Paul J. Montle, et al.

Securities and Exchange Commission v. Paul J. Montle, et al., 98 CV 3446 (S.D.N.Y.) (MP) (March 3, 2003)

The Securities and Exchange Commission ("Commission") announced today that on March 3, 2003, the Honorable Milton Pollack, United States District Judge for the Southern District of New York, found defendant Paul J. Montle ("Montle") in contempt for failure to pay the Commission's $415,000 judgment ("Judgment") against him. The Court ordered Montle to pay the July 12, 2001 Judgment in monthly installments of $10,000 (beginning March 13) and to turn over assets to the Commission.

In 1998, the Commission brought a civil enforcement action in the Southern District of New York against Montle as the lead figure in a series of federal securities law violations, which essentially included: (1) publishing, or causing to be published, numerous false and baseless sales reports and projections regarding Viral Testing Systems Corporation; (2) making false statements in Commission filings regarding Lone Star Casino Corporation; and (3) orchestrating a market-manipulation scheme designed to maintain and raise artificially the stock price of RMS Titanic, Inc.

On July 12, 2001, after a bench trial, Judge Pollack entered a judgment against Montle (the AJudgment@) on all counts alleged in the Commission's complaint. Judge Pollack: (1) permanently enjoined Montle from violating various sections of the federal securities laws, including, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; (2) ordered Montle to pay the Commission disgorgement plus pre-judgment interest thereon, totaling $365,092.25; (3) ordered Montle to pay a $50,000 civil penalty; (4) barred Montle for the period of five years from acting as an officer or director of a public company; and (5) prohibited Montle from participating, directly or indirectly, in the sale of securities pursuant to Regulations D and S of the Securities Act of 1933.

Montle failed to pay the Judgment, and the Commission subsequently sought information from him concerning his assets. However, Montle refused to produce this information, and on January 17, 2002, Judge Pollack ordered Montle to do so. On January 30, 2002, after Montle still refused to provide the requested information (and to pay the Judgment), the Commission sought civil contempt sanctions against him. In a final attempt to avoid payment, Montle filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. In April 2002, the Commission obtained a dismissal of Montle's bankruptcy proceeding, and the Commission renewed its request for contempt sanctions before Judge Pollack. Judge Pollack initially held that request in abeyance pending further investigation of Montle's assets.

On January 8, 2003, the Commission renewed its contempt motion against Montle in light of evidence that Montle had been hiding assets from the Commission. On March 3, 2003, Judge Pollack granted the Commission's contempt motion and ordered Montle to pay the Commission in monthly installments of $10,000, with the first payment due March 13, 2003. Additionally, Judge Pollack ordered Montle to produce information to the Commission regarding his assets and to turn over certain assets. The order also allows the Commission to move the Court for an order of commitment if Montle "disobeys this Order in any respect." Judge Pollack found that Montle had engaged in "obstructionism" by failing to produce key documents to the Commission. Judge Pollack further noted that Montle's "continuing refusal to pay a penny of the Judgment, at the same time that he maintained an admittedly extravagant lifestyle and hid assets, strikes this Court as contumacious conduct."