Saturday, June 17, 2017

New Jersey Holds SEC Sanction No Basis For Reciprocal Discipline

The New Jersey Supreme Court has declined to impose reciprocal discipline based on a sanction imposed by the Securities and Exchange Commission.

The court held that there was no jurisdiction to impose discipline based on the SEC order, described here in an SEC press release.

In March 2010, the SEC charged Richard Verdiramo, RECOV Energy Corp.’s former Chairman, CEO, President, and CFO, with, among other things, committing fraud and violating the securities registration requirements based on his issuances of RECOV stock for his and his father’s personal benefit. The SEC charged his father, Vincent Verdiramo, an attorney who facilitated the misconduct and who was a recipient of some of the RECOV stock, with aiding and abetting his son’s fraud and with violating the securities registration requirements. 

The Court previously ordered all of the injunctive relief sought by the Commission in its Complaint against both Richard and Vincent Verdiramo for all of their misconduct.  The Court had also previously ordered the defendants to pay full disgorgement for their violations of the securities registration requirements, including holding Richard Verdiramo jointly and severally liable with other defendants.  In November 2011, the SEC issued an order suspending Vincent Verdiramo from appearing or practicing before the SEC as an attorney.

The SEC complaint is linked here. 

The Disciplinary Review Board surveyed the law and concluded that the SEC order was not a basis to impose reciprocal sanctions. 

In our view, the reasoning of the Supreme Courts of Florida and Ohio is sound and, thus, we have concluded that we are without jurisdiction to impose reciprocal discipline on respondent based on the SEC’s order of suspension. First,  no SEC bar or rules of professional conduct exist that apply to lawyers who practice before it. Second, even though the SEC may discipline anyone for unethical or improper professional conduct, respondent was not suspended on this ground. Thus, the SEC order permanently suspending respondent from appearing before it cannot be considered a disciplinary order within the meaning of R. 1:20-4(e)(4). Accordingly, we lack jurisdiction to consider the motion for reciprocal discipline.

Background

This matter was before us on a motion for reciprocal discipline, pursuant to R. 1:20-14, filed by the Office of Attorney Ethics (OAE), following the entry of an order, in a public administrative proceeding instituted by the United States Securities and Exchange Commission (SEC), pursuant to Rule 102(e)(3) of the SEC’s Rules of Practice, temporarily suspending respondent from "appearing or practicing before the [SEC] as an attorney."

The attorney previously had been suspended as a result of a criminal conviction.

On May 31, 1984, the Court imposed on respondent what amounted to a seven-and-a-half-year (time-served) suspension as a result of his September 28, 1976 guilty plea to the charge of influencing a witness.

The conviction involved his representation of Rep. Henry Helstoski as documented in the court's suspension order.

In 1975, the respondent, who was primarily involved in criminal law matters, was acting as an Administrative Aide to Congressman Henry Helstoski. He was also a member of the Congressman's team of defense attorneys who represented Helstoski in a federal criminal matter. On April 17, 1976, the respondent, who had just returned from a trip to Atlanta, received a telephone message to call Helstoski. At Helstoski's request, the respondent drove directly to Helstoski's office. Helstoski introduced respondent to Joel Urdang, who was about to testify before a federal Grand Jury with regard to Helstoski's alleged failure to report certain income to the Internal Revenue Service. The respondent was aware that an individual named John Mazella, an employee of Helstoski, had previously testified before the Grand Jury and had made certain misstatements during his testimony. The respondent knew that Urdang's testimony could contradict that of Mazella. Thus, during this conversation with Urdang, the respondent stated "Look, do me a favor. Just don't hurt the old guy, will you?" The respondent testified at a hearing before the District VI Ethics Committee that he was trying to protect Mazella, who was old, was in questionable health, and had a nice family. Mazella was "a genuinely nice human being who screwed up what checks went into what account." [Reference to transcript omitted.] His conversation with Urdang lasted about one and one half minutes. At the time the respondent spoke to Urdang concerning Mazella he was aware that he was asking Urdang to lie before the Grand Jury. [Reference to transcript omitted.] On June 2, 1976, the respondent was charged in two counts of a twelve count indictment with obstruction of justice in violation of 18 U.S.C. § 371 and influencing a witness in violation of 18 U.S.C. § 1503. The respondent entered a guilty plea on September 28, 1976 to the charge of influencing a witness. On September 21, 1977, the respondent was sentenced to a term of five years imprisonment, with the suspension of all but 60 days of that term, and probation for the remaining four years and ten months. A fine of $2,500 was assessed as a condition of probation. Execution of sentence was stayed until October 11, 1977. The remaining Count of that indictment against the respondent was dismissed.

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2017/06/the-new-jersey-supreme-court-has-imposed-reciprocal-discipline-based-on-sanction-imposed-by-the-securities-and-exchange-commi.html

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