UNITED STATES OF AMERICA
In the Matter of
FEELEY & WILLCOX ASSET MANAGEMENT CORP.
MICHAEL J. FEELEY
ORDER DENYING MOTION FOR RECONSIDERATION
Background. On July 10, 2003, we issued an opinion finding that Feeley & Willcox Asset Management Corp. ("FWAM") and Michael J. Feeley (collectively, "Respondents") violated or caused the violation of provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940 ("July 10 Opinion").1 Respondents now request reconsideration of our opinion.
The July 10 Opinion found that Respondents violated or caused the violation of the antifraud provisions of the Securities Act, the Exchange Act, and the Advisers Act with respect to the sale of securities to FWAM's advisory clients in 1992 and 1993, and violated or caused the violation of the antifraud provisions of the Advisers Act by failing to disclose conflicts of interest to FWAM advisory clients in 1995. It also found, on the basis of unappealed findings of the law judge, that Respondents violated or caused the violation of recordkeeping and reporting provisions of the Advisers Act between 1994 and 1998. As to sanctions, it found, as relevant here, that ordering joint and several disgorgement in the amount of $95,000 by Respondents was in the public interest.
Respondents' Motion. In their motion for reconsideration, Respondents contend that we should (1) dismiss the entire proceeding on account of "unreasonable delay"; (2) modify the July 10 Opinion at four places, on the basis of the sworn declaration of Feeley, signed on July 10, 2003, and an accompanying two-page document titled "Repayment History of Feeley & Willcox Clients Referred to in the Commission's Initial Decision," to reflect what Respondents represent are payments FWAM made to certain advisory clients since the close of the hearing in 1998; and (3) recognize that Feeley did not personally benefit from his actions and, in response, modify the sanctions imposed on Feeley by dispensing with the disgorgement award as to him.
Standard to Be Applied. We consider Respondents' motion under Rule 470 of the Commission's Rules of Practice.2 That rule allows the Commission to reconsider its decisions in exceptional cases. This extraordinary remedy3 is designed to correct manifest errors of law or fact or permit the presentation of newly discovered evidence.4 Respondents' motion affords no basis for our reconsideration of the July 10 Opinion.5
Request for Dismissal of the Proceeding. Respondents contend that this proceeding against them should be dismissed in its entirety on account of assertedly unreasonable delay in its resolution.6 Respondents stress that the OIP did not issue until 1998, although the last of the debenture sales that are the subject of certain of the charges were completed in 1993. Respondents also focus on the facts that the law judge issued her decision almost two years after hearings were completed, and that the July 10 Opinion issued almost three years after appeal briefing was completed. Respondents assert that each of these three time periods is "unreasonable," and posit that, "[i]n the aggregate, the delay is unconscionable."
Respondents failed to make this claim to the Commission until now.7 Accordingly, we will not consider it. As we stated explicitly in another order denying reconsideration, "a party may not seek rehearing of an appellate decision in order to advance an argument that it could have made previously but elected not to. . . ."8
In any event, our decisions in Hayden9 and Stayner,10 which Respondents cite in support of their dismissal request, are not on point. Among other reasons, in these cases the time that had elapsed between the last of the allegedly unlawful conduct and institution of the proceeding was eight years and six years, respectively. In this case, as noted,11 a portion of the conduct alleged in this proceeding occurred as late as 1998, the same year this proceeding was instituted. Nor are Respondents persuasive in suggesting that our recent adoption of revisions to the Commission's Rules of Practice -- which were directed at improving the timeliness of Commission administrative proceedings -- provides support for their request for dismissal.12 As Respondents recognize, the revisions themselves specify that the time frames adopted "confer no substantive rights on the parties."13 Neither general principles of fairness nor the revised rules mandate dismissal here. The July 10 Opinion parsed the evidence and Respondents' arguments with care and assessed appropriate sanctions in the public interest. It would be contrary to the public interest to dismiss this proceeding. In a recently decided case, the United States Court of Appeals for the Ninth Circuit declined to find that a three-year delay between the issuance of a law judge's initial decision and the issuance of our decision on appeal was grounds for abating part of the sanctions against wrongdoers, where there was no evidence "of lackadaisical conduct on the part of the Commission or of any improper reason for the delay."14 Respondents have not even hinted at the existence of such conduct or any impropriety.
Nor have Respondents suggested, let alone demonstrated, as they would be required to do, any prejudice to them or to their ability to defend themselves caused by the allegedly undue delay.15 The record reflects that Respondents had, and took advantage of, an ample opportunity to defend themselves against the charges. Moreover, Feeley has worked in the securities industry while this proceeding was pending against him and FWAM, and, moreover, he had the use of the funds our order has directed him to pay. An earlier conclusion to the case would have removed him from the industry that much sooner and required him to make the ordered payments earlier.16
Request for Admission of Feeley's Declaration and Respondents' Payment Schedule, and for Modification of Opinion to Reflect Substance of These Documents. Respondents seek to adduce additional evidence in the form of a declaration and accompanying schedule of payment and request modifications to our opinion that would treat as true Respondents' assertion that FWAM has paid specified amounts to certain defrauded advisory clients since the law judge closed the evidentiary record.17 This is not newly discovered evidence that appropriately may be presented as part of a motion for reconsideration.18 Rather, it is evidence that Respondents prepared from documentation presumably available to them before our opinion issued, but that Respondents presented to us only after our opinion issued.19 We will not adduce, or incorporate into our opinion, this new evidence, which comes too late. Indeed, there are fairness as well as efficiency concerns that would be implicated were we to accept the material at this point. Like an earlier proposed submission of similar material that accompanied Respondents' reply brief that we rejected in the July 10 Opinion,20 the material submitted as part of the reconsideration motion has not been verified, nor, given the posture of this matter, has counsel for the Division of Enforcement had the opportunity to address its contents.21
As the July 10 Opinion indicated, if Respondents have complied with their payment obligations they, in due course, will be credited for the amounts paid.22 As counsel for the Division of Enforcement at oral argument stated: "The Enforcement Division is not in the business of collecting disgorgement twice. It won't happen here. . . . [I]f we attempted to do that a federal court would have the procedure to protect [Respondents] in that regard."23
Request That We Eliminate the Disgorgement Award Against Feeley. Respondents request that we modify the July 10 Opinion to omit any disgorgement award against Feeley because the record assertedly does not establish that Feeley personally benefitted from his misconduct. This request is without basis.
As an initial matter, what Feeley, or any other respondent, chooses to do with funds by which he is unjustly enriched does not affect an analysis of whether disgorgement should be ordered. The remedy of disgorgement deprives wrongdoers of ill-gotten funds and also deters wrongful conduct by making violations unprofitable. Further, Respondents' attempt to differentiate Feeley's disposition of the funds from FWAM's is unavailing. In the July 10 Opinion, we found, on the basis of an uncontested finding by the law judge and our own assessment that her determination was "well supported,"24 that FWAM and Feeley were alter egos. Accordingly, we will make no distinction, as Respondents claim we should, based on what the record reflects about "personal benefit" to Feeley and enrichment of FWAM.25
Our order that Respondents jointly and severally disgorge $95,000 will not be modified. However, to the extent our opinion can be read to suggest that Respondents did not pursue the claim made in their Petition for Review that Feeley obtained no "personal benefit," we modify it to reflect that, as Respondents assert in their motion for reconsideration, Respondents in fact pursued the claim at oral argument. / For the reasons discussed above this modification does not necessitate any change in our result.
Accordingly, IT IS ORDERED that the motion for reconsideration filed by Feeley & Willcox Asset Management Corp. and Michael J. Feeley be, and it hereby is, DENIED.
By the Commission.
In a footnote to their Reply Brief Respondents make an oblique reference to the duration of these proceedings and suggest that "[i]t would not be inappropriate" to dismiss the proceedings. This passing comment falls short of asserting a claim for relief on that basis and, indeed, Respondents do not now claim that the Commission overlooked an argument they made earlier.
Respondents assert only that Feeley "has been under the overhang of these ongoing proceedings, with his professional livelihood and ability to continue to make a living uncertain for more than a decade." We note that, in fact, the Commission did not begin its investigation of Feeley until 1996.
See Rule 470(b), 17 C.F.R. ' 201.470(b) (No responses to a motion for reconsideration shall be filed unless requested by the Commission).
Had Respondents submitted the material before we concluded our deliberations, Division counsel would have been afforded the opportunity to address the admissibility and significance of the proferred information. Respondents' explanation for the late submission -- that "it could not [b]e predicted how quickly the Commission would issue the Opinion" -- while true, does not afford a basis for relief from our established practice of rejecting such evidence after an opinion issues. Compare John Montelbano, Exchange Act Rel. No. 47624 (Apr. 3, 2003), 79 SEC Docket 3604, 3608 (declining to make part of the record documents respondent appended to his motion for reconsideration; respondent claimed that lateness of the submission was due to fact he was unaware that the Commission was in the process of deciding his case).
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