SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 34-41226 / March 30, 1999 Admin. Proc. File No. 3-9019 ______________________________________ : In the Matter of the Application of : : ROBERT SAYEGH : 353 East 83rd Street : New York, NY 10028 : ______________________________________: OPINION OF THE COMMISSION BROKER-DEALER PROCEEDING Grounds for Remedial Action Injunction Practice and Procedure Bar from association with a broker or dealer or member of a national securities exchange or registered securities association Collateral bar Associated person of registered broker-dealer was permanently enjoined from violations of the antifraud provisions of the federal securities laws. Held, it is in the public interest to bar respondent from association with broker, dealer, municipal securities dealer, investment adviser, or investment company or with a member of a national securities exchange or of a registered securities association. APPEARANCES: Robert Sayegh, pro se. Carmen J. Lawrence, Robert B. Blackburn, Anahaita N. Kotval, and Bohdan S. Ozaruk, for the Division of Enforcement. Appeal filed: November 7, 1997 Last brief filed: February 23, 1998 Oral argument: January 12, 1999 I. Both Robert Sayegh [1] and the Division of Enforcement appeal from the decision of an administrative law judge permanently barring Sayegh from association with a broker or dealer and from being associated with a member of a national securities exchange or registered securities association. Sayegh challenges the bar as excessive; the Division challenges the law judge's failure to impose a collateral, or industry-wide, bar preventing Sayegh from participating as a professional in any securities activities. We base our findings on an independent review of the record, except with respect to those findings below not challenged on appeal. II. We instituted this administrative proceeding by order dated June 4, 1996 ("Order"), pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934. [2] The order alleged that a permanent injunction was entered against Sayegh in November 1995, enjoining him from violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder, [3] and sought sanctions against Sayegh in the public interest. The civil action resulting in the November 1995 injunction was based on Sayegh’s role during the manipulation of the price of American Depository Receipts ("ADRs") for the securities of the Institute of Clinical Pharmacology ("ICP"), an Irish corporation. [4] Our findings of the facts below are derived primarily from the district court’s opinion. [5] Sayegh was, during the relevant period, a three-percent general partner of Moore & Schley, a broker-dealer formerly registered with this Commission. Moore & Schley began trading ICP ADRs through Nasdaq in November 1984. By July 1986, Moore & Schley had become the sole market-maker for ICP ADRs and from October 1987 through August 1988 maintained a large position in ICP ADRs in its proprietary account. By the time of the events in question, Moore & Schley's position in ICP ADRs was substantial enough that the viability of the firm was closely linked to the value of the security. Sayegh was in charge of Moore & Schley's over-the-counter trading during 1987-1989. All orders for ICP ADRs went through Sayegh's desk, and Sayegh had sole authority to make trades in Moore & Schley’s proprietary accounts. Accordingly, Sayegh knew that the magnitude of the company’s position in ICP ADRs caused Moore & Schley’s future to be connected to the price of the ADRs. Attempting to avoid a financial crisis for the firm in the event of an eventual drop in the price of ICP ADRs, Sayegh participated in a scheme to manipulate their price. Sayegh's illegal activities, mainly occurring between October 1987 and March 1989, included artificially supporting the price of ICP ADRs during the October 1987 stock market break; artificially dropping the price of ICP ADRs in early 1988 to dissuade major shareholder Dr. Ian Brick from selling his ICP ADRs in the open market; refusing to execute customer sell orders; executing ICP ADR cross trades to avoid open market liquidations of ICP; and creating the false impression of market interest in ICP. [6] The United States District Court for the Southern District of New York concluded that Sayegh violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by manipulating the market for a security, and permanently enjoined Sayegh from further violations of the antifraud provisions of the securities laws. [7] Specifically, the district court found: Sayegh's violations were knowing and egregious. . . . These violations were not isolated, but went on for over 17 months while the price of ICP ADRs was maintained at an artificial level. . . . Sayegh has not shown or acknowledged a recognition of the wrongful nature of his actions. . . . The facts show that Sayegh generated and participated in much of the conduct contributing to the manipulation. . . . He fails to recognize the significance of his wrongful conduct and this gives rise to serious doubts about his future ability to refrain from engaging in such conduct. Sayegh is currently employed in the securities industry and it appears that his occupation will present opportunities for future violations of the securities laws. [8] The district court noted that Sayegh did not receive any direct compensation from transactions involving the ICP ADRs. [9] As a result of the district court’s entry of the permanent injunction, Sayegh became subject to a statutory disqualification. [10] Stuart, Coleman & Co., Inc. ("Stuart, Coleman"), then applied to the NASD, seeking to remain an NASD member even if it continued to employ Sayegh. The NASD denied Stuart, Coleman’s application. [11] On November 15, 1996, the Commission upheld the NASD's determination. [12] At the hearing, two close and long-time friends of Sayegh testified to Sayegh's good character. The law judge found their testimony "credible but non-persuasive." Relying primarily on the facts found by the district court and described above, the law judge noted that the evidence was "overwhelming" that Sayegh violated the securities laws and determined that there was a significant probability that he would do so in the future since he refused to acknowledge that his actions were improper. Based on this record, the law judge permanently barred Sayegh from association with a broker or dealer and from being associated with a member of a national securities exchange or of a registered securities association, but declined the Division's request to impose an industry-wide bar against Sayegh. III. A. Sayegh argues that, pursuant to Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996), this action is time-barred because the events on which the action is based, namely his manipulation of the price of ICP ADRs from October 1987 through December 31, 1988, occurred outside the applicable five-year statute of limitations. [13] We disagree. Exchange Act Section 15(b)(6)(A)(iii) [14] authorizes the imposition of sanctions if, among other things, a respondent, while associated with a broker or dealer, has been enjoined permanently from "engaging in or continuing any conduct or practice . . . in connection with the purchase or sale of any security" and if such sanctions would be in the public interest. [15] Since this cause of action did not "accrue" until the final judgment in the district court case was entered against Sayegh, the date of the conduct underlying the injunction is not determinative. [16] The district court entered its final judgment against Sayegh on November 21, 1995. [17] This action was instituted seven months later, well within the relevant five- year statute of limitations. [18] B. Sayegh also attacks the law judge’s application of the doctrine of collateral estoppel to bar Sayegh’s challenges to any of the findings of fact or conclusions of law made by the district court and any procedural rulings by the district court in conducting the underlying civil proceeding. Sayegh continues to argue before us that the district court erred in both its factual and legal conclusions. These arguments are foreclosed since Sayegh may not relitigate in this proceeding any portion of the underlying district court case. [19] We also reject Sayegh's contention that the law judge did not fairly apply the doctrine of collateral estoppel because the law judge allowed the Division to ask Sayegh questions about the underlying civil proceedings. The Division's questions were not for the purpose of collaterally attacking the findings of the violation. Rather, the Division sought to establish the public interest in imposing sanctions. [20] C. Sayegh argues that the sanctions imposed by the law judge "are not justified by the record in this action." Also, at oral argument, Sayegh argued for the first time that the three years he has been out of the securities industry due to the NASD’s statutory disqualification proceeding should be sufficient punishment for his violations. [21] The law judge, in determining what sanction was in the public interest, properly considered the factors articulated in Steadman v. SEC: the egregiousness of the defendant's actions, the isolated or recurrent nature of the infraction, the degree of scienter involved, the sincerity of the defendant's assurances against future violations, the defendant's recognition of the wrongful nature of his conduct, and the likelihood that the defendant's occupation will present opportunities for future violations. [22] Based on the findings and conclusions of the district court in the underlying case, the law judge found that Sayegh had committed knowing and egregious violations of the securities laws during a period of over 17 months. We agree. Manipulation of the price of a security is a fraud that goes to the core integrity of the securities markets and by its nature is egregious. That is particularly so here, where the manipulation involved a scheme that took place over 17 months. Sayegh’s participation in the scheme, as found by the district court, was intentional and protracted. Sayegh failed to accept responsibility for his actions either in the district court or at the administrative hearing. Sayegh consistently argued in both forums, and continues to insist before us, that he violated the securities laws only because he "should have been aware of the unreported crosses in ICP at the time they were occurring." He denies that he committed any improper acts. This position is flatly contradicted by the extensive findings of the district court. Sayegh’s refusal to recognize the wrongfulness of his conduct means either that he does not know what is wrongful or that he is unrepentant. Either way, Sayegh’s continued protestations of innocence at this late date bespeak a significant risk that, given the opportunity, he would commit further similar misconduct in the future. Based on Sayegh’s assertions that he intends to re-enter the securities business, we find that he is likely to do so if permitted. [23] Accordingly, we find that the application of the Steadman factors to the facts of this case warrants the bar imposed by the law judge. [24] Sayegh also argues that the law judge inappropriately imposed upon him a more severe penalty than the penalties imposed upon Cranley and Core, who Sayegh argues were more culpable, and who fought the underlying civil action for approximately three years before settling. [25] But settle they did, and as we have repeatedly stated, "it is well established that respondents who offer to settle may properly receive lesser sanctions than they otherwise might have received based on pragmatic considerations such as the avoidance of time-and-manpower-consuming adversary proceedings." [26] Core and Cranley cooperated with the Division during its preparation for trial against Sayegh in the district court. They also testified at the trial about the circumstances of the ICP fraud and the respective roles of each participant in the fraud without any promises from or cooperation agreements with this Commission. Core and Cranley also expressed remorse at the hearing for their roles in the fraud. In light of their cooperation and remorse, the ALJ appropriately gave Core and Cranley lesser sanctions than Sayegh. IV. The Division challenges the law judge's denial of its request to impose a "collateral bar" against Sayegh, thereby barring him from association with any municipal securities dealer, investment adviser, or investment company. As we stated in Meyer Blinder: In determining whether to impose a collateral bar, we consider foremost whether the misconduct is of the type that, by its nature, `flows across’ various securities professions and poses a risk of harm to the investing public in any such profession. We also consider whether the egregiousness of the respondent’s misconduct demonstrates the need for a comprehensive response in order to protect the public. [27] We found above that Sayegh’s conduct was egregious. Sayegh’s actions during the seventeen-month market manipulation of ICP evince the type of conduct that "flows across" the securities industry. Securities professionals, such as Sayegh, who have demonstrated such a disregard for the securities laws as to commit violations that can inflict serious harm to investors and the markets pose a risk of further harm no matter in which sector of the securities industry they practice. Accordingly, we find it appropriate to impose a collateral bar on Sayegh. [28] An appropriate order will issue. [29] By the Commission (Chairman LEVITT and Commissioners JOHNSON, CAREY, AND UNGER); Commissioner HUNT concurring in part and dissenting in part. Jonathan G. Katz Secretary Commissioner HUNT, concurring as to the findings and the imposition of a broker-dealer bar based on the application of the Steadman factors to the facts of this case, but dissenting as to the collateral aspects of the bar imposed by the majority for the reasons stated in his dissent in Meyer Blinder, Exchange Act Rel. No. 39180 (October 1, 1997). **FOOTNOTES** [1]: Two of Sayegh’s partners, Thomas Core and John J. Cranley, Jr., were censured and barred from association in a supervisory or proprietary capacity with any broker or dealer. Core and Cranley did not appeal the law judge’s decision. Robert Sayegh, Thomas Core, and John J. Cranley, Jr., Initial Decision Rel. No. 118 (October 10, 1997), 65 SEC Docket 2262. [2]:15 U.S.C. § 78o(b)(1998); 15 U.S.C. § 78s(h)(1998). [3]:15 U.S.C. § 78j(b)(1998); 17 C.F.R. § 240.10b-5(1998). [4]:SEC v. Sayegh, 906 F. Supp. 939, 941 (S.D.N.Y. 1995), aff’d, 101 F.3d 685 (2d Cir. 1996) (Table); see also Robert J. Sayegh, Exchange Act. Rel. No. 37953 (November 15, 1996), 63 SEC Docket 666, 667 (Commission opinion dismissing appeal from the denial by the NASD of an application by Sayegh’s employer to continue employing Sayegh following the district court injunction). [5]:See Sayegh, 906 F. Supp. at 940-48. [6]:Sayegh, 906 F. Supp. at 939, 943-46; see also Sayegh, 63 SEC Docket at 666. [7]:Sayegh, 906 F. Supp. at 946, 948-49; see also Sayegh, 63 SEC Docket at 666-67. [8]:Sayegh, 906 F. Supp. at 946, 948. [9]:Id. at 943. [10]:See Exchange Act § 3(a)(39)(F), 15 U.S.C. § 78c(a)(39)(F); Exchange Act § 15(b)(4)(C), 15 U.S.C. § 78o(b)(4)(C); Exchange Act §15A(g)(2), 15 U.S.C. 78o- 3(g)(2). [11]:See Sayegh, 63 SEC Docket at 666. [12]:Id. at 666, 672. [13]:In Johnson, the United States Court of Appeals for the D.C. Circuit found the five-year statute of limitations set forth in 28 U.S.C. § 2462 applicable to proceedings brought before us under Section 15(b)(4)(E) of the Exchange Act seeking to censure and suspend a securities supervisor who had failed reasonably to supervise a person who committed a securities violation. Section 2462 provides that the limitations period for an action covered by the statute begins to run "when the claim first accrue[s]." 87 F.3d at 492. [14]:15 U.S.C. § 78o(b)(6)(A)(iii). [15]:Exchange Act § 15(b)(4)(C), 15 U.S.C. § 78o(b)(4)(C). [16]:Russell G. Koch, Exchange Act. Rel. No. 38658 (May 20, 1997), 64 SEC Docket 1616, 1621, appeal filed, No. 97-70834 (9th Cir. July 17, 1997). [17]:Id. [18]:Sayegh has filed a document entitled "Motion Requesting that the Commission Consider Whether the ALJ’s Interpretation of SEC v. William Somdahl Constitutes a Conflict of Interest." In William Edwin Somdahl, 62 SEC Docket 1174 (July 22, 1996) the law judge who adjudicated Sayegh’s administrative proceeding previously concluded that, Johnson notwithstanding, an injunction based on conduct occurring more than five years prior to the filing of an administrative proceeding was an independent basis for instituting a cause of action under § 15(b). Sayegh appears to be arguing that the law judge’s interpretation of Johnson in Somdahl influenced her subsequent consideration of Johnson in this administrative proceeding to the extent that she was unwilling to consider the possible correctness of Sayegh’s interpretation that Johnson barred this administrative proceeding. We reject this argument. Not only is Somdahl consistent with our subsequent position in this matter, see Koch, 64 SEC Docket at 1621, but it is axiomatic that a law judge will at times be required to consider the same or similar issues in subsequent cases and endeavor to render consistent decisions. [19]:See Meyer Blinder, Exchange Act Rel. No. 39180 (October 1, 1997), 65 SEC Docket 1970, 1973 & n.11 (citing generally Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326 n.5 (1979)); Blinder, Robinson & Co. Inc., 48 S.E.C. 624, 628-30 (1986), vacated and remanded on other grounds, 837 F.2d 1099 (D.C. Cir. 1988), cert. denied, 488 U.S. 869 (1988); Kimball Securities, Inc., 39 S.E.C. 921, 924 n.4 (1960); J.D. Creger & Co., 39 S.E.C. 165, 169 (1959); Kaye, Real & Co. Inc., 36 S.E.C. 373, 375 (1955); James F. Morrissey, 25 S.E.C. 372, 381 (1947); see also Benjamin G. Sprecher, Exchange Act Rel. No. 38485 (Apr. 8, 1997), 64 SEC Docket 720, 729 (criminal conviction cannot be collaterally attacked in an administrative proceeding); cf. Herbert Garrett Frey, Exchange Act Rel. No. 39007 (September 3, 1997), 65 SEC Docket 845, 849 (an applicant cannot collaterally attack validity of an arbitration award in a disciplinary proceeding brought against applicant for failure to pay the arbitration award). [20]:Sayegh also appears to argue that the admonition by the United States Supreme Court in Central Bank of Denver v. First Interstate Bank of Denver, 114 S. Ct. 1439 (1994), that the language of statutes must be strictly construed, prohibits both the administrative proceeding and the district court's injunction. Sayegh points to the language of Exchange Act § 21(d)(1) providing that an injunctive action may be brought only when a "person is engaged or is about to engage" in violations of securities laws. To the extent that Sayegh is challenging the administrative proceeding, § 21(d)(1) is not applicable here. The administrative proceeding is not an injunctive action, but rather is a proceeding to determine appropriate sanctions for violations, as permitted pursuant to § 15(b)(6). To the extent that he is challenging the district court injunction, the doctrine of collateral estoppel again bars his argument. [21]:We understand Sayegh to be proposing that we impose a three-year suspension and consider those three years discharged by the time he has already spent outside of the securities industry due to the NASD’s action. Technically, under the Exchange Act [15 U.S.C. § 78o(b)(4)], any sanction longer than a year would be a bar with a right to reapply after a specified time. Any reapplication would be considered in light of the facts and circumstances at that time. [22]:603 F.2d 1126, 1140 (5th Cir. 1979) (internal citations and quotations omitted), aff’d on other grounds, 450 U.S. 91 (1981). Sayegh also contends that the law judge failed to find any harm to public securities markets or individual investors resulting from Sayegh’s actions. These factors are not part of the Steadman analysis. See id. [23]:At oral argument Sayegh stated, for the first time, that he did not intend to re-enter the industry. We are not persuaded by this purported last-minute change of heart. [24]:Sayegh argues that SEC v. Youmans, 729 F.2d 413, 415 (6th Cir. 1984), required the law judge also to consider his age (now 66) and health (high blood pressure) in determining the appropriateness of sanctions. The Division counters that Youmans, which added age and health to the core factors identified in Steadman, applies only to the appropriateness of sanctions imposed by district courts, and that Steadman governs sanctions imposed in administrative proceedings. However, both cases cite SEC v. Blatt, 583 F.2d 1325, 1334 n.29 (5th Cir. 1978) as a source for the criteria Steadman and Youmans have in common. Youmans also cites SEC v. Washington County Utility District, 676 F.2d 218, 227 & n.19 (6th Cir. 1982), which noted the additional criteria of an individual's health, age, retirement, and lack of opportunity, citing Blatt without explanation as support. We do not express any opinion regarding whether age and health ordinarily should be considered in determining the appropriateness of sanctions. Even if Sayegh's age and heath are relevant to our consideration, they are outweighed by Sayegh's insistence that he intends to participate in the securities industry. [25]:Core and Cranley ultimately consented in the district court to the entry of final judgments of permanent injunction. Sayegh, 906 F. Supp. at 942. [26]:Richard H. Puccio, Exchange Act Rel. No. 37849 (October 22, 1996), 63 SEC Docket 158, 163 (internal citations and quotations omitted); see also cases cited therein. [27]:Meyer Blinder, 65 SEC Docket at 1981. [28]:See id. [29]:All contentions advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed in this opinion. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 41226 / March 30, 1999 Admin. Proc. File No. 3-9019 ORDER IMPOSING REMEDIAL SANCTION On the basis of the Commission's opinion issued this day, it is ORDERED that Robert Sayegh be, and he hereby is, barred from association with a broker, dealer, municipal securities dealer, investment adviser, or investment company or with a member of a national securities exchange or of a registered securities association. By the Commission. Jonathan Katz Secretary