REVISED, AUGUST 26, 1997

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 96-60328

JAY HOUSTON MEADOWS

Petitioner

VERSUS

SECURITIES AND EXCHANGE COMMISSION

Respondent

On Petition for Review of an Order of the

Securities and Exchange Commission

August 22, 1997

Before DUHÉ, BENAVIDES, and STEWART, Circuit Judges.

DUHÉ, Circuit Judge:

Petitioner Jay Houston Meadows seeks review of an order of the

Securities and Exchange Commission sustaining sanctions imposed on

him by an administrative law judge for violations of § 17(a) of the

Securities Act of 1933, 15 U.S.C. § 77q(a), § 10(b) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b5, 17 C.F.R. § 240.10b-5, promulgated thereunder. We affirm.

I

At all relevant times, Jay Houston Meadows was a registered

representative affiliated with Rauscher Pierce Refnes, Inc.
 

1In May 1994, Gunderson and Harriger, without admitting or

denying any of the allegations in the complaints against them,

consented to the entry of permanent injunctions enjoining them from

violating the antifraud provisions of the securities acts.

 

2Initially, Mundiger was to perform both businesses. The

principals created Mira Golf only after Meadows’s RPR compliance

officer informed Meadows that he could not serve as an officer or

director in any venture that sought to raise capital through the

sale of gas well interests. RPR also prohibited Meadows from

soliciting interests in either venture and from owning more than

10% of Mundiger’s stock.

 

3All references to the Division are to the Securities and

Exchange Commission’s Division of Enforcement, the Respondent in

this action.

2

(“RPR”), a registered broker-dealer. In late 1990, Meadows, along

with Marc W. Gunderson and William Craig Harriger,1 formed Mundiger

International, Inc. (“Mundiger”) and Mira Golf International, Inc.

(“Mira Golf”) (collectively, the “Companies”) to engage in two

businesses: Mira Golf was to wholesale recycled golf balls, and

Mundiger was to use the sale proceeds of the recycled golf balls to

drill and operate gas wells.2 

The three principals, along with Brian Catlin, shouldered the

management obligations for both Companies. Gunderson, the brains

behind the ventures, claimed to have much experience in both

businesses and thus assumed the daily operating responsibilities;

Harriger, an attorney, provided legal and administrative support;

Catlin served as the Companies’ CPA; and Meadows joined purportedly

to assist Gunderson with managerial duties, to provide labor at

Mira Golf, and to invest Mundiger’s excess cash flow. The Division

of Enforcement (“Division”)3 contends, however, that Gunderson and

Harriger recruited Meadows solely to raise capital, noting
 

4Meadows and Harriger were members of the Masterminds.

3

Meadows’s lack of relevant business experience other than his

contacts to potential investors. Whether Meadows did in fact raise

capital forms the basis of this appeal.

Pursuant to RPR’s instructions, Meadows took no formal

position at Mundiger, and he confined his investment in Mundiger to

$10,000, for which he received 10% of its stock. Meadows also

invested $100 in Mira Golf, for which he received an 81⁄2% interest,

and was appointed its secretary-treasurer and one of its directors.

Meadows and Harriger presented Mundiger to the “Masterminds,”

a small networking group established solely to discuss money-making

opportunities,4 and they arranged for Gunderson to speak at an

upcoming meeting. At this meeting, Gunderson enthusiastically

represented the Companies’ prospects, promising that investors

could expect high returns within months of their investment.

Gunderson explained he had retained a lease on valuable gasproducing property in the Fort Worth Basin (“Property”), and that

Mundiger had a contract to supply gas to the Texas Utility and Fuel

Company (“TUFCO”), a local Texas utility, at a price above the

current market price. He indicated he sought investors to help

finance the drilling on the Property before the TUFCO contract

expired in two-and-one-half years. Gunderson represented there was

only a six-percent possibility--a figure he attributed largely to

human error--that a particular well would fail to produce. Meadows

challenged none of these assertions. Rather, he echoed Gunderson’s

enthusiasm, claiming Mundiger would hit gas wherever it drilled.
 

5The Division does not suggest that any of the investments

passed through RPR or that Meadows received any commission from RPR

for the investments made.

4

Meadows, however, never seriously investigated the validity of

such claims. He testified he relied largely on both Harriger’s

opinion of Gunderson and Gunderson himself. The only independent

inquiry Meadows made was in late 1990 when he visited the

Companies’ offices after regular business hours--and in the absence

of Gunderson and Harriger--to verify Mira Golf’s golf ball

inventory. When Harriger learned of the unannounced visit, he

changed the locks and temporarily refused to give Meadows a key.

Meadows, who was one of Mira Golf’s officers and directors, was

somehow untroubled by Harriger’s action, testifying he knew he

still had authority to inspect the books during business hours.

Meadows, however, never chose at any time to examine any of the

books because he “trusted that it was being taken care of.”

Following the initial Masterminds meeting, Meadows, either

alone or with Gunderson and/or Harriger, met in the RPR offices and

elsewhere with Masterminds members and other potential investors to

encourage their investment in the Companies. Between late 1990 and

early 1991, Mundiger raised approximately $800,000 from over twenty

investors through the sale of participation interests in several

separate drilling programs. Mira Golf raised $78,000 from nine

investors. Of the twenty or so investors in these Companies, ten

were Meadows’s RPR clients.5

Mundiger drilled its first two gas wells in early 1991.

Output was far short of that represented by the principals; in
5

fact, production costs far exceeded revenues, a pattern that

continued for six of the ten wells Mundiger drilled. Gunderson,

however, falsely represented otherwise, claiming these wells were

profitable. In a February 1991 memo to Meadows and Catlin,

Gunderson and Harriger wrote that “we have grossly underestimated

our wells[’] production[,]” and urged Meadows and Catlin to solicit

more investors for future programs. Without verifying Gunderson’s

claims of above-expectation well production, Meadows repeated them

to potential investors. Investors testified that Meadows’s

positive characterizations of the wells’ successes influenced their

investment decisions.

In April 1991, Mundiger began paying investors their purported

pro rata shares of revenues earned from gas production and sales to

TUFCO. These distributions, however, were in excess of investors’

actual shares but still significantly less than what Gunderson,

Harriger, and Meadows had represented. Mundiger apparently

obtained the funds for these overpayments from investor funds

furnished for subsequent well programs.

In May 1991, Meadows resigned his positions at Mira Golf

following various salary disputes with Gunderson and Harriger.

Thereafter, he sold back some of his ownership interests in the

Companies for an initial payment of $10,000 and additional monthly

payments of $1,000 for one year. The monthly payments were

conditioned, however, upon Meadows’s silence as to the Companies’

financial situation. Under this agreement, Meadows received

$13,000 in total, approximately $3,000 more than his aggregate
6

investment just over seven months earlier.

In August 1991, Harriger told Catlin he suspected Gunderson of

misappropriating Mundiger funds. In September 1991, Catlin assumed

managerial responsibilities for Mundiger and discovered that in

fact both Gunderson and Harriger had been misappropriating

corporate funds for their personal uses. Catlin also learned that

Gunderson had grossly misrepresented the Property’s productive

capacity; most of the wells had gone dry. Catlin further

ascertained that the Companies had never been profitable; in fact,

he determined that Mundiger was insolvent. Contrary to the

promises of Gunderson, Harriger, and Meadows, none of the

investors, except Meadows, recouped his or her initial investment.

In January 1994, the Securities and Exchange Commission

(“Commission”) instituted administrative proceedings against

Meadows. It alleged that Meadows, in connection with the offer and

sale of the Companies’ securities, willfully violated § 17(a) of

the Securities Act of 1933, § 10(b) of the Securities and Exchange

Act of 1934, and Rule 10b-5 promulgated thereunder. The ALJ

agreed, finding Meadows had misrepresented to investors the risks

of investing in the Companies, the likelihood the ventures would be

profitable, and the speed with which investors would recoup their

investments. The ALJ then barred Meadows from association with any

broker-dealer with a right to reapply in two years; ordered Meadows

to permanently cease and desist from committing or causing any

violation of the antifraud provisions; and fined Meadows $100,000.

On appeal, the Commission affirmed. Meadows appeals.
7

II

We uphold an agency’s decision unless it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance

with law.” 5 U.S.C. § 706(2)(A); accord Hawkins v. Agricultural

Marketing Serv., 10 F.3d 1125, 1128 (5th Cir. 1993). We uphold the

Commission’s factual findings if supported by substantial evidence.

See 15 U.S.C. § 78y(a)(4); Whiteside & Co. v. SEC, 883 F.2d 7, 9

(5th Cir. 1989). “Substantial evidence is such relevant evidence

as a reasonable mind might accept to support a conclusion. It is

more than a mere scintilla and less than a preponderance.” Ripley

v. Chater, 67 F.3d 552, 555 (5th Cir. 1995) (footnotes omitted).

It is not the function of an appellate court to reweigh the

evidence or to substitute its judgment for that of the Commission.

See id. 

By contrast, legal conclusions are “for the courts to resolve,

although even in considering such issues the courts are to give

some deference to the [agency’s] informed judgment.’” Faour v.

United States Dept. of Agriculture, 985 F.2d 217, 219 (5th Cir.

1993) (quoting Federal Trade Comm’n v. Indiana Fed’n of Dentists,

476 U.S. 447, 454 (1986)).

II

Section 17(a) of the Securities Act of 1933 states in

pertinent part:

It shall be unlawful for any person in the offer or

sale of any securities . . ., directly or

indirectly--

(1) to employ any device, scheme, or artifice

to defraud, or
 

6Meadows insists the Division conceded he did not act as a

“seller” under § 17(a) when it informed the ALJ that it is not

“alleging that Mr. Meadows quote unquote sold the securities.”

Meadows’s allegation blatantly ignores the context in which this

statement was made. In response to the ALJ’s confusion as to

exactly what charges Meadows faced and exactly in what capacity

Meadows was charged, the Division explained, “We are not alleging

§ 5 [i.e., 15 U.S.C. § 78e, which prohibits any broker or dealer

from selling unregistered securities]. We are not alleging,

although . . . it’s implicit in much of the testimony . . . that

Mr. Meadows quote unquote sold the securities. We are alleging

nothing more than § 10(b) and § 17 may require . . . .”

 

7The Division does not specify, however, the class of

defendants it believes is contemplated by § 17(a).

 

8Our research has uncovered no case squarely resolving this

question. We recognize the Supreme Court has stated that the

language of § 17(a) “does not require that the fraud occur in any

particular phase of the selling transaction,” United States v.

8

(2) to obtain money or property by means of

any untrue statement of a material fact or

any omission to state a material fact

necessary in order to make the statements

made . . . not misleading, or

(3) to engage in any transaction, practice, or

course of business which operates or would

operate as a fraud or deceit upon the

purchaser.

15 U.S.C. § 77q(a). Meadows insists we cannot hold him culpable

under this section.6 We disagree.

A

Meadows reasons that § 17(a) culpability attaches only to

“offerors” or “sellers” of securities, and he maintains he acted as

neither in the offer and sale of the Companies’ securities. The

Division disputes Meadows’s interpretation of § 17(a), arguing that

§ 17(a) encompasses more than just “offerors” or “sellers” because

it applies to “any person in the offer or sale of any security”

(emphasis added).7 We need not resolve this interpretive issue.8
Naftalin, 441 U.S. 768, 773 (1979), and that “[t]he statutory terms

[offer and sale] . . . are expansive enough to encompass the entire

selling process, including the seller/agent transaction.” Id.

Naftalin, however, dealt with the single issue whether a seller

could be held liable under § 17(a)(1) for fraudulent conduct

directed against his broker.

 

9Although Pinter involved § 12 of the 1933 Act, it interpreted

language identical to that found in § 17(a), viz., the terms

“offer” and “sale.” The ALJ’s decision to apply the Pinter

definitions to the instant case was therefore proper and is not

questioned by the parties.

9

Even if we assume, without deciding, that § 17(a) applies only to

offerors or seller, Meadows’s argument still fails because

substantial evidence demonstrates Meadows was, in fact, a “seller.”

A “seller” is one who (1) “engages in solicitation,” Pinter

v. Dahl, 486 U.S. 622, 643 (1988), and (2) is “motivated at least

in part by a desire to serve his own financial interests or those

of the securities owner.” Pinter, 486 U.S. at 647.9 Meadows fits

squarely within this definition. 

1

In the investment context, one who solicits attempts to

produce the sale by urging or persuading another to act. See id.

at 646. Persuasion can take many forms. Here, Meadows, who

testified he considers himself a terrific salesman, admitted he

could initiate a sale simply by informing a customer that he liked

a certain investment or had invested in a particular venture.

Substantial evidence shows Meadows exploited these sales tactics to

raise capital for Mundiger and Mira Golf. By characterizing the

Companies as opportunities too good to pass up, Meadows solicited

many investors to furnish capital for worthless projects.
 

10Four investors testified that Meadows recommended investments

in one or both of the Companies; three of the four were Meadows’s

RPR clients. At least two investors testified they would not have

become involved with the Companies absent Meadows’s recommendation.

 

11Meadows points to four witnesses who testified that he did

not solicit their investment. Nonetheless, two of these investors

later testified they relied on Meadows’s investment suggestions;

one later testified he wouldn’t have gotten involved had Meadows

not recommended the investment; and another testified he tendered

payment to Meadows. In any event, that some witnesses did not

testify against Meadows does not refute others’ statements that

Meadows had solicited them.

10

In particular, the record demonstrates Meadows recommended the

Companies to investors;10 claimed that Mundiger would hit gas

wherever it drilled; avowed that an investment in Mundiger was a

“sweetheart” or “slam dunk” deal; estimated that Mira Golf’s

potential profit on each recycled golf ball was between $.19 and

$.50; assured that an investment in Mira Golf was “pretty safe”;

maintained that investors could expect payback within six-months;

conveyed that the first two wells “came in real well” but that the

latest well package was “the most sure thing” and a “huge plum”;

asserted that investments in Mundiger and Mira Golf would help

realize the investor’s investment goals; advised investors on means

by which they could procure funds to invest in the Companies;

remarked that demand to participate in the well programs was

greater than the supply of participation interests; commented that

all his RPR clients invested in the Companies; and disclosed that

he had done the same.11

Notably, the record also reveals that others perceived Meadows

as a fundraiser. Investors testified they considered Meadows the
 

12The testimony shows that Meadows used his RPR offices to

solicit or to participate in the solicitation of investors; that he

personally picked up an investment check at an investor’s home; and

that he accepted investment checks from investors at his RPR

offices. Such utilization of his RPR offices lends further support

to investors’ perceptions of Meadows as a salesman. 

 

13We emphasize that we considered the totality of the

circumstances in finding that Meadows solicited investors. No

particular factor played a determinative role in our decision. 

11

“salesperson” of the Companies’ three principals.12 Gunderson and

Harriger viewed Meadows similarly. When Mundiger was short on

capital, they wrote to Meadows and Catlin asking them to “contact

[their] investors” and to “get [their] feelers out now.” Meadows

himself understood his role to be that of a salesman. After

another client made the decision to invest, Meadows declared, “Boy,

I wish all my sales were that easy.” The evidence establishes,

therefore, that Meadows engaged in the solicitation of

investments.13

2

Liability will extend to Meadows, however, only if substantial

evidence shows that his solicitations were motivated by personal

financial gain. See Pinter, 486 U.S. at 647. “Congress did not

intend to impose [liability] on a person who urges the purchase but

whose motivation is solely to benefit the buyer.” Id. Meadows

claims his motivations were pure, arguing that the evidence shows

only that he was motivated by a gratuitous desire to share an

attractive investment opportunity with his fellow country club

members and others. In support, he notes he received neither a

salary from the Companies nor a commission from RPR. These facts,
 

14Though Meadows did not invest directly in any of Mundiger’s

well programs, Mundiger itself held a 221⁄2 % to 63% working interest

in each drilling program. 

 

15Meadows was charged with violating all three subsections of

§ 17(a). Scienter is not an element of a § 17(a)(2) or § 17(a)(3)

cause of action, however. See Aaron v. Securities & Exchange

Comm’n, 446 U.S. 680, 697 (1980). Under these subsections,

culpability is established merely by a showing of negligence. See

id.

12

however, are not dispositive. Where a defendant “anticipat[es] a

share of the profits,” the Supreme Court has held that he has

solicited for personal financial benefit. See id. at 654

(alteration in original). Meadows was a shareholder of both

Mundiger and Mira Golf and thereby stood to benefit personally from

the additional investments he solicited.14 We conclude, therefore,

that substantial evidence supports the Commission’s finding that

Meadows acted as a seller under § 17(a).

B

Meadows also complains he cannot be held culpable under §

17(a) insofar as substantial evidence fails to show he acted with

scienter.15 Liability under § 17(a)(1) attaches only upon a showing

of severe recklessness. See Securities and Exchange Comm’n v.

Southwest Coal and Energy Comm’n, 624 F.2d 1312, 1320-21 & n.17

(5th Cir. 1980). Severe recklessness is:

limited to those highly unreasonable omissions or

misrepresentations that involve not merely simple or

even inexcusable negligence, but an extreme

departure from the standards of ordinary care, and

that present a danger of misleading buyers or

sellers which is either known to the defendant or is

so obvious that the defendant must have been aware

of it.

See Broad v. Rockwell Int’l Corp., 642 F.2d 929, 961 (5th Cir.
 

16See supra Part II.A.1.

13

1981) (en banc); Southwest Coal, 624 F.2d at 1321 n.17. Although

Meadows insists the record does not show that he knew or should

have known his conduct presented a danger of misleading others, the

substantial weight of the evidence demonstrates otherwise.

Meadows solicited investors with materially false and

misleading claims that Mundiger and Mira Golf were low-risk

investments that were virtually certain to yield a high return.16

Moreover, Meadows failed to disclose many material facts, including

that: he, an officer and director of Mira Golf, had been

temporarily denied after-hours access to the Companies’ books; he

had never conducted a background investigation into Gunderson, any

of Gunderson’s assertions, or the Companies’ purported successes

and that therefore, he had no basis for recommending the

investments; he was aware Gunderson recently had been accused of

misappropriation; he was aware Gunderson, while unemployed, was

known as a big spender; he was aware Gunderson had a reputation for

being able to “sell ice to an Eskimo”; he was aware Gunderson and

Harriger refused to follow Catlin’s recommendation that they

maintain separate bank accounts for each of Mundiger’s drilling

programs; he discovered the funds for each drilling project were

commingled; and he had been forced out of the Companies by

Gunderson and Harriger, who also paid him to be silent about the

Companies’ financial situation.

In light of his knowledge of these disturbing facts, to say
 

17Meadows attacks certain language in the Commission’s opinion

as erroneously imposing upon him those due diligence obligations

pertinent only to a securities professional acting in that

capacity. Because the Division does not allege Meadows acted as a

registered representative with respect to the sale of interests in

the Companies, Meadows argues we must reverse.

At one point in its opinion, the Commission referred to a

stockbroker’s obligation to investigate any highly optimistic

claims he or she makes. This reference notwithstanding, we

conclude the Commission’s finding of scienter turned on its

determination that Meadows, whether acting as a registered

representative or otherwise, exhibited conduct that represents an

extreme departure from the standards of ordinary care. Meadows

made material misrepresentations and omitted material facts when he

had strong reasons to do otherwise, and his actions or lack thereof

presented a clear danger of misleading buyers. We therefore find

Meadows’s argument without merit.

 

18The Commission rejected Meadows’s explanations for his

conduct. Substantial evidence supports this decision.

14

that Meadows, a securities professional,17 knew or should have known

that his recitations of Gunderson’s consistently optimistic claims

of the Companies’ successes presented a danger of misleading buyers

is an understatement.18 We conclude, therefore, that substantial

evidence supports the Commission’s determinations.

III

The Commission also found that Meadows willfully violated §

10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b),

and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder.

Meadows disputes only whether substantial evidence supports the

Commission’s finding that he acted with scienter. As with § 17(a),

liability under § 10(b) and Rule 10b-5 attaches upon a showing of

severe recklessness. See Broad, 642 F.2d at 961-62. As discussed

above, we have concluded that Meadows acted with the requisite

scienter. We thus affirm the Commission’s findings.
 

19We note that Meadows has failed to point to anything in the

record suggesting the ALJ’s credibility assessments should not be

upheld.

15

IV

Meadows next alleges the ALJ denied him a fair hearing. 

A

Meadows claims first that the ALJ failed to give any reasons

both for his decision to reject testimony indicating Meadows did

not solicit investors and for his conclusion that Harriger, a lessthan-trustworthy individual, was a credible witness for the

Division. We are bound by an ALJ’s credibility determinations.

See Helena Laboratories Corp. v. NLRB, 557 F.2d 1183, 1187 (5th

Cir. 1977). “If, however, the credibility choice is based on an

inadequate reason, or no reason at all, we are not compelled to

respect it, and shall not do so.” NLRB v. Moore Business Forms,

Inc., 574 F.2d 835, 843 (5th Cir. 1978).

We disagree with Meadows’s contention that the ALJ failed to

give any reasons for his decision. The ALJ stated he reviewed the

testimony and found it does not support Meadows’s claim of an

unfair hearing. Our review of the record satisfies us that the

ALJ’s reason is adequate. As to Harriger’s credibility, we point

out that the Commission noted its findings of Meadows’s culpability

do not rest on Harriger’s testimony. On appellate review, our job

is not to reweigh the evidence. Our job is to review the record to

determine if substantial evidence supports the judge’s finding. It

does.19

B
16

Meadows next argues that the ALJ evidenced a pattern of bias

or prejudice against him. He claims the ALJ aggressively supported

the Division’s case by vigorously cross-examining Meadows’s

witnesses, by restricting the evidence exculpating Meadows of

fraudulent conduct, and by targeting Meadows and his counsel with

sarcastic comments.

In Liteky v. United States, 114 S. Ct. 1147 (1994), the

Supreme Court set forth the standard for establishing bias. The

Court said, “[J]udicial remarks during the course of a trial that

are critical or disapproving of, or even hostile to, counsel, the

parties, or their cases, ordinarily do not support a bias or

partiality challenge” unless “they reveal such a high degree of

favoritism or antagonism as to make fair judgment impossible.” Id.

at 1157. The Commission considered Meadows’s allegation of

procedural impropriety and concluded the ALJ treated both sides

equally. Substantial evidence supports this finding: the ALJ

cross-examined witnesses on both sides, limited the number of

witnesses each party could call, finding the testimony repetitive,

and plied both parties with sarcasm.

V

Meadows next argues that the sanctions imposed on him by the

Commission--a bar from association with any broker or dealer with

the right to reapply in two years, a cease and desist order, and a

$100,000 fine--are unwarranted. We will affirm the Commission’s

imposition of sanctions absent arbitrariness or an abuse of

discretion. See Whiteside, 883 F.2d at 10. Moreover, “[i]t would
 

20Meadows relies on Johnson v. SEC, 87 F.3d 484 (D.C. Cir.

1996), for the proposition that a temporary bar from the securities

industry is a punitive rather than remedial sanction. Meadows’s

reliance on Johnson is misplaced, however. Johnson emphasized that

the imposition of a six-month suspension is less penal in nature

where the reason for the sanction is the degree of risk petitioner

poses to the public and is based upon findings demonstrating

petitioner’s unfitness to serve the investing public. See id. at

489. In the instant action, the ALJ made such findings.

 

21Meadows argues the temporary bar from the brokerage industry

sounds the death knell for his career as a stockbroker. We note,

however, that re-entry following a temporary bar is neither

illusory nor unwelcome. See In re Arthur H. Ross, Exchange Act

Release No. 34-30956, 1992 WL 188932, at *2-3 (SEC July 27, 1992);

In re Paul Edward Van Dusen, Exchange Act Release No. 34-18284,

1981 WL 27886, at *3 (SEC Nov. 24, 1981).

17

be a gross abuse of discretion to bar an investment advisor from

the industry on the basis of isolated negligent violations.”

Steadman v. Securities & Exchange Comm’n, 603 F.2d 1126, 1141 (5th

Cir. 1979), aff’d on other grounds, 450 U.S. 91 (1981). 

Meadows gives us no reason to disturb the Commission’s choice

of sanctions. The temporary bar from association is neither

arbitrary nor an abuse of discretion. The record demonstrates

Meadows engaged in a continual pattern of culpable behavior with

severe recklessness and with almost no thought to those he would

harm.20 The temporary bar from association is thus an appropriate

remedy designed to protect the public from future misconduct.21

Moreover, the $100,000 fine is justified. Section 21B(b) of

the Exchange Act, 15 U.S.C. § 78u-2(b), grants the Commission

authority to assess penalties of $100,000 for each fraudulent act

or omission if it resulted in substantial losses. Every investor,

except Meadows, suffered losses. By the close of 1993, Mundiger

investors had received a return of $167,445 on aggregate
18

investments of $783,126; Mira Golf investors lost more than 90% of

their investment. The imposed sanctions are thus not

disproportionate to Meadows’s conduct.

VI

For the foregoing reasons, we

AFFIRM.