INITIAL DECISION RELEASE NO. 618
UNITED STATES OF AMERICA
Administrative Proceedings Rulings
In the Matter of
ROBERT CORD BEATTY
ORDER PARTIALLY GRANTING MANIFEST ERROR MOTION
On January 14, 2005, I issued an Initial Decision, which barred Robert Cord Beatty ("Beatty") from participating in any offering of penny stock based on facts put into the record as exhibits to the Division of Enforcement's ("Division") Motion for Summary Disposition and Memorandum in Support (collectively "Motion for Summary Disposition"). (Robert Cord Beatty, Initial Decision No. 271 (Jan. 14, 2005).) Beatty filed a Motion to Correct Manifest Error of Fact ("Manifest Error Motion") in the Initial Decision on January 26, 2005. Beatty signed and dated the Manifest Error Motion on January 24, 2005. The Division opposes the Manifest Error Motion.
The Manifest Error Motion requests correction of what Beatty characterizes as nine errors of fact in the Initial Decision.
1. Beatty asserts that the sentence on page three, footnote one, which quotes AutoCorp Equities Inc.'s ("AutoCorp"), formerly Chariot Entertainment, Inc., Form 10-QSB for the quarter ended September 30, 1994, is incorrect. (Initial Decision at 3 n.1.) Beatty does not claim the quote is inaccurate. He claims that the information in the Form 10-QSB is wrong.
2. Beatty claims that the first full sentence on page four is wrong because it implies that he knew the certificates of deposit were fake when he authorized issuance of the Regulation S shares. (Initial Decision at 4.)
3. The Initial Decision states in the second full paragraph on page four: "AutoCorp subsequently filed a Registration Form S-8 with the Commission on April 5, 1994, in an attempt to raise money by selling stock to the public and securing loans on the CDs." (Initial Decision at 4.) Beatty notes that Judge Paul G. Cassell used separate sentences to convey this information in his Opinion and Order Granting and Denying Summary Judgment in Part because the Registration under Form S-8 is a different matter than raising funds from investors. (Motion for Summary Disposition, Exhibit A at 7.)
4. Beatty disputes the statement on page four, third full paragraph. that "Judge Cassell found it 'undisputed' that by mid-July of 1994, Beatty knew the CDs were worthless." (Initial Decision at 4.) Beatty claims that Judge Cassell denied summary judgment on this issue.
As a matter of fact, Judge Cassell's Opinion and Order Granting and Denying Summary Judgment in Part unequivocally found: "Nevertheless, it is undisputed that by mid-July, when Beatty met with Frenkel, Beatty knew the CDs were worthless." (Motion for Summary Disposition, Exhibit A at 26.)
5. Beatty claims that the sentence on page four, fourth full paragraph, stating that AutoCorp's stock was sold to the public until October 1994, should be deleted inasmuch as the stock is being sold "over the pink sheets which is a public market." (Manifest Error Motion at 3.)
As authority for the statement, the Initial Decision cites the Opinion and Order Granting in Part Summary Judgment Against Robert Cord Beatty in which Judge Cassell states that AutoCorp "stock continued to be sold publicly until October 1994." (Motion for Summary Disposition, Exhibit B at 9.)
6. Beatty contends that the Initial Decision, last paragraph on page four carried over to page five, erred in giving weight to the Blue Sheet Report By Trade Date, Exhibit E to the Motion for Summary Disposition, because Exhibit E does not identify AutoCorp as the security being traded. (Initial Decision at 4-5.) Although Beatty is correct as to the lack of AutoCorp's name on the exhibit, the Division's Motion for Summary Disposition represented that the trading information was for AutoCorp and Beatty failed to contest that representation while the motion was pending. (Motion for Summary Disposition at 6, 10.)
Beatty also contests the statement in the Initial Decision that the Blue Sheet Report By Trade Date shows that transactions in AutoCorp on multiple days in 1994 and 1995 were for a per share price of $3.75 or less. (Initial Decision at 4-5.) Beatty correctly notes that the Blue Sheet Report By Trade Date does not show trades in 1995. The last trade occurred in August 1994. The Initial Decision found several facts, including the Blue Sheet Report By Trade Date, supported a conclusion that AutoCorp's stock met the definition of a penny stock when Beatty committed the illegal conduct that was the basis for the permanent injunction. The error does not change that finding.
7. Beatty claims it was manifest error for the Initial Decision to state in the first full paragraph on page five that the United States District Court found that he acted fraudulently when the court found "that Beatty committed fraud when he failed to inform investors that the CDs were apparently worthless." (Initial Decision at 5; Motion for Summary Disposition, Exhibit B at 10.) Beatty believes there is a significant difference between acting fraudulently, which he defines as "an openly, obvious and intentional act," and committing fraud, which he defines as an action "undertaken given the weight of all the circumstances." (Manifest Error Motion at 5.)
8. Beatty claims that the Initial Decision's reference on page seven, second full paragraph, to the Beatty family trust's ownership of Uniprime, a public company that is the subject of a Commission enforcement action, is irrelevant and has no bearing on his fitness to be associated with a penny stock company. (Initial Decision at 7.) Beatty claims the Commission initiated an enforcement action against Uniprime three years before the Beatty family trust acquired Uniprime stock, and that the trust's ownership terminated in January 2004. (Manifest Error Motion at 5.)
9. Beatty contests the contents of a deposition from Dr. Todd Cressman. (Initial Decision at 7.) Again, Beatty disputes factual matters advanced in the Motion for Summary Disposition, which he failed to raise when the Motion for Summary Disposition was pending. (Motion for Summary Disposition at 13, Exhibit K.)
The Division's Opposition to the Motion to Correct Manifest Error of Fact ("Opposition"), filed on February 3, 2005, cites Black's Law Dictionary to argue that the matters Beatty raises as errors one through five and seven through nine do not meet the definition of credible error of fact. The Division also argues that Beatty does not offer any evidence to support his factual error allegations and cites evidence in the record to support the accuracy of the statements. As to alleged error six, the Division attaches to its Opposition four data requests to show that the Blue Sheet Report By Trade Date shows trading in AutoCorp stock. (Opposition at Exhibit 1.) Finally, the Division argues that Beatty has failed to show that AutoCorp was not a penny stock in 1995.
Beatty's Manifest Error Motion was not filed within ten days of the Initial Decision and therefore does not comply with Rule 111 of the Commission's Rules of Practice. 17 C.F.R. § 201.111. Given that Beatty appears pro se and he missed the due date by a short period, I will not treat his failure to make a timely filing as determinative.
Another failure by Beatty, however, is considerably more significant. Beatty filed a Manifest Error Motion even though he did not file an opposition to the Division's Motion for Summary Disposition. The Commission's Rules of Practice provide that "any allegation not denied [in an answer to an Order Instituting Proceedings] shall be admitted." 17 C.F.R. § 201.220(c). In addition, a party who fails to respond to a dispositive motion may be deemed to be in default and the allegations in the Order Instituting Proceedings may be determined to be true. 17 C.F.R. § 201.155. Given that Beatty did not take issue with the exhibits attached to the Motion for Summary Disposition, the Initial Decision relied on those factual materials. Therefore, it is too late for Beatty to dispute factual matters that he should have addressed in an opposition to the Motion for Summary Disposition. 17 C.F.R. §§ 201.154, .250. I will address the merits of the Manifest Error Motion, however, because the Commission's Rules of Practice do not specifically prohibit a motion to correct a manifest error by a respondent who failed to oppose a motion for summary disposition.
The Commission's Rules of Practice do not describe what is meant by "manifest error" and the term does not appear at any other place in the Rules of Practice. I define manifest error as "[a]n error that is plain and indisputable, and that amounts to a complete disregard of the controlling law or the credible evidence in the record" from Black's Law Dictionary 563 (7th ed. 1999).
I GRANT the Manifest Error Motion in part as to alleged error six, which refers to the sentence on page four carried over to page five of the Initial Decision. As to the Blue Sheet Report By Trade Date, the credible evidence in the record does not show AutoCorp trades in 1995. Accordingly, the sentence is modified to eliminate the reference to 1995. The sentence now reads, "Also, transactions in AutoCorp on multiple days in 1994, were all for a per share price of $3.75 or less, so it is reasonable to conclude that AutoCorp's per share price was five dollars or less in the relevant period." (footnote omitted) This correction does not change the finding that AutoCorp's stock met the definition of a penny stock when Beatty committed the illegal conduct that was the basis for the permanent injunction.
I DENY the remainder of the Manifest Error Motion because none of the points raised constitute a plain and indisputable error that is contrary to the credible evidence in the record.
Brenda P. Murray
Chief Administrative Law Judge
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