The opinion of the court was delivered by: LEE
Before the Court are Chambers Defendants' Motion in Limine Concerning SEC Settlements (Document No. 95) (filed on behalf of defendants Chambers Development Company, Inc., John G. Rangos, Sr. and Jr., Alexander W. Rangos, Michael J. Paretto, John M. Arthur, William M. Moffett, William R. Nelson, Estate of Hugh Scott, John J. Cushma and Joseph G. Stotlemyer; hereafter collectively "Chambers" defendants), and the Motion in Limine of Defendants Grant Thornton and Charles R. Fallon [hereafter collectively "Grant Thornton" defendants] to Exclude References to SEC Consent Decree and Enforcement Releases Issued as a Result of Settlement and for Other Relief (Document No. 93). After careful consideration of said motions in limine, plaintiffs' response, the memoranda in support of and in opposition to exclusion of challenged evidence, and the record as a whole, the motions in limine will be granted in part and denied in part.
This case was consolidated on March 30, 1993, for pretrial purposes only, along with twenty related actions at Civil Action No. 92-0679, Lovato v. Chambers Development Company, Inc., which was filed as a class action; eventually, twenty-three cases were consolidated by the Judicial Panel on Multi-District Litigation for pretrial purposes at MDL-982, and designated as the Chambers Development Securities Litigation.
The consolidated action was for the most part settled upon agreement of most of the parties and approval by this Court, which certified a class of plaintiffs and a class of certain defendants for settlement purposes, and approved a substantial settlement in the vicinity of $ 100 million.
Several plaintiffs elected to opt out of the settlement, including Option Resource Group, and its General Partners Ben Nitka and Ira Holtz (hereafter collectively "Option" or plaintiffs), who now proceed on their original complaint alleging violations of section 10(b), 15 U.S.C. § 78j(b), sections 20(a) and 20(A) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a) and § 78t-1, and Rule 10b-5 of the Securities and Exchange Commission ("SEC"). Motions for summary judgment are pending in this Court.
Concurrently with the civil proceedings in this Court, the SEC investigated Chambers Development Company's conduct with regard to its accounting practices and numerous securities filings and announcements made to the trading public regarding its capitalization of expenses, earnings and overall financial picture, and the conduct of several of its officers and employees, and of Grant Thornton and several of its partners or employees who were responsible for auditing Chambers. The SEC investigation concluded with settlements of the several separate administrative actions and accompanying administrative findings, conclusions and orders.
The SEC issued Auditing and Accounting Enforcement Release ("hereafter "Release") No. 767, sanctioning John M. Golberger, an audit partner of Grant Thornton, and C. Kirk French, a senior manager in the audit department, for improper professional conduct and violations of various Generally Accepted Accounting Principles ("GAAP") and Generally Accepted Auditing Standards ("GAAS").
As a result of this settlement and Release, Goldberger and French were denied the privilege of appearing or practicing before the SEC as accountants for at least 18 months, after which they could seek reinstatement.
The SEC also issued Releases finding violations of several GAAP or GAAS provisions and/or violations of various securities laws and regulations, and ordering disciplinary sanctions against defendants Chusma and Richard A. Knight, accountants who were permanently denied the privilege of appearing or practicing before the SEC, and also ordering these defendants and defendants John G. Rangos, Sr., and William Nelson, and another Chambers official, Dale O. Nolder, Jr., to cease and desist from causing any violations of certain securities laws, rules and regulations.
Additionally, on May 9, 1995, the SEC filed a civil injunctive action in this Court, Securities and Exchange Commission v. Chambers Development Company, Inc., at Civil Action No. 95-0693, along with a Consent and proposed Final Judgment of Permanent Injunctive and Other Relief. The case was settled, and closed on May 31, 1995, pursuant to the Consent which manifested the willingness of Chambers to accept the terms of the Final Judgment which, inter alia, permanently enjoins Chambers from violating specific provisions of the Securities Act of 1933, Securities Exchange Act of 1934 and the Rules promulgated thereunder regarding fraudulent omissions and misrepresentations in the sale and purchase of securities, and obligated Chambers to pay a civil monetary penalty in the amount of $ 500,000.00.
Chambers executed the Consent and Final Judgment "without admitting or denying any of the allegations in the complaint . . . ." Chambers Defendants' Motion in Limine, Exhibit 5, Consent. Chambers did, however, acknowledge the SEC's policy, set forth in 17 C.F.R. § 202.5(e), not to permit a defendant to consent to a judgment or order imposing a sanction while denying the allegations of the complaint. Id. at P 9.
In the several SEC disciplinary and administrative actions, each of the respondents submitted, and the SEC accepted, Offers of Settlement. Each Release contains a proviso stating the findings of the investigation are solely for the SEC proceedings, and are not binding on any other person or entity named as respondents in SEC proceedings; additionally, while there are some variations in the exact language, each Release provides that the named respondent consents to the entry of the SEC's findings and an order imposing sanctions and/or ...