INITIAL DECISION RELEASE NO. 118 ADMINISTRATIVE PROCEEDING FILE NO. 3-9019 UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Washington, D.C. ______________________________ : In the Matter of : : INITIAL DECISION ROBERT SAYEGH, : October 10, 1997 THOMAS CORE, and : JOHN J. CRANLEY, Jr. : ______________________________ APPEARANCES: Bohdan S. Ozaruk, Anahaita N. Kotval, and Wendy A. Lurie for the Division of Enforcement, Securities and Exchange Commission Robert Sayegh, pro se Paul K. Rooney for Thomas Core Frank H. Wright for John J. Cranley, Jr. BEFORE: Brenda P. Murray, Chief Administrative Law Judge The Securities and Exchange Commission ("Commission") initiated this proceeding on June 4, 1996, pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"). I received Mr. Sayegh s answer on October 16, 1996, Mr. Core s amended answer on October 3, 1996, and Mr. Cranley s answer on November 5, 1996.<(1)> I conducted telephonic prehearing conferences on July 1, 1996, and October 24, 1996. On November 6, 1996, I held a hearing in New York City at which the Division of Enforcement ("Division") called the three Respondents as witnesses and introduced eight exhibits.<(2)> Mr. Core <(1)> My file indicates that this was the only answer Mr. Core filed. <(2)> Tr. __ refers to the transcript page of the hearing. Counsel s Exhibit No. 1 is a list of Division exhibits. Counsel s Exhibit No. 2 is a list of Mr. Core s exhibits. I will refer to the exhibits as Div. Ex. __, Core Ex. __, or Sayegh Ex. __. ======END OF PAGE 1====== testified and introduced eight exhibits. Mr. Cranley testified, called one witness, and introduced no exhibits. Mr. Sayegh testified, called three witnesses, and introduced one exhibit.<(3)> The Division submitted a Post-Hearing Memorandum of Law dated December 20, 1996, Mr. Sayegh filed a Brief in Response dated January 7, 1997, Mr. Core filed a letter response dated January 6, 1997, Mr. Cranley filed a Post-Hearing Memorandum of Law dated January 29, 1997, and the Division filed a Reply to Respondents Memoranda dated February 18, 1997. Messrs. Cranley and Sayegh filed letters dated February 24, 1997, replying to the Division s Reply. Related Proceedings The Commission filed a complaint for injunctive and other relief against Vincent Militano and Milton Sonneberg in the United States District Court for the Southern District of New York on January 25, 1989, and amended that complaint on June 4, 1991, by adding Messrs. Cranley, Core, Sayegh, John Kolb, and Carl Varrone as defendants. The complaint charged that from late 1987 through early 1989, defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.<(4)> As to these three Respondents, the complaint alleged that Mr. Sayegh manipulated the American depository receipts ( ADRs or shares ) of the Institute of Clinical Pharmacology ( ICP ), and that Mr. Cranley and Mr. Core manipulated the shares of Chase Medical Group, Inc. ( Chase ) and the shares of ICP. On November 2, 1994, the court issued a Final Judgment As To Defendant John J. Cranley, Jr., By Consent which enjoined Mr. Cranley from violations of Section 10(b) of the Exchange Act and Rule 10b-5. (Div. Ex. 18; Sayegh Ex. 1 at A-11.) From 1990 to November 1995, Mr. Cranley was employed by Lyon & Ross and the firm it acquired, Jessup Josephthal, where he performed administrative responsibilities which did not involve sales or supervision. <(3)> I did not allow Mr. Sayegh to put in evidence a brief he submitted in the related court proceeding. (Tr. 287-89.) <(4)> Judge John F. Keenan issued a Final Judgment and Permanent Injunction against Vincent Militano on July 19, 1991, and ordered him to disgorge $306,068.75. (Sayegh Ex. 1 at A-6.) He entered a Final Judgment and Permanent Injunction against Milton Sonneberg on August 16, 1991, and on December 1, 1994, he ordered Mr. Sonneberg to disgorge $311,355.48. (Sayegh Ex. 1 at A-6, A- 12.) Messrs. Militano and Sonneberg pled guilty to criminal violations of law in connection with these matters, and Mr. Militano also pled guilty to obstruction of justice charges. (Div. Ex. 21, SEC v. Sayegh, 906 F.Supp 939, 942 (S.D.N.Y. 1995), aff d, SEC v. Militano, 1996 WL 282013 (2d Cir. 1996).) Judge Keenan entered a Final Default Judgment of Permanent Injunction against Carl Varrone and ordered him to disgorge $254,996.01 on November 13, 1991. (Sayegh Ex. 1 at A-7.) He issued a Final Judgment and Permanent Injunction against John Kolb on August 17, 1994, and ordered him to disgorge the sum of $85,251.23. (Sayegh Ex. 1 at A-10.) ======END OF PAGE 2====== (Tr. 34-36.) From November 1995 to the present, Mr. Cranley has been a self-employed consultant. In this capacity, he has done some recruiting for two broker-dealers, du Pasquier & Co. and Palmieri, Angnardo & Co. (Tr. 33-34.) On November 2, 1994, the court issued a Final Judgment As To Defendant Thomas Core By Consent which enjoined Mr. Core from violations of Section 10(b) of the Exchange Act and Rule 10b-5. (Div. Ex. 19; Sayegh Ex. 1 at A- 12.) The court ordered Mr. Core to disgorge $103,000, plus $66,201.53 in prejudgment interest, but payment was waived based on his demonstrated inability to pay. (Div. Ex. 19.) Mr. Core joined J.T. Moran in 1989 as a registered representative and head of marketing options. After J.T. Moran went bankrupt, he assumed similar responsibilities with the successor firms: Jessup and Lamont, Josephthal & Co., and Josephthal, Lyon & Ross. (Tr. 150-51.) Mr. Core has had no supervisory responsibilities in the securities industry since 1988. In November 1996, Mr. Core was associated with du Pasquier & Co. as a registered representative. On November 13, 1995, following an eleven day non-jury trial, the court entered Findings of Fact and Conclusions of Law and it permanently enjoined Mr. Sayegh from violations of Section 10(b) of the Exchange Act and Rule 10b-5. (Div. Ex. 21, SEC v. Sayegh, 906 F.Supp. 939 (S.D.N.Y. 1995), aff d, SEC v. Militano, 1996 WL 282013 (2d Cir. May 29, 1996).) Judge Keenan found that Messrs. Militano, Sonneberg, Sayegh, Cranley, and Core had manipulated trading in ICP to support the share price of ICP because of the adverse consequences a drop in the price of ICP would have on Moore & Schley, Cameron & Co. ( Moore & Schley ), which held large amounts of ICP in its proprietary account and in its customers accounts. (SEC v. Sayegh, 906 F.Supp at 942-43;<(5)> Sayegh Ex. 1 at A-13.) Judge Keenan also found that Messrs. Militano, Sonneberg, Cranley, and Core manipulated Chase stock, that the manipulation was key to the demise of Moore & Schley, and that between $9 and $10 million was lost on Chase. SEC v. Sayegh, 906 F.Supp at 941-42. The National Association of Securities Dealers ( NASD ) initiated a proceeding against Mr. Sayegh and as a result barred him from association with a broker-dealer on February 27, 1996. (Tr. 266.) On November 15, 1996, the Commission upheld the NASD s determination that Stuart, Coleman & Co., Inc. ( Stuart, Coleman ) could not remain an NASD member if it continued to employ Mr. Sayegh. Robert J. Sayegh, 63 SEC Docket 666 (Nov. 15, 1996). The NASD did not initiate proceedings against either Mr. Cranley or Mr. Core. Issue Section 15(b)(6) of the Exchange Act directs the Commission to sanction any person, if it is in the public interest, who, while associated with a broker or dealer, willfully violated any provision of the securities statutes or the rules promulgated thereunder, or who is permanently <(5)> The court entered Amended Findings of Fact and Conclusions of Law on Dec. 5, 1995. (Sayegh s Ex. 1 at A-13.) ======END OF PAGE 3====== enjoined from engaging in or continuing any practice or conduct in connection with any activity of a broker or dealer or in connection with the purchase or sale of any security. All three Respondents fit this description, so the only issue in this proceeding is what, if any, sanction is in the public interest. Findings of Fact<(6)> Moore & Schley, a registered broker-dealer in business for about one hundred years, was a member of the New York Stock Exchange, the American Stock Exchange, the Philadelphia Stock Exchange, and the NASD. In 1989, Moore & Schley had five offices in New York, New Jersey, and Paris, and a subsidiary, Moore & Schley Municipals, also had four or five offices. (Tr. 37-39, 44.) The combined operation had over 300 sales people. Mr. Cranley was Moore & Schley s managing partner and chaired the firm s management committee. He entered the securities business in 1959 after graduating from Villanova University.<(7)> In 1969, he and others employed at Dryfus & Company bought the company from Jack Dryfus and merged the firm with Moore & Schley. (Tr. 37.) Mr. Cranley held a fourteen percent partnership interest in Moore & Schley. Mr. Core graduated from Franklin & Marshall College in 1962, and entered the securities business in 1966. Mr. Core joined Moore & Schley in 1975 and became a two percent general partner in 1977. Mr. Core managed Moore & Schley s main office at 45 Broadway in New York City. In addition to supervising the sales persons operating out of the Broadway office, where Messrs. Militano and Sonneberg were located, Mr. Core had his own retail clients, and he was the firm s registered options principal. (Tr. 149.) Mr. Sayegh, a graduate of New York University, was employed by the NASD from 1959-69. Mr. Sayegh joined Moore & Schley in 1982, as a three percent general partner, when the firm purchased Robertson Securities Corp., a firm that he co-owned. (Tr. 205, 207-08.) In 1987-89, Mr. Sayegh was in charge of Moore & Schley s over-the-counter ( OTC ) trading. (Tr. 238.) Despite its long history in the industry, Moore & Schley faced financial difficulties in the period 1987-89, especially after the major market disruption on October 19, 1987. In the period 1987-88, the firm experienced net capital problems and often had a net capital level that was very close to the minimum amount required to stay in business. (Tr. 190- 91; SEC v. Sayegh, 906 F.Supp at 942.) As one of the last small <(6)> 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. <(7)> Mr. Cranley s father had been a floor partner with Dryfus & Company and a member of the New York Stock Exchange. (Tr. 67- 68.) ======END OF PAGE 4====== partnerships left on Wall Street, Moore & Schley faced increased competition from larger, better capitalized firms which were able to offer a greater variety of sales products. Its status as a New York regional broker dealer did not make it an attractive acquisition for a larger firm, and its primary operation was in retail sales when the industry s emphasis was on institutional business. (Tr. 192-93.) Moore & Schley took various measures in the late 1980s to ensure its economic viability. (Tr. 192-93.) One of these steps was to hire Vincent Militano and Milton Sonneberg as registered representatives in 1986. Messrs. Militano and Sonneberg were big producers who engaged in aggressive cold calling from the firm's office at 45 Broadway.<(8)> Mr. Cranley and other Moore & Schley partners were concerned that the firm had begun to engage in this type of sales practices and Moore & Schley s in-house legal counsel, Robert Berson, and its national sales manager were given extra supervisory responsibilities over Messrs. Militano and Sonneberg s activities. (Tr. 43.) When Mr. Berson left Moore & Schley in early May 1987, Mr. Core took over the extra supervision of Messrs. Militano and Sonneberg.<(9)> (Tr. 140, 185.) Following Mr. Berson s departure, the firm suffered a breakdown in compliance oversight. In-house legal counsel, for assorted reasons, did not play the same strong role in compliance and legal issues as their predecessors. One counsel was terminated in June 1988 for poor performance and his successor was inexperienced and overwhelmed by the responsibility. (Tr. 185-88.) In 1984, Moore & Schley underwrote the initial public offering of ICP s ADRs traded through NASD s inter-dealer quotation system, NASDAQ. ICP was an Irish corporation which performed clinical tests of pharmaceutical substances and collected data on the effects of substances on humans. The Irish Development Authority introduced Mr. Cranley to ICP. He became an ICP director. Moore & Schley believed in the company and bought a substantial amount of ICP shares for its proprietary account and sold large amounts to its customers in 1984-87. (Tr. 81-83.) In 1986, another broker-dealer ceased its market making activities and Moore & Schley was left as the only market maker for ICP. As a result of the events at issue here, Moore & Schley ceased doing business as an independent entity and was purchased by J.T. Moran & Co. in <(8)> Cold callers engage in aggressive sale practices which are often illegal. As has been noted, Messrs. Militano and Sonneberg pled guilty to criminal law violations in connection with their activities involving Chase and ICP, and both have been barred from participating in the securities industry. (Tr. 14-15; SEC v. Sayegh, 906 F.Supp at 941-42.) <(9)> Mr. Berson left because Moore & Schley could not afford to pay him more money and he was concerned not only about salary, but also the value of his partnership investment. Mr. Berson is a partner in the firm of Kelley Drye & Warren. (Tr. 183, 185.) ======END OF PAGE 5====== March 1989.<(10)> (Tr. 41-42.) Conclusions of Law Section 15(b)(6) of the Exchange Act authorizes the Commission to act where persons are the subject of an injunction and that injunction was issued within five years of the institution of an administrative proceeding. (See Robert Sayegh, Order on Motion, 62 SEC Docket 2193 (Sept. 4, 1996); Tr. 10-12.) I find that the existence of an injunction is an independent basis for the proceeding. Accordingly, I deny of Respondents claim that the Commission lacks jurisdiction to bring this proceeding because the actions which are the basis of the injunctions occurred more than five years before the Commission instituted this proceeding. Public Interest The Division recommends that (1) Mr. Sayegh be barred from association with any broker or dealer, investment adviser, investment company or municipal securities dealer and from association with a member of a national securities exchange or registered securities association ( collateral or industry-wide bar ), (2) Mr. Cranley receive an industry- wide bar with the right to reapply to participate in a non-supervisory and non-proprietary capacity after four years, and (3) Mr. Core receive an industry-wide bar with the right to reapply to participate in a non- supervisory and non-proprietary capacity after two years. (Tr. 12-23; Division s Post-Hearing Memorandum of Law at 14-15; Division s Reply to Respondents Post-Hearing Memorandum of Law at 3-12.) The Division recommended a less severe sanction for Mr. Core because he was subordinate to Mr. Cranley at the firm and, therefore, was more limited in his ability to stop or impede the fraudulent activities of Messrs. Militano and Sonneberg.<(11)> (Division s Pre-Hearing Memorandum of Law at 8.) All three Respondents consider the sanctions that the Division recommends too severe. Mr. Cranley recommends that he receive a three month suspension. (Cranley Post-hearing Memorandum at 16.) Mr. Core recommends that he receive a thirty day suspension from association and a bar from acting in a supervisory capacity. (Core Post-hearing letter at 7.) The initial determination required is whether it is in the public interest to sanction the Respondents. I conclude that Respondents should receive a sanction with the objective of prospectively deterring illegal actions that damage investors and the integrity of the securities markets. <(10)> Following J.T. Moran & Co., Moore & Schley s offices and personnel were acquired by a number of broker-dealers. (Tr. 35- 36.) <(11)> In its Post-hearing Brief, the Division states that Mr. Core should receive a lesser sanction than Mr. Cranley because of their relative positions at Moore & Schley and the degree of [Mr. Core s] involvement in the manipulation suggests that a lesser sanction be imposed. (Post-hearing Memorandum of Law at 14.) I know of no record evidence to support the latter assertion. ======END OF PAGE 6====== See Steadman v. SEC, 603 F.2d 1126, 1142 n.22 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981); Arthur Lipper Corp. v. SEC 547 F.2d 171, 184 (2d Cir. 1976). The severity of a sanction depends on the facts of each case and the value of the sanction in preventing a recurrence. Berko v. SEC, 316 F.2d 137, 141 (2d Cir. 1963); Richard C. Spangler, Inc., 46 S.E.C. 238, 254 n.67 (1976); Leo Glassman, 46 S.E.C. 209, 211-12 (1975). The established criteria for determining what sanctions are appropriate in the public interest in proceedings such as this, instituted pursuant to Sections 15(b) and 19(h) of the Exchange Act, include deterrence and: the egregiousness of the defendant's actions, the isolated or recurrent nature of the infraction, the degree of scienter involved, the sincerity of the defendant's assurances against future violations, the defendant's recognition of the wrongful nature of his conduct, and the likelihood that the defendant's occupation will present opportunities for future violations. Steadman, 603 F.2d at 1140; see also Richard C. Spangler, Inc., 46 S.E.C. at 254 n.67. The Commission recently found that it has authority to issue an industry-wide or collateral bar in administrative proceedings instituted pursuant to Sections 15(b) and 19(h) of the Exchange Act. Meyer Blinder, Exchange Act Rel. No. 39180 (Oct. 1, 1997.) I find that the public interest does not require application of an industry-wide bar to these Respondents because they do not meet the criteria set out in Meyer Blinder. See also David Disner, 63 SEC Docket 2246 at 2257 (Feb. 4, 1997). This record does not show that the Respondents pose a threat to the investing public by their participation in all facets of the securities industry. Unlike Mr. Blinder, these Respondents have not been found guilty of criminal conduct, do not have records of prior securities law violations, did not substantially enrich themselves by their activities, and did not threatened judicial and regulatory officials who dealt with them. Mr. Sayegh I reject Mr. Sayegh s contention that he should not receive any sanction because he is innocent, but that, if he is sanctioned, he should be treated less severely than the other two Respondents because, unlike them, he was not charged with manipulating the shares of Chase, which he contends caused losses of $11.2 million and the demise of Moore & Schley. (Tr. 99-100, 104-06, 172.) Mr. Sayegh s situation is very different from the other Respondents. They have admitted to the allegations, assisted the Commission s enforcement efforts, and consented to the entry of injunctions. Mr. Sayegh, on the other hand, maintained he was innocent until shortly before the hearing.<(12)> (Tr. 262.) <(12)> It is well established that respondents who offer to settle may properly receive lesser sanctions than they otherwise might have received based on pragmatic considerations such as the avoidance of time-and-manpower-consuming adversary proceedings. David A. Gingras, 50 S.E.C. 1286, 1294 (1992). See Nassar and Co., Inc., 47 S.E.C. 20, 26 (1978), aff d, 600 F.2d 280 (D.C. Cir. 1979); Jack Schaefer, 46 S.E.C. 59, 63 (1975). ======END OF PAGE 7====== Throughout the SEC Civil Court Trial, my appeal to the Second Circuit Court, my Petition for Re-Hearing with a suggestion for Re-hearing en banc . . . the NASD Hearing and my Appeal to the Securities and Exchange Commission of the NASD revocation of my registration as a registered representative . . . I have rightly and steadfastly maintained my innocence with respect to all allegations in this action. (Answer of Respondent Robert Sayegh at 1.) Mr. Sayegh was the subject of an eleven day trial after which Judge Keenan concluded: The [Commission] has proven by a preponderance of the evidence that Sayegh by using the means or instrumentalities of interstate commerce and the mails, in connection with the purchase or sale of a security traded in the [over-the-counter] market, with scienter, effected a series of transactions that created actual or apparent active trading in the security, or raised or depressed the price of the security, and that these transactions operated as a fraud or deception on the market for the security at issue . . . . . . . . . . The facts in this case show that Sayegh knowingly violated Section 10(b) of the Exchange by participating in the manipulation of ICP ADRs. Sayegh s violations were knowing and egregious. Sayegh accomplished the manipulation by buying and having other market makers buy ICP ADRs while withholding their supply from the market. These violations were not isolated, but went on for over 17 months while the price of ICP ADRs was maintained at an artificial level. Mr. Sayegh has not shown or acknowledged a recognition of the wrongful nature of his actions. His denials are not credible in light of the magnitude of Moore & Schley s financial problems and the recurring ICP related issues. The facts show that Sayegh generated and participated in much of the conduct contributing to the manipulation. . . . He fails to recognize the significance of his wrongful conduct and this gives rise to serious doubts about his future ability to refrain from engaging in such conduct. Sayegh is currently employed in the securities industry and it appears that his occupation will present opportunities for future violations of the securities laws. SEC v. Sayegh, 906 F.Supp at 946, 948. In February 1996 when the NASD barred Mr. Sayegh from association with a broker-dealer, he was a registered representative associated with Stuart, Coleman where his annual compensation was between $100,000 and $140,000 a ======END OF PAGE 8====== year.<(13)> (Tr. 266-67.) Mr. Sayegh claimed that he had to file for bankruptcy because of these events, and in June 1996, he represented to the United States Court of Appeals for the Second Circuit that he could not afford to pay the $105.00 filing fee. (Tr. 278.) At the hearing, Mr. Sayegh blamed Messrs. Cranley and Core or, alternatively, the forces of supply and demand for any manipulation that occurred in ICP shares. (Tr. 260-66.) On brief, he reiterated that he was unaware of the manipulative acts and practices carried out by others in ICP. (Brief in Response at 2.) Mr. Sayegh took this position even though Judge Keenan found that Mr. Sayegh s denial that he knew that Moore & Schley s trading desk was manipulating ICP shares not credible. SEC v. Sayegh, 906 F.Supp at 948. The facts are that Mr. Sayegh was in charge of OTC trading; all the orders for ICP went through his desk; Mr. Sayegh had exclusive authority to trade for Moore & Schley; he was at his desk from 7:00 a.m. to 5:00 p.m. and only left his desk for three or four minutes; and, between October 1, 1987, and December 30, 1988, Moore & Schley posted the high bid for ICP shares on 271 of 313 trading days and bought more than half the ICP shares offered in the open market. SEC v. Sayegh, 906 F.Supp at 940, 943-48. Two close friends who have known Mr. Sayegh and his family for a many years and one long-time business associate believe that Mr. Sayegh is a person of tremendous accomplishments and good character. I find their testimony credible but non-persuasive. It is admittedly inexplicable how someone can reveal such strikingly different qualities to different people. The evidence, however, is overwhelming that Mr. Sayegh violated the securities statutes as alleged in the Order Instituting Proceedings and that there is a significant probability he will do so in the future since he refused to acknowledge that his actions were improper. Based on these findings, Mr. Sayegh s adamant refusal almost throughout this proceeding to admit that he acted illegally, and his lack of candor in his sworn testimony, I find it appropriate in the public interest to bar Mr. Sayegh from association with a broker or dealer, or a member of a national securities exchange or registered securities association. Messrs. Cranley and Core Messrs. Cranley and Core admitted their guilt when they testified at the hearing, and Mr. Cranley, in his Consent, agreed not to contest any of the allegations in the Order Instituting Proceedings. (Div. Ex. 18.) The Order Instituting Proceeding alleged that: II H.4. Cranley: (i) assisted Militano and Sonneberg in obtaining multiple Reg T extensions from [Securities Settlement Corp. ( SSC )] and [the responsible person at SSC] with respect <(13)> Mr. Sayegh s wife became associated with Stuart, Coleman as a registered representative shortly after Mr. Sayegh was forced to cease his association with the firm and serves many of his former clients. (Tr. 268-74.) ======END OF PAGE 9====== to unpaid for and unauthorized purchases of Chase Medical; (ii) directed the processing of trades by Militano and Sonneberg in Moore & Schley s error account to avoid liquidating into the open market vast quantities of Chase Medical common stock that they had accumulated in their customer accounts; and (iii) approved cross trades of Chase Medical common stock between customer accounts, knowing that Militano and Sonneberg were executing cross trades to avoid liquidating the Chase Medical shares they had accumulated in their customer accounts. II H.5. Core (i) approved the processing of trades by Militano and Sonneberg in Moore & Schley s error account to avoid liquidating into the market vast quantities of Chase Medical common stock that they had accumulated in their customer accounts, (ii) approved cross trades of Chase Medical common stock between customer accounts, knowing that Militano and Sonneberg were executing cross trades to avoid liquidating the Chase Medical shares they had accumulated in their customer accounts; (iii) requested numerous extensions from SSC and [the responsible individual at SSC] to comply with Reg T; and (iv) authorized Militano and Sonneberg to open multiple accounts for customers with existing, persistent, Reg T problems to facilitate the parking of Chase Medical common stock. . . . II K.2. Cranley: (i) instructed Militano and Sonneberg to buy ICP ADRs in customer accounts without regard to whether the customers had authorized the purchases or would pay for the ICP ADRs placed in their accounts; (ii) directed Militano and Sonneberg to execute ICP ADR cross trades between customer accounts and approved cancellation, and rebilling to different customers of Militano and Sonneberg, of ICP ADR trades to avoid Reg T liquidations of ICP ADRs into the open market; (iii) threatened an ICP insider, Ian Brick ( Brick ) that Moore & Schley would drop its bid for ICP ADRs if Brick attempted to sell his ICP ADRs into the open market; and (iv) knowing that they would use this information to solicit purchases and forestall sales of ICP ADRs, gave Militano and Sonneberg misleading and/or inaccurate information about ICP, including that ICP was going to be purchased by another company, that Moore & Schley had found a buyer for the ICP ADRs in its customer accounts, and that Moore & Schley was going to buy the customers holdings without loss to the customer. II K.3. Core (i) directed Militano and Sonneberg to execute purchases of ICP ADRs in customer accounts knowing that many of these customers had insufficient funds to pay for, and in many instances never paid for, the transactions; (ii) approved cross trades entered by Militano and Sonneberg to avoid paying for or liquidating into the open market vast quantities of ICP ADRs that they had accumulated in their customer accounts; (iii) knowing that Militano s and Sonneberg s customers were generating an excessive number of Reg T calls due to their persistent failure to pay for the ICP ADRs placed in their respective accounts, ======END OF PAGE 10====== approved trade cancellations which rebilled the trades to different customers of Militano and Sonneberg to prevent Reg T liquidations of ICP ADRs; and (iv) approved the opening of new accounts by Militano and Sonneberg in the names of customers with existing, persistent Reg T problems knowing that Militano and Sonneberg were creating multiple accounts in these customers names to facilitate the parking of ICP ADRs. According to the Division: Unlike Sayegh, [Messrs. Cranley and Core] appear to recognize the wrongful nature of their conduct. Moreover, both contributed significantly to the ultimate success of the Commission s case in District Court against Sayegh. Neither Core nor Cranley received any promises of leniency from the staff, express or implied. Nevertheless, without any promises, and without any cooperation agreements, both Core and Cranley cooperated with the staff during its preparation for trial, meeting with the staff on numerous occasions prior to trial. Both testified candidly at trial about the circumstances of the ICP fraud, as well as the respective roles of each participant in the fraud. Their testimony was credited by the District Court and both appear to express genuine remorse for their roles in the fraud. (Division s Pre-hearing Memorandum of Law, September 6, 1996, at 8.) Mr. Cranley Mr. Cranley s actions were serious and continued over a long period.<(14)> There are, however, significant mitigating factors. Following the stock market crash in October 1997, Moore & Schley was under intense competitive pressure and Mr. Cranley as managing partner believed he was responsible for the firm s future. (Tr. 72.) The measures the firm took under Mr. Cranley s leadership in the late 1980s to remain economically viable were not successful. (Tr. 72, 191-92.) From the fall of 1987 through 1988, Moore & Schley lacked the strong, in-house legal counsel that had long been an important part of firm management. (Tr. 178- 82, 188.) The illegal actions at issue are completely contrary to the high standards of professional conduct that Mr. Cranley exhibited throughout his career and to his customary good judgment. (Tr. 184-85, 195.) When the manipulation in Chase became public, the American Stock Exchange suspended <(14)> In his answer, Mr. Cranley distinguished his actions from those of Messrs. Militano and Sonneberg. (Answer at 4-5.) However, Mr. Cranley agreed not to contest the allegations in the Order Instituting Proceeding. (Div. Ex. 18, Final Judgment As To John J. Cranley, Jr. By Consent.) According to the Division, Mr. Cranley knew of, condoned, and facilitated the manipulation of Chase and ICP securities to keep Moore & Schley in business. (Division s Reply Brief at 4.) The Division contends that Mr. Cranley is inaccurately trying to depict himself as a victim and that it was duped into not presenting compelling evidence of Mr. Cranley s wrongdoing. (Reply Brief at 9 n.5.) ======END OF PAGE 11====== trading in Chase and Moore & Schley faced liquidation which would have left its customers looking to the Securities Investor Protection Corporation for relief. (Tr. 85-86, 194.) Mr. Cranley worked with Moore & Schley s outside counsel and helped convince the firm s clearing broker and that broker-dealer s parent to accept responsibility for claims by Moore & Schley s customers.<(15)> (Tr. 85-86, 194.) In these negotiations, Mr. Cranley relinquished his Moore & Schley capital account of $1.5 million which represented most of his assets. (Tr. 86-87.) For the past six years, Mr. Cranley s activities in the securities industry have been limited to performing administrative tasks for broker- dealers or consulting assignments. The broker-dealer Mr. Cranley was associated with in 1991 decided not to renew his license because of the possibility that regulatory authorities would initiate action against him. (Tr. 88-89.) Mr. Cranley has had limited dealings with former associates in the eight years since these events occurred due to his embarrassment at his actions. (Tr. 89-90, 196-97.) Mr. Cranley has suffered substantial financial loss as a result of his illegal actions and has experienced health problems: As a consequence of what happened and my own sense of guilt, I had -- I was treated for depression for a period of time. I ve had to suffer the embarrassment of what happened. My own self condemnation for not performing in the way that I should have, and the way that I normally did over a period of time. And then this dragging on and being brought back to your mind year after year, it never goes away, and it s been difficult on a personal basis. (Tr. 65-66, 89-90.) In his thirty years in the securities industry, Mr. Cranley was the subject of only one customer complaint, a law suit initiated in the 1960s by a customer who deliberately named each of Moore & Schley s partners, rather than the firm, as defendants. (Tr. 68-69) Mr. Cranley benefited from the illegal activities in that Moore & Schley continued operating but the loss of his capital account exceeded the financial benefits he received. (Tr. 98-99.) Mr. Cranley s Consent does not require disgorgement. (Div. Ex. 18.) The Division would mitigate Mr. Cranley s sanction based on his ability to recognize the wrongfulness of his conduct, his cooperation, and his remorse, but believes its recommended sanction appropriate given that Mr. Cranley s conduct was egregious. (Division Post-hearing Memorandum at 11-12.) Considering all the mitigating factors, the criteria for <(15)> Mr. Cranley believes that SSC or its parent Continental Bank of Illinois ( Continental Bank ) assumed all customer claims in Chase and that J.T. Moran & Co. assumed all customer complaints for ICP. (Tr. 47, 86-87.) The Division agrees that the SSC agreed to accept responsibility for $11.2 million in Moore & Schley customer claims in connection with Chase, but disagrees that all investors were compensated for their losses. (Post-hearing Memorandum at 3.) ======END OF PAGE 12====== determining what is appropriate in the public interest, Mr. Cranley s cooperation with the Division, that Mr. Cranley s participation in the securities industry has been de facto severely limited for the last six years, and having observed the witness s demeanor and testimony under oath, I find it in the public interest to censure Mr. Cranley and bar him from association with a broker or dealer in a supervisory or proprietary capacity. I reject the Division s recommendation as too severe. I find Mr. Cranley s remorse at what occurred sincere and there is no evidence to suggest that his future participation in the securities business presents any threat to the investing public. (Tr. 90-92, 196-97.) Mr. Core Mr. Core admits the allegations and has expressed regret.<(16)> He began cooperating with the Division in 1993, and his cooperation was important to the Commission s successful prosecution of the persons named in the civil complaint. (Tr. 17-18.) In fact, Mr. Sayegh considers Mr. Core to have been the significant witness against him in the civil case. (Tr. 162.) Additionally, Mr. Core did not realize any income from the trading by Messrs. Militano and Sonneberg in the securities of Chase or ICP, and his customers did not suffer any losses. (Tr. 151.) Mr. Core has suffered significant financial loss as a result of these events; he filed for personal bankruptcy in 1995 and was discharged in 1996. (Tr. 152-53.) Mr. Core was never charged with any securities violations before the events at issue here. Finally, the record contains eight letters from persons active in the securities industry, customers, friends, and his wife. (Core Exs. A-H.) All these individuals attest to Mr. Core s good character, and opine that his continued participation in the securities industry presents no threat to the investing public. Many of the correspondents urge leniency in view of the number of years that have passed since the events at issue occurred and the punishment, emotional and financial, already meted out to [Mr. Core]. (Core Exs. A, B, E.) Based on the purpose of sanctions described above, my observation of the witness, his testimony under oath, and the record evidence, I find that Mr. Core s participation in the securities business presents no future threat to the investing public. Accordingly, I find that Mr. Core should be censured and barred from association with a broker or dealer in a supervisory or proprietary capacity. 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 <(16)> The Division disagrees with counsel s view of Mr. Core as a supervisor who merely failed to detect Militano and Sonneberg s manipulative conduct. (Division Post-hearing Reply at 6.) I agree with the Division. Mr. Core has admitted that he was a primary participant in the schemes to manipulate the securities of Chase and ICP. (Div. 19, Final Judgment as to Defendant Thomas Core By Consent.) See also SEC v. Sayegh, 906 F.Supp 939. ======END OF PAGE 13====== March 7, 1997. Order Based on the findings and conclusions set forth above, I ORDER, pursuant to Sections 15(b) and 19(h) of the Exchange Act, that: Robert Sayegh is barred from association with a broker or dealer and from being associated with a member of a national securities exchange or registered securities association; and Thomas Core and John J. Cranley are censured and barred from association in a supervisory or proprietary capacity with any broker or dealer. 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 such party, 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 ======END OF PAGE 14======