Sec. v. Solow

682 F.Supp.2d 1312

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,

v.Jamie SOLOW, Defendant.

Case No. 06-81041-CIV.

United States District Court, S.D. Florida.

Decided: Jan. 15, 2010.

Order Denying Stay Pending Appeal Jan. 22, 2010.

Jane M.E. Peterson, John G. Silber-mann, Marsha C. Massey, Securities & Exchange Commission, Washington, DC, for Plaintiff.

Jamie L. Solow, Boca Raton, FL, pro se.

Carl Francis Schoeppl, Jr., Schoeppl & Burke, P.A., Boca Raton, FL, Thomas Franklin Almon, Jr., Miami, FL, for Defendant.

ORDER OF CIVIL CONTEMPT

DONALD M. MIDDLEBROOKS, District Judge.

THIS CAUSE comes before the Court on Plaintiff, Securities and Exchange Commission's ("SEC") application for an Order to Show Cause why Defendant Jamie L. Solow should not be held in contempt of court [DE 157], filed on June 4, 2009. I have reviewed the record and am advised in the premises. I find Mr. Solow to be in Contempt of this Court's Order.

I. Background

In this action, the SEC alleged that the Defendant, Jamie L. Solow ("Solow") engaged in a fraudulent trading scheme involving inverse floating rate collateralized mortgage obligation ("inverse floaters"). The case went to trial. The jury returned a verdict [DE 120] finding Mr. Solow liable on all seven counts of the Complaint. Accordingly, the May 14, 2008, 554 F.Supp.2d 1356, the Final Judgment [DE 138] explained that the jury found Mr. Solow violated: Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5]; Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)]. Additionally, the jury found that Mr. Solow aided and abetted primary violations by Archer Alexander Securities Corp. ("Archer Alexander") of: Section 17(a) of the Exchange Act [15 U.S.C. § 78q(a)]; Rules 17a-3(a)(l) [17 C.F.R. § 240.17a-3(a)(l)]; 17a-2(a)(2) [17 C.F.R. § 240.17a-3(a)(2)]; 17a-3(a)(7) [17 C.F.R. § 240.17(a)(7)]; 15(c)(3) of the Exchange Act [15 U.S.C. § 78o(c)(3)]; Rule 15c3-l [17 C.F.R. § 240.15c3-1]; Section 17(a) of the Exchange Act [15 U.S.C § 78q(a)], and Rule 17a-4(a)(2) [17 C.F.R. § 240.17a-5(a)(2)] thereunder.

The Final Judgment enjoined the defendant from any further statutory violations and from attempting to register as a broker-dealer or investment advisor or being associated with or seeking to be associated with a broker-dealer or an investment advisor. The Final Judgement also found Mr. Solow liable for $2,6446, 485.99, together with prejudgment interest of $778,302.91, for a total of $3,424, 788.90. Mr. Solow also had to pay a civil penalty of $2,646, 485.99.

The SEC now moves the Court for an Order to Show Cause [DE 1571. The SEC states that although Mr. Solow responded to the Final Judgment by not paying the amounts ordered and claiming that he had "negative net worth," his depleted net worth was the result of a purposeful campaign of asset dissipation. The SEC explains that in the days preceding the jury trial, and the months before the entry of the Final Judgment, Mr. Solow and his wife liquidated joint securities accounts, and transferred the proceeds to an account in Mrs. Solow's name. Thereafter, Mrs. Solow traveled to Switzerland to deposit cash and jewelry in safe deposit accounts. In addition, after the jury's verdict, and less than 60 days prior to the entry of the Final Judgment, Mr. Solow executed a $5.26 million mortgage on his homestead property for the purpose of funding a Cook Islands asset protection trust in his wife's name. The SEC alleges that this enabled him to transfer $5.49 million of his individual net worth to his wife, in addition to the transfer of two real estate parcels whose combined value is over $3 million.

This Court held a hearing on August 14, 2009. Upon representations by the parties that the dispute could be resolved among them without this Court's hearing the merits of the claims, this Court ordered the surrender of Mr. Solow's passport [DE 166]. Thereafter, this Court issued an Order [DE 167] continuing the hearing, with the direction to Mr. Solow to provide the SEC counsel a full and complete accounting of the disposition of every asset that he owned or controlled through June 30, 2008, and that the parties make good faith efforts to reach a settlement in this matter.

The continued show cause hearing was delayed due to various scheduling issues outside of the Parties' control. In the interim, Mr. Solow has filed notices with this Court of its First Amended Account- ing [DE 176-184], filed on November 19, 2009 through November 22, 2009. I have reviewed all of those filings. This Court issued an Order resetting the show cause hearing for January 8, 2010.

In the interim, the SEC filed suit against Mrs. Solow, a new party, Mr. So-low, and related entities for fraudulent transfer and foreclosure of equitable liens. SEC v. Gina P. Solow, et at, CASE NO.: 09-CV-61868.¹ The complaint alleges, inter alia, many of the same alleged events and occurrences as those discussed in the instant application for an order to show cause in this case.

In the instant motion, the SEC further alleges that "Mr. Solow now claims to be wholly reliant on his wife to pay his 'recurring and non-recurring expenses, ' such as the lease payments on his BMW automobile and extended visits to their Park City, Utah home in the winter months." [DE 157, ¶ 3]. Finally, it alleges that "Mr. So-low has made a mockery of his disgorgement obligation by paying only nominal amounts as he liquidates items such as office furniture and an old vehicle. Thus far, these payments have totaled a mere $2,639.24." [DE 157, ¶ 4]. Therefore, the SEC alleges that Mr. Solow is in contempt of Court for failure to comply with the Final Judgment. The SEC filed a memoranda in support of its motion [DE 157-2], with exhibits that include the Declaration of John G. Silbermann, counsel for the SEC, excerpts from the transcript of Mrs. Solow's deposition, and Mr. Solow's responses to post-judgment interrogatories.

The memorandum of law explains various events and financial transactions made by Mr. and Mrs. Solow against the backdrop of the trial and the final judgment. From the SEC's brief, the docket, the SEC's January 13, 2010 filing, and the evidentiary hearing, I have organized such events into a condensed time-line as follows:

• November 9, 2007 From this date until the commencement of the jury trial, Mr. and Mrs. Solow received deposits totaling $576,856.27 into their joint bank account at Bank of America ("BofA").

• November 13, 2007 From this date until January 16, 2008, Mr. Solow paid his counsel $275,000 from the joint BofA account. The account was also used to pay the following expenses: $33,594.74 to Fettes College; $35,872.39 to American Express; $17,270.78 to Capital One; $27,737.12 to Lydian Bank; and $43,339.00 to Arbern for Jamie Solow's office rental.

• December 4, 2007 Mr. Solow signed a bill of sale for a 2004 Rolls Royce Phantom for $205,000 as "Vice President and Duly Authorized Agent of JSolow Limo, Inc."

• January 2, 2008 The Solows deposited a $46,856.27 cashiers check into their checking account.

• January 8, 2008 Highland Financial Group, Inc. ("Highland") wired an additional $400,000 to the same account.

• January 22, 2008 Civil trial commenced

• January 31, 2008 Civil trial ended and jury returned verdict.

• February 4, 2008 Mrs. Solow retains a law firm, Donlevy-Rosen & Rosen, P.A. ("Donlevy-Rosen Firm"), specializing in asset protection using offshore trusts in the Cook Islands.

• February 7, 2008 First of three transactions ("Checking Account Transactions") in which a total of $820,000 was deposited in to their checking account from Highland and Arlene Zayas, the wife of Highland's principal officer.

• February 8, 2008 The Commission filed, and served upon Solow's counsel, its motion for remedies, seeking judgment for penalties, disgorgement, and prejudgment interest totaling $6,214, 632.46.

• February 11, 2008 Mrs. Solow pays the Donlevy-Rosen Firm $30,000 in legal fees and $5,350 for a "cost deposit" out of the Solow's joint checking account.

• February 12, 2008 $36,000 was transferred from the Solows' joint account at BofA into an account in the name of Gina P. Solow, and $27,727.12 was paid to Lydian Bank for the mortgage on the Hillsboro property.

• February 29, 2008 The second of the three Checking Account Transactions described above.

Another series of transactions takes place. ("POD Account Transactions"). In these transactions, the Solows transfer $777,000 from their joint checking account to a checking account titled in the name of "Gina Pearl Solow POD Jamie Leigh Solow" (the "POD Account") 2.

• March 5, 2008 The Solows paid $556,632 to the Internal Revenue Service.

• March 7, 2008 The third of the three Checking-Account Transactions described above.

By a corporate consent ("Corporate Consent") backdated to be effective March 3, 2008, Mrs. Solow authorizes a series of transaction that result in a $1,187, 500 mortgage being placed on their Ft. Lauderdale residence in exchange for a certificate of deposit in the same amount to be assigned to the Gina P. Solow Trust, a Cook Islands International Trust. Mrs. Solow paid Donlevy-Rosen Firm $123,242.04 for a "Recording/Documentary Stamp."

• March 10, 2008 Second of the "POD Account Transactions"

• March 24, 2008 Mrs. Solow executes a mortgage on their Ft. Lauderdale residence in the amount of $1,187, 500. Mr. and Mrs. Solow execute a mortgage on their Hillsborow Beach residence in the amount of $5,261, 289. The lender for these two mortgages is the Federation Advances Corp., a Nevis limited liability company identified in the Cook Islands Trust scheme.

• April 8, 2008 Third of the "POD Account Transactions"

• April 9, 2008 The Court holds an evidentiary hearing on remedies to be imposed against Mr. Solow. [DE 1341.

• April 18, 2008 Ms. Zayas transferred $279,256.10 to the POD account. Ms. Zayas also transferred $73,016.68 into...