SEC v. Antar, Civ. A. No. 89-3773 (NHP).

Citation831 F. Supp. 380
Decision Date23 August 1993
Docket NumberCiv. A. No. 89-3773 (NHP).
PartiesSECURITIES AND EXCHANGE COMMISSION v. Deborah Rosen ANTAR, Simone Antar, Nicole Antar, Danielle Antar, Gabrielle Antar, and Noelle Antar.
CourtU.S. District Court — District of New Jersey

Richard E. Simpson, Richard G. Wallace, S.E.C., Washington, DC, for plaintiff.

Stephen L. Dreyfuss, Matthew E. Moloshok, Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, Myrna Felder, Raoul Lionel Felder, New York City, for nominal defendants.

A. Richard Ross, Carella, Byrne, Bain, Gilfillan, Cecchi & Stewart, Roseland, NJ, for trustee/receiver Charles C. Carella.

John D. Arseneault, Arseneault, Donohue, Sorrentino & Fassett, Chatham, NJ, for Eddie Antar.

Marvin Gersten, David W. O'Connor, Gersten, Savage, Kaplowitz & Curtin, New York City, for Mitchell Antar.

Michael Chertoff, U.S. Atty., Dept. of Justice, Newark, NJ.

POLITAN, District Judge.

BACKGROUND

Before the Court is another chapter in the saga of the Antar family. The naked question in this case is whether a person who has violated the securities laws can shield the ill-gotten gains from recoupment by causing those profits to occur in a trust for his children.

The naked facts are living proof of the old adage, which unfortunately is the all too frequent credo in today's world: "let the ends justify the means". Placing Deborah Rosen Antar's testimony in the matrimonial action in juxtaposition to her testimony in this case, dramatically demonstrates that "truth" depends upon what result is sought. A sorry commentary. The real truth, however, compels rejection of her latest version of the facts placed before this Court to support her assertion that the ill-gotten gains should not be recouped. This Court will not be fooled by tears, nor misled by the obvious appeal to its sensitivity for children. The ends can never justify the means. This Court in no uncertain terms rejects this ill-conceived evil principle. Let the truth be told and judged whatever the result. The law demands no more and no less than that.

This case involves a claim by the United States Securities and Exchange Commission ("SEC") for constructive trust and unjust enrichment in connection with approximately $8,000,000 (Eight Million Dollars) that was obtained through the sale of 300,000 shares of the common stock of Crazy Eddie, Inc. ("Crazy Eddie") on June 28, 1985. The 300,000 shares will be referred to herein as the "custodial stock." The defendants in this case are Deborah Rosen Antar ("Deborah"), the former wife of Eddie Antar ("Eddie"), and the five children of Deborah and Eddie Antar named Danielle Antar, now deceased, Simone Antar, Nicole Antar, Gabrielle Antar, and Noelle Antar. The children's ages at the time of the sale of their shares on June 28, 1985 were as follows: Danielle, age 10, Simone, age 11; Nicole, age 11; Gabrielle, age 7; and Noelle, age 6. The defendants will be referred to herein as the "nominal defendants." The SEC has alleged no violations of federal securities law against Deborah Rosen Antar or the children.

The custodial stock was purportedly held by Deborah Antar as custodian for her five children. The stock originated from purported gifts to the children that were made by Eddie Antar in December 1983 and January 1984 under the New York Uniform Gifts to Minors Act. For reasons expressed in this opinion, the Court finds that the adjudication of the SEC's case against the nominal defendants does not require a determination of whether Eddie Antar's purported gift was legally effective or whether Deborah Antar actually held title to the custodial stock as custodian for her five children.

The SEC initiated this action in 1989, asserting claims against only former officers, directors or executive employees of Crazy Eddie, Inc.: Eddie Antar, Sam E. Antar, Mitchell Antar, Isaac Kairey, David Panoff, Eddie Gindi and Kathleen Morin. The SEC's original complaint sought injunctive relief against each of the defendants as a violator of the Securities Act of 1933 or the Securities Exchange Act of 1934, and the additional remedy of disgorgement of profits derived by each such violator.

On or about April 9, 1990, the SEC filed an Amended Complaint to join Deborah Rosen Antar and her children as nominal defendants. In the Amended Complaint, the SEC alleged that Eddie Antar caused the sale of the custodial stock. The SEC alleged that Eddie did so at a time when he knew or was reckless in not knowing that the market price of the stock was based on materially false representations regarding Crazy Eddie's financial condition. The SEC alleged that Eddie was the person who made the decision to sell the custodial stock. The SEC also alleged that Eddie's sale of the stock violated section 17(a) of the Securities Act, 15 U.S.C. §§ 77q(a), section 10(b) of the Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.

The SEC alleges that the nominal defendants are constructive trustees with respect to the illegal profits derived from the sale of the custodial stock. According to the SEC, the nominal defendants hold the illegal profits under circumstances in which it is unjust or inequitable for them to retain the funds. The SEC also maintains that the nominal defendants are unjustly enriched by the illegal profits.

The SEC asks this Court to impose a constructive trust on the illegal profits held by the nominal defendants and to order the nominal defendants "to account for and disgorge all profits and monies received as a result of the illegal conduct of Eddie Antar in connection with the sale" of the custodial stock.

The nominal defendants have denied that the SEC is entitled to any recovery as against them, and have asserted as defenses, inter alia, that the SEC failed to state a claim, that Eddie Antar was never custodian of their shares, that Eddie Antar had no beneficial interest in their shares, that Deborah Rosen Antar as sole custodian made the decision to sell the children's shares, that the nominal defendants were innocent of wrongdoing, that the nominal defendants had received no illegal profit, that the nominal defendants had no fiduciary duties to Crazy Eddie, Inc. or its shareholders, that the SEC's claims are barred by the applicable statute of limitations, and that the Court lacks subject matter jurisdiction.

The SEC moved for summary judgment against the nominal defendants, and the nominal defendants cross-moved for summary judgment dismissing the Amended Complaint as against them. The motion and cross-motion were argued on October 28, 1991. In support of their motions, the parties submitted affidavits, documentary evidence and, in the case of the SEC, transcripts of testimony given by Deborah Antar. This Court found at the hearing that the only disputed factual issue was the question of who sold the custodial stock. Citing Securities and Exchange Commission v. Cherif, 933 F.2d 403 (7th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 966, 117 L.Ed.2d 131 (1992), the nominal defendants posit that the issue of "who sold the stock" is immaterial as a matter of law. The SEC disagrees and maintains that there is no genuine issue regarding who sold the stock.

To facilitate resolution of the motion and the determination of the claims and defenses, this Court directed an evidentiary hearing solely on the issue of "who sold the stock." The issues of law that the parties raised in their motions were taken under advisement.

This Court held a trial on November 21 and 22, 1991 on the issue of who sold the custodial stock. See Transcript of Proceedings, Securities and Exchange Commission v. Deborah Rosen Antar, et al., Civil No. 89-3773 (D.N.J. November 21 and 22, 1991) ("Tr."). At trial, five witnesses testified resulting in a trial transcript of 262 pages. The witnesses were: Myrna Felder, attorney for Deborah in Deborah Antar v. Eddie Antar, Index No. 06755/88 (N.Y.Sup.Ct. Kings Co.); Deborah Rosen Antar; Robert S. Rosenbaum, President of R.S. Rosenbaum & Company, the firm that printed the June 28, 1985 Proxy Statement of Crazy Eddie, Inc.; Theresa Miselis, keeper of the records of Bank Leumi Trust Company of New York; and Lillian Rosen, the mother of Deborah Antar.

In addition to the testimony of the five witnesses who appeared at trial, portions of testimony that Deborah gave at deposition and trial in Deborah Antar v. Eddie Antar, at deposition in Deborah Antar v. Eddie Antar and Solomon Antar, Index No. 15910/87 (N.Y.Sup.Ct.N.Y.Co.), and at deposition in this case, were offered into evidence. The two actions above that Deborah brought against Eddie Antar and/or Solomon Antar are referred to herein as the "matrimonial case." Furthermore, sworn affidavits that Deborah submitted in this case and in the matrimonial case were received in evidence. The Court also admitted into evidence portions of deposition testimony that Lillian Rosen gave in the matrimonial case, and the entire transcript of deposition testimony that Ted Serure gave in this case. Ted Serure was the broker who executed the sale of the custodial stock.

The following exhibits were received into evidence at trial: SEC Exhibits ("Px") 1 through 17, 20 through 24, and 42 through 48; Nominal Defendants' Exhibits ("Dx") 1 through 31. These exhibits included public documents from the matrimonial case and documents from the files of Crazy Eddie, Bank Leumi Trust Company of New York, the SEC, R.S. Rosenbaum & Company, and Bear, Stearns & Company. This Opinion constitutes the Court's Findings of Fact and Conclusions of Law.

FINDINGS OF FACT
EDDIE ANTAR SOLD THE CUSTODIAL STOCK

Based on the evidence that was presented at the trial held on November 21 and 22, 1991, the Court hereby finds that Eddie Antar was the person who sold the custodial stock on June 28, 1985. The reasons for the Court's finding are set forth below.

Deborah Antar's Prior Sworn Statements Establish That Eddie Was The Person Who Decided To...

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