United States District Court, District of Columbia
ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE.
Paul Waymack is a citizen of the United States, a transplant
surgeon living in Washington, D.C., and the founder,
Chairman, and Chief Medical Officer of Kitov Pharmaceuticals
Holdings, Ltd., a drug company headquartered in Israel and
listed on the Tel Aviv Stock Exchange. The Israel Securities
Authority is conducting a criminal investigation of Kitov
Pharmaceuticals and has asked the United States Securities
and Exchange Commission for assistance by obtaining documents
and deposition testimony from Dr. Waymack here in the U.S.
Because Dr. Waymack objects, the Securities and Exchange
Commission has sought a court order compelling his compliance
with its subpoenas.
Waymack faces a significant difference in criminal law
between the United States and Israel. He has rights under the
Fifth Amendment to the U.S. Constitution to refuse to answer
questions that may incriminate him; no U.S. prosecutor may
later cite the silence of a defendant as indicative of guilt.
In Israel, however, while a person under investigation can
refuse to answer questions, his refusal may be cited as
evidence of guilt. Dr. Waymack protests that the Securities
and Exchange Commission cannot properly use a civil subpoena
to obtain evidence for a criminal investigation or put him in
this dilemma between asserting his rights in the U.S. and
having it used against him in Israel.
Court concludes that the Securities and Exchange Commission
has statutory authority to proceed as it is but that its
subpoenas for documents are unreasonably broad. Therefore, it
will grant the Securities and Exchange Commission's
motion in part and deny it in part.
Pharmaceuticals is a biopharmaceutical company headquartered
in Israel. Its stock is traded on the Tel Aviv Stock Exchange
and its American Depository Shares are listed on the NASDAQ
Capital Market stock exchange. See Appl. of the SEC for an
Order to Show Cause and for an Order Requiring Compliance
with an Admin. Subpoena (SEC Appl.) [Dkt. 1] at 2. As a
foreign private issuer, Kitov must make relevant regulatory
filings with the U.S. Securities and Exchange Commission (SEC
or Commission). Id. Dr. Waymack is the founder,
Chairman and Chief Medical Officer of Kitov and a resident of
the District of Columbia. Id. Founded in the United
States, Kitov was moved to, and incorporated in, Israel after
it received significant funding from Israeli investors.
Israel Securities Authority (ISA) is an agency of the Israel
government that regulates the trade of securities in Israel
and has the authority to investigate Kitov due to its
location in Israel and its listing on the Tel Aviv Stock
Exchange. Id. In March 2017, the ISA
requested assistance from the Commission in procuring
documents and testimony from Kitov and related persons
located in the United States. Id. “On June 13,
2017, pursuant to Section 21(a)(2) of the Exchange Act, 15
U.S.C. § 78u(a)(2), the Commission issued an Order
Directing Private Investigation and Designating Officers to
Take Testimony in an investigation captioned In the Matter of
Kitov Pharmaceuticals Holdings, Ltd. (the “Formal
Order”).” Id. at 4. The Formal Order
described the SEC's authority to issue subpoenas for
testimony and documents to Dr. Waymack and Kitov in aid of
the ISA's investigation. Id.
15, 2017, the Commission served a subpoena on Dr. Waymack,
requiring him to produce certain documents by June 30, 2017,
and to appear for testimony on September 12, 2017.
Id. The subpoena was properly served on Dr. Waymack.
Id. In response to the June 2017 subpoena, Dr.
Waymack sought more time to comply and contested the
potential volume of responsive documents at issue.
Id. at 4-5. Counsel for Dr. Waymack also indicated
Dr. Waymack was considering asserting his Fifth Amendment
right against self-incrimination and refusing to testify.
Id. at 5.
prolonged negotiations, on January 23, 2018, Dr. Waymack
indicated that he “would neither produce documents nor
appear for testimony.” Id.; see also Ex. A-6,
Dr. Waymack's Resp. in Opp'n to the Commission's
Appl. (Waymack Opp'n) [Dkt. 5], Jan. 23, 2018 Letter from
Dr. Waymack's Counsel to SEC (Waymack Jan. 2018 Letter)
[Dkt. 5-7]. This denial was based on Dr. Waymack's belief
that the ISA is attempting to use the SEC process to obtain
legally certain of his documents that the ISA had unlawfully
seized through an improperly-executed search warrant in
Israel. See Waymack Jan. 2018 Letter at 1. Dr. Waymack
contends that the ISA had a warrant when it conducted a
search at Kitov headquarters in Israel but that its agents
exceeded the authority of the warrant by collecting documents
and emails from Dr. Waymack that were maintained by Google on
servers outside of Israel. Waymack Opp'n at 4-7.
Specifically, Dr. Waymack states that his email account,
which is exclusively based in the United States, was accessed
and frozen by the ISA for weeks. See Id. at 5. Dr.
Waymack informed the SEC that Kitov is challenging the
validity of that aspect of the search with the Attorney
General of Israel, but that no decision has been reached. See
Waymack Jan. 2018 Letter at 1.
23, 2018, the SEC served Dr. Waymack with a second subpoena
for documents and testimony. See SEC Appl. at 5-6; see also
Ex. A-9, Waymack Opp'n, SEC Am. Subpoena [Dkt. 5-10]. Dr.
Waymack again refused to testify or provide documents,
objecting to the “ISA's investigative misconduct,
” “significant legal and constitutional concerns
within the United States, ” and the overbreadth of the
proposed search terms. Ex. A-10, Waymack Opp'n, Aug. 3,
2018 Letter from Dr. Waymack's Counsel to SEC (Waymack
Aug. 2018 Letter) [Dkt. 5-11] at 1-2. The SEC and Dr.
Waymack's counsel continued to meet and confer in an
attempt to resolve the dispute until September 14, 2018, when
both parties filed motions to either compel or quash the
outstanding subpoenas. See SEC Appl.; Mot. to Quash Am.
Subpoena, Waymack v. SEC, No. 18-mc-110 (D.D.C. Sept. 14,
2018), ECF No. 1. The Court consolidated the cases in
miscellaneous case number 18-mc-128 and the motion has been
fully briefed. The Court heard oral argument from the
parties on February 12, 2019.
Court has jurisdiction under § 21(c) of the Securities
and Exchange Act of 1934, 15 U.S.C. § 78a et seq.
(Exchange Act), which authorizes the Commission to sue to
enforce a subpoena in the jurisdiction in which an
investigation is proceeding or the subpoenaed-individual
resides. See 15 U.S.C. § 78u(c). The investigation is
being carried out in the District of Columbia and Dr. Waymack
is a resident of the District of Columbia.
Motion to Compel
21(a)(2) of the Exchange Act gives the Commission the
authority to assist foreign securities agencies:
On request from a foreign securities authority, the
Commission may provide assistance in accordance with this
paragraph if the requesting authority states that the
requesting authority is conducting an investigation which it
deems necessary to determine whether any person has violated,
is violating, or is about to violate any laws or rules
relating to securities matters that the requesting authority
administers or enforces.
15 U.S.C. § 78u(a)(2). The Commission may provide such
assistance “without regard to whether the facts stated
in the request would also constitute a violation of the laws
of the United States.” Id. Section 21(b) of
the Exchange Act provides the Commission ...