S.E.C. v. Bilzerian

• Decision Date: 21 August 2000
• Docket Number: No. CIV. A. 89-1854 SSH.,CIV. A. 89-1854 SSH.
• Citation: 112 F.Supp.2d 12
• Parties: SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Paul A. BILZERIAN, Defendant.
• Court: U.S. District Court — District of Columbia

112 F.Supp.2d 12

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Paul A. BILZERIAN, Defendant.

No. CIV. A. 89-1854 SSH.

United States District Court, District of Columbia.

August 21, 2000.

Judith Roxanne Starr, Securities & Exchange Commission, Division of Enforcement, Washington, DC, for Plaintiff.

Paul A. Bilzerian (Pro Se), Tampa, FL.

OPINION

STANLEY S. HARRIS, District Judge.

This matter now is before the Court on plaintiff Securities and Exchange Commission's ("SEC") application for an order holding defendant Paul A. Bilzerian in contempt of the Court's January 28, 1993, and June 25, 1993, disgorgement orders. The SEC also seeks an order holding Bilzerian in contempt of the Court's November 20, 1998, order directing Bilzerian to file an accounting of his assets. The Court held a hearing on the SEC's application for civil contempt on March 5, 1999. The Court also held a telephone conference with the parties on April 19, 1999, at which a court reporter was present. In addition, the parties have submitted numerous memoranda in support of and in opposition to the SEC's application (detailed below). After considering the arguments made and evidence presented by the SEC and Bilzerian (appearing pro se), as well as the entire record herein, the Court finds Bilzerian in contempt of its 1993 disgorgement orders and orders him to purge his contempt as set forth in the accompanying Order. The Court declines now to find Bilzerian in contempt of its order for an accounting, but orders him to file another, more detailed accounting. Also before the Court are Bilzerian's motion to strike and request for oral argument, and the SEC's opposition thereto. Upon consideration of these submissions, as well as the entire record herein, the Court denies Bilzerian's motion to strike and request for oral argument. The Court's reasons for these decisions follow.

PROCEDURAL BACKGROUND

This is the latest phase of a long history of litigation involving Bilzerian and the SEC, both in this Court and elsewhere. The Court provides a summary of this litigation.

A. Criminal Conviction in the Southern District of New York

Bilzerian was convicted of securities fraud and conspiracy to defraud the United States on September 27, 1989, in the United States District Court for the Southern District of New York. The Second Circuit affirmed his criminal conviction. United States v. Bilzerian, 926 F.2d 1285 (2d Cir.1991), and the Supreme Court denied his petition for a writ of certiorari. Bilzerian v. United States, 502 U.S. 813, 112 S.Ct. 63, 116 L.Ed.2d 39 (1991). He was sentenced to four years imprisonment and a $1.5 million fine. Bilzerian paid the fine, and the district court later reduced his sentence to twenty months. In addition to his direct appeal, Bilzerian moved to vacate and set aside his conviction pursuant to 28 U.S.C. § 2255. The district court denied that motion, the Second Circuit affirmed, and the Supreme Court denied his petition for a writ of certiorari. Bilzerian v. United States, 1996 WL 524340 (S.D.N.Y.); Bilzerian v. United States, 127 F.3d 237 (2d Cir.1997); Bilzerian v. United States, 527 U.S. 1021, 119 S.Ct. 2365, 144 L.Ed.2d 770 (1999).

B. Civil Liability in this Court

After Bilzerian's criminal conviction in New York, the SEC filed this civil suit against him on June 29, 1989. Based on the collateral estoppel effect of his criminal conviction for securities fraud, the Court granted the SEC's motion for partial summary judgment, found Bilzerian liable for securities fraud, and imposed permanent injunctions against any further securities law violations by him. SEC v. Bilzerian, 1991 WL 83964 (D.D.C.1991). The Court of Appeals affirmed the Court's decision. SEC v. Bilzerian, 29 F.3d 689 (D.C.Cir. 1994). His untimely petition for a writ of certiorari was not accepted for filing. Bilzerian v. SEC, 514 U.S. 1011, 115 S.Ct. 1350, 131 L.Ed.2d 210 (1995). See also Bilzerian v. SEC, 514 U.S. 1094, 115 S.Ct. 1820, 131 L.Ed.2d 742 (1995) (denying motion for reconsideration).

In connection with his civil liability for securities fraud, the Court ordered Bilzerian to disgorge $33,140,787.07, his profit from the fraud, on January 28, 1993. SEC v. Bilzerian, 814 F.Supp. 116 (D.D.C.1993). On June 25, 1993, the Court ordered Bilzerian to disgorge an additional $29,196,812.46 in prejudgment interest. SEC v. Bilzerian, 1993 WL 542584 (D.D.C.). The Court of Appeals affirmed the disgorgement orders. Bilzerian, 29 F.3d at 696. Bilzerian readily admits that he has yet to pay one penny of the more than $62 million judgment.¹ However, the SEC did not seek to enforce this judgment for more than five years, due to protracted litigation over the dischargeability of the judgment in a bankruptcy proceeding.

C. Bankruptcy Petition in the Middle District of Florida

On April 6, 1991, two days before the Court's grant of partial summary judgment against him, Bilzerian filed for bankruptcy in the Middle District of Florida.² During the pendency of the bankruptcy proceeding, Bilzerian claimed that this Court's disgorgement judgment was dischargeable in bankruptcy, while the SEC argued that it was not. On September 9, 1998, after several years of litigation, the Eleventh Circuit affirmed the Florida district court's decision that the disgorgement judgment was not dischargeable in bankruptcy. In re Bilzerian, 153 F.3d 1278 (11th Cir.1998). Bilzerian then sought rehearing en banc and also filed suit against the SEC in the Middle District of Florida seeking to set aside the decision on the ground that it was obtained as a result of the SEC's fraud on the court. Bilzerian v. SEC, No. 98-CV-2563 (M.D.Fla.). On December 14, 1998, the Eleventh Circuit denied Bilzerian's petition for rehearing en banc. In re Bilzerian, 166 F.3d 355 (11th Cir.1998). On March 16, 1999, the Florida district court granted the SEC's motion to dismiss Bilzerian's fraud case against it. (Pl.'s Response to Def.'s Suppl. Opp'n Ex. 2.) On January 24, 2000, the Eleventh Circuit affirmed the district court's dismissal of Bilzerian's fraud case. Bilzerian v. SEC, 208 F.3d 1011 (11th Cir.2000). On April 11, 2000, the Eleventh Circuit denied Bilzerian's petition for rehearing en banc.³ 213 F.3d 650 (11th Cir.2000)

D. The SEC's Application To Hold Bilzerian in Civil Contempt of this Court's 1993 Orders

After the Eleventh Circuit's decision, the SEC applied to this Court on November 12, 1998, seeking to hold Bilzerian in civil contempt of the 1993 disgorgement orders. On November 20, 1998, the Court issued a show cause order that set a briefing schedule, ordered Bilzerian to file a sworn accounting identifying all assets in which he had any direct or indirect beneficial interest, and set a hearing date for January 6, 1999. Bilzerian filed an opposition to the SEC's motion on December 23, 1998, and the SEC filed its reply on December 29, 1998. Because Bilzerian suffered a skiing injury shortly before the hearing, the Court granted Bilzerian's January 4, 1999, motion to continue the hearing to a later date. Over the SEC's opposition, the Court rescheduled the hearing for March 5, 1999.⁴ Because Bilzerian had not yet filed the ordered accounting, the Court again ordered him to file it. Bilzerian filed his purported accounting on February 26, 1999. At the March 5 hearing, at Bilzerian's request, the Court granted him another opportunity to respond to the SEC's motion. Accordingly, he submitted a supplemental memorandum in opposition to the SEC's motion for a contempt order on March 19, 1999, to which the SEC filed a response. The Court held a telephone conference with the parties on April 19, 1999, during which the Court granted Bilzerian yet another opportunity to respond to the SEC's motion. On May 3, 1999, Bilzerian submitted a second supplemental memorandum in opposition to the SEC's motion, to which the SEC filed a response as well as two supplemental declarations. Finally, on May 25, 1999, Bilzerian filed a motion to strike certain paragraphs of the SEC's supplemental declarations as well as a request for another hearing, to which the SEC filed an opposition.

CIVIL CONTEMPT STANDARDS

The Court has both an inherent and a statutory power to enforce compliance with its orders through the remedy of civil contempt. See Shillitani v. United States, 384 U.S. 364, 370, 86 S.Ct. 1531, 16 L.Ed.2d 622 (1966); Petties v. District of Columbia, 897 F.Supp. 626, 629 (D.D.C. 1995); SEC v. Current Fin. Servs., Inc., 798 F.Supp. 802, 806 (D.D.C.1992); 18 U.S.C. § 401. A civil contempt proceeding generally involves three stages: (1) the court issues an order; (2) after the party disobeys the order, the court issues a conditional order finding the recalcitrant party in contempt and threatening to impose a specified penalty unless the recalcitrant party purges itself of contempt by complying with prescribed purgation conditions; and (3) if the party does not fulfill the purgation conditions, the court exacts the threatened penalty. See NLRB v. Blevins Popcorn Co., 659 F.2d 1173, 1184 (D.C.Cir. 1981); SEC v. Parkersburg Wireless, L.L.C., 156 F.R.D. 529 (D.D.C.1994); Current Fin. Servs., 798 F.Supp. at 806. This matter is currently at the second stage; the SEC seeks an order finding Bilzerian in civil contempt of the Court's 1993 disgorgement orders and directing him to comply with certain conditions in order to purge the contempt.

A party is in contempt of court when he "violates a definite and specific court order requiring him to perform or refrain from performing a particular act or acts with knowledge of that order." SEC v. Bankers Alliance Corp., 881 F.Supp. 673, 678 (D.D.C.1995) (quoting Whitfield v. Pennington, 832 F.2d 909, 913 (5th Cir. 1987)). As the party seeking a finding of contempt, the SEC bears the initial burden of showing, by clear and convincing evidence, that (1) court orders were in effect, (2) the orders required certain conduct by Bilzerian, and (3) Bilzerian failed to...