of

Section 17(a) of the Exchange Act, 15 U.S.C. 78q(a) and

the bookkeeping rules thereunder. On March 11, 1974,

defendant Sloan filed a notice of appeal from this order

and moved the United States Court of Appeals for the

Second Circuit to stay the effectiveness of that judgment

pending appeal. The Court of Appeals denied that stay on

October 29, 1974.

5. On November 6, 1974, defendant Sloan sent a letter to

the Commission stating that “it is my intention to resume

activity as a dealer in over-the-counter securities for-

thwith."’ The letter further advised that some of Sloan's

books and records were located at 1761 Eastburn Avenue,

Bronx, New York but that he would not permit any “officer

or employee of the Securities and Exchange Commission to

enter my personal residence for any purpose’’ unless a valid

search warrant were produced. Sloan’s November 6 letter is

attached hereto as Exhibit 1.

6. In December, 1974 I received information from the

NQB indicating that Mr. Sloan was submitting, as a

broker-dealer, quotations for publication in the pink sheets

while not in possession of current financial or other in-

26a

formation with respect to the companies for which he

sought to enter quotations as required by Section 17(a) of

the Exchange Act, 1S U.S.C. 78q(a) and Rule 15c2-11

thereunder, 17 C.F.R. 240.1Sc2-11. On December 18,

1974 I telephoned Mr. Sloan and informed him that any

quotations published for these companies would not

comply with the Commission's rules. Sloan stated that it

was his intention to wilfully violate Rule 1Sc2-11 with

regard to these issues and that he also intended to publish

quotations for at least 93 other companies for which

current information was not available.

7. In view of Mr. Sloan's expressed intention to conduct

business as a broker-dealer while not permitting the

Commission access to his books and records and his ex-

pressed intention to violate Rule 15¢2-11, the Commission

filed its complaint in the instant action seeking a temporary

restraining order and a preliminary and permanent in-

junction against Sloan from violating Section 17(a) of the

Exchange Act and the quotations. initiation rule (Rule

ISc2-11 thereunder). The complaint also sought a man-

datory order requiring Sloan to permit immediate

examinatica of the books and records of Sloan and Sloan &

Co. in an easily accessible place by representatives of the

Commission.

8. On December 30, 1974, Judge Robert J. Ward en-

dorsed an order to show cause why a preliminary injunction

should not be granted as requested by the Commission and

entered an order temporarily restraining Sloan from

violating Rule 15c2-11 and directing him to permit im-

mediate examination in an easily accessible place of the

books and records of Sloan and Sloan & Co. A copy of this

order was personally served upon the defendant on

December 30, 1974. On January 8, 1975, Judge Thomas F.

Griesa endorsed an order extending the temporary

restraining order to and including January 17, 1975.

4. On January 17, 1975S, after an evidentiary hearing,

27a

Judge Ward entered an order of injunction which granted

all the relief sought by the Commission including a

mandatory order requiring Sloan to permit an immediate

inspection of his books and records by representatives of

the Commission. That order of injunction was personally

served upon Mr. Sloan in open court. (Transcript of

Proceedings, January 17, 1975, p. 86).

10. On February 26, 1975, at approximately 9:15 a.m.,

Ralph Pernick, a staff member of the New York Regional

Office, telephoned Sloan at 212-583-8586. Pernick

identified himself, stated that he worked for the Securities

and Exchange Commission, and asked Sloan what time

during the following week would be convenient for Sloan

for an examination of the books and records of Sloan & Co.

by representatives of the Commission. Sloan replied that no

time during that week would be convenient and that he was

“not particularly inclined to cooperate” with the Com-

mission.

11. Sloan then uted Pernick what books and records he

would want to see. Pernick stated that the staff wanted to

examine various books and records, including capital

computations, to determine if Sloan & Co. was in com-

pliance with the net capital rule, among others. Pernick

then stated that in view of Sloan's statement that he was

“not particularly inclined to. cooperate” with the Com-

mission, it appeared that Sloan had not yet decided

whether he would permit such an inspection. Pernick then

asked Sloan when the latter would make up his mind.

12. Sloan then stated that he would not let examiners of

the Commission inspect the books and records of Sloan &

Co.

13. A letter memorializing this conversation was mailed

to Sloan on February 27, 1975 (a copy of this letter and the

return receipt are attached as Exhibit 2. Inexplicably, after

the Commission received the return receipt, the letter was

returned unclaimed to the Commission). The letter

;

ted

Y at

Pree

Ser NT eS, Se :

Sanat en See ee: te i on ae pei tty

tt os

— apt UNA i Berwess 9

= ht am ee

28a

specifically stated that at 10:00 a.m., March 5, 1975, two

representatives of the Commission would arrive at Sloan's

apartment at 1761 Eastburn Avenue, Bronx, New York! to

conduct such an examination.

14. At 10:00 a.m., March S, 1975, I arrived at Sloan's

apartment at 1761 Eastburn Avenue, Bronx, New York

accompanied by Thomas Dolan, a securities compliance

examiner in the Commission's New York Regional Office.

Although we knocked on the door, which was partially

open when we arrived, there was no reply or response from

inside the apartment. I then telephoned Sloan's apartment.

1S. A woman, later identified as Palina Kristjansdottir,

answered the telephone. I gave my name, identified myself

as an employee of the Commission, and asked if I had

reached the apartment of Samuel Sloan. She replied that it

was Sloan's apartment, but that Sloan was not in the

apartment and that she did not know where he was, nor

where he could be contacted, nor when he would return. |

then told her that another representative of the Com-

mission was waiting in the hallway outside the door to

Sloan S apartment, and that the two of us were there to

inspect the books and records of Sloan & Co.

, 16. The Commission never received any communication

from Sloan which indicated that Sloan could not or would

not be at his apartment at 10:00 a.m., on March 5S, 1975.

17. I rejoined Dolan in the hallway outside Sloan's

apartment. At no time did Mr. Dolan or | enter Sloan's

apartment. Kristjansdottir came to the door. Dolan told her

his name, identified himself as an employee of the Com-

mission, and said that he and I wanted to examine the

books and records of Sloan & Co. Kristjansdottir toid us

that Sloan was not there and that he had not left any in-

structions. Upon hearing this, we left.

18. On March 6, 1975, at approximately 10:00 a.m., |

returned to Sloan's apartment. | saw Kristjansdottir leaving

Sloan's apartment. She saw me and told me that she had

29a

not seen or heard from Sloan since Dolan and I had left the

apartment house the previous day. Upon hearing this, |

immediately left.

19. Sloan has published quotations in the pink sheets for

various securities as recently as March 21, 1975. Exhibit 3

is a copy of several quotations published in the pink sheets

for Sloan within the past month. These quotations are

typical ones for the relevant period. Each listing, whether

or not accompanied by a bid or asked quotation, also

includes the telephone numbers of Sloan’s Bronx apart-

ment or his hospital room in Plattsburgh, New York.

20. Sloan and Sloan & Co. have continually refused to

act in accordance with the injunction entered against them

in this action. Their acts are consistent with Sloan's

repeated statements that he will not conduct himself ac-

cording to the statutes and rules applicable to all broker-

dealers. By submitting quotations in the pink sheets, Sloan

is acting as a broker-dealer. Nevertheless, he has failed

utterly to comply with the laws applicable to broker-

dealers. Although two months have passed since Sloan was

ordered to permit an immediate examination of his books

and records, Sloan still refuses to allow such an

examination. As a result, the Commission has been unable

to obtain the relief granted by this Court.

s/Ira B. Splindler

IRA B. SPLINDLER

Sworn to

March ? ith, 1975 >

1. Sloan stated on the record that his books and records

were kept in his apartment (Transcript of Proceedings.

December 30, 1974, pages 12-13, 25). His letter to the

Commission dated November 6, 1975 repeats this assertion

(Exhibit 1).

30a

APPENDIX “J”

AFFIDAVIT OF SERVICE

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

-against-

SAMUEL H. SLOAN, Individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

STATE OF NEW YORK )

COUNTY OF NEW YORK ) ss.:

WILLIAM NORTMAN, being duly sworn, deposes and

says:

1. | am over 21 years of age and am employed as an

attorney by the Securities and Exchange Commission in its

New York Regional Office. I am not a party to this action.

2. On March 24, 1975, I served a copy of the Com-

mission's Response of the Commission to Defendants’

Motion for Injunction against Harassment, Notice of

Cross-Motion and Affidavit in Support Thereof, and the

Memorandum in Support of the Commission's Motion for

a Contempt Citation Against Sloan and Sloan & Co., and

in Opposition to Defendants’ Motion for an Injunction,

upon Samuel H. Sloan and Samuel H. Sloan & Co. by

depositing true copies of same in postpaid envelopes in an

3la

official depository under the exclusive care and custody of

the United States Postal Service, addressed to the following

locations:

1. Samuel H. Sloan, 120 Liberty Street, New York, New

York 10006

‘ 2. Samuel H. Sloan, 1761 Eastburn Avenue. Bronx, New

ork.

3. Samuel H. Sloan, c/o 917 Old Trent's Ferry Road,

Lynchburg, Virginia.

4. Samuel H. Sloan, Champlain Valley Physicians

Hospital Medical Center, Plattsburgh, New York

s/William Nortman

WILLIAM NORTMAN

Sworn to

March 25th, 1975

ned

32a

APPENDIX “K”

LETTER DATED MARCH 25, 1975

FROM SAMUEL H. SLOAN

917 Old Trent’s Ferry Road

Lynchburg, Virginia 24503

March 25, 1975

Phone: 804-384-1207

Clerk

U.S. Court of Appeals

U.S. Courthouse

Foley Square

New York, New York

Dear Sir:

I presently have pending a number of appeals in your

court: S.E.C. v. Sloan & Co., 74-1436, S.E.C. v. Canadian

Javelin Ltd. 75-7046, Sloan v. S.E.C. 73-5.17, S.E.C. v.

Sloan 75-7056, Sloan v. Canadian Javelin Ltd. 75-7096-7,

and a recent appeal entitled Sloan v. S.E.C. et al., to which

no docket number has yet been assigned.

On March 9, 1975, while traveling on Highway 11 near

Champlain, N.Y., Highway 87, and the Canadian border,

the car I was driving broke down. While attempting to flag

a passing automobile, | was struck, and both of my legs

were broken below the knees. My doctor anticiaptes that,

due to the nature of the fractures, it will be six months

before I can again walk.

Presently, I am working on my briefs for the above

encaptioned appeals. This is proving difficult, because |

have no law books and I am forced to lie on my back at all

times. However, in spite of these handicaps, I hope to have

the briefs filed as soon as it is physically possible for me to

do so.

The purpose of this letter is to inform you and my ad-

33a

versaries of this state of affairs, and to ask your

forebearance, in view of this situation. I also wish to inform

you that during the period of my convalescence my address

will be:

Samuel H. Sloan

917 Old Trent's Ferry Road

Lynchburg, Virginia 24503

Yours very truly.

s/Samuel H. Sloan

Samuel H. Sloan

SHS/ms

copies to rh

Securities & Exchange Commission

Hon. Robert J. Ward

Hon. Thomas P. Griesa

34a

APPENDIX “L”

LETTER DATED APRIL 15, 1975

FROM DR. TERRANCE O. MILLER

PIEDMONT ORTHOPEDIC SURGERY, INC.

April 15, 1975

To whom it may concern:

Mr. Sloan was injured in an automobile accident on 3-

9-75. He was initially treated in Plattsburgh, New York.

He suffered displaced fractures of the bones of both lower

extremities. The evening of the injury he underwent

closed reduction of the fracture with application of casts

and three pins were placed in the tibia on the left side. He

was hospitalized until his transfer to Lynchburg, Virginia

on 3-23-75. He was again hospitalized here on 4-3-75 and

underwent repeat general anesthesia with manipulation

with recasting of his legs.

He remains totally disabled, wheelchair bound and, of

course, is in no medical condition to appear in court.

If further information is required, please contact me.

s/Sincerely,

s/Terry O. Miller, M.D.

TERRY O. MILLER, M.D.

TOM /sdf

ce: Mr. Sloan

35a

APPENDIX “M”

DEFENDANTS FIRST INTERROGATORY

TO PLAINTIFF

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES & EXCHANGE COMMISSION

Plaintiff.

-against-

SAMUEL H. SLOAN individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

Pursuant to Rule 33 of the Federal Rules of Civil

Procedure defendants hereby demand that plaintiff furnish

within 30 days of service hereof, separately and fully in

writing under oath, an answer to the following in-

terrogatories:

1. State separately each and every act and practice in

which plaintiff contends the defendants have engaged, are

engaged or are about to engage which constitute violations

of Sections 15(c)(2) and 17(a) of the Securities Exchange

Act of 1934 and Rules 17 CFR 240.1Sc2-11 and 17 CFR

240.17a-4 promulgated thereunder.

2. State whether any of the defendants are registered

brokers or dealers with the Securities & Exchange Com-

mission and whether a broker dealer withdrawal request

has been filed and the date of said filing.

3. With respect to each and every quotation published in

the pink sheets of the National Quotation Bureau Inc. at

36a

the request of Samuel H. Sloan & Co. which plaintiff

contends was in violation of Rule 17 CFR 240.1Se 2-11,

state the exact name of the issuer of security, the exact title

and class of the security, the quotation published, whether

it was a bid or an asked quotation. the date on which the

quotation was published, whether the S.E.C. had ever

suspended trading in that security and, if so, the dates

when the suspension of trading commenced and ter-

minated.

4. With respect to every quotation listed in item three

above, state, by reference to the appropriate subsection of

Rule 1S ¢ 2-11, the manner in which this quotation was

manipulative, fraudulent or deceptive.

5S. With respect to every quotation listed in item three

above, state the name or names of any brokers or dealers

listed in the pink sheets under the same security either on

the same date or on the dates immediately following and

state whether the plaintiff has commenced either ad-

ministrative or injunctive proceedings against said brokers

and dealers for alleged violations of Rule 1Sc 2-11.

6. State the time and dates of all conversations by

telephone and in person between Ira Spindler and the

defendants and between Thomas Dolan and the defendants

and state the substance of all such conversations.

7. State the time and date of each conversation by

telephone and in person between Jerome Selvers and the

defendants or their agents between December 30, 1974 and

January 8, 1975 and state the substance of each con-

versation.

8. State whether plaintiff.communicated with the firms

of E. L. Aaron & Co. and Morton Kominsky regarding the

listing in the pink sheets of Continental Dynamics Ltd.

which was initiated by the defendants and state the nature

of every such communication.

9. Siate whether sworn testimony was taken by plaintiff

with regard to the matters referred to in item eight above

37a

and state the time, date and place of such sworn testimony

and the name of the person who testified.

10. State the name of each and every security suspended

from trading by the plaintiff during 1973, 1974 and 1975

and the dates of each suspension.

11. State the full name, the residence address and the

political party of each commissioner of the Securities &

Exchange Commission and the date when appointed.

i2. State any business, vocation or employment, other

than that of serving as commissioner of each and every

commissioner of the Securities & Exchange Commission.

13. State each and every purchase and sale of a security

including the date, price and name of the security involved

in the purchase and sale and each and every stock market

transaction engaged in by each commissioner of the

Securities & Exchange Commission during the period in

which he has been a commissioner.

14. Describe, in a manner sufficient for a subpoena

duces tecum or for production of documents pursuant to

Rule 34 of the Federal Rules of Civil Procedure, all

documents contained in the records and files of plaintiff

including all transcripts, correspondence, memoranda,

and work product concerning the examination and in-

vestigation by plaintiff of the defendants both prior to and

during the course of this lawsuit.

Dated: June 11, 1975

Lynchburg, Virginia

s/Samuel H. Sloan

SAMUEL H. SLOAN

917 Old Trents Ferry Road

Lynchburg, Virginia 24503

(804) 384-1207

To: Securities & Exchange Commission

26 Federal Plaza

New York, New York 10007

38a

APPENDIX “N”

NOTICE OF MOTION AND

DEMAND FOR JURY TRIAL

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, Individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

PLEASE TAKE NOTICE that upon the annexed

affidavit of Samuel H. Sloan sworn to the 29th day of

July, 1975 the undersigned will move this court on the

12th day of August, 1975 (1) for reargument of this

court’s decision of July 22, 1975S in which the undersigned

was adjudged to be in contempt of court, (2) for a hearing

and/or trial by jury on the motion for contempt and (3)

for an order pursuant to 28 U.S.C. 144 and 28 U.S.C. 455

recusing the Hon. Robert J. Ward from proceeding

further in this case or the grounds that he has demon-

strated bias and prejudice against the pro se defendant

and that, by virtue of his conduct in this case, he has

demonstrated his lack of regard for the oath prescribed

by 28 U.S.C. 453 and his unfitness to be a judge of the

United States District Court, (4) in the event that parts

(1), (2) and (3) of this motion are denied for leave pursuant

to 28 U.S.C. 1292) from that part of the decision and

39a

order of this court which is interlocutory in character and

(S) for a stay pursuant to Rule 8(a) R. App. P.

Dated: Lynchburg, Virginia

July 28, 1975

Yours, etc.

s/Samuel H. Sloan

Samuel H. Sloan

917 Old Trents Ferru Road

Lynchburg, Virginia 24503

(804) 384-1207

To: Securities & Exchange Commission

26 Federal Plaza

New York, N.Y.

40a

APPENDIX “O”

AFFIDAVIT OF SAMUEL H. SLOAN

IN SUPPORT OF MOTION

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, Individually and

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

COMMONWEALTH OF VIRGINIA)

CITY OF LYNCHBURG ) Ss.:

SAMUEL H. SLOAN, being duly sworn, deposes and

says:

1. On July 22, 1975 this Court adjudged me to be in

contempt of court and ordered that my books and records

be removed to a place where they may be inspected by

representatives of the Securities & Exchange Com-

mission. (‘‘S.E.C.”). | now ask for reargument on this

motion.

2. As far as | am aware the S.E.C. has no interest in

examining my books and records. If they have such an

interest, they have not communicated it to me. On July

25, 1975, the day I received the decision of this court in

the mail, I called S.E.C. staff attorney Thomas L. Taylor,

Ill and asked if and when the S.E.C. would be coming to

4la

inspect my books and records. Mr. Taylor replied that the

S.E.C. had no plans to do so. He indicated that he

thought that under the circumstances the court would

direct the U.S. Marshal to come to Lynchburg and get

my books and records. It should be noted, incidentally,

that all of the attorneys who originally expressed an

interest in examining my books and records and who

instituted this lawsuit are no longer employed by the New

York Regional Office of the S.E.C.

3. Several months ago I inquired of Mr. Taylor as to

whether the motion for contempt had been decided. He

told me that he did not expect that the motion for con-

tempt would ever be decided by the court since the S.E.C.

had not proceeded via an order to show cause. He stated

that the S.E.C. had merely brought this motion for the

purpose of having it before the court in case the S.E.C.

wanted a decision at some time in the future.

4. In any event, it is apparent that the S.E.C. has no

present interest in examining my books and records.

This, in part, provided the basis for my motion to dismiss

this proceeding as moot. It is submitted that this court

was in error and that my motion to dismiss should have

been granted.

5. Furthermore, at no time has the S.E.C. desired to

have any books and records removed to a place where

they could be inspected by the S.E.C. This has come up in

connection with the previous lawsuit. In August and

September, 1973, my then attorney, Robert W. Taylor,

called the S.E.C. and offered to turn over all of my books

and records to the S.E.C. This offer was refused by the

S.E.C. The S.E.C. stated that it was not willing to act as a

storehouse for the books and records of brokers and

dealers. Instead, the S.E.C. wanted to be able to examine

my books and records with me present. This was im-

possible because I was in Europe at the time although my

books and records were readily available to the S.E.C. at

my office at 11 Broadway, New York, N.Y. The point

42a

remains, however, that the S.E.C. is not interested in the

removal of my books and records and did not request this

relief in the ad damnum of its complaint.

6. In connection with this motion, I am requesting a

jury trial. Since it appears that this Court plans to fine or

imprison me at some date in the future there can be no

question that I am entitled to a trial by jury in accordance

with the Sixth and Seventh Amendments to the Con-

stitution of the United States.

7. Finally, I ask that Judge Ward recuse himself. |

realize that I have made this request previously. However,

| am repeating this motion because the Hon. Robert J.

Ward has, by his acts, clearly demonstrated his unfitness

to be a federal judge. It is true that the principle that a

judge may not be removed because of inability in both

sound and well established by the Constitution. Chandler

v. Judicial Council 398 U.S. 74 (1970). However, a judge

may be removed for inability in a particular case. Oc-

cidental Petroleum Corp. v. Chandler 303 F. 2d 55 (10

Civ. 1962) (en banc), cert. denied 383 U.S. 936 (1966);

United States v. John Anthony Taylor 487 F. 2d 307 (2d

Cir. 1973). In the case at the bar, the judge presently

assigned to this case has displayed bias, prejudice and

inability and has further demonstrated that he is un-

mindful of the oath prescribed by 28 U.S.C. 453.

8. At the outset, this case was assigned to Judge Ward

illegally by virtue of false representations made to the

coordinating clerk by the S.E.C. attorneys. In particular,

the S.E.C. attorneys falsely represented that there was a

“pending related case” before Judge Ward bearing the

docket number 71 Civil 2695. That representation was

untrue in that a final judgment had been entered that

case and that judgment was on appeal. The S.E.C. at-

torneys also omitted to state that there was a pending

related case before Judge Griesa, 74 Civil 2792, in which

the S.E.C. had just requested an extension of time to

move to dismiss. Thus, by a tactical manuver, and by

43a

making false statements of material fact to the coor-

dinating clerk, the S.E.C. was able to cause the instant

case to be assigned to a district court judge known to be

favorable to the S.E.C. Clearly, this was a violation of the

due process clause of the Fifth Amendment.

9. It is apparent that the judge himself acquiesced to

this procedure. Rule 4(A) of the Calendar Rules for the

Southern District of New York requires that all civil

actions and proceedings be assigned to a judge by lot.

This was not done in this case. Rule 13 provides that

related cases be assigned to the same judge by the

coordinating Clerk provided there is agreement between

the judge to whom the new case was assigned by lot and

the judge to whom the older case was assigned by lot in

the first instance.

10. In the previous trial, 71 Civil 2695, Judge Ward

displayed prejudice by shouting at me on numerous

occasions for no apparent reason, by stomping around

the courtroom while I was testifying or attempting to

examine witnesses, by bearing his teeth, by directing the

order in which I was required to call my witnesses by

“closing” my case, by displaying prosecutional zeal, and

by generally displaying a lack of judicial temperment.

11. In the case at bar, Judge Ward has again displayea

prejudice. He required me to return from Iceland on

January 8, 1974 to attend a hearing scheduled for that

date. However, when I appeared, it turned out that he was

away on vacation and would not return for a week. On

January 17, 1975, when the so-called hearing was finally

held, it is apparent that Judge Ward had communicated

with the S.E.C. on an ex parte basis and directed them to

have their witnesses, Ira Spindler and Thomas Dolan,

present in the courtroom on that date while at the same

time advising the S.E.C. that it would not be necessary to

call them to testify.

12. At the so-called hearing (Tr 44-5) Judge Ward

stated:

44a

‘so far, all of your discussion has been standing

back there, not under oath, making statements

which have no probative value, and I would

suggest, you are not an officer of this court whose

statements I can accept as an officer of the court.

You are appearing pro se.”’

13. It is apparent from this statement and from many

similar statements made by Judge Ward at the previous

trial that he is prejudiced against the defendant because

the defendant is appearing pro se and Judge Ward is

attempting to punish the defendant for not hiring an

attorney. While refusing to accept representations of the

defendant on the ground that he is pro se, Judge Ward

has willingly accepted representations from the S.E.C.

attorneys even though, in many cases, these represen-

tations have been demonstrably untrue. Furthermore,

Judge Ward has protected these S.E.C. attorneys from

having their lies exposed by refusing to permit the

defendant to call them to testify under oath.

14. For all of these reasons, Judge Ward should recuse

himself from proceeding further in this case. Fur-

thermore, since the S.E.C. has no desire io examine the

books and records of the defendant, the decision ad-

judging the defendant to be in contempt of court should

be reversed.

1S. It should be noted that the defendant has moved

Judge Ward to recuse himself on two previous occasions.

The first time on December 30, 1974, Judge Ward agreed

to recuse himself immediately (Tr 32). Later, Judge Ward

changed his mind. At the so-called hearing, Judge Ward

criticized the defendant for not submitting an affidavit. It

is true that 28 U.S.C. 144 requires the submission of an

affidavit. However, in lieu of Judge Ward's prior

representation that he would recuse himself from this

case, an affidavit should have been unnecessary. In any

event, under 28 U.S.C. 144 I am entitled to submit one

affidavit as | am doing in this case.

45a

16. As the court is aware, earlier this year I was struck

by an automobile with the result that both my legs were

broken. In fact, the S.E.C. moved for contempt while |

was in the hospital in Plattsburgh, N.Y. I am still unable

to walk normally. For this reason this case should be

transfered to the Western District of Virginia, Lynchburg

Division.

WHEREFORE, I respectfully pray that (1) decision of

this court dated July 22, 1975 should be reversed (2) this

matter should be set down for a hearing and/or trial by

jury and (3) Judge Ward should recuse himself from this

case.

s/Samuel H. Sloan

Samuel H. Sloan

Sworn to

July 24th, 1975

46a

APPENDIX “P”

YLAINTIFF’S ANSWERS TO

DEFENDANT'S INTERROGATORIES

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

-against-

SAMUEL H. SLOAN, individually ond

d/b/a SAMUEL H. SLOAN & CO.

Defendants.

In response to the Interrogatories of defendants Samuel

H, Sloan (Sloan"’) and Samuel H. Sloan & Co. (Sloan &

Co."’), and pursuant to the order of the Court dated August

4, 1975 that the Securities and Exchange Commission

(“Commission”) answer defendants’ Interrogatories 1, 2,

3, 4, 6, and 7, the Commission hereby submits its answers

pursuant to Rule 33 of the Federal Rul

vl es of Civil

Question /; “State separately each and every act and

practice in which plaintiff contends the defendants have

engaged, are engaged or are about to engage which con-

stitute violations of Sections 15(c)(2) and 17(a) of the

Securities Exchange Act of 1934 and Rule 17 C.F.R.

240.1Se2-11 and 17 C.F.LR. 240.17a-4

thereunder,” a-4 promulgated

Answer: (a) Section 15(c)(2) and Rule 152-11

thereunder—the defendant Sloan has submitted at least

47a

293 Form 211s with the National Quotation Bureau, copies

of which are in the possession of this office, which indicate

that the defendants neither knew nor possessed the in-

formation required by the Rule. The Commission will,

pursuant to Rule 33(c) of the Federal Rules of Civil

Procedure, afford the defendants, upon their request, a

reasonable opportunity to examine, audit or inspect such

records and to make copies, compilations, abstracts or

summaries,

(b) Section 17(a) and Rule 17a-4 thereunder—the

defendants have refused to permit immediate examination

in an easily accessible place by examiners and other

representatives of the Commission of the books and records

of Sloan and Sloan & Co,

Question 2: “State whether any of the defendants are

registered brokers or dealers with the Securities and Ex.

change Commission and whether a broker dealer with-

drawal request has been flied and the date of said filing.”

Answer: On April 28, 1975, the Commission revoked the

broker-dealer registration of Sloan & Co., and barred

Sloan from association with any broker or dealer

(Securities Exchange Act Release No, 11376). The

defendants have petitioned the United States Court of

Appeals for the Second Circuit for review of this order, on

May 13, 1975, that Court declined the defendants’ motion

for a stay pending appeal (Dkt. No. 75-4087),

On information and belief, on September 17, 1973, the

defendants filed with the Commission a Form BDW in

which they sought to withdraw their registrations as

broker-dealers. Such withdrawal did not become effective,

since, pursuant to Rule 17 C.F.R. 240,15b6-1, the

Commission had previously, on April 25, 1972, instituted

administrative proceedings against the defendants to

determine whether the defendants had violated the federal

securities laws, and to determine what remedial action, if

any, might be appropriate in the public interest.

48a

Question 3: “With respect to each and every quotation

published in the pink sheets of the National Quotation

Bureau Inc, at the request of Samuel H. Sloan & Co. which

plaintiff contends was in violation of Rule 17 C.F.R.

240. 1S¢2-11, state the exact name of the issuer of security,

the exact title and class of the security, the quotation

published, whether it was a bid or an asked quotation, the

date on which the quotation was published, whether the

SEC had ever suspended trading in that security and, if so,

the dates when the suspension of trading commenced and

terminated.”

Answer: Defendants are referred to plaintiff's answer to

question 1. Moreover, for the purpose of deriving the

answer to other parts of this question, the Commission will,

pursuant to Rule 33(c) of the Federal Rules of Civil

Procedure, afford the defendants, upon their request, a

reasonable opportunity to examine, audit or inspect the

Commission's public records and to make copies, com-

pilations, abstracts or summaries.

Question 4; “With respect to every quotation listed in

item three above, state, by reference to the appropriate

subsection of Rule 152-11, the manner in which this

quotation was manipulative, fraudulent or deceptive.”

Answer: According to the terms of Rule 1Se2-11, “It

shall be a fraudulent, manipulative, and deceptive practice

within the meaning of Section 15(c)(2) of the Act, for a

broker or dealer to publish any quotation for a security or,

directly or indirectly, to submit any such quotation for

publication, in any quotation medium... unless (the

terms of the Rule are complied with). An examination of

the documents referred to in plaintiffs answer to question

1, reveals, on its face, that the defendants have failed to

comply with the terms of Rule 1Se2-11.

Question 6: “State the time and dates of all con-

versations by telephone and in person between Ira Spindler

and the defendants and between Thomas Dolan and the

49a

defendants and state the substance of all such con-

versations.”

Answer: (a) Upon information and belief, the dates,

times, and substance of all conversations between Ira

Spindler and Sloan, prior to the commencement of this

action, are a matter of public record, See Spindler affidavit

of December 30, 1974; Spindler affidavit of March 24,

1975; and transcript of evidentiary hearing held on January

17, 1975.

(b) Upon information and belief, the dates, times, and

substance of all conversations between Thomas F. Dolan

and Sloan, prior to the commencement of this action, are a

matter of public record. See Dolan affidavit of December

W, 1974,

Question 7: “State the time and date of each con-

versation by telephone and in person between Jerome

Selvers and the defendants or their agents between

December 30, 1974 and January 8, 1975 and state the

substance of each conversation.”

Answer: Upon information and belief, the dates, times

and substance of all conversations between Jerome M.

Selvers, Esq. and Sloan or his agents, between December

W, 1974 and January 8, 1975, are a matter of public

record. See Selvers affidavit of December 30, 1974 and

Selvers affidavit of January 8, 1975.

50a

Dated New York, New York

September 2, 1975

Respectfully submitted,

s/William D. Moran

WILLIAM D. MORAN

Regional Administrator

Attorney for Plaintiff

SECURITIES AND EXCHAN

COMMISSION ws

New York Regional Office

26 Federal Plaza

New York, N.Y. 10007

Tel. No. (212) 264-1636

TO: Samuel H. Sloan

c/o 917 Old Trent's Ferry Road

Lynchburg. Virginia 24503

Verified by

Ralph Pernick |

on September 2nd, 1975

5la

APPENDIX Q

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION

Plaintiff,

“against -

SAMUEL H. SLOAN, Individually and d/b/a

SAMUEL H. SLOAN & CO.

Defendants.

74 Civil 5729 (RJW)

ORDER OF CIVIL CONTEMPT

Plaintiff Securities and Exchange Commission (“Com-

mission”) having moved by notice of motion dated

March 24, 1975 for an order of civil contempt against

Samuel H. Sloan ("Sloan") and having submitted an

affidavit and a memorandum of law in support thereof,

and the Court having filed a Memorandum dated July 22.

1975, and it being established to the satisfaction of the

Court that:

1. On December 30: 1974 plaintiff Commission filed a

Complaint seeking preliminary and permanent injunctions

and certain other relief against the defendants. On that

date the Court ordered defendants Sloan and Samuel H.

Sloan & Co. ("Sloan & Co.") to permit immediate examina-

tion in an easi!s accessible place by examiners and other

representatives of the Commission of the books and

records of Sloan and Sloan & Co

2. On January 8 1975, the Honorable Thomas P.

Griesa, United States District Judge, extended said order

up to and including January 17, 1975,

3, On January 17, 1975, the Court held an evidentiary

hearing on the Commission's application for a prelimi-

nary injunction, and issued an Order of Injunction order-

ing. inter alia, Sloan and Sloan & Co. to permit immediate

examination in an easily accessible place by examiners

and other representatives of the Commission of the books

und records of Sloan and Sloan & Co,

4, On January 20, 1975 the defendants filed a notice

of appeal to the United States Court of Appeals for the

Second Circuit trom said Order of Injunction and moved

the Court of Appeals by notice of motion filed January

23, 1975 for a stay of said Order of Injunction pending

appeal. The Court of Appeals denied the defendants’

motion for a stay on February 13, 1975,

5. The defendant Sloan refused to permit examiners of

the Commission to inspect the books and records of

Sloan & Co., and the Commission moved by notice of

motion duted March 24, 1975 to adjudge Sloan in con-

tempt of this Court for wilful violation of the Court's

Order of Injunction dated January 17, 1975,

6. The Court filed its memorandum dated July 22,

1975 in which it was found that the defendant Sloan

wilfully violated this Court's order of preliminary injunc-

tion dated January 17, 1975 by refusing to permit inspec-

tion of the books and records of Samuel H. Sloan & Co.,

by representatives of the Commission.

7, Defendant Sloan moved by notice of motion dated

July 28. 1975 for, inter alia, reargument of this Court's

decision of July 22. 1975 and for a hearing and or trial

by jury on the motion for contempt. On August 1K, 1975

the Court tiled tts memorandum denying said motion

53a

IT IS HEREBY ORDERED, ADJUDGED AND DE-

CREED that the defendant Sloan is in civil contempt of

this Court for wilful failure to comply with the Order

of Injunction dated January 17, 1975 by refusing to

permit immediate examination in an easily accessible

place by examiners and other representatives of the

Commission of the books and records of Sloan & Co..,

and it is further

ORDERED, ADJUDGED AND DECREED that the

defendant Sloan be and he is hereby granted twenty

(20) days trom date of this Order within which to purge

his contempt by permitting immediate examination in an

casilv accessible place by examiners and other representa-

tives of the Commission of the books and records of

Sloan & Co., and it is further

ORDERED. that defendant Sloan appear before this

Court .on the 26TH day of SeptemBer. 1975, at 2:15

o'clock in the afternoon. in Room 906 of the United

States Courthouse, Foley Square. New York, New York,

for sentencing and it is further

ORDERED that, in the event the defendant Sloan

fails to appear before the Court on the date above

indicated. the Commission is authorized to serve a

certitied cepy of this Order of Civil Contempt upon

he United Stefes Marshal. and the Uniied States Marsha!

shall. upon receipt of a certified copy of this Order of

Civil Contempt. arrest Samuel H. Sloan and confine him

to the Metropolitan Correctional Center, 150 Park Row,

New York. New York, until he permits immediate examina-

tion im an easily accessible place by examiners and other

representatives of the Commission of the books and

records of Sloan & Co.

Dated: New York. New York

Scriember 3. 1975

(signed) Robert J. Ward

UNITEDSTATES DISTRICT JUDGE

54a

APPENDIX R—MOTION TO COURT OF APPEALS

FOR IMMUNITY FROM ARREST AND

OF SERVICE APESDAVIT

United States Court of Appeals

for the Second Circuit

Securities & Exchange Commission,

Plaintiff-appellee,

-against-

Pye H. Sloan individually and d/b/a Samuel ” ’. Sloan

0.,

Defendant-appellant.

75-6106

NOTICE OF MOTION

PLEASE TAKE NOTICE that upon the annexed af-

fidavit of Samuel H. Sloan sworn to the 23rd day of

December, 1975 the undersigned hereby moves this court

for an order granting immunity from arrest or, in the

alternative, for a temporary 48 hour stay of the order of

civil contempt so that the appellant may be able to attend

court on January 7, 1976 for the purpose of participating in

= argument of appeals no. 74-1436, 75-7046 and 75-

Dated: December 23, 1975

REYKJAVIK, ICELAND

Yours, etc.,

s/ Samuel H. Sloan

55a

To:

Thomas L. Taylor III

Securities & Exchange Commission

S00 N. Capital St.

Washington, D.C. 20549

AFFIDAVIT IN SUPPORT OF MOTION

United States Court of Appeals

for the Second Circuit

Securities & Exchange Commission,

Plaintiff-Appellee.

-against-

Samuel H. Sloan individually and

d/b/a Samuel H. Sloan & Co.,

Defendant-appellant.

75-6106

REYKJAVIK )

ICELAND ) S:S.:

Samuel H. Sloan, being duly sworn, deposes and says:

1. | make this affidavit in support of a motion for im-

munity from arrest or, in the alternative, for a temporary

48 hour stay of Judge Wards order of civil contempt dated

September 3, 1975. On September 26, 1975 I moved for a

stay of Judge Ward’s order and that motion was denied.

The instant motion, however, is made for a different reason

and under different circumstances. A motion essentially

identical to the instant motion was made before Judge

Ward on December 2, 1975. As far as I know, Judge Ward

has yet to make a decision on that motion. Because oral

argument has been scheduled for January 7, 1976 at 9:30

Samuel H. Sloan

KLEPPSVEG 26

3 HAED T.H.

REYKJAVIK, ICELAND

56a

A.M. I feel that I can wait no longer before making this

motion here. In addition, since this motion concerns

matters of direct interest to this court, I feel that this

motion is most appropriately brought here in any event.

2. A copy of my moving papers in the district court are

attached hereto and marked exhibit A. A copy of the

response of the S.E.C. is attached hereto and marked

exhibit B.

3. I am presently in Iceland. I have no plans to return to

the United States until these appeals have been decided.

However, I would like to be able to attend court on January

7, 1976 to argue appeals no. 74-1436, 75-7046 and 75-7056.

- This court has given me 40 minutes to argue these three

appeals. However, it will be physically impossible for me to

do so unless I am given either immunity trom arrest or I am

granted a stay of Judge Ward’s order. I need about a 48

hour stay in order to be able to get in and out of the United

States considering possible cancellation of flights and other

contingent problems. Naturally, I would be gratified if this

court were to grant me a stay pending appeal but this relief

has been denied previously and would not be necessary for

the purposes which bring about this motion.

4. I view this case as being one where a district judge has

conducted a trial in abstentia or conducted proceedings ex

parte. The simple fact is that Judge Ward refused to give

me a hearing and, because he decides motions on papers

without hearing oral argument, it was not even possible to

present my side of this case. However, by refusing to permit

me to come into his courtroom he also deprived himself of

the jurisdiction and the power to enforce his own order.

There was no order to show cause or order of civil arrest in

compliance with Rule 42(b) Fed. R. Crim. P. There was no

proper service of a summons and complaint. The S.E.C.

did not even give me the required 10 days notice in its

motion for civil contempt. Nor can any claim be made that

I was likely to run away because, as a matter of fact, I was

in the hospital because I had sustained two broken legs as

57a

the result of an automobile accident. In short, every rule of

procedure with respect to either civil or criminal contempt

was ignored in this case.

5. However, that is not the issue here. The sole issue is

whether this court will make it physically possible for me to

attend at court to argue my appeals. These appeals are

complex and involve many issues of fact. Congress has

established the policy of permitting appellants to argue

their cases orally. I realize that there have been exceptions

to this policy but none of these exceptions apply here. If I

did not believe that the presentation of my oral argument is

essential to my right to appeal in these cases I would not be

prepared to travel nearly 3000 miles in order to be in court

on January 7, 1976. Although the S.E.C. has protested

vigerously it has not yet cited any harm which will result to

the S.E.C. if | am permitted to argue my cases orally nor

has it shown any public policy that will be undermined by

permitting me to appear in court to argue my appeals.

Indeed, if this court did not agree with me on this point it

would not have accorded me a total of 40 minutes to argue

my appeals. The S.E.C. will also have 40 minutes to argue

on that day. It is essentially unfair for the S.E.C. to be

given 40 minutes to argue under circumstances where it is

not possible for me to be present. | am not, however,

objecting to the presence of the S.E.C. on that date. I

merely wish to be permitted to appear and argue on an

equal footing with the S.E.C. Furthermore, there is

authority for the granting of this motion under these

circumstances. The immunity principle is well established

in the New York State courts and, according to the

S.E.C.’s own brief, this principle has also been applied in

the federal courts. Therefore this motion must be granted.

s/ Samuel H. Sloan

Samuel H. Sloan

Kleppsvegi 26

3 Haed t.h.

Reykjavik, Iceland

Tele-no. 35332

58a

Certificate of Acknowledgment of Execution of an In-

strument

Republic of Iceland

City of Reykjavik

Embassy of the United

States of America

I, Charles D. Mierzejewski, Vice Consul of the United

States of America at Reykjavik, Iceland duly commissioned

and qualified, do hereby certify that on this 23rd day of

December, 1976, before me personally appeared Samuel

H. Sloan to me personally known, and known to me to be

the individual described in, whose name is subscribed to,

and who executed the annexed instrument, and being

informed by me of the contents of said instrument he duly

acknowledged to me that he executed the same freely and

voluntarily for the uses and purposes therein mentioned.

In witness whereof I have hereunto set my hand and

official seal the day and year last above written.

s/ Charles D. Mierzejewski

Charles D. Mierzejewski

Vice Consul of the United States of America.

{Seal}

59a

APPENDIX S—TRANSCRIPT OF PROCEEDINGS OF

FEBRUARY 2, 1976

MR. SLOAN: I am inclined to question why you called

this hearsay. It’s not hearsay. It’s a statement by the

Securities and Exchange Commission. Mr. Jacobs has

indicated that he is not aware of the statement, but. of

course, Mr. Jacobs is not the attorney on this case.

THE COURT: Well, if you have an affidavit, let me see

it.

MR. SLOAN: Your Honor, I have no more documents

with me.

THE COURT: If you want to take the stand and swear

that the statements you just made, I would ask you,

number one, to state the specifics of when and under what

circumstances the statements were made by Mr. Pernick. |

would ask the statements be set forth. I would have to warn

you at this time that if you testified falsely in any material

respect this matter would be sent to a grand jury for such

action as they deem appropriate which goes beyond the

contempt and touches on perjury. It’s a serious matter to

the Court. But if you are prepared to take the stand and

swear to what you have just stated, you say this statement

of admission against interest by the Commission, | am not

sure what the position is of the Commission and therefore |

call it hearsay.

But let’s say he’s in such a position he could bind the

Commission, I would hear you, and then we will get ahold

of Mr. Pernick and I will hear what he says.

If you wish to take the stand and have Miss Kruger

administer the oath and testify under oath, you may do so.

However, I must warn you that any statement you make, in

view of your past record with this Court, will be looked at

with considerable care and scrutiny, and if at odds with the

sworn statement of any other person might be presented to

a grand jury and might be the basis of a separate and

additional charge of perjury. I suggest before we go further

you have the right to consult with counsel, you have the

righ

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