Antoniu v. S.E.C.

• Decision Date: 31 July 1989
• Docket Number: 88-1095,Nos. 85-5384,s. 85-5384
• Citation: 877 F.2d 721
• Parties: , Fed. Sec. L. Rep. P 94,475 Adrian ANTONIU, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 721

877 F.2d 721

58 USLW 2028, Fed. Sec. L. Rep. P 94,475

Adrian ANTONIU, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent.

Nos. 85-5384, 88-1095.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 17, 1988.

Decided June 19, 1989.

Rehearing and Rehearing En Banc Denied July 31, 1989.

David Stratman, Albuquerque, N.M., for petitioner.

Martha H. McNeely, S.E.C., Washington, D.C., for respondent.

Before LAY, Chief Judge, FLOYD R. GIBSON, Senior Circuit Judge, and McMILLIAN, Circuit Judge.

LAY, Chief Judge.

Adrian Antoniu (Antoniu) worked from August 1972 until May 1975 in the corporate finance department of Morgan Stanley & Co., Inc. (Morgan Stanley), a broker-dealer registered with the Securities and Exchange Commission (SEC or Commission). Antoniu entered into an insider trading conspiracy with James N. Newman (Newman), a securities trader. Antoniu would obtain the non-public information about imminent takeover bids by Morgan Stanley's clients. Newman would then buy large blocks of stock of the targeted companies and later sell the stock at a profit. Antoniu shared in the profits.

Morgan Stanley asked Antoniu to resign and he took a position at Kuhn Loeb & Co. (Kuhn Loeb) (later Lehman Brothers Kuhn Loeb, Inc.) in the newly established mergers and acquisitions department. Antoniu continued to receive market-sensitive non-public information from Morgan Stanley employee E. Jacques Courtois. While at Kuhn Loeb, Antoniu repeated the pattern: he misappropriated the information and passed it to Newman, who bought and sold stocks of target companies. The conspirators split the profits. Kuhn Loeb fired Antoniu in 1978 when he was investigated for insider trading violations. Antoniu then moved to Italy.

On November 13, 1980, Antoniu pled guilty to two counts of misappropriating information in securities markets in violation of 15 U.S.C. Secs. 78j(b) and 78ff, and Rule 10b-5, 17 C.F.R. 240.10b-5 and 18 U.S.C. Sec. 2, as part of a plea bargain. ¹ He was sentenced to three months' imprisonment, thirty-six months' suspended sentence and a $5000 fine, on August 11, 1982. On March 31, 1983, the sentence was reduced to thirty-nine months' unsupervised probation and a $5000 fine.

In 1984, Antoniu moved to Minnesota to take a job with M.H. Novick & Co. Due to Antoniu's criminal conviction, Antoniu and Novick sought approval for the employment from the National Association of Securities Dealers (NASD). After an evidentiary hearing, NASD approved the employment on June 3, 1985. Antoniu went to work for Novick later that summer.

On September 3, 1985, the SEC vetoed NASD's approval of that particular employment. (This set of proceedings is hereinafter referred to as Antoniu I ). One of the participating commissioners was Charles C. Cox. On September 19, 1985, the SEC started a second set of proceedings (hereinafter referred to as Antoniu II ). Commissioner Cox also took part in the SEC's decision to institute Antoniu II. The purpose of this second set of proceedings was to determine whether Antoniu should be subjected to sanctions due to his criminal conviction. In other words, the Commission was to determine whether it was in the public interest to exclude Antoniu from any employment in the securities business. ²

While Antoniu II was pending, on October 18, 1985, Commissioner Cox gave a speech in Denver entitled "Making the Punishment Fit the Crime--A Look at SEC Enforcement Remedies." The speech outlined two recent cases before the SEC in which the Commission had imposed sanctions on firms or persons. Commissioner Cox said that each of the sanctioned entities was an "indifferent violator" and further expounded:

Mr. Antoniu, on the other hand, can be appropriately termed a violator, for he pled guilty to criminal violations of the federal securities laws. In his positions at Morgan Stanley and Kuehn [sic], Loeb and Company, he provided inside information on several occasions to accomplices who traded while in possession of that information. Although he was prosecuted for this conduct, Mr. Antoniu recently applied to become associated with a broker-dealer. Apparently, Mr. Antoniu believed that, since his rehabilitation was complete, there was no further reason to prevent his future dealings in the securities industry. In that case, the Commission responded by denying Mr. Antoniu's request for association.

One issue that frequently arises with respect to individuals whom I call "indifferent violators" is the length of time that a Commission remedy should remain in effect. This may come up when originally structuring the settlement of an injunction or an administrative proceeding, or in later applications for relief from an injunction or Commission order. * * * In the case of Mr. Antoniu, his bar from association with a broker-dealer was made permanent.

(Emphasis added).

Cox's words describing Antoniu's bar as permanent can only be interpreted as a prejudgment of the issue. We emphasize that the speech was made while the Antoniu II proceedings were pending. ³ The text of the speech was also printed and distributed by the SEC. Following Cox's public denouncement of him, Antoniu made multiple requests in the administrative proceedings for permission to develop the record on the issue of bias. His requests were denied. Antoniu also made a motion on April 6, 1986, to disqualify the whole Commission. The motion was denied and specifically, Commissioner Cox refused to recuse himself. He continued to participate in the Antoniu II proceedings, including the SEC's rejection of Antoniu's proposed settlement. Commissioner Cox did finally recuse himself, on December 3, 1987, the day the Antoniu II opinion of the Commission was handed down.

In the final Antoniu II opinion, the SEC found:

Antoniu's misconduct could hardly be more serious. As the law judge observed, it was not the product of impulse or attributable to a temporary lapse in judgment or ethics. Rather, it arose from a carefully conceived scheme that Antoniu devised, using accomplices that he recruited. He engineered a protracted and complex operation to betray his employers' trust by misappropriating confidential information for personal gain.

As we have so often emphasized, the securities industry is heavily dependent upon the integrity of its participants. We must protect the public from persons like Antoniu whose demonstrated conduct falls so far below acceptable standards of honesty and trust. We recognize the serious effect of the sanction we are imposing. Yet we are convinced that a lesser remedy will not suffice. Under all the circumstances, particularly the egregious and protracted nature of Antoniu's misconduct, we conclude that the public interest requires that Antoniu be barred from association with any broker or dealer.

In the Matter of Adrian Antoniu, S.E.C. Rel. No. 25169, Admin.Proc. File No. 3-6566 at 7-8 (Dec. 3, 1987) (hereinafter Antoniu II opinion).

Antoniu appeals the SEC's orders, raising a number of arguments. After careful consideration, we find that only one of them merits our attention. Due in part to Commissioner Cox's remarks about Antoniu made in the Denver speech, Antoniu claims that the proceedings were biased or at least that they were impermissibly tainted with the appearance of impropriety. Antoniu raises several other points ⁴ besides Cox's involvement in support of his claim of the SEC's prejudiced treatment of his case. As to these, we affirm the Commission's finding ⁵ that they lack substance. We do however, address Commissioner Cox's behavior in regard to this case.

We begin with the fundamental premise that principles of due process apply to administrative adjudications. See Amos Treat & Co. v. SEC, 306 F.2d 260, 264 (D.C.Cir.1962). The Supreme Court has described the requirements of due process: "A fair trial in a fair tribunal is a basic requirement of due process. Fairness of course requires an absence of actual bias in the trial of cases." In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955). The Court has demanded not only a fair proceeding, but also that " 'justice must satisfy the appearance of justice.' " Id., citing Offutt v. United States, 348 U.S. 11, 14, 75 S.Ct. 11, 13, 99 L.Ed. 11 (1954). The relevant inquiry is thus whether Commissioner Cox's post-speech participation in the Antoniu II proceedings comported with the appearance of justice.

A number of other courts have entertained similar questions. In Staton v. Mayes, 552 F.2d 908 (10th Cir.) (as amended), cert. denied, 434 U.S. 907, 98 S.Ct. 309, 54 L.Ed.2d 195 (1977), a school superintendent was dismissed by a majority vote of the school board. The members comprising the majority had made statements about the superintendent, both in public and in private, prior to any sort of hearing on the matter. The Tenth Circuit reviewed the trial court's approval of the school board's actions. The court said:

The firm public statements before the hearing by defendant Mayes for the removal of Dr. Staton, and the discussions by defendants Moore and Wade as admitted, reveal a tribunal not meeting the demands of due process for a hearing with fairness and the appearance of fairness. These were not mere statements on a policy issue related to the dispute, leaving the decision maker capable of judging a particular controversy fairly on the basis of its own circumstances. Nor was this simply a case of the instigation of charges and a statement of them during an investigatory phase by the body that will later decide the merits of the charges.

Instead this case involves statements on the merits by those who must make factual determinations on contested fact issues of alleged incompetence and willful neglect of duty, where the fact finding is critical.

Id. at 914 (citations omitted). The court concluded:

We do not...