Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-11-01067/USCOURTS-caDC-11-01067-0/pdf.json

Parties Involved:
Steven Altman
Petitioner
Securities and Exchange Commission
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2011 Decided December 16, 2011

No. 11-1067

STEVEN ALTMAN,

PETITIONER

v.

SECURITIES AND EXCHANGE COMMISSION,

RESPONDENT

On Petition for Review of an Order of

 the Securities & Exchange Commission

Steven Altman, appearing pro se, argued the cause and filed

the briefs for petitioner.

Christopher M. Bruckmann, Senior Counsel, Securities and

Exchange Commission, argued the cause for respondent. With

him on the brief were Mark D. Cahn, General Counsel, Richard

M. Humes, Associate General Counsel, Melinda Hardy,

Assistant General Counsel, and Donna S. McCaffrey, Special

Trial Counsel. 

Before: SENTELLE, Chief Judge, HENDERSON and ROGERS,

Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

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ROGERS, Circuit Judge: This case is before the court on a

petition to review the opinion and order of the Securities and

Exchange Commission permanently denying Steven Altman, an

attorney admitted to practice in New York State, the privilege of

appearing or practicing before the Commission, pursuant to Rule

102(e)(1)(ii) of the Commission’s Rules of Practice, and Section

4C of the Securities Exchange Act of 1934 (“the Act”). The

Commission found that Altman, in appearing before it, violated

three Disciplinary Rules of the New York Bar Association

Lawyer’s Code of Professional Responsibility, and that the

violations were “egregious, recurrent, and reflected a high

degree of scienter.” Steven Altman, Esq., Exchange Act Release

No. 63306, 2010 SEC LEXIS 3762, at *70 (Nov. 10, 2010). 

Altman also petitions for review of the Commission’s denial of

his motion for reconsideration and a stay. Steven Altman, Esq.,

Exchange Act Release No. 63665, 2011 SEC LEXIS 30 (Jan. 6,

2011). 

Altman, now proceeding pro se, contends that the procedure

employed by the Commission was unconstitutional, because (1)

the Commission lacked authority to sanction him under Rule

102(e)(1)(ii) and Section 4C of the Act based on its

determination of violations of the New York Bar disciplinary

rules; (2) the Commission failed to provide notice that it could

proceed against him in the absence of prior action by New York

State and of the standard of conduct that could be found to

violate Rule 102(e)(1)(ii) and Section 4C; and (3) the

Commission’s findings are not supported by substantial

evidence. He also contends that the sanction was excessive. For

the following reasons we deny the petition.

I. 

Altman is a general commercial litigator who has rarely

practiced before the Commission. In this instance, he

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represented a client who had been subpoenaed by the Division

of Enforcement in a proceeding against a company. Altman’s

client had previously been employed by another company but

occasionally performed secretarial tasks for the company under

investigation. At the time of the subpoena, the client (through

Altman) was involved in negotiations with the client’s prior

employer about a severance package. The Division learned the

client could testify that a key defense of the company being

investigated was false. After the Division contacted Altman to

request an interview with his client, Altman engaged in a series

of telephone conversations with the company’s attorney, Irving

Einhorn, who, unbeknownst to Altman, tape recorded five of the

six conversations. The transcripts show that Altman encouraged

Einhorn to convince the company to facilitate the payment of a

severance package to Altman’s client and to remove the client’s

name as a co-signer of two car leases held by the company’s

CEO. Among the various exchanges, in the final taped

conversation of February 10, 2004, Einhorn asked Altman:

“What is the bottom line? What is it going to take? What kind

of package is this? . . . What is the package that [the client]

wants to, you know, not cooperate or whatever?” Altman

responded: “Get [the client] off those leases and, you know, a

year’s salary . . . .” Einhorn then asked: “What will we get if

they do that, [the client] won’t cooperate or [the client] won’t

remember?” Altman responded: “Uh, probably both.” SEC Off.

of Gen. Counsel Ex. 18 at 1660.

On January 30, 2008, the Commission instituted

proceedings against Altman for “engag[ing] in unethical or

improper professional conduct” in violation of Rule 102(e)(1)(ii)

and Section 4C of the Act. An administrative law judge found,

after an evidentiary hearing at which Altman was represented by

counsel, that Altman had violated three of the New York Bar

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disciplinary rules,1

 and suspended him from appearing before

the Commission for nine months. Altman appealed to the

Commission; the Office of General Counsel appealed the ninemonth suspension. The Commission, upon reviewing the

transcripts of the taped conversations, the judge’s findings, and

Altman’s defenses, affirmed the factual findings that he had

knowingly violated three New York Bar disciplinary rules, but

concluded a permanent bar better “serves the public interest and

is remedial because it will protect the integrity of [the

Commission’s] prosecutorial and adjudicatory processes, and

thereby the investing public, from future harm by Altman.” 

Altman, 2010 SEC LEXIS, at *75. Upon the Commission’s

denial of his motion for reconsideration and a stay, Altman

petitioned for review.

II.

Altman’s challenge to the Commission’s authority to

sanction him based on violations of the New York Bar

disciplinary rules fails. Section 4C of the Act provides:

The Commission may censure any person, or deny,

temporarily or permanently, to any person the

privilege of appearing or practicing before the

Commission in any way, if that person is found by the

Commission, after notice and opportunity for hearing

1

 The Commission found Altman had violated Rule 1-

102(A)(4), prohibiting “conduct involving dishonesty, fraud, deceit,

or misrepresentation”; Rule 1-102(A) (5), prohibiting “conduct that is

prejudicial to the administration of justice”; and Rule 1-102(A)(7),

prohibiting “conduct that adversely reflects on the lawyer’s fitness as

a lawyer.” New York State Bar Association Lawyer’s Code of

Professional Responsibility Disciplinary Rules (herein “New York Bar

disciplinary rules”).

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in the matter . . . to be lacking in character or integrity,

or to have engaged in unethical or improper

professional conduct.

15 U.S.C. § 78d-3(a)(2). By its plain terms Section 4C

authorizes the Commission to deny the privilege of appearance

upon finding improper professional conduct. Because it does

not unambiguously define “unethical or improper professional

conduct,” the question is whether the Commission’s

interpretation of the statute to allow it to apply State Bar

disciplinary rules to define the proscribed conduct is

permissible. See Chevron U.S.A. Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 843 (1984). “In reviewing an

agency’s interpretation of its authority under a statute it

administers, the court will uphold that interpretation so long as

it is a reasonable interpretation of the statute.” Financial

Planning Ass’n v. SEC, 482 F.3d 481, 487 (D.C. Cir. 2007)

(citing Village of Bergen v. FERC, 33 F.3d 1385, 1389 (D.C.

Cir. 1994)).

Rule 102(e)(1)(ii) of the Commission’s Rules of Practice

was codified as Section 4C of the Act as part of the SarbanesOxley Act of 2002, Pub. L. 107-204, 116 Stat. 745 (2002)

(codified as 15 U.S.C. § 78d-3(a)(2)). Prior to its codification

the Commission stated that it “perceives no unfairness

whatsoever in holding those professionals who practice before

[the Commission] to generally recognized norms of professional

conduct . . . whether or not such norms had previously been

explicitly adopted or endorsed by the Commission. To do so

upsets no justifiable expectations, since the professional is

already subject to those norms.” Carter and Johnson, 47 S.E.C.

471, 508 & n.65 (Feb. 28, 1981) (referencing the American Bar

Association (“ABA”) Code of Professional Responsibility

Disciplinary Rules). The text of Section 4C is virtually

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identical to Rule 102(e)(1)(ii).2

 “It is well established that when

Congress revisits a statute giving rise to a longstanding

administrative interpretation without pertinent change, the

‘congressional failure to revise or repeal the agency’s

interpretation is persuasive evidence that the interpretation is

the one intended by Congress.’” Commodity Futures Trading

Comm’n v. Schor, 478 U.S. 833, 846 (1986) (quoting NLRB v.

Bell Aerospace Co., 416 U.S. 267, 274–75 (1974)). In In re

Snyder, 472 U.S. 634, 645 & n.6 (1985), the Supreme Court

held that a federal court could charge an attorney appearing

before it “with the knowledge of and the duty to conform to the

state code of professional responsibility” and thus the court was

“entitled to rely on the attorney’s knowledge of the state code

of professional conduct applicable in that state court . . . .”

Similarly, the Commission was entitled to rely on Altman’s

knowledge of and duty to conform to the New York Bar

disciplinary rules. See Herman v. Dulles, 205 F.2d 715, 716

(D.C. Cir. 1953). 

Contrary to Altman’s position, the Commission did not lack

2

 Rule 102(e)(1)(ii) provides, with Section 4C’s codification

changes shown within brackets:

(1) Generally. [Authority to Censure] The Commission may

censure a [any] person[,] or deny, temporarily or permanently,

[to any person] the privilege of appearing or practicing before

it [the Commission] in any way to any person who [if that

person] is found by the Commission[,] after notice and

opportunity for hearing in the matter:

. . . 

(ii) To be lacking in character or integrity[,] or to have

engaged in unethical or improper professional conduct[.]

Compare 17 C.F.R. § 201.102(e)(1), with 15 U.S.C. § 78d-3(a)(2).

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authority to act because of previous pronouncements that it

would generally not do so without prior judicial or

administrative findings of misconduct. Altman points to the

Commission’s statements of its general policy.3 Nothing in

these statements suggested the Commission would not act in the

appropriate circumstances. To the extent the Commission has

for “nearly 20-year[s] stay[ed] [] its hand on attorney

discipline,” Petr.’s Br. 18, the Commission’s “powers . . . are

not lost by being allowed to lie dormant.” United States v.

Morton Salt Co., 338 U.S. 632, 647 (1950). 

Neither, as Altman contends, does the Commission’s

exercise of authority absent prior disciplinary proceedings

against him by New York State implicate separation of powers

or federalism concerns. The sanction imposed on Altman is

limited to appearances before the Commission and has no effect

either on his ability to practice law in New York State and to

appear before any court, or on New York State’s authority to

3

 “[T]he Commission generally should not institute Rule

102(e) proceedings against attorneys absent a judicial determination

that the lawyer has violated the federal securities laws.”

Implementation of Standards of Professional Conduct for Attorneys

[under Section 307 of the Sarbanes-Oxley Act regarding issuers], 67

Fed. Reg. 71,670, 71,672 (proposed Dec. 2, 2002); “[T]he

Commission has generally utilized Rule 2(e) proceedings against

attorneys only where the attorney’s conduct has already provided the

basis for a judicial or administrative order finding a securities law

violation in a non-Rule 2(e) proceeding.” Disciplinary Proceedings

Involving Professionals Appearing or Practicing Before the

Commission, Securities Act Release No. 33-6783, 41 SEC Docket

388, 394–95; 1988 SEC LEXIS 1365, at *22 (July 7, 1988). Rule

2(e), promulgated in 1935, was redesignated as Rule 102(e) in 1995;

the text of subpart (1)(ii) did not change. See Implementation of

Standards of Professional Conduct for Attorneys, 67 Fed. Reg. at

71,671 n.11.

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discipline him. Cf. United States v. Cutler, 58 F.3d 825, 838

(2d Cir. 1995). And Altman’s contentions that the Commission

could have taken a more limited approach under Rule 180 of its

Rules of Practice, that New York State follows a different, and

likely more comprehensive, disciplinary process, and that the

U.S. Patent and Trademark Office has a more robust

disciplinary process are not relevant to the question whether the

Commission acted within its authority in sanctioning him.

III.

Altman’s contention that he lacked sufficient notice of

either the possibility of Commission administrative proceedings

absent prior disciplinary action by New York State or of the

standards of conduct subject to discipline under Rule

102(e)(1)(ii) and Section 4C of the Act also fails. The court

will uphold the Commission’s legal conclusions unless they are

“arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law.” 5 U.S.C. § 706(2)(A); Graham v.

SEC, 222 F.3d 994, 999–1000 (D.C. Cir. 2000); Wonsover v.

SEC, 205 F.3d 408, 412 (D.C. Cir. 2000). 

In Marrie v. SEC, 374 F.3d 1196, 1205 (D.C. Cir. 2004),

this court stated, in a case involving the discipline of an

accountant pursuant to Rule 102(e)(1), that “[i]t cannot be

gainsaid that the Commission could reasonably conclude that

any licensed accountant is on notice of professional standards

generally and of what constitutes extreme departures in

particular.” The same principle applies here. The Commission

has previously relied on external codes of professional conduct,

including the ABA Canons of Professional Ethics, as a basis for

disciplining attorneys under its rules. See Kivitz, 44 S.E.C. 600,

607–08 (June 29, 1971), reversed on other grounds, Kivitz v.

SEC, 475 F.2d 956 (D.C. Cir. 1973). It announced in 1981, in

Carter and Johnson, 47 S.E.C. at 508, that generally recognized

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norms could provide the basis for discipline under Rule

102(e)(1)(ii) (then Rule 2(e)(1)(ii), see supra note 3). And in

2002, in considering standards for issuers under Section 307 of

the Sarbanes-Oxley Act, the Commission noted: 

Rule 102(e) does not establish professional standards. 

Rather, the rule enables the Commission to discipline

professionals who have engaged in improper

professional conduct by failing to satisfy the rules,

regulations or standards to which they are already

subject, including state ethical rules governing

attorney conduct . . . .

Implementation of Standards of Professional Conduct for

Attorneys, supra note 3, 67 Fed. Reg. at 71,671 n.13. 

Altman was on notice of his duty to comply with the New

York Bar disciplinary rules, and when appearing before the

Commission, he could be held to that duty. Cf. In re Snyder,

472 U.S. at 645 & n.6. He cannot seriously suggest that he

lacked notice that conduct in the nature of a fraud on

Commission proceedings falls within the purview of Rule

102(e), the purpose of which is to “protect[] the integrity of the

Commission’s own processes . . . .” Marrie, 374 F.3d at 1200. 

Likewise, Altman’s contention that he lacked notice of the

standard of conduct proscribed by Rule 102(e)(1)(ii) and

Section 4C of the Act is unpersuasive. Although the court has

sustained challenges to the Commission’s imposition of Rule

102(e)(1) sanctions based on inadequate notice of the applicable

standard, see Marrie, 374 F.3d 1196; Checkosky v. SEC, 139

F.3d 221 (D.C. Cir. 1998); Checkosky v. SEC, 23 F.3d 452

(D.C. Cir. 1994), those cases, on which Altman relies,

concerned the failure to provide standards or notice as to the

possibility that negligent or reckless conduct could fall within

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Rule 102(e)’s ambit. See Marrie, 374 F.3d at 1202. The

Commission found Altman had engaged in “egregious”

intentional improper professional conduct, Altman,, 2010 SEC

LEXIS, at *70, specifically that he was seeking a severance

package for his client in exchange for untruthful testimony in

Commission proceedings or evasion of its process by his client.4

Whatever ambiguity may exist as to lesser mental states that

might implicate Rule 102(e), intentional improper conduct in

the nature of “extreme departures,” Marrie, 374 F.3d at 1205,

such as Altman’s sanctioned conduct, falls within the rule’s

ambit. Altman thus was on notice that based on the New York

Bar disciplinary rules the Commission could proceed against

him under Rule 102(e)(1)(ii) and Section 4C of the Act to

protect the integrity of its processes.

IV.

The Commission’s factual determinations are conclusive

“if they are supported by substantial evidence” in the record. 

Horning v. SEC, 570 F.3d 337, 343 (D.C. Cir. 2009); 15 U.S.C.

§ 78y(a)(4). Altman, however, has forfeited his challenges to

the tapes evidence upon which the Commission relied. He

identified these challenges only in introductory sections of his

opening brief, see Petr’s. Br. at xiii, 6, but provided no

argument or citations, see Anna Jaques Hosp. v. Sebelius, 583

F.3d 1, 7 (D.C. Cir. 2009), and did not present his argument

until his reply brief, see Petr’s. Reply Br. at 5–9. See United

States v. Moore, 651 F.3d 30, 50 n.4 (D.C. Cir. 2011); American

4

 Altman’s challenge to the Commission’s source of law for

its scienter finding fails. Regardless of whether the administrative law

judge relied on Black’s Law Dictionary in finding Altman’s conduct

to be intentional, the Commission relied on published case law from

New York State where he is licensed to practice law. See Altman,

2010 SEC LEXIS, at *44-*50.

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Wildlands v. Kempthorne, 530 F.3d 991, 1001 (D.C. Cir. 2008);

FED. R. APP. P. 28(a)(9)(A). The court “generally will not

entertain arguments omitted from an appellant’s opening brief

and raised initially in his reply brief.” McBride v. Merrell Dow

and Pharmaceuticals, Inc., 800 F.2d 1208, 1210 (D.C. Cir.

1986) (citing, inter alia, Carducci v. Regan, 714 F.2d 171, 177

(D.C. Cir. 1983)); see Rollins Envtl. Servs. Inc. v. EPA, 937

F.2d 649, 652 n.2 (D.C. Cir. 1991). In any event, the entirety of

the stipulated transcript of the tape recordings provides

substantial evidence for the Commission’s finding that Altman

engaged in intentional improper professional conduct.5 

V. 

Finally, Altman contends the sanction was excessive in

view of his otherwise unblemished disciplinary record,

mitigating personal factors, and his subsequent significant

community service. Again he has presented his arguments only

in his reply brief and forfeited them. See Rollins, 937 F.2d at

652 n.2. In any event, the court will not “disturb the

Commission’s choice of sanction unless it is either unwarranted

in law or without justification in fact.” Horning, 570 F.3d at

343 (internal quotation marks, ellipsis, and citation omitted);

see WHX Corp. v. SEC, 362 F.3d 854, 859 (D.C. Cir. 2004).

The Commission’s factual findings are supported by

5

 Altman’s suggestion at oral argument that the transcript of

the tape recordings contain errors comes too late. Oral Arg. at 3:44-

7:20. He concedes that he did not provide the court with a “corrected”

transcript, id. at 4:27, and that, in the proceedings before the

Commission, he stipulated, through counsel, to the majority of the

transcript, id. at 23:10-23:57. Moreover, counsel for the Commission

stated that the differences between the Commission’s version and

Altman’s version of the transcripts are immaterial. Id. at 17:50-18:48.

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substantial evidence in the record and its choice of sanction was

statutorily authorized under Section 4C of the Act. The

Commission applied the public interest standards set forth in

Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), see 

Kornman v. SEC, 592 F.3d 173, 187–88 (D.C. Cir. 2010), and

it was unpersuaded that circumstances in mitigation identified

by Altman in his Reply Brief warranted a lesser sanction. To

the extent Altman would reprise arguments in mitigation that he

presented to the Commission, he has not provided grounds for

the court to conclude the Commission abused its discretion. See

Wonsover, 205 F.3d at 413 (quoting Svalberg v. SEC, 876 F.2d

181, 185 (D.C. Cir. 1989)); see also Kornman, 592 F.3d at

187–88. To the extent he raises new arguments, it is unclear

how his subsequent community service demonstrates an abuse

of discretion by the Commission, much less how claimed

reputational damage would be undone by a lesser sanction given

the nature of the improper professional conduct found by the

Commission. 

Accordingly, the petition for review is denied.

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