Litigation Release No. 17941 / January 21, 2003
Securities and Exchange Commission v. Jeffrey C. Hays, Marlen V. Johnson, and James M. Nilsson, Civil Action No. 3:95-CV-0250-G, (USDC/ND/TX)
After ordering defendant Marlen V. Johnson's arrest and incarceration, United States District Judge A. Joe Fish has assessed civil penalties, fines and attorney's fees in excess of $290,000 against Johnson for conduct in contempt of a final judgment signed by Judge Fish in 1996. On December 9, 2002, Judge Fish signed an Order Setting Additional Fines and Setting Amount of Attorneys' Fees to be Paid by Marlen V. Johnson Pursuant to Order of Contempt ("December 9 Order"). The December 9 Order supplements the Order Holding Defendant Marlen V. Johnson in Civil Contempt for Failure to Comply with Court Orders, Granting Sanctions for Contempt and Granting Other Post-Judgment Relief, entered by the Court on September 24, 2002 ("September 24 Order") [see LR 17750/September 26, 2002].
Both the September 24 Order and December 9 Order arise from Johnson's violations of the terms of an Agreed Final Judgment entered by Judge Fish on April 7, 1996. (SEC v. Jeffrey C. Hays, Marlen V. Johnson, and James M. Nilsson, USDC/NDTX [Dallas Division], Civil Action No. 3:02-CV-0250-G) The final judgment, entered in a matter charging Johnson with masterminding a stock-manipulation scheme, barred Johnson from acting as an officer or director. The judgment also permanently enjoined Johnson from, among other things, future violations of the antifraud and reporting provisions of the federal securities laws.
Judge Fish found that Johnson violated the final judgment from at least October 19, 2001, to the present by acting as an officer and director of a public company, including, but not limited to, Voyager Group, Inc., Neoteric, Inc., and R&RX Group, Inc. Judge Fish further found that Johnson violated the antifraud and reporting provisions of the final judgment by causing reports to be filed with the Commission that omitted to disclose material information. Specifically, Forms 10-K and 10-Q that Johnson signed and filed on behalf of Voyager and Neoteric failed to disclose that Johnson, while acting as president, secretary and a director of these companies, was nonetheless subject to the final judgment barring him from acting as an officer or director. Moreover, Johnson failed to disclose any portion of the 1996 final judgment against him.
Johnson ignored the Court's initial order to show cause and failed to appear at a contempt hearing held by Judge Fish on September 24, 2002. Pursuant to the September 24 Order, Judge Fish issued a bench warrant requiring the arrest and incarceration of Johnson and ordered the assessment of daily coercive fines until Johnson purged himself of contempt. Additionally, the Court required Johnson to pay the Commission attorney's fees for the time expended in seeking to enforce Johnson's compliance with the final judgment. Finally, the Court imposed on Johnson a third-tier civil penalty of $120,000 for his failure to disclose his disciplinary history in filings with the Commission.
After Johnson was arrested and incarcerated, the Court held a second show cause hearing. Following this hearing, Judge Fish issued the December 9 Order, awarding the Commission additional monetary relief against Johnson. The Court set the amount of the coercive fines against Johnson at $120,000. Additionally, the Court granted the Commission's request for attorneys' fees in the amount of $50,975.
For further information regarding Marlen V. Johnson, see SEC Litigation Release No. 17717/September 10, 2002.