Mr. Osborne is 52 years of age. (Div.
Exs. 31 at 3; 54.) After attending four colleges, he graduated in January
1971 from San Diego State University where he majored in psychology, sociology,
and finance. (Tr. 127.) Based on information he submitted to the National
Association of Securities Dealers ("NASD"), Mr. Osborne has been a registered
representative since 1966, and was associated with eight registered broker-dealers
in southern California between 1966 and 1986: Dean Witter, PaineWebber,
Wagenseller & Durst, Jeffries & Co., Merrill Lynch, J. David Securities,
Bear Stearns, and Jesup & Lamont.4
(Tr. 132-35; Div. Exs. 31 at 3; 54.)
From January 1986 to September 1987,
Mr. Osborne was a vice-president at R.G. Dickinson & Co., and from
September 1987 to January 1988, he was a senior vice-president at Westmont
Securities, Inc. (Div. Ex. 54.)
Mr. Osborne holds several securities
industry licenses: a Series 4 license (Registered Options Principal), a
Series 7 license (Full Registration/General Securities Representative),
a Series 24 license (General Securities Principal), and a Series 27 license
(Financial and Operations Principal); and he believes he may also have
held a Series 5 license (Interest Rate Options). (Tr. 129-30; Div. Exs.
38 at 2; 39 at 1; 54.)
In February 1988, Mr. Osborne started
his own firm, Osborne, Stern & Co. ("OSC"), where he was the principal
shareholder, director, and officer. (Tr. 113, 177-78; Div. Ex. 31 at 5;
Answer . 2.) OSC, headquartered in Los Angeles, California, and only registered
in the State of California, was the successor of Timberlane Securities,
Inc. (Div. Ex. 54.) On September 16, 1993, the Commission issued an order
which found that OSC had been permanently enjoined from violations of the
securities statutes and revoked OSCs broker-dealer registration ("OSC Settlement").
Osborne, Stern & Co., Order Instituting Public Administrative Proceedings
Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making
Findings and Imposing Sanctions, 54 SEC Docket 2702 (1993). The Commission
relied on a permanent injunction entered against OSC on September 8, 1993,
in the same court proceeding that is the basis for this proceeding. (Div.
Ex. 2; SEC v. Osborne, Stern & Co., and Douglas W. Osborne, Final Judgment
of Permanent Injunction And Disgorgement by Default Against Defendant Osborne,
Stern & Company, No. 93-5199 AWT (Sx) (C.D. Cal. 1993).)
Mr. Osborne also owned 100 percent of
Osborne Precious Metals, Inc.; Osborne Commodities Trading, Inc.; Osborne
Travel, Inc., Osborne Travel II; Osborne Travel III; Double Eagle Bullion;
Osborne Ostrich Farm, Inc.; Osborne Group of Companies, Inc.; Osborne Group
LAX; Osborne Group Las Vegas; Osborne Take One; and Osborne Monte Carlo,
Inc. (Div. Ex. 34 at 3, 22-23.) These entities were known collectively
as the Osborne Group. (Div. Ex. 34 at 22.)
In October 1996, Mr. Osborne described
his occupation as ostrich farmer. (Tr. 190-91.) Mr. Osborne denied that
he is engaged in telemarketing shares in the business but stated that he
boards ostriches for private owners and markets meat. (Tr. 191-93.) Mr.
Osborne acknowledged that a pair of ostriches sold for between $25,000
to $50,000 a few years ago; that he had a toll-free telephone number, 1-800-A-BIG-EGG;
that he was still getting calls in response to an advertisement that he
placed in a trade journal; that each ostrich is registered and sold to
an individual owner; and that he and the business had been the subject
of several lawsuits. (Tr. 190-93.)
Mr. Osborne wants to participate in
the securities industry. (Tr. 156-57.) One of the reasons he attended the
hearing in this proceedings is that he believes he can reapply to California
authorities for a securities license in 1997. (Tr. 156-58.)
Order Instituting Proceeding Allegation - Injunction
Mr. Osborne admits that as the result
of a complaint filed on August 27, 1993, (1) the U.S. District Court for
Central District of California on January 5, 1994, enjoined him from violations
of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities
Act"), and Sections 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-5,
15c1-2, and 15c1-8 thereunder, and ordered him to disgorge $170,849.00
together with prejudgment interest in the amount of $30,752.84, and (2)
that on November 22, 1995, the Court of Appeals for the Ninth Circuit affirmed
the judgment.5 (Div.
Exs. 5, 7; SEC v. Osborne, Stern, & Co., Final Judgment of Permanent
Injunction And Disgorgement by Default Against Defendant Douglas W. Osborne,
No. 93-5199 AWT (Sx) (C.D. Cal. 1994), affd, No. 94-55997 (9th Cir. 1995);
Answer . 3.) I will refer to this judgment as the injunctive action.
The complaint in the injunctive action
alleged that Mr. Osborne and OSC, acting through Mr. Osborne and other
registered representatives working under his direction, did the following:
(1) from May 1988 through March 1990, offered and sold to the public 383,136
unregistered common stock shares of Consolidated Energy Systems, Inc. ("Consolidated"),
a penny stock, in violation of Sections 5(a) and 5(c) of the Securities
Act; and (2) from January 3, 1990, through March 12, 1990, offered and
sold Consolidated stocks to the public without disclosing to investors
that OSC dominated and controlled the market in Consolidated shares and
that the mark-ups charged ranged from 11 percent to 167 percent over OSCs
contemporaneous cost in violation of Section 17(a) of the Securities Act
and Sections 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-5, 15c1-2,
and 15c1-8 thereunder. (Div. Ex. 1.)
Related Disciplinary Proceeding
The NASD, the broker-dealer self regulatory
organization, took disciplinary action against Mr. Osborne based on the
same conduct that was the basis of the injunctive action. On April 2, 1990,
NASDs District Business Conduct Committee for District No. 2 ("DBCC") found
that Mr. Osborne charged excessive markups in 155 of 156 of OSCs sales
of Consolidated stock during the period July 1, 1988, through September
23, 1988. (Div. Ex. 38 at 2-4.) These undisclosed, excessive markups resulted
in profits in excess of 5 percent of OSCs contemporaneous cost for Consolidated
shares, totaling $170,303. (Div. Ex. 38 at 6 n.3.) The DBCC also found
that in two of the three months in question, OSC dominated and controlled
the market for Consolidated shares by handling more than 70 percent of
the trading volume. (Div. Ex. 38 at 4.) The DBCC found that:
Respondent Osborne acted with reckless
indifference to the consequences of his actions. He was aware of the consistently
large disparities between what the firm charged its customers for Consolidated
and the contemporaneous prices it paid for the securities it sold to such
customers.
(Div. Ex. 38 at 4.) The DBCC indicated that it:
could find no mitigating factors for
Respondent Osbornes actions. . . . The guideline with respect to markups
is clear on its face. Nonetheless, Respondent Osborne ignored the guideline
and made an unconscionable profit on Consolidated all while acting in contravention
of a restriction placed on the firms conduct of business.
(Div. Ex. 38 at 5.)
The DBCC also found that by executing
trades as a principal, OSC violated an agreement not to trade for its own
account which was a condition to its membership in the NASD. (Div. Ex.
38 at 5.) Based on its findings, the DBCC censured Mr. Osborne and OSC,
fined them $270,454, and suspended OSC from operating as a broker-dealer
and Mr. Osborne from associating with any NASD member for ninety days.
(Div. Ex. 38 at 6.)
Mr. Osborne and OSC appealed to the
Board of Governors of the NASD which affirmed the DBCC decision:
[Respondent] Osborne, displaying no remorse for or appreciation of his
misconduct, continued to maintain that had the firm elected not to support
the stock of Consolidated in the manner it did, the public would have been
harmed to a far greater degree than it was by the mark-ups alleged in the
complaint.
(Div. Ex. 39 at 9.) Mr. Osborne and OSC appealed to the Commission which
affirmed the NASDs determination:6
The markups of 25% to 125% in 152 transactions
were clearly excessive . . . . Additionally, the markups are so excessive
as to be fraudulent . . . . Osbornes insistence on charging customers markups
based on unsubstantiated asked quotations, rather than on prices consistent
with what [OSC] had paid for the stock displays, at a minimum, a reckless
indifference by Osborne to the duty owed his customers. . . . We find his
conduct with regard to the pricing of Consolidated constituted scienter.
Osborne, Stern & Co., 50 S.E.C. 1295, 1298 (1992) (footnotes omitted).
Issue
Since Mr. Osborne admits that he is
subject to a permanent injunction and disgorgement order enjoining him
from violating Sections 5(a), 5(c), and 17(a), of the Securities Act, and
Sections 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-5, 15c1-2,
and 15c1-8 thereunder, the only issue is what, if any, sanction is appropriate
in the public interest.
Conclusions of Law
At the hearing on October 28, 1996,
Mr. Osborne read a statement in which he voiced several objections to the
proceeding. One of these objections concerned the age of the allegations.
(Tr. 101, 112, 116-22.) I affirm my ruling that, under the holding in Johnson
v. SEC, the entry of an injunction within five years of when the Commission
instituted the proceeding is a statutory basis for the proceeding even
though the actions which were the basis for the injunction occurred beyond
the five year statute of limitations. (See Notice of Rulings at Prehearing
Conference, September 5, 1996.)
Mr. Osborne also objected, among other
things, to not being provided with legal counsel and that I did not issued
two subpoenas testificandum that he requested on September 9, 1996. (Tr.
102, 110.) The case law is clear that a respondent in an administrative
proceeding who is presumed to be indigent does not have a right to appointed
counsel. Feeney v. SEC, 564 F.2d 260, 262 (8th Cir. 1977), cert. denied,
435 U.S. 969 (1978); Boruski v. SEC, 340 F.2d 991, 992 (2nd Cir. 1965),
cert. denied, 381 U.S. 943 (1965). I regret that Mr. Osborne did not receive
the subpoenas, but he should have brought the matter to my attention in
a timely fashion. Instead, he waited a month and a half, and inquired as
to their status on the day before the hearing. Mr. Osborne did not raise
the issue when the parties circulated their list of witnesses. He received
a list of the Divisions witnesses but he did not inform the Division that
he intended to call any witnesses. Moreover, it appears that Mr. Osborne
intended that these persons would address the validity of the judgments
entered against him and OSC, and I have ruled that the doctrine of collateral
estoppel and legal precedent precluded him from doing so.7
(July 1, 1996, and September 4, 1996, Prehearing Conference Transcripts.)
See FDIC v. Daily (In re Daily), 47 F.3d 365, 368-69 (Bankr. 9th Cir. 1995)
("It is implicit in the doctrine of collateral estoppel that, where a party
has been accorded a full and fair opportunity to litigate an issue in a
prior proceeding, due process is not violated by denying the party a further
opportunity to litigate the same issue in a subsequent proceeding.") and
Lamb Brothers, Inc., 46 S.E.C. 1053, 1058 n.22 (1977) (the public interest
is not diminished by the fact that an injunction was entered on default).
Public Interest
Section 15(b)(6) of the Exchange Act
requires that the Commission sanction someone who, like Mr. Osborne, has
violated the securities statutes and is enjoined from engaging in wrongful
conduct with respect to the purchase and sale of securities, if the Commission
finds that it is in public interest to do so. Application of the established
criteria to assess what sanction, if any, is in the public interest establishes
that Mr. Osborne should receive the most severe measure available with
the objective of preventing him from ever participating in the securities
industry. Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979) (quoting
SEC v. Blatt, 583 F.2d 1325, 1334 n.29 (5th Cir. 1978)), aff'd, 450 U.S.
91 (1981).
The record contains a seven page list
with five to six entries on most pages describing separate disciplinary
actions which various regulatory authorities took against Mr. Osborne and/or
OSC from January 27, 1989, through March 10, 1994. (Div. Ex. 51.) A separate
exhibit shows a breakdown by jurisdiction and subject matter - cease and
desist orders (9), denial of broker-dealer applications (12), registration
revocations (3), monetary awards and judgments (10), and injunctions (6).8
(Div. Ex. 52.)
This information is summarized as follows.
United States District Court
On July 15, 1992, the Federal Trade
Commission ("FTC") filed for an injunction and other equitable relief against
Mr. Osborne, OSC, and Osborne Precious Metals, Inc., in connection with
the telemarketing of precious metals, including silver, gold, and platinum
as investments to consumers throughout the United States. (Div. Ex. 30
at 3.) The United States District Court for the Central District of California
found that the evidence submitted by the FTC established numerous violations
of the Federal Trade Commission Act, 15 U.S.C. . 45. (Div. Ex. 32 at 1.)
On March 10, 1994, the court issued a permanent injunction, prohibited
Mr. Osborne from engaging in the business of telemarketing unless he first
obtained a performance bond of $5 million, imposed a monetary judgment
of $13,300,000, jointly and severally, on the defendants, required Mr.
Osborne to report to the FTC semi-annually for a period of five years his
income and expenses for the period and his address and occupation, and
continued the powers of the receiver which the court ordered as part of
the preliminary injunction it issued in 1992. FTC v. Osborne Precious Metals,
Inc., No. CV 92-4193 (AWT)(GHKx) (C.D. Cal. 1994). (Div. Ex. 33 at 2-7.)
The court found that Mr. Osborne "was fully in control of the operation,
had full authority and supervision over the sales personnel who made the
misleading misrepresentations and should be held individually liable,"
and that his opposition to the FTCs request missed the point and was unhelpful.
(Div. Ex. 32 at 2.) The court characterized consumer losses of $13.3 million,
which included $6.1 million in commissions, in the period March 1, 1990,
to February 11, 1992, as "well-documented and uncontroverted." (Div. Ex.
32 at 3.)
A court appointed receiver issued a
final report on September 22, 1995, after liquidating the assets of the
companies Mr. Osborne controlled, which included two Mercedes Benz 380
SL automobiles and one private airplane. (Div. Ex. 34 at 35.)
States
The securities regulators in nine states
-- Indiana, Iowa, Michigan, Minnesota, Missouri, Montana, Ohio, Virginia,
and Wisconsin -- have issued cease and desist orders against Mr. Osborne
and/or OSC for selling unregistered securities. (Tr. 162-72; Div. Exs.
9A, 10, 13, 15, 16A, 17, 21, 24B, 29A.) The Montana State Auditor and Commissioner
of Securities found that Respondent Osborne knowingly misled the state
regulators when he advised them that OSC had not conducted securities business
with Montana residents when OSC confirmations indicated otherwise. (Div.
Ex. 16A at 5-6.) The Michigan Department of Commerce found that OSC had
filed an application for registration that was false and misleading. (Div.
Ex. 24A at 2.)
State courts in California, Idaho, and
Iowa have enjoined OSC and Mr. Osborne from operating as an unregistered
broker-dealer, selling unregistered securities, and employing unregistered
agents. (Div. Exs. 23, 28B, 29B.)
On April 12, 1993, Michigans Ingham
County Circuit Court affirmed an order of the State Department of Commerce
which ordered OSC, which was not a registered broker-dealer in Michigan,
and Mr. Osborne to cease and desist from violating the Michigan securities
statutes, rules, and orders, and to pay a $3,000 civil penalty for selling
unregistered securities, which were not exempt from registration, to a
Michigan resident. (Div. Exs. 24B, 24C.)
Between September 6, 1989, and April
30, 1991, nine states -- Delaware, Illinois, Indiana, Massachusetts, Michigan,
Mississippi, Missouri, New Jersey, and Oklahoma -- and the District of
Columbia denied broker-dealer applications filed by Mr. Osborne on behalf
of OSC because Mr. Osborne failed to disclose his prior disciplinary record.
(Div. Exs. 9B, 11A, 11B, 11C, 12, 14A, 14B, 18, 19, 20, 22, 24, 26, 27.)
The States of Maryland and California revoked OSCs certificate of broker-dealer
registration on June 27, 1991, and August 5, 1994, respectively. (Div.
Exs. 27, 28C.)
NASD
On November 13, 1990, an NASD arbitrator
ordered OSC and Mr. Osborne to rescind a customers purchase of 10,000 shares
of Consolidated and to return her investment of $20,030. (Div. Ex. 40.)
On May 6, 1991, the NASD revoked OSCs
NASD membership and Mr. Osbornes NASDs registration.9
(Div. Ex. 41.) The NASD decision noted that Mr. Osborne owned 100 percent
of the shares of OSC and that he and the firm were the subject of two statutory
disqualifications: the Judgment and Permanent Injunction entered by the
Fifth Judicial District Court of Idaho on September 20, 1990, and the Preliminary
Injunction entered by the Superior Court of California, Los Angeles County,
on August 28, 1990. The NASD was "concerned by the extremely serious nature
of the misconduct engaged in by [OSC] and Osborne." (Div. Ex. 41 at 3.)
On December 30, 1991, an NASD Panel
ordered Mr. Osborne to pay a claimant actual damages of $21,970 and punitive
damages of $65,910. (Div. Ex. 42.)
Commodity Futures Trading Commission ("CFTC")
On January 17, 1993, the CFTC affirmed
the decision of the National Futures Association ("NFA") which revoked
Mr. Osbornes associated person registration and the introducing broker
registration of Osborne Commodities Trading, Inc. ("OCTI"). (Div. Ex. 36.)
The NFA found that Mr. Osborne was the sole principal of OCTI, which was
the same registrant as OSC. (Div. Ex. 35 at 1, 13.) The NFA found Mr. Osbornes
actions willful and that his evidence as to mitigation and rehabilitation
was unpersuasive, and concluded that his continued registration would pose
a substantial risk to the public.10
(Div. Ex. 35 at 17, 20, 23-24.)
Summary
In terms of the public interest, Mr.
Osborne's conduct that resulted in the civil injunction was egregious;
as the owner of an NASD member firm, he, and the associated registered
representatives he supervised, offered and sold unregistered securities,
which were not exempt from registration, from 1988 until 1990; and for
several months in 1990, he willfully participated in a systematic, organized
fraud in the offer and sale of those securities to public investors.
In addition to the specific violations
which are the subject of the civil injunction, Mr. Osborne has compiled
the extensive record of state and federal securities law violations detailed
above. He has repeatedly engaged in excessive and fraudulent markups of
penny stocks; lied to state securities regulators; executed unauthorized
trades; sold unregistered securities; acted as an unregistered broker-dealer;
employed unregistered agents; and he has engaged in a massive telemarketing
fraud involving the sale of precious metals. In writing Section 15(b) of
the Exchange Act, Congress "viewed past misconduct as the basis for an
inference that the risk of probable future misconduct was sufficient to
require exclusion from the securities business." Arthur Lipper Corp., 46
S.E.C. 78, 101 (1975), affd, 547 F.2d 171 (2d Cir. 1976).
The securities industry presents many
opportunities for abuse and overreaching, so it is in the public interest
not to allow participation by individuals whose continued participation
would expose investors to undue risks. Richard C. Spangler, Inc., 46 S.E.C.
238, 252 (1976); see also Hughes v. SEC, 174 F.2d 969, 975-76 (D.C. Cir.
1949); Archer v. SEC, 133 F.2d 795, 803 (8th Cir. 1943). Mr. Osborne takes
no responsibility for his actions. He does not acknowledge any wrongdoing
but claims people took advantage of him. (Tr. 162-85.) It appears that
Mr. Osborne has not paid any of the over $14,000,000 in awards and judgments
entered against him as a result of securities and commodities frauds.11
(Tr. 137-40, 153-54, 156, 158-60.) He made a filing under the bankruptcy
statute in 1986, and intends to file again as "the only way out of this
whole thing." (Tr. 156; Div. Ex. 54.)
The record establishes beyond a reasonable
doubt that Mr. Osborne cannot be trusted, and that he has no regard for
statutes and legal norms. (Tr. 21-22.) The court in the injunctive action
concluded that it "could draw no conclusion except that Osbornes failure
to comply with the courts order was . . . willful."12
(Div. Ex. 6 at 6.) The court-appointed Receiver who liquidated the assets
of the Osborne Group complained that Mr. Osborne withheld information and
that he was hampered by Mr. Osbornes lack of cooperation in disclosing
definitive and verifiable information on assets which he owned and controlled.
(Div. Ex. 34 at 6.) As has been noted, the Montana State Auditor and Commissioner
of Securities found that Mr. Osborne made false representations and knowingly
misled Montana authorities. (Div. Exs. 16A at 5-6; 16B at 6.) Mr. Osborne
admitted he contacted Florida residents about securities accounts after
assuring state authorities that he would not do so until he and OSC were
properly registered to do business in Florida. (Div. Ex. 25A at 4, 8.)
At the hearing Mr. Osborne asserted he had rescinded trades even though
the NASD, after allowing him extra time to support this claim, held "we
do not accept respondents contention that they have paid more than $1 million
to customers who purchased Consolidated. Respondents have provided no evidence
with respect to these alleged rescissions other than to have highlighted
a number of firm purchases on the firms end-of-month trading reports."
(Tr. 141-44; Div. Ex. 39 at 9.) I reject as blatantly false Mr. Osbornes
explanation that in 1989 and later he did not know how to ascertain whether
OSC was registered to do business in a state because his securities experience
was only in the area of sales. (Tr. 170.)
The testimony of two witnesses established
that OSCs clearing broker from approximately 1989 to June 1990 advised
Mr. Osborne beginning in September 1989 that the prices OSC was charging
customers for Consolidated shares, which were well in excess of its contemporaneous
cost, would be considered as excessive markups. (Tr. 18, 77-78; Div. Exs.
46, 47, 48.) In response, Mr. Osborne assured the clearing firm that he
would comply with its requirements, but he failed to do so. (Tr. 80-82.)
The clearing firm ended the business relationship because it feared OSC
was headed for regulatory problems and it did not want to be involved.
(Tr. 82.)
In this proceeding, as in his dealings
in the related proceeding conducted by the NASD in 1990, Mr. Osborne has
displayed no remorse or appreciation of his misconduct, and there are no
mitigating circumstances. (Div. Ex. 39 at 9.)
An important consideration in imposing
a sanction is the impact it will have in deterring people from illegal
actions which damage public investors and the integrity of the securities
markets. See Steadman, 603 F.2d at 1142 n.22; Arthur Lipper Corp. v. SEC,
547 F.2d 171, 184 (2d Cir. 1976). The record evidence and Mr. Osbornes
testimony and demeanor at the hearing establishes that it is almost certain
that he will commit future violations if he is allowed to participate in
the securities industry. Accordingly, to deter Mr. Osborne and others tempted
to duplicate his illegal acts, it is necessary to bar Mr. Osborne from
participating in the industry to the broadest extent possible.
Record Certification
Pursuant to Rule 351(b) of the Commission's
Rules of Practice, 17 C.F.R. . 201.351(b) (1996), I certify that the record
includes the items set forth in the record index issued by the Secretary
of the Commission on April 4, 1997.
Order
Based on the findings and conclusions
set forth above, I ORDER, pursuant to Section 15(b) of the Exchange Act,
that Douglas W. Osborne is barred from association with a broker or dealer,
from participating in an offering of penny stock, and from being associated
with a member of a national securities exchange or registered securities
association.
This order shall become effective in
accordance with and subject to the provisions of Rule 360 of the Commission's
Rules of Practice, 17 C.F.R. . 201.360 (1996). Pursuant to that rule, a
petition for review of this initial decision may be filed within 21 days
after service of the decision. It shall become the final decision of the
Commission as to each party who has not filed a petition for review pursuant
to Rule 360(d)(1) within 21 days after service of the initial decision
upon him, unless the Commission, pursuant to Rule 360(b)(1), determines
on its own initiative to review this initial decision as to any party.
If a party timely files a petition for review, or the Commission acts to
review as to a party, the initial decision shall not become final as to
that party.
______________________________
Brenda
P. Murray
Chief
Administrative Law Judge
FOOTNOTES
-[1]- "Tr. ___" refers to the transcript page of
the hearing. Counsels Exhibit No. 1 is a list of Division exhibits. Division
exhibits are referred to by number as "Div. Ex. ___."
-[2]- Mr. Osborne arrived shortly after the hearing
had begun. (Tr. 22.)
-[3]- My findings and conclusions are based on
the record. I applied preponderance of the evidence as the applicable standard
of proof. I have considered all proposed findings and conclusions and all
contentions, and I accept those that are consistent with this decision.
-[4]- Mr. Osborne insisted that he had been a registered
representative only since 1973, but offered no explanation why he signed
a uniform application for broker-dealer registration form on February 3,
1988, stating that Dean Witter employed him as a registered representative
in 1966. (Tr. 113, 134-35; Div. Ex. 54.) On that form, Mr. Osborne answered
yes to inquiries whether the Commission or the Commodity Futures Trading
Commission ever found that he had been involved in a violation of investment-related
regulations or statutes, and whether he had been the subject of an investment-related,
consumer-initiated complaint or proceeding that alleged compensatory damages
of $10,000 or more, fraud, or wrongful taking of property. (Div. Ex. 54.)
-[5]- On December 17, 1993, the district court
struck Mr. Osbornes answer and entered a default judgment for failure to
comply with the courts local rules: "In light of [Mr. Osbornes] total lack
of cooperation and total lack of response to the courts order, no remedy
short of the entry of default appears to be a sufficient remedy in this
case." (Div. Ex. 3 at 1-2.) On May 4, 1994, the district court denied Mr.
Osbornes motion to set aside the default judgment. (Div. Ex. 6.) The district
court stated that it could "draw no conclusion except that Osbornes failure
to comply with the courts order was, not only his own fault, but also willful."
(Div. Ex. 6 at 6.)
-[6]- The Commission also affirmed the NASDs finding
that OSC had violated its agreement with the NASD to execute only limited
transactions in the firms investment account. The Commission rejected Mr.
Osbornes assertion that he relied upon the advice of an NASD employee,
finding that he "did not rely on the advice of a current NASD staff member,
but, rather, that of a private consultant Osborne hired." Osborne, Stern
& Co., 50 S.E.C. 1295, 1299 n.23 (1992). The Commission concluded that
Mr. Osborne "engaged in egregious misconduct. [He] charged customers clearly
excessive and fraudulent markups in numerous transactions over a period
of months." Id. at 1300 (footnote omitted). The Commission noted that only
one of OSCs transactions in Consolidated during the three-month period
in question had a markup of less than 10 percent. Id. at 1300 n.27.
-[7]- The names my office received by fax on September
19, 1996, are Annette L. Hunter and Alex P. Aghajanian, Esq. A person by
the name of Annette L. Abel was actively involved in all levels of administration
and management of the Osborne entities and even used the title "partner."
(Div. Ex. 34 at 23.) Mr. Aghajanian has represented OSC and Mr. Osborne.
Osborne, Stern & Co., 50 S.E.C. at 1295. Mr. Osborne has sued Mr. Aghajanian.
(Tr. 153-56.)
-[8]- I agree with the summary proffered by the
Division with one exception. It appears that the Florida District Court
of Appeal, First District, reversed and remanded to the Florida Department
of Banking and Commerce the latters decision to issue a cease and desist
order, to deny the registration, and to impose a fine. (Div. Ex. 25B.)
-[9]- The decision noted that the NASDs Board of
Governorss action on November 20, 1990, disciplining OSC and Mr. Osborne,
had been stayed while on appeal to this Commission. (Div. Ex. 41 at 2-3.)
-[10]- The NFA noted that Mr. Osbornes conduct
was "simply another example of [his] complete disregard for statutory requirements."
(Div. Ex. 35 at 21.)
-[11]- In its 1992 decision affirming the findings
of the NASD, this Commission found that, "On the basis of the evidence
produced by [OSC and Mr. Osborne], we cannot find that any restitution
was made." Osborne, Stern & Co., 50 S.E.C. at 1300.
-[12]- Mr. Osborne characterized the court's finding
that he refused to cooperate as "a sham of justice" and "a bunch of bull."
(Tr. 124-25, 174-75.)
http://www.sec.gov/enforce/id114bpm.htm
