Securities & Exchange Commission v. Moss

K. K. HALL, Circuit Judge: Sheldon S. Moss appeals from an order of the district court holding him in civil contempt and committing him to the custody of the U. S. Marshal for failing to comply with an order entered on a consent judgment of permanent injunction and other relief entered by the same court on January 22, 1979. We affirm the district court’s contempt and commitment order. The consent judgment in issue arose from a complaint brought by the Securities and Exchange Commission (SEC) in civil enforcement proceedings against Moss and others. The SEC alleged, inter alia, that Moss, individually and doing business as Correlated Equities Corporation, and others had violated the antifraud and registration — 315 — provisions of the federal securities laws.1 Moss, through counsel, consented to the entry of a preliminary injunction. On January 22, 1979, again through counsel, Moss consented to the entry of a permanent injunction. An order was entered by the district court upon the parties’ consent and signature. The consent order required Moss to deposit $4.5 million in the court registry and prohibited him from disposing of his assets without prior court approval, except in limited circumstances.2 The consent order further provided that: Correlated Equities and Sheldon Moss .. . deposit and remit the above described monies by February 28, 1979, or file with the plaintiff, Securities and Exchange Commission a detailed schedule of the monthly receipt and disbursement of all monies, funds, and properties for each of them and all persons or corporations controlled directly or indirectly, by them by the 10th day of the month following the month covered by said schedule of receipts and disbursements until said sum is paid, the first schedule covering January and February, 1979, to be filed by March 10, 1979. Moss filed monthly reports for January, February and March in compliance with the consent judgment. On April 30, 1979, the SEC petitioned the district court for an adjudication in civil contempt against Moss for failing to deposit the $4.5 million in the court registry. On June 26, 1979, a contempt hearing was held during which the district court questioned the parties extensively regarding the intent of the consent judgment. At this time Moss argued the consent judgment provided him with alternate means of compliance, to wit: the deposit of $4.5 million or the timely filing of reports on receipts and disbursements. The district court denied the SEC’s petition for contempt but rejected Moss’ argument. By order filed July 13, 1979, it found: a meeting of the minds of all the parties occurred on January 22, 1979, the date the agreement was signed and filed, and it is concluded that the intent of the parties was that the defendants Correlated Equities Corporation and Sheldon Moss pay into the Clerk of the Court $4,500,000.00 in negotiable U. S. Government Securities “within a reasonable time” from the date on which the consent decree and injunction was entered. The district court further found that the reasonable time for compliance had expired and it ordered Moss to deposit the money and file the required reports by August 1, 1979. This deadline was later amended to September 1, 1979. On August 21, 1979, in connection with a related matter, the reports for April, May and June of 1979 were delivered. These reports disclosed that Moss had sold a condominium apartment and some shares of bank stock without the court’s approval. Nine days later the SEC filed another petition to hold Moss in civil contempt for selling these assets without court approval and for claiming excessive living expenses. At the contempt hearing Moss claimed he had sold these assets to support his family and to pay counsel fees. Following this hearing, but before the court issued its order, Moss filed an affidavit stating that he was unemployed and that he had virtually no assets. On September 20, 1979, the district court issued an order holding Moss in civil contempt and ordering his commitment until he purged himself by paying the $4.5 million. Moss filed another affidavit stating — 316 — his poverty. The district court stayed its commitment order pending this appeal. On May 8,1979, following the entry of a guilty plea to 16 counts of mail fraud, Moss was sentenced to 8 years in prison. On appeal Moss argues there was no basis for holding him in civil contempt because he did not violate the consent order. Moss renews his argument that the January 22,1979, order provided for alternate means of compliance. We, too, find this argument unpersuasive. If Moss’ position were to be accepted, he could forever avoid the payment of the $4.5 million by filing timely reports. Furthermore, it is clear that Moss violated that portion of the consent judgment which prohibited the sale of assets without court approval except in limited circumstances. Moss was only permitted to use his personal funds for the payment of living expenses and counsel fees. The sale of assets without court approval was restricted to sales for the purpose of funding repayment or repaying Television Marketing’s indebtedness. The sale of assets for other purposes required prior court approval which Moss did not request or receive. Moss also contends the district court improperly modified the consent judgment and order by inferring the parties meant to require payment within a reasonable time. The district court acted well within its powers in determining the parties’ intent when they entered into the consent judgment. U. S. v. ITT Continental Baking Co., 420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975). The district court’s determination that there was a meeting of minds and that a reasonable time for compliance was intended was a permissible exercise of its “inherent power to supervise and aid the implementation of settlement agreements in pending litigation.” Wood v. Virginia Hauling Co., 528 F.2d 423 (4th Cir. 1975). Moss’ final contention is that since he does not have the present financial ability to comply with the consent order, the commitment will serve no remedial purpose. The district court heard testimony and evaluated the evidence presented to show Moss’ inability to comply with the consent order. It did not credit much of Moss’ testimony, especially in light of the government’s allegations that Moss was attempting to evade the judgment. We find no abuse of discretion by the district court. When Moss completes his present criminal sentence, he may then present whatever new evidence is available to demonstrate his inability to comply with the consent order. AFFIRMED. Footnotes [1] The complaint alleged violations of 15 U.S.C. § 77e(a) and (c), 15 U.S.C. § 77q(a), and 15 U.S.C. § 78j(b). [2] The consent judgment provided that: “the defendants are permitted to use their personal funds for reasonable and necessary living, secretarial, utility, travel, counsel fees, accountants [sic] fees, rent expenses ...” (emphasis added). Correlated Equities Corporation and Moss, individually, and d/b/a Television Marketing were further permitted to pledge, hypothecate, sell, assign, transfer or otherwise dispose of any assets for the purpose of funding the repayment or repaying the indebtedness of Television Marketing.