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SEC v. KENTON CAPITAL

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


November 6, 1997

SECURITIES AND EXCHANGE COMMISSION, Plaintiff
v.
KENTON CAPITAL, LTD.; DONALD C. WALLACE; JEFFREY E. CARTER; TRACY FRENCH; HARRY WATSON; DELTAUR PARTNERS; and TERRY PLACK, Defendants; ATLANTIC PACIFIC GUARANTEE CORPORATION and CHARLES SMITH, Relief Defendants

The opinion of the court was delivered by: KOLLAR-KOTELLY

ORDER HOLDING DEFENDANT CHARLES SMITH IN CIVIL CONTEMPT AND IMPOSING SANCTIONS

 (November 6, 1997)

 This matter is before the Court on the application of Plaintiff Securities and Exchange Commission (Commission) for an order holding Relief Defendant Charles Smith in civil contempt [# 115] for his violation of the Court's Judgment requiring disgorgement of $ 126,584, plus prejudgment and postjudgment interest, reinstating an asset freeze, and requiring an accounting. The Court has considered the Commission's Application; supporting Memorandum; exhibits; opposing papers submitted on behalf of the named defendant, including the suggestion of an automatic stay as a result of defendant's filing of a petition in bankruptcy; the Commission's response; and arguments upon the application heard by telephone conference on October 29, 1997, and at a hearing on October 30, 1997; the full record herein. The Court's Memorandum Opinion issued this date which sets out the Court's findings of fact and conclusions of law which is incorporated as part of this order.

 WHEREAS, it appears from the above-described materials that:

 1. Relief Defendants Charles Smith and Atlantic Pacific Guarantee Corporation have failed to comply with the Judgment of this Court dated July 19, 1996, requiring them to disgorge investor funds in the amount of $ 126,584, plus prejudgment interest, into the registry of this Court, for which sum they are jointly and severally liable;

 2. Defendant Charles Smith has failed to demonstrate an inability to comply with the Judgment;

 3. The Court is conducting this contempt proceeding to uphold the dignity of the Court and to vindicate the authority of the Court to enforce its orders; and

 4. This contempt proceeding also falls within the exceptions of 11 U.S.C. §§ 364 (b)(4) & (5) as it relates to assets and income identification and an accounting to mitigate any harm done to the Commission by the non-payment, and so is not subject to the automatic stay, although execution on the money judgment will require action by the Bankruptcy Court.

 WHEREFORE, the Court is satisfied that the Commission has made a sufficient and proper showing in support of the relief granted herein, pursuant to 18 U.S.C. § 401.

 NOW THEREFORE,

 I.

 IT IS HEREBY ORDERED that Charles Smith is in civil contempt of the order of this Court contained in the Judgment of July 19, 1996, regarding disgorgement of investor funds to the United States.

 II.

 IT IS FURTHER ORDERED that Charles Smith identify assets sufficient to pay the judgment in this action of the amount of $ 126,584, plus prejudgment interest of $ 9,984.35, for a total disgorgement amount of $ 136,468.35, plus post-judgment interest, within thirty (30) days of entry of this Order.

 III.

 IT IS FURTHER ORDERED that defendants Charles Smith and his company, Atlantic Pacific Guarantee Corporation, and each of them, shall, within thirty (30) days of receipt of this Order, file with this Court and serve upon the Commission, through the Commission's counsel, as of the date of production of the statement to the Commission, a sworn accounting of all of their assets, and fully document what has happened to any assets Charles Smith or any entity he controlled, have claimed to have had since January 1, 1993, including:

 

a. all securities, funds, real estate, and other assets held in its or his name, or in which it or he has had any direct or indirect beneficial interest, including funds held by any legal counsel, stating the location of each of the assets;

 

b. each account with any financial institution or brokerage firm maintained in its or his name, or in which he or it has or has had any direct or indirect beneficial interest;

 

c. the name and address of each location from which it or he have done business or received funds or assets since entry of the judgment in this case;

 

d. every transaction in which any funds or other assets of any kind were transferred between or among itself or himself and any other defendant or defendants in this action, or from it or him to any other person or to any entity in which any of the defendants or other persons have any ownership interest, or from it or him to any other person or to any entity in which it or him, including any of his relatives, or in which Quillan Quinn or any partner of Smith, have any ownership interest; and

 

e. all funds received from any person, since entry of the Judgment in this case, including a list of:

 

(i) the name, address, and telephone number of each such person; and

 

(ii) the amount received and a statement of the location and disposition of any funds so received.

 IV.

 IT IS FURTHER ORDERED that, if the requirements of Section II of this Order are not complied with by the time set forth therein, a warrant be issued for the arrest of Relief Defendant Charles Smith by reason of his contempt. He shall remain confined until such time as this Court determines that he has complied fully with all provisions of this Court's order.

 SO ORDERED, this 6 day of November, 1997.

 JUDGE COLLEEN KOLLAR-KOTELLY

 United States District Judge

19971106

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