INITIAL DECISION RELEASE NO. 133 ADMINISTRATIVE PROCEEDING FILE NO. 3-8798 UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ In the Matter of : : SUPPLEMENTAL INITIAL DECISION TERRY T. STEEN : September 29, 1998 ______________________________ APPEARANCES: Thomas D. Carter and Polly A. Atkinson for the Division of Enforcement, Securities and Exchange Commission Daniel F. Wake for Respondent Terry T. Steen BEFORE: Carol Fox Foelak, Administrative Law Judge SUMMARY The issue in this proceeding is Respondent Terry T. Steen's ability to pay disgorgement. The Securities and Exchange Commission (Commission) previously concluded that he sold unregistered securities in violation of the securities laws, ordered him to cease and desist from such violations, and suspended him for six months from association with a broker- dealer. It remanded the matter to the administrative law judge for consideration of his ability to pay disgorgement of gains from his violative trades, amounting to $68,068.40 plus prejudgment interest. This Decision finds that Steen is unable to pay the disgorgement, and accordingly, waives payment. I. INTRODUCTION A. Procedural Background The Commission initiated this proceeding by an Order Instituting Proceedings (OIP) on September 6, 1995, pursuant to Section 8A of the Securities Act of 1933 (Securities Act) and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934. The OIP charged Steen with violations of the registration requirements of the Securities Act. After a hearing on March 19 and 20, 1996, an Initial Decision concluded that Steen willfully violated Sections 5(a) and 5(c) of the Securities Act in connection with transactions in restricted stock of Stat-Tech International Corporation. Terry T. Steen, Initial Decision, 64 SEC Docket 244 (Mar. 7, 1997) (Steen I). The Decision ordered Steen suspended for six months from association with a broker or dealer and from association with a member of a national securities exchange or registered securities association; and to cease and desist from committing or causing violations or future violations of Sections 5(a) and 5(c) of the Securities Act. It also ordered him to disgorge $68,068.40, representing commissions and profits he received from his violative trades, plus prejudgment interest. On appeal, the Commission affirmed the conclusion that Steen violated Securities Act Sections 5(a) and 5(c). Terry T. Steen, Opinion of the Commission, 67 SEC Docket 837, 837-43 (June 2, 1998) (Steen II). It affirmed the six month suspension and cease and desist order. Steen II, 67 SEC Docket at 843-46 & n.21, 849. As to disgorgement, the Commission remanded the matter "to the law judge for further consideration of Respondent's ability to pay disgorgement as of the time of the hearing on remand, and to set the amount of disgorgement." Steen II, 67 SEC Docket at 846- 49. B. The Remand Proceeding The undersigned held a prehearing conference on August 20, 1998, and ordered procedures to comply with the requirements of Rule 630 of the Commission's Rules of Practice, 17 C.F.R. 201.630. See Terry T. Steen, Prehearing Order (Aug. 20, 1998). Accordingly, the Division of Enforcement (Division) and the Respondent filed evidence and briefs on September 25, 1998. These filings include a brief of each party and Division Exhibit A, the only exhibit offered in the remand proceeding. With the agreement of both parties, the undersigned has determined Steen's ability to pay based on the information provided in these documents and the record evidence of the March 1996 hearing. Preponderance of the evidence was applied as the standard of proof. Steen asserts he is unable to pay disgorgement; the Division urges that his ability to pay be determined on the basis of the information provided. Pursuant to the August 20, 1998, Prehearing Order, Steen provided Form D-A, a sworn financial statement, to the Division. Division Exhibit A summarizes his financial statement. It shows a substantial negative net worth and monthly expenses substantially exceeding income. Steen does not object to Division Exhibit A except to state that it does not incorporate $24,000 in debt to family and friends. Division Exhibit A will be admitted into evidence and the record closed. There are no other exhibits. Steen requests a protective order pursuant to Rule 322 to limit Division Exhibit A from disclosure to the public. The Division states that it does not oppose this request. The request for a protective order will be granted. Although the record in a public hearing is presumed to be public, the harm resulting from disclosure of Steen's financial statement outweighs the benefits. See Rule 322(b). Disclosure of financial information concerning an individual is presumed harmful. It is specifically limited in various statutes, for example, Exemption 4 of the Freedom of Information Act, 5 U.S.C. 552(b)(4) and the Privacy Act, 5 U.S.C. 552a. There is no benefit from disclosure in this case. II. FINDINGS OF FACT AND CONCLUSIONS OF LAW The Respondent's gains from the violative trades total $68,068.40. For an explanation of the calculation of this amount, see Steen I, 64 SEC Docket at 254, 256, 260-63. It is the appropriate amount for disgorgement because it is causally related to the proven wrongdoing. SEC v. First City Financial Corp., 890 F.2d 1215 (D.C. Cir. 1989); see also Hateley v. SEC, 8 F.3d 653 (9th Cir. 1993). Steen has a substantial negative net worth and monthly expenses substantially exceeding income. Div. Ex. A. The undersigned has reviewed Division Exhibit A and the parties' briefs in light of the record of the March 1996 hearing and concluded that Steen does not, as of the time of this remand proceeding, have the financial ability to pay disgorgement plus prejudgment interest. III. PROCEDURAL ORDER IT IS ORDERED that Division Exhibit A is admitted into evidence. IT IS FURTHER ORDERED that Division Exhibit A SHALL BE MAINTAINED UNDER SEAL by the Commission's Office of the Secretary and NOT DISCLOSED to the public. IT IS FURTHER ORDERED that the record in this remanded proceeding IS CLOSED.[1] IV. ORDER Based on the findings and conclusions set forth above, IT IS ORDERED that disgorgement is fixed in the amount of $68,068.40, plus prejudgment interest from February 1, 1992, through the last day of the month preceding which payment is made, at the rate of interest established under Section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. 6621(a)(2), compounded quarterly, pursuant to Rule 610 of the Commission's Rules of Practice, 17 C.F.R. 201.610. IT IS FURTHER ORDERED that payment of all such disgorgement of $68,068.40, plus prejudgment interest, IS WAIVED based on Respondent Steen's demonstrated inability to pay. IT IS FURTHER ORDERED that the Division may at any time petition the Commission to reopen this matter to: 1) consider whether Steen provided accurate and complete financial information at the time such representations were made; 2) determine the amount of and order disgorgement up to $68,068.40, plus prejudgment interest; and 3) seek any additional remedies that were authorized in the OIP and are appropriate in light of 1) and 2). No issues shall be considered in connection with such petition other than: whether the financial information provided by Steen was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of disgorgement and prejudgment interest to impose, and whether any additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in this Decision or the Commission's Opinion or the Commission's authority to impose any additional remedies that were authorized in the OIP. This Supplemental Initial Decision shall become effective in accordance with and subject to the provisions of Rule 360 of the Commission's Rules of Practice, 17 C.F.R. 201.360. Pursuant to that rule, a petition for review of this Decision may be filed within 21 days after service of the Decision. It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to Rule 360(d)(1) within 21 days after service of this Decision upon him, unless the Commission, pursuant to Rule 360(b)(1), determines on its own initiative to review this Decision as to any party. If a party timely files a petition for review, or the Commission acts to review as to a party, this Decision shall not become final as to that party. Carol Fox Foelak Administrative Law Judge **FOOTNOTES** [1]: Thus, the record in the remand proceeding following the Commission's June 2, 1998, Opinion, is comprised of: an Order Designating Administrative Law Judge (June 4, 1998); an Order Scheduling Prehearing Conference (Aug. 17, 1998); a Prehearing Order (Aug. 20, 1998); the transcript of an August 20, 1998, prehearing conference; the Division's Brief, dated September 24, 1998; Respondent's Brief, dated September 24, 1998; and Division Exhibit A.