Terence Michael Coxon, Alan Michael Sergyand World Money Managers Rel. Nos. 34-48385, IA-2161, IC-26165

SECURITIES ACT OF 1933
Rel. No. 8271 / August 21, 2003

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 48385 / August 21, 2003

INVESTMENT ADVISERS ACT OF 1940
Rel. No. 2161 / August 21,2003

INVESTMENT COMPANY ACT OF 1940
Rel. No. 26165 / August 21, 2003

Admin. Proc. File No. 3-9218

In the Matter of

TERENCE MICHAEL COXON
ALAN MICHAEL SERGY

and

WORLD MONEY MANAGERS

ORDER IMPOSING SANCTIONS

On the basis of the Commission's opinion issued this day, it is

ORDERED that World Money Managers and Terence Michael Coxon be, and they hereby are, ordered to cease and desist from committing or causing any violations or any future violations of Section 206(2) of the Investment Advisers Act of 1940, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, Sections 10(b), 12(b), 13(a)(3), and 17(d) of the Investment Company Act of 1940 and Rules 12b-1 and 17d-1 thereunder; and it is further

ORDERED that Terence Michael Coxon be, and he hereby is, ordered to cease and desist from committing or causing any violations or any future violations of Section 34(b) of the Investment Company Act of 1940, and it is further

ORDERED that World Money Mangers and Terence Michael Coxon, jointly and severally, shall disgorge a total of $971,777.54, and pay half the amount of prejudgment interest as described at 17 C.F.R. § 201.600(b), due from September 21, 1993, which we deemto be the date of their violative conduct, through the last day of the month preceding the month in which disgorgement is made; and it is further

ORDERED that, within 60 days after funds have been turned over by World Money Managers or Terence Michael Coxon in accordance with this order and any appeals of the disgorgement order have been waived or completed or appeal is no longer available, the Division of Enforcement shall submit a proposed plan for the administration and distribution of disgorgement funds, as provided in Rules of Practice 610 through 614, 17 C.F.R. §§ 201.610-614; and it is hereby further

ORDERED that these proceedings against Alan Michael Sergy be, and they hereby are, dismissed.

Payment of disgorgement shall be made to the United States Treasury within 21 days of the issuance of this order. The payment shall be (a) made by United States postal money order, certified check, bank cashier's check, or bank money order; (b) made payable to the Securities and Exchange Commission; (c) mailed or delivered by hand to the Comptroller, 6432 General Green Way, Alexandria VA 22312; and (d) submitted under cover letter that identifies the particular respondent in this proceeding making payment and the Commission's administrative proceeding file number. A copy of the cover letter and money order or check shall be sent to John S. Yun, San Francisco District Office, 44 Montgomery Street, Suite 1100, San Francisco CA 94104.

By the Commission.

Jonathan G. Katz
Secretary

1 Jerrold Abeles was on the briefs with Mr. Cotton.
2 The second general partner of WMM is Terry Coxon, Inc., a corporation wholly owned by Terry Coxon.
3 15 U.S.C. § 80b-6(2).
4 15 U.S.C. § 80a-33(b).
5 15 U.S.C. § 77q.
6 15 U.S.C. § 78j, 17 C.F.R. § 240.10b-5.
7 15 U.S.C. §§ 80a-10(b)(2), 80a-12(b), 80a-13(a)(3), and 80a-17(d); 17 C.F.R. §§ 270.12b-1 and 270.17d-1.
8 Browne wrote a series of books on investment strategies and finance in the 1970s and early 1980s. During this period, Coxon was Browne's assistant and, later, his co-author.

Browne and Coxon theorized that an investor could design a portfolio of investments including stocks, bonds, precious metals, and foreign currencies so that if one portion of the portfolio declined another investment would prosper. Under this theory, the investor's overall wealth would be safeguarded, regardless of future economic events.
9 In 1998, Sergy retired from the Fund for health reasons.
10 As average net assets increased above $200 million, the percentage level of the advisory fee was adjusted downward.
11 IC Act Rule 12b-1 permits an investment company to pay for its distribution costs pursuant to a written plan that complies with that rule.
12 Cuggino included in the audit work papers the following statement for possible inclusion in a management letter:

Ernst & Young did not send a management letter to the Fund.

  • During our review of the costs incurred by the investment advisor and 12b-1 reimbursements to the investment advisor from the fund, it was noted that the fund incurred certain costs [i.e., the transfer agentfees and auditing fees] for reimbursement under the 12b-1 [plan] which are not qualifying expenses under the contract. Fortunately, there were sufficient costs incurred so that no adjustment was necessary to the expenses as booked by the fund, however, on a prospective basis, the investment advisor needs to ensure that these costs are not part of the reimburseable [sic] costs.
13 Coxon testified that, in the previous year, the Treasury Bill Portfolio generated $110,000 in 12b-1 distribution fees.
14 Respondents assert that WMM's financial condition was not bad because it reported income or small losses on its tax returns for 1988 through 1990. We have previously stated that financial statements prepared on an accrual basis provide a more accurate view of a company's condition than its tax returns. "[B]ecause of its fixation on the oft-fortuitous circumstance of actual payment, the cash basis does not relate costs to the period in which they were incurred. Nor does it relate revenues to the slice of time in which they were earned. Hence, cash basis financial statements are necessarily distorted to some extent." Multi Benefit Realty Fund, 46 S.E.C. 286, 288 (1976) (denying application for exemption to file tax-basis, instead of accrual, financial statements). Before the law judge, Coxon admitted that the amounts reported on WMM's tax returns reflected the timing of certain payments of WMM's expenses.

In contrast, accrual accounting allocates items of expense and revenues to accounting periods and matches them, regardless of when the cash expenditures or receipts occur. See D. Edward Martin, Attorney's Handbook of Accounting, Auditing and Financial Reporting § 2.04[3] (1999) (observing that accrual accounting provides "the most accurate pictureof an entity's operations" because revenue is regarded as earned in the period in which services are rendered and expenses are regarded as applicable to the period in which they are incurred, regardless of when paid).
15 Sergy reported to the Board that the subsidiary would incur organizational costs of approximately $35,000 (consisting of $18,000 already incurred and a projected additional $16,900), together with $37,000 for first-year operations.
16 Although Sergy had not received a salary from WMS when it was owned by WMM, he began to receive a salary as WMS' president after its acquisition by the Permanent Portfolio.
17 Sergy had attempted to get the restrictions lifted in December 1989, but the NASD denied his request.
18 Coxon executed the Selling Agreement on behalf of the Fund and WMM, and Sergy executed the agreement for WMS. The Fund's signature line stated that it "approved and acknowledged" the agreement.
19 At the Board meeting, Martin asked Coxon whether the 1990 Selling Agreement would conflict with the requirement contained in the 12b-1 plan that each portfolio be responsible for its own distribution costs. Coxon represented that there was no conflict because each portfolio would continue to be responsible for its own distribution expenses. In fact, the direct-mail campaigns for the Treasury Bill and Aggressive Growth Portfolios were funded from Permanent Portfolio shareholders' $950,000 investment in WMS.
20 Martin testified that WMS earned $200,000 in trailing commissions the first year, and it was projected that WMS would receive more than $600,000 over the 6-1/2 year term. However, interest rates declined and investors redeemed their shares in the Treasury Bill Portfolio, reducingsubsequent years' payments of trailing commissions to WMS.
21 Ultimately, WMS dissipated all its funds, including the revenue generated by the trailing commissions. Martin testified that some of WMS' money went to salaries, including Sergy's salary, some for rent, some for the Passport Financial, Inc. underwriting, discussed at Section II.G., and some for registration and regulatory expenses.

In 1996, WMS filed to withdraw its registration on Form BDW. At the request of the Division, the law judge dismissed WMS as a respondent in this proceeding.
22 From conversations with Coxon and Layman's personal attorney, Layman understood that the taxable gain or loss on a grant of a right to purchase his Symantec stock would not be recognized unless and until the Permanent Portfolio exercised the right and received the underlying Symantec stock. Thus, Layman's tax liability on the transaction would be deferred until the right was exercised or lapsed.
23 The Symantec agreement gave the Permanent Portfolio theright for the period up to April 6, 2005, to purchase up to 22,500 shares of Symantec common stock at an adjustable "Purchase Price," initially equal to 55.6% of the closing price of Symantec on April 6, 1990. For the right, the Permanent Portfolio paid Layman 73.2% of the initial Purchase Price.
24 Coxon testified that, before this lease, WMM and the Fund occupied space that was small and cramped, and did not comply with earthquake standards.
25 Sergy paid $100 per month under his sublease.

Richard Rolnick was in-house counsel to the Fund, WMM, and its affiliates. In addition, Rolnick engaged in a private law practice. Rolnick occupied the largest office in the suite and a portion of the common area, which was occupied by his secretary and files. Rolnick paid $500 per month to each of WMS and WMM.

Cuggino paid to WMS $500 per month for his office. In addition to being the Fund's treasurer, Cuggino also engaged in an independent private accounting practice as MichaelCuggino, CPA, a sole proprietorship.
26 WMM began paying WMS' share of its rent after WMS was dissolved in 1996. However, WMM had guaranteed to the landlord WMS' performance under WMS' lease, and, therefore, WMM was obligated to pay the rent when WMS could no longer perform.

The record does not indicate that the Fund's Board discussed or approved the leases. The minutes of one Board meeting state only that Coxon informed the Board about the proposed move to the new offices.
27 The agreement was never executed. The signatories to the proposed agreement were to be WMS, Passport Financial, Inc., WMM with respect to one provision of the agreement, and the Fund, which was to "acknowledge and agree" to its provisions.
28 Passport was a start-up company, intended to publish "informational materials" on international investments. Passport proposed to offer $2 million in stock and an additional $2 million in warrants.
29 The record is unclear about the level of consideration given by the Fund's Board to the Passport transaction. Independent director Robert Martin testified that the Board discussed the transaction, but that he was not asked toapprove it. Martin Tier, another independent director, testified that he "reviewed" the transaction while on the Board. The Respondents did not introduce minutes of any Board meeting reflecting the Board's deliberations with respect to this transaction. We conclude that Respondents have not shown that the directors approved the transaction.
30 In any event, half the projected commissions would be generated only if and when the holders exercised the accompanying warrants.
31 SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194 (1963). See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 17 (1979) ("As we have previously recognized § 206 establishes 'federal fiduciary standards' to govern the conduct of investment advisers.").
32 To find that Respondents aided and abetted, the record must demonstrate (1) the existence of an independent primary violation; (2) general awareness or reckless disregard by the alleged aider and abettor of the primary violation and of his or her role in furthering the violation; and (3) substantial assistance by the respondent in the commission of the primary violation. Graham v. SEC, 222 F.3d 994, 1000 (D.C. Cir. 2000); SEC v. Fehn, 97 F.3d 1276, 1288 (9th Cir. 1996).

Our findings that Respondents willfully aided and abetted the Fund's violations necessarily make them a "cause" of those violations. See Richard D. Chema, 53 S.E.C. 1049, 1059 n.20 (1998); Dominick & Dominick, Inc., 50 S.E.C. 571, 578 n.11 (1991). To conclude that a respondent aided and abetted another violation, we must find that he acted with scienter. A respondent is a "cause" of another's violation if the respondent "knew or should have known" that the respondent's act would contribute to the violation. Exchange Act Section 21C(a); Chema, 53 S.E.C. at 1059 n.20.
33 Compare Steadman v. SEC, 603 F.2d 1126, 1130 (5th Cir. 1979)(upholding Commission finding that potential self-dealing by adviser to fund's detriment required disclosure), aff'd on other grounds, 450 U.S. 91 (1981).
34 SEC v. Advance Growth Capital Corp., 470 F.2d 40, 43 n.2 (7th Cir. 1972).
35 SEC v. General Time Corp., 407 F.2d 65, 67 (2d Cir. 1968). See Rule 17d-1(b) (requiring the Commission to consider whether the investment company's participation in a proposed transaction is consistent with the purposes of the Act and the extent to which such participation is on a different or less advantageous basis "than that of other participants").
36 Respondents assert that a transaction between "a company of the character described in" IC Act Sections 12(d)(3)(A) and (B) and the controlling investment company is exempt from IC Act Section 17(d). Sections 12(d)(3)(A) and (B) encompass the wholly-owned subsidiary of an investment company that underwrites the investment company's securities. Respondents assert that WMS, which was wholly-owned by the Permanent Portfolio and acted as its underwriter, is a company described in those sections. Here, however, there were three parties to the Selling Agreements -- the Fund, WMS, and WMM -- and, thus, they required a Commission exemption.
37 The Division also introduced expert testimony that an independent, third-party broker-dealer would be extremely reluctant to advance funds for distribution or to pay other selling brokers commissions when the broker-dealer was to receive only annual commissions.
38 Respondents also assert that they received advice from Richard Rolnick, the Fund's in-house counsel (who was also counsel to WMM), that the Selling Agreements did not require Commission exemption. Respondents do not explain the precise nature of the purported advice or the circumstances under which it was received. Instead, they cite a memorandum from Rolnick with respect to transactions by the Fund in brokerage stocks. That memorandum merely observes that brokerage stock transactions may be permissible under the same exemption that permitted the Portfolio to acquire WMS. The memorandum does not mention the Selling Agreements.

We conclude that Respondents have not made a showing of reliance on counsel. SEC v. Savoy Industries, Inc., 665 F.2d 1310, 1314 n.18 (D.C. Cir. 1981) (stating that defendant must establish that "he (1) made a complete disclosure to counsel; (2) requested counsel's advice as to the legality of the contemplated action; (3) received advice that it was legal; and (4) relied in good faith on that advice" to obtain this limited defense).
39 The prospectuses stated that the Fund would not pay any of WMM's general or administrative overhead. WMM undertook to pay the fees and expenses of the Fund's independent directors. However, Respondents charged the Fund's 12b-1 plan for travel for Coxon and Sergy to locations where Fund Board meetings were held, including London and Hong Kong.

Respondents assert that Coxon and Sergy engaged in marketing activities on these trips and that marketing expenses could be paid under the 12b-1 plan. However, the prospectus does not disclose that, under certain circumstances, the Fund might pay Coxon or Sergy's travel expenses.
40 One of the independent directors, Martin Tier, testified that, if he had been told that reimbursement was aggressive, he would have asked if it was illegal or unethical. Coxon's and Sergy's failure to disclose this information prevented that discussion from occurring.
41 The Division argues that, because WMM agreed to pay certain ordinary operating expenses of the Fund but instead charged such expenses to the Fund's 12b-1 distribution plan, Respondents willfully aided and abetted and were causes of violations of IC Act Section 12(b) and IC Act Rule 12b-1. Section 12(b) generally prohibits an investment company from using company funds to distribute its shares, absent compliance with a Commission rule like IC Act Rule 12b-1. Because we find that WMM, aided and abetted by Coxon and Sergy, violated the terms of its advisory agreement that required it to pay the Fund's ordinary operating expenses, and that WMM's conduct thereby violated Advisers Act Section 206(2), we do not reach the Division's remaining allegations that Respondents thereby also aided, abetted and were causesof the Fund's IC Act Section 12(b) and 12b-1 violations.
42 A third independent director of the Fund resigned in August 1990.
43 See Green v. Brown, 398 F.2d 1006, 1010 (2d Cir. 1968) (noting Commission position that "advance shareholder approval gives minority shareholders both an opportunity to dissuade the majority, and a chance to dispose of their holdings before the change occurs").
44 The Fund's prospectus, dated May 31, 1990, was issued afterexecution of the Symantec agreement. The prospectus merely states that Permanent Portfolio will engage "in the same types of investments in which the Aggressive Growth Portfolio may invest." The Aggressive Growth Portfolio's investment policy states that the portfolio invests in "stock and stock warrants of U.S. companies," and explains that stock warrants "are long-term options to purchase shares of stock at a fixed price."
45 The Division's expert testified that it would be unlikely for a warrant to include a cash settlement provision because a warrant "is ultimately a source of capital for the corporation."
46 In the pamphlet, entitled, "Using Warrants: Safe Investment Programs Using Stock Warrants in Dual-Purpose Funds," Coxon states that warrants are issued "by the company whose stock is involved" The pamphlet added, "Warrants differ from call options, which can be written (issued) by any investor." Coxon agreed at trial that this was "reasonable" as a "general description."
47 The Fund's SAI disclosed that the Permanent Portfolio would purchase put options or sell call options for hedging purposes. Reading the prospectus, which stated that the portfolio would be "stock warrants of U.S. companies" and the SAI, an investor would not understand that the Permanent Portfolio might purchase a call option from a third-party individual.
48 At the hearing, Division counsel asked Coxon what would happen if, hypothetically, (a) Symantec stock increased in price; (b) the Permanent Portfolio exercised its option; and (c) Layman elected to tender cash to the Portfolio rather than the stock.

Coxon opined that, as a result, the Permanent Portfolio would have an immediate capital gain on the cash. However according to Coxon, "Layman's exercise of the right of prevention would constitute a repurchase of an option being sold, and he would be repurchasing it for more than he sold it for. So he would have a capital loss." Coxon also agreed that, if the price of Symantec rose further during the 14-day period provided for settlement under the Right of Prevention, Layman would receive the benefit of that increase.

The Division's expert explained that, if the Permanent Portfolio received Symantec stock, rather than cash, it would not have a taxable event until it sold that stock. Moreover, the expert stated that the Permanent Portfolio would "inherit the cost basis of the option."
49 The Division's expert also expressed the opinion that it would be difficult to hedge the Permanent Portfolio's risk during the period between exercise and Layman's election under the Right of Prevention. The Division further argued that, if the Permanent Portfolio exercised the option, it would have been exposed in the event of Layman's bankruptcy to the bankruptcy court's setting the option aside as an executory contract. See, e.g., In re Robert L. Helms Constr. & Dev. Co., 139 F.3d 702, 705 (9th Cir. 1998) (holding that option may be executory contract if holder has exercised option before bankruptcy); In re Riodizio, Inc., 204 B.R. 417, 423 (Bankr. S.D.N.Y. 1997) (determining that stock warrant is executory by weighing relative benefits and burdens to the debtor's estate of assuming or rejecting performance under warrant).
50 At argument, respondents counsel suggested that the Symantec option had been profitable. There is nothing on the record from which we can determine whether this is a reference to realized or unrealized gains and whether the Fund might have profited more or less employing a different strategy.

In any event, whether a transaction involving a potential conflict of interest ultimately proves profitable is irrelevant to respondents' obligation to disclose the potential conflict. SEC v. Capital Gains Research Bureau, 375 U.S. at 200 (holding that "actual inequitable conduct" is irrelevant because the Advisers Act is "directed not only at dishonor, but also at conduct that tempts dishonor.")
51 See, e.g., SEC v. Advance Growth Capital Corp., 470 F.2d at 43 n.2. See text accompanying note 34 supra.
52 Sergy's brief adopted Coxon's arguments. To the extent that Sergy also asserts that he should not be held responsible for actions approved by the Fund's Board, we note that Sergywas secretary-treasurer of the Fund, WMS' president, and secretary to the Board, as well as a director. As described above, Sergy participated actively in the various violations. We find that Sergy willfully aided and abetted and was a cause of WMM's and the Fund's violations.
53 See Steadman v. SEC, 603 F.2d at 1135 (officer's control "is a substantial ground for the inference that he was involved in every important activity of that company").
54 Respondents claim that they cannot be liable for aiding or abetting because the Fund was not charged with primary violations of the Investment Company Act. However, IC Act Section 9(b) authorizes the Commission to bring proceedings against any associated person of an investment company who "has willfully aided, abetted, counseled, commanded, induced, or procured the violation" of any provision of the securities laws or the rules thereunder. We previously rejected the argument that the Commission may not proceed against an aider and abettor unless the primary violator is charged. "Even in a criminal context, it is not necessary to identify, indict, try, or convict a principal wrongdoer in order to convict an aider and abettor." Swartwood Hesse, Inc., 50 S.E.C. 1301, 1304 n.8 (1992), citing United States v. Mann, 811 F.2d 495, 497 (9th Cir. 1987). See also SEC v. Fehn, 97 F.3d at 1294 (finding attorney aided and abetted issuer's disclosure violations).

Rather, the Commission must find that primary violations occurred. Here, the Order Instituting Proceedings gave Respondents notice of the Fund's alleged primary violations, and Respondents vigorously defended against those allegations. As described in this opinion, we conclude that the Division met its burden of demonstrating that the Fund engaged in the violations that we have found.

Moreover, Coxon and Sergy are primary violators of the antifraud provisions, and WMM was a primary violator, aided and abetted by Coxon and Sergy, of Advisers Act Section206(2) and IC Act Section 17(d) and IC Act Rule 17d-1.
55 From the record, however, it appears that the Board did not approve either the WMM/WMS lease or the Passport transaction. See notes 26, 29 supra. Thus, these transactions would not, in any event, be entitled to protection under the business judgment rule.
56 International Ins. Co. v. Johns, 874 F.2d 1447, 1461 (11th Cir. 1989) (business judgment rule protects a director "in the absence of a showing of abuse of discretion, fraud, bad faith, or illegality."); Arthur Lipper Corp. v. SEC, 547 F.2d 171, 180 (2d Cir. 1976), cert. denied, 434 U.S. 1009 (1978) (concluding that "bald diversion" of investment company funds "is quite different" from discretionary transactions entitled to protection under the business judgment rule "after full disclosure to the independent directors"); Yost v. Early, 87 Md. App. 364, 377-78 (1991) (finding that "proof of the lack of good faith defeats both the presumption of the business judgment rule" and the requirements of the Maryland Code of Conduct for directors, Section 2-405.1). See also Parish v. Maryland & Va. Milk Producers Ass'ns Inc., 250 Md. 24, 74 (1968) (finding that business judgment rule does not protect directors acting "with gross or culpable negligence").
57 Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 185 (1973). See also Rizek v. SEC, 215 F.3d 157, 160 (1st Cir. 2000) (same).
58 Respondents assert that the passage of time hampered their defense because Rolnick died in 1994, and Sergy's memory became deficient. Although Respondents assert that Rolnick advised them with respect to various transactions, as discussed in note 38 supra, they failed to establish reliance on the advice of counsel.

Sergy's testimony at the hearing was consistent with that of Coxon and other witnesses. It was also confirmed by various documents in the record, including minutes of board meetings, the office leases, and the disclosure documents.
59 On the record before us, we have determined not to impose bars, suspensions, or civil penalties. Respondents argue that we could not impose such remedies in this case because they are time-barred under 28 U.S.C. § 2462, as interpreted by Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996). Section 2462 requires the federal government to bring an action for enforcement of a "civil fine, penalty, or forfeiture" no later than five years after the claim accrues. We do not address Respondents' argument, other than to note that it overlooks the fact that, while much of the misconduct here occurred more than five years before the institution of these proceedings, payments under the WMM and WMS leases and the Passport Financial offering did not.

Section 2462 does not constitute an evidentiary bar. Evidence of matters that occurred before the applicable limitations period may be admitted. Joseph J. Barbato, 53 S.E.C. 1259, 1278 n.26 (1999), citing United States v. Gavin, 565 F.2d 519, 523 (8th Cir. 1977).
60 Respondents did not address the applicability of Section 2462 to cease-and-desist proceedings. Because a cease-and-desist order is forward-looking, we believe that Section 2462 does not apply to actions for a cease-and-desist order. The order here requires only that Respondents obey the law, which they must do in any event, and is designed to ameliorate the risk of similar violations occurring in the future.
61 Among those factors are, "the seriousness of the violation, the isolated or recurrent nature of the violation, the respondent's state of mind, the sincerity of the respondent's assurances against future violations, the respondent's recognition of the wrongful nature of his or her conduct, and the respondent's opportunity to commit future violations. In addition, we consider whether the violation is recent, the degree of harm to investors or the marketplace resulting from the violation, and the remedial function to be served by the cease-and desist order in the context of any other sanctions being sought in the same proceeding." KPMG Peat Marwick LLP, Exchange Act Rel. No. 43862 (Jan. 19, 2001), 74 SEC Docket 384, 436, petition denied, 289 F.3d 109 (D.C. Cir. 2002).
62 Hately v. SEC, 8 F.3d 653, 655 (9th Cir. 1993); SEC v. Rind, 991 F.2d 1486, 1941 (9th Cir. 1993).

Respondents do not assert that disgorgement is subject to 28 U.S.C. § 2462 although, as discussed below, they assert that certain aspects of the law judge's award constitute a penalty. Johnson v. SEC, 87 F.3d at 1491, stated that "where the effect of the SEC's action is to restore the status quo ante, such as through a proceeding for restitution or disgorgement of ill-gotten profits, § 2462 will not apply." Respondents unlawfully obtained use of the Permanent Portfolio's money, and Respondents have not returned any funds to the Portfolio. The status quo ante is restoration of those funds.
63 SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1475 (2d Cir. 1996), cert. denied, 522 U.S. 812 (1997), quoting SEC v. Patel, 61 F.3d 137, 139 (2d Cir. 1995).
64 See, e.g., SEC v. First Pacific Bancorp, 142 F.3d 1186, 1992 (9th Cir. 1998) (finding that disgorgement by defendant was appropriate where defendant had fraudulently diverted funds into an offering, the infusion of capital put off the enterprise's failure and permitted continued operations, and defendant had paid himself salaries, commissions, and fees.)
65 Respondents also claim that they should be credited with the value of their donation of WMS to the Permanent Portfolio. We disagree. Martin testified that the Fund's counsel had given the opinion that the Fund was prohibited from paying any amount of money for WMS. Respondents were unable to receive compensation for WMS. Moreover, WMM had written off WMS as an asset.

We also reject Respondents' assertion that they are entitled to offset the rent WMM paid on the office suite after WMS was dissolved. As guarantor of WMS's performance under the lease, WMM had the obligation to pay rent.
66 Respondents and the Division agree that, in the initial decision, the disgorgement amount awarded by the law "double counted" or duplicated Respondents' ill-gotten gains. Thus, she awarded $850,000, plus $182,005 in printing and mailing costs from the 1990 Selling Agreement, the $154,566 in printing and mailing costs from the 1991 Selling Agreement, the $52,137 in rent that WMS paid for the space occupied by WMM, the Fund, and Bullion Security Corp., and the $20,289 in unreimbursed costs that WMS incurred in connection with the Passport Financial offering although each of these expenditures were paid out of the $850,000 excess capitalization of WMS. The $850,000 in disgorgement that weimpose here includes these other expenditures.
67 SEC v. First Jersey Sec., Inc., 101 F.3d at 1475.
68 SEC v. First Pacific Bancorp, 142 F.3d at 1191, citing SEC v. Hateley, 8 F.3d at 656; SEC v. Hughes Capital Corp. 124 F.3d 449, 455 (3rd Cir. 1997) ("When apportioning liability [for disgorgement] among multiple tortfeasors, it is appropriate to hold all tortfeasors jointly and severally liable for the full amount of the damage unless the liability is reasonably apportioned."); SEC v. First Jersey Sec., Inc., 101 F.3d at 1475
69 SEC v. Hughes Capital Corp., 124 F.3d at 455, citing SEC v. First City Financial Corp., 890 F.2d 1215, 1232 (D.C.Cir. 1989).
70 15 U.S.C. §77h-1(e); 15 U.S.C. §78u-3(e).
71 We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.