Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_83-cv-00711/USCOURTS-cand-3_83-cv-00711-23/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

v.

JOSEPH S. AMUNDSEN,

Defendant. /

No. C 83-00711 WHA

ORDER FINDING DEFENDANT

IN CIVIL CONTEMPT

INTRODUCTION

In this civil action for violations of federal securities laws, the Securities and Exchange

Commission moves for an order finding defendant in civil contempt for violating a consent

decree he entered in 1983. To the extent set forth below, the motion is GRANTED.

STATEMENT

In 1983, the Securities and Exchange Commission filed a complaint against defendant

Joseph Amundsen, then a certified public accountant, alleging that defendant misrepresented

material facts in audit reports he had prepared in connection with securities of Olympic Oil and

Gas, Inc. The complaint further alleged that defendant had made false statements under oath to

the SEC staff investigating him. Defendant, proceeding pro se, voluntarily signed a consent

“Final Judgment of Permanent Injunction.” The 1983 consent judgment permanently enjoined

defendant from “appearing or practicing before the Commission in any way” (Dkt. Nos. 1–3).

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*

 Since the SEC filed the instant motion, defendant has responded by filing three “petitions for

summary judgment” (Dkt. Nos. 119, 125, 129). Because final judgment has already been entered in this case,

this order construes these filings as motions to vacate the injunction. These motions, however, merely rehash

old arguments that have been rejected on numerous occasions in prior orders. The motions are therefore

DENIED. 

2

From 1983 until at least 1998, defendant was not licensed as a certified public

accountant and prepared no documents filed with the Commission. By 2003, however, he had

regained his license and began a niche practice of auditing financial statements of brokerdealers, which financial statements, together with his audit reports, were then filed with the

Commission. He did so more than one thousand times at approximately three dozen brokerdealers (Dkt. No. 39).

In November 2011, after an order denied defendant’s first request to vacate the 1983

injunction, the SEC brought a motion to find defendant in civil contempt, alleging that

defendant had been appearing and practicing before the SEC as an accountant by (1) performing

audits of securities broker-dealers registered with the SEC and (2) signing forms for those

broker-dealers knowing that they were required to be, and would be, filed with the SEC (Dkt.

Nos. 5, 14, 24). 

An order dated January 19, 2012, granted in part and denied in part the SEC’s motion to

find defendant in contempt. The January 2012 order found that defendant’s auditing of

financial statements of broker-dealers that would be filed with the SEC constituted “‘appearing

or practicing before the Commission’ in violation of the injunction” and ordered defendant “to

cease preparation of all audit reports destined for filing with the Commission, including audit

reports on financial statements for broker-dealers so destined for filling with the Commission.” 

The January 2012 order declined to resolve the Commission’s additional contention that

defendant could not prepare unaudited financial statements to be filed by others (Dkt. No. 39).

Since the January 2012 order, defendant has filed numerous additional motions to vacate

the injunction, all of which have been denied. Defendant’s multiple requests to reconsider the

denials of those motions have also been rejected by the undersigned judge (see, e.g., Dkt. Nos.

46, 62, 75, 81, 87, 101).*

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The SEC now moves for a second order finding defendant in contempt for violating the

1983 injunction. The motion concerns activities in 2015 and 2016, during which time

defendant served as the engagement quality reviewer (“EQR”) on over a dozen audits of

broker-dealers. To encourage compliance with the 1983 injunction in the future, the SEC seeks

an order requiring defendant to disgorge all profits he received in connection with these audits

(Dkt. No. 111). This order follows full briefing and oral argument.

ANALYSIS

“A court has power to adjudge in civil contempt any person who willfully disobeys a

specific and definite order requiring him to do or to refrain from doing an act.” Shuffler v.

Heritage Bank, 720 F.2d 1141, 1146 (9th Cir. 1983). “The standard for finding a party in civil

contempt is well settled: The moving party has the burden of showing by clear and convincing

evidence that the contemnors violated a specific and definite order of the court. The burden

then shifts to the contemnors to demonstrate why they were unable to comply.” In re Bennett,

298 F.3d 1059, 1069 (9th Cir. 2002) (citation omitted).

1. DEFENDANT VIOLATED THE 1983 INJUNCTION.

The 1983 injunction prohibits defendant from “appearing or practicing before the

Commission in any way.” The scope of this injunction has been litigated incessantly for nearly

a decade. Broker-dealers are regulated by the SEC, 15 U.S.C. § 78o, and practicing before the

Commission includes the following (17 C.F.R. § 201.102(f)):

(1) Transacting any business with the Commission; and

(2) The preparation of any statement, opinion or other paper by any

attorney, accountant, engineer or other professional or expert, filed

with the Commission in any registration statement, notification,

application, report or other document with the consent of such

attorney, accountant, engineer or other professional or expert.

Public Company Accounting Oversight Board’s Auditing Standard 7, in turn, requires

an engagement quality review for audits of broker-dealers as part of the annual audit process. 

The EQR must provide concurring approval of issuance before the audit firm may grant

permission to the client to use the auditor’s report. 

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The SEC has submitted evidence — namely, defendant’s under-oath testimony from a

parallel SEC enforcement action — demonstrating that defendant recently acted as EQR on

over a dozen audits. Defendant ensured that audit plans had been followed, proofread and

corrected the underlying financial statements, and ultimately approved the audits. Defendant

knew his approval was necessary for the audit team to release the audits to the broker-dealers

for inclusion with their filings with the SEC. This work therefore constituted appearing and

practicing before the SEC, as defendant knew that his approval of the audits was required and

that the audits would later be filed with the Commission. Based on the above findings, a

finding of civil contempt is warranted.

This case has tugged at the conscience of the district judge because defendant has been

subjected to the injunction for decades and it has compromised his ability to earn a living. For

that reason, the district judge was hopeful that the instant motion would provide an opportunity

to consider whether some relief from the consent decree should be allowed. At the hearing on

the instant motion, the undersigned accordingly directed the SEC to file a supplemental brief

addressing the adequacy of defendant’s EQR work on any one audit for 2014 or 2015. The SEC

thereafter submitted evidence of the EQR work defendant performed for Profor Advisors, a

broker-dealer, for its audit for the year ending on December 31, 2014. In connection with that

work, defendant signed the “Supervision, Review, and Approval Form” that approved the audit

of Profor. Therein, defendant affirmed that he “possess[ed] the competence, independence,

integrity, and objectivity to perform the engagement quality review (EQR)” (Dkt. No. 134-1 at

5). In reality, however, defendant’s daughter was Profor’s financial and operations principal

and had final responsibility for all financial matters, including the handling of financial

statements. These circumstances demonstrate that defendant has remained tone deaf when it

comes to his professional responsibilities and that the injunction should remain in place. 

2. APPROPRIATE RELIEF?

In order to ensure defendant’s future compliance with the 1983 injunction, the SEC

seeks an order (1) requiring defendant to inform the Court and the SEC of the identities of all

broker-dealers for which he served as EQR and whose audits were filed with the SEC, and the

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years for which he served as EQR on those audits; (2) requiring defendant to withdraw from

any present engagement as EQR on any audits of broker-dealers registered with the SEC; (3)

restating that defendant is barred from appearing and practicing before the SEC, including

appearing by participating in any way on audits of regulated entities such as broker-dealers; and

(4) requiring defendant to disgorge all profits gained in performing the audits at issue in this

order. With respect to disgorgement, the SEC estimates that defendant has earned at least

$7,000 for his work as an EQR. 

For the foregoing reasons, this order directs defendant to file with the Court a complete

list of all broker-dealers for which he has served as EQR and whose audits were filed with the

SEC since 2015, identifying each by date and name of the broker-dealer. This must be filed by

JUNE 14, 2019. Defendant should be mindful that he remains barred from appearing or

practicing before the SEC, including by participating in any way on audits of regulated entities

such as broker-dealers. This order postpones consideration of any further penalties until

completion of the SEC’s parallel administrative enforcement action against defendant.

CONCLUSION

To the extent stated above, the motion to find defendant in civil contempt is GRANTED.

IT IS SO ORDERED.

Dated: May 13, 2019. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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