SEC bares its teeth in going after decades-old judgment

SEC settlements, judgments. REUTERS/Chip East - The judge's gavel is seen in court room 422 of the New York Supreme Court at 60 Centre Street February 3, 2012. Picture taken February 3, 2012.

Some critics of the Securities and Exchange Commission, including federal judges, say the agency accepts overly lenient settlement terms from major financial services firms, and then without fanfare hands out waivers from the ancillary costs of alleged misconduct. The SEC has also drawn comparisons to the bumbling Inspector Clouseau of the Pink Panther movies by missing long-running scams by smaller industry participants such as Bernie Madoff and Allen Stanford.
But when it comes to protecting its legal position, especially against an individual, the SEC can act like Inspector Javert of the novel Les Misérables, who relentlessly pursued a man for stealing a loaf of bread.

According to an SEC press release on Friday, James L. Douglas also known as James L. Cooper, stole more than a loaf of bread, a federal judge found after Douglas settled charges of raising over $7.5 million by offering and selling unregistered oil and gas partnerships through false pretenses. The court on August 26, 1983, ordered Douglas to disgorge $200,000 within three years.

Douglas failed to comply with the payment schedule and left an unpaid balance of $78,024.71 plus post-judgment interest when his lawyer reported that Douglas lacked the ability to pay and may have moved to Scotland, the SEC announcement said.

The court on August 8, 1988, found Douglas in contempt and issued a warrant for his arrest that was never executed because federal marshals could not find him. He eventually surfaced in 2010, when the SEC learned that he had returned to the United States and that his fortunes had changed.

Douglas had sued several tobacco companies in Florida state court on behalf of his deceased wife’s estate – of which he is the sole beneficiary – and a $2.5 million jury verdict in his favor is on appeal to the Supreme Court of Florida, the SEC said.

After four days of evidentiary hearings, Douglas was again held in contempt, as Toledo federal judge Jack Zouhary said Douglas’ “lavish lifestyle apparently is over, but he has dodged his legal debt long enough, and it is high time for him to pay what he owes.”

Zouhary ordered Douglas to pay post-judgment interest at the statutory rate of 10.74 percent from the date the judgment was entered.

“That rate may seem high by today’s standards, but it is properly calculated. … And if [Douglas] finds the amount due unreasonable, it is the result of his own misconduct for avoiding payment for so long,” Zouhary wrote.

The amount owing on the $78,000 judgment now exceeds $1.7 million, the SEC said. As a result, Douglas may have to reach into his own pocket to pay the SEC even if the award on behalf of his late wife is upheld on appeal in light of legal fees and other litigation costs.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges.)