Opinion
Civil Action No. C 02-04238 SI
October 27, 2003
JOSE F. SANCHEZ, TODD BRILLIANT, California, for Plaintiff
Irving M. Einhorn, Esq., Law Offices of Irving M. Einhorn, Santa Monica, CA, for Defendant
CONSENT OF DEFENDANT SHAWN SMITH TO ENTRY OF JUDGMENT OF PERMAJNENT INJUNCTION AND OTHER RELIEF
Defendant Shawn Smith, without admitting or denying any of the allegations of the Complaint in this action, except as specifically set forth herein, consents to the entry of a Judgment Of Permanent Injunction And Other Relief Against Shawn Smith ("Judgment"), in the form attached hereto as Exhibit 1. Shawn Smith, for purposes of this Consent Of Defendant Shawn Smith To Entry Of Judgment Of Permanent Injunction And Other Relief ("Consent"), consents, agrees, admits, acknowledges, represents, understands, and waives as follows:
1. Shawn Smith admits service upon him of the Summons and Complaint in this Action.
2. Shawn Smith admits to the jurisdiction of this Court over him and over the subject matter of this action.
3. Shawn Smith consents to entry of the Judgment in the form attached hereto and incorporated by reference herein, which, among other things: permanently restrains and enjoins Shawn Smith from committing future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77e(a), 77e(c), 77q(a), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
4. Shawn Smith acknowledges having been fully advised and informed of his right to a judicial determination of this matter.
5. Shawn Smith waives the entry of findings of fact and conclusions of law under Rule 52 of the Federal Rules of Civil Procedure.
6. Shawn Smith voluntarily consents to the entry of the Judgment and represents that no tender, offer, promise or threat of any kind whatsoever has been made by the Securities and Exchange Commission ("Commission") or any member, officer, agent, or representative thereof to induce him to so consent
7. Shawn Smith acknowledges and agrees that this proceeding and his Consent are for the purposes of resolving this proceeding only, in conformity with the provisions of 17 C.F.R. § 202.5(f), and do not resolve, affect, or preclude any other proceeding which may be brought against him, Consistent with the provisions of 17 C.F.R. § 202.5(f), Shawn Smith waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein. Shawn Smith acknowledges that the Court's entry of a permanent injunction may have collateral consequences under federal or state law and the rules and regulations of self-regulatory organizations, licensing boards, and other regulatory organizations. Such collateral consequences include, but arc not limited to, a statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organization. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding.
8. Shawn Smith admits that the Judgment entered in accordance with this Consent complies with Rule 65(d) of the Federal Rules of Civil Procedure and that he has been advised and understands that the Court may adjudgehim in civil or criminal contempt if he commits any violation of any provision of the Judgment entered pursuant to this Consent
9. Shawn Smith understands and agrees to comply with the Commission's policy, as set forth in 17 C.F.R. § 202.5(e), "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings." 17 C.F.R. § 202.5(e), In compliance with this policy, Shawn Smith agrees: (i) not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the Complaint or creating the impression that the Complaint is without factual basis; and (ii) that upon the Commission's filing of this Consent, Shawn Smith hereby withdraws any papers filed in this action to the extent that they deny any allegation in the Complaint If Shawn Smith breaches this agreement, the Commission may petition the Court to vacate the Judgment and restore this action to its active docket Nothing in this provision affects Shawn Smith's: (i) testimonial obligations; or (ii) right to take legal or factual positions in defense of Litigation or in defense of other legal proceedings in which the Commission is not a party,
10. Shawn Smith agrees that the Court shall retain jurisdiction to determine the appropriateness and amounts of disgorgement, prejudgment interest, and a civil penalty. Prejudgment interest shall be calculated pursuant to 28 U.S.C. § 1961 based on the date of entry of the order fixing the amount of disgorgement. Shawn Smith agrees that, solely for the purposes of determining the appropriateness and amounts of disgorgement and a civil penalty, the Court shall accept and deem as true the facts alleged in the Commission's Complaint. Sherman S. Smith agrees not to raise as a defense that he is not liable for payment of disgorgement or a civil penalty because he did not violate the provisions of the Securities Act, the Exchange Act, or rules thereunder, as set forth in the Commission's Complaint
11. Shawn Smith acknowledges that he is not entitled to a trial by jury for purposes of determining the amount of disgorgement or a civil penalty.
12. Shawn Smith waives the right, if any, (a) to seek relief from the Judgment under Rule 60(b) of lie Federal Rules of Civil Procedure; and (b) to appeal from entry of the Judgment,
13. Shawn Smith hereby agrees that the Judgment in the form attached hereto as Exhibit I, and incorporated herein by reference, may be presented by the Commission to the Court for signature and entry forthwith and without further notice.
14. Shawn Smith agrees that this Consent may be annexed to, and made part of, the Judgment filed simultaneously herewith,
15. Shawn Smith hereby waives notice of entry of the Judgment and agrees that entry of the Judgment by the Court will constitute notice to him of the terms and conditions of the Judgment Shawn Smith further agrees that he will accept service of a copy of the Judgment entered by the Court and will provide to the Commission, within ten (10) days, written acknowledgment thereof.
16. Shawn Smith hereby agrees that this Court shall retain jurisdiction of this action for all purposes, including implementing and enforcing the terms of the Judgment and all other orders and decrees that have been or may be entered herein and granting such other relief as the Court may deem necessary and just.
17. Shawn Smith agrees that, during the pendency of this action, he remains a party to this action subject to the discovery provisions of the Federal Rules of Civil Procedure which apply to parties, and, in addition, agrees and undertakes that he will appeal, without the service of a subpoena, for deposition or to testify as a witness at any trial of this action or at any other related proceeding-Failure to comply with the foregoing will subject Shawn Smith to the remedies and sanctions set forth in Rule 37 of the Federal Rules of Civil Procedure and all other available remedies.
18. Shawn Smith hereby waives any rights under the Equal Access to Justice Act, the Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to pursue reimbursement of attorney's fees or other fees, expenses, or costs expended by Shawn Smith to defend against this action For these purposes, Shawn Smith agrees that Shawn Smith is not the prevailing party in this action since the parties have reached a good faith settlement
19. Shawn Smith represents that he has read and understood each provision in this Consent and attached Judgment before signing it.
JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF AGAINST SHAWN SMITU
Plaintiff Securities and Exchange Commission ("Commission"), having filed and served upon Defendant Shawn Smith a Summons and Complaint in this action; Shawn Smith having admitted service upon him of the Summons and Complaint in this action and the jurisdiction of this Court over him and over the subject matter of this action; having been fully advised and informed of his right to a judicial determination of this matter, having waived the entry of findings of fact and conclusions of law as provided by Rule 52 of the Federal Rules of Civil Procedure; having consented to the entry of this Judgment Of Permanent Injunction And Other Relief Against Shawn Smith ("Judgment") without admitting or denying the allegations in the Complaint, except as specifically set forth in the Consent Of Shawn Smith To Entry Of Judgment Of Permanent Injunction And Other Relief ("Consent"); no notice of hearing upon the entry of this Judgment being necessary; and this Court being fully advised:I
IT IS ORDERED, ADJUDGED AND DECREED that Shawn Smith and his agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice of this Judgment by personal service or otherwise, are permanently restrained and enjoined from, directly or indirectly:
a. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell any security through the use or medium of any prospectus or otherwise, unless a registration statement is in effect as to such security;
b. carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale, unless a registration statement is in effect as to such security; and
c. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise, any security, unless a registration statement has been filed with the Commission as to such security, or while a registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding of examination under Section 8 of the Securities Act, 15 U.S.C. § 77h;
in violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. § 77e(a) 77e(c).
II
IT IS FUR THER ORDERED, ADJUDGED, AND DECREED that Shawn Smith and his agents, servants, employees, attorneys, and all persons in active concert or participation with any of them, who receive actual notice of this Judgment, by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, in the offer or sale of the securities of any issuer, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails:
a. employing any device, scheme or artifice to defraud;
b. obtaining money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
c. engaging in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser,
in violation of Section 17(a) of the Securities Act of 1933, 15 U, S.C. § 77q(a)
III
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Shawn Smith and his agents, servants, employees and attorneys, and all persons in active concert or participation with any of them, who receive actual notice of this Judgment by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, in connection with the purchase or sale of any security, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange:
a. employing any device, scheme, or artifice to defraud;
b. making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
c. engaging in any act, practice, or course of business which operates or would operate as a, fraud or deceit upon any person;
in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (the "Exchange Act"), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
IV.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the provisions of the Consent filed concurrently with this Judgment are incorporated herein with the same force and effect as if fully set forth herein and that Shawn Smith shall comply with his Consent
V.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Court retains jurisdiction to determine the appropriateness and amounts of disgorgement, prejudgment interest, and a civil penalty. Prejudgment interest shall be calculated pursuant to 28 U.S, C. § 1961 based on the date of entry of the order fixing the amount of disgorgement. In connection with any hearing to determine the appropriate amounts of disgorgement and a civil penalty, if any, Shawn Smith shall not raise as a defense that he is not liable for payment of disgorgement or a civil penalty, because he did not violate the provisions of the Securities Act, the Exchange Act, or rules thereunder as set forth in the Complaint Solely for the purposes of determining the amount of disgorgement and a civil penalty, the Court shall accept and deem as true the facts alleged in the Commission's Complaint
VI.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Shawn Smith shall not be entitled to a trial by jury for purposes of determining the amount of disgorgement or a civil penalty.
VII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED AND DECREED that during the pendency of this action against any defendant, Shawn Smith shall remain subject to the discovery provisions of the Federal Rules of Civil Procedure which apply to parties, and, in addition, that Shawn Smith agrees and undertakes, without service of a subpoena, to appear for his deposition or to testify as a witness at any trial of this action or at any related proceeding. Failure to comply with the foregoing will subject Shawn Smith to the remedies and sanctions set forth in Rule 37 of the Federal Rules of Civil Procedure and all other available remedies.VIII.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain jurisdiction ever this action for all purposes, including implementing and carrying out the terms of this Judgment and all other orders which may be entered herein to resolve the Commission's pending claims against Shawn Smith for disgorgement, together with prejudgment interest, and for a civil penalty, and to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.