S.E.C. v. Drexel Burnham Lambert Inc., 95-6217

• Citation: 101 F.3d 107
• Decision Date: 08 March 1996
• Docket Number: No. 95-6217,95-6217
• Parties: NOTICE: THIS SUMMARY ORDER MAY NOT BE CITED AS PRECEDENTIAL AUTHORITY, BUT MAY BE CALLED TO THE ATTENTION OF THE COURT IN A SUBSEQUENT STAGE OF THIS CASE, IN A RELATED CASE, OR IN ANY CASE FOR PURPOSES OF COLLATERAL ESTOPPEL OR RES JUDICATA. SEE SECOND CIRCUIT RULE 0.23. SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. DREXEL BURNHAM LAMBERT INCORPORATED; Drexel Burnham Lambert Group Inc.; Michael R. Milken; Lowell J. Milken; Cary J. Maultasch; Pamela R. Monzert; Steven N. Posner; Pennsylvania Engineering Corporation, Defendants, Victor Posner, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 107

101 F.3d 107

NOTICE: THIS SUMMARY ORDER MAY NOT BE CITED AS PRECEDENTIAL AUTHORITY, BUT MAY BE CALLED TO THE ATTENTION OF THE COURT IN A SUBSEQUENT STAGE OF THIS CASE, IN A RELATED CASE, OR IN ANY CASE FOR PURPOSES OF COLLATERAL ESTOPPEL OR RES JUDICATA. SEE SECOND CIRCUIT RULE 0.23.

SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. DREXEL BURNHAM LAMBERT INCORPORATED; Drexel Burnham Lambert

Group Inc.; Michael R. Milken; Lowell J. Milken; Cary J.

Maultasch; Pamela R. Monzert; Steven N. Posner;

Pennsylvania Engineering Corporation, Defendants,

Victor Posner, Defendant-Appellant.

No. 95-6217.

United States Court of Appeals, Second Circuit.

March 8, 1996.

APPEARING FOR APPELLANT: Jay P. Lefkowitz, Kirkland & Ellis, Washington, DC.

APPEARING FOR APPELLEE: Leslie E. Smith, Securities and Exchange Commission, Washington, DC.

PRESENT: HON. ROGER J. MINER, HON. DENNIS G. JACOBS, HON. JOSE A. CABRANES, Circuit Judges.

UPON CONSIDERATION of this appeal from an order of the United States District Court for the Southern District of New York, it is hereby

ORDERED, ADJUDGED, AND DECREED that the order be and it hereby is AFFIRMED.

This cause came on to be heard on the transcript of record and was argued by counsel.

Defendant-appellant Victor Posner appeals from an order entered on June 30, 1995 in the United States District Court for the Southern District of New York (Pollack, J.). The district court ordered that, as to all proposed transactions involving Salem Corporation ("Salem") that require shareholder approval, the trustee holding Posner's shares is to vote those shares proportionately without any interference from Posner.

In 1988, plaintiff-appellee Securities and Exchange Commission ("SEC") brought a civil enforcement action against Posner and several others, alleging that they had violated the federal securities laws. Specifically, the SEC charged that Posner had participated in a scheme to fraudulently purchase a controlling stock interest in Fischbach Corporation ("Fischbach").

Following a bench trial, the district court found that Posner had violated various provisions of the securities laws. SEC v. Drexel Burnham Lambert Inc., 837 F.Supp. 587 (S.D.N.Y.1993). The court found that Posner had committed these violations with a "high degree of scienter," id. at 611, and that Posner in the past had "repeatedly abused [his] positions in public companies, engaged in self-dealing, [and] enriched [himself] at the expense of public shareholders," id. at 606. The district court found that "[t]here is every reason to believe that, absent further injunctive and ancillary relief, [Posner] will continue to abuse [his] positions as officers and directors of public companies to engage in future violations." Id. at 611.

Accordingly, in addition to ordering Posner to disgorge the compensation paid to him by Fischbach, the district court ordered that Posner be barred from serving as an officer or director of any public company. The district court further ordered that Posner's shares in any public companies in which he owns a controlling interest be placed in a trust. The court stated that "[p]lacing the shares [Posner] own[s] in such companies in a voting trust will divest [him] of control, and thereby give added assurance of compliance, without depriving [him] of the economic value of [his] shares." Id. at 615. The court stated that the voting trust order "will expressly provide that [Posner] retain[s] the right to sell or pledge the stock held in the trust at any time," and that his right to vote stock that he owns in a company that he controls "shall be restored upon that company's ceasing to be a reporting company under the federal securities laws." Id. at 616. On December 29, 1993, the district court entered a Final Judgment as to Posner, which provided that a Voting Trust Order thereafter would be entered.

On appeal, we affirmed the judgment of the district court. SEC v. Posner, 16 F.3d 520 (2d Cir.1994), cert. denied, 115 S.Ct. 724 (1995). In regard to his claim that the officer and director bar should be vacated, we stated that "[t]he court has broad equitable power in this area," and that "[w]e intend our affirmance of Judge Pollack's judgment in this respect as a sharp warning to those who violate the securities laws that they face precisely such banishment." Id. at 521-22.

Following the submission of letters from Posner and the SEC to the district court, the district court entered the Voting Trust Order on March 2, 1994. George H. Heyman, Jr., was appointed to serve as Trustee. The Voting Trust Order provided:

[I]n respect of any proposal other than the election of directors submitted by a Reporting Company whose Securities are subject to the Trust to the holders of such Securities or submitted by a third party for their vote ..., the Trustee shall instruct the Custodian to vote the Trust Securities ... in proportion to the votes ... of the other holders of such Securities who cast votes for or against the proposal.... Provided that, the Trustee, in his sole discretion, upon consideration of the purposes for the Final Judgment, ..., on 10 days advance written notice to the Court, the Securities Exchange Commission and the Certificate holders, and...