Opinion ID: 389930
Heading Depth: 1
Heading Rank: 2

Heading: Enforcement of the SEC Subpoenas

Text: 25 McGoff and his companies, Global and Sacramento, have voluntarily associated themselves with Panax, a publicly held corporation, and are unquestionably subject to disclosure obligations the Federal securities laws impose on persons holding significant interests in such a corporation. They enjoy no special privilege as press entities to withhold information others must furnish to the investing public. 26 The SEC, invoking regulatory laws of general applicability, seeks to pursue a vigorous investigation involving McGoff's publishing and printing network. McGoff resists the investigation on the basis of his status as a publisher. We do not doubt his claims that the demands confronting him may affect his ability to gather and circulate information and argument or that they inquire into his associations with South African officials. But the Federal securities laws that the SEC invokes are nondiscriminatory, they impose no direct regulation on the content, time, place, or manner of expression, nor do they directly regulate McGoff's associations. See generally Cox, Foreword: Freedom of Expression in the Burger Court, 94 Harv.L.Rev. 1, 50-55 (1980). 27 The Supreme Court has consistently rejected claims that the press is shielded by the Constitution against laws of general applicability of the kind involved here. See Associated Press v. NLRB, 301 U.S. 103, 130-33, 57 S.Ct. 650, 654, 81 L.Ed. 953 (1937) (application of National Labor Relations Act to employment of reporters and editors); Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945) (application of Sherman Act to news gathering and disseminating organization); Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 192-94, 66 S.Ct. 494, 497-498, 90 L.Ed. 614 (1946) (requiring newspapers to comply with minimum wage and overtime restrictions applicable to other enterprises producing goods for interstate commerce). More recently, the Court has ordered journalists to comply with legal obligations of general applicability in the face of assertions no less appealing than the ones made by McGoff. Branzburg v. Hayes, 408 U.S. 665, 92 S.Ct. 2646, 33 L.Ed.2d 244 (1972) (reporters asked relevant questions in a grand jury probe are not privileged to conceal their sources and information conveyed to them under promise of confidentiality); Herbert v. Lando, 441 U.S. 153, 99 S.Ct. 1635, 60 L.Ed.2d 115 (1979) (no special exemption for the media from the general rules of pretrial discovery); Zurcher v. Stanford Daily, 436 U.S. 547, 98 S.Ct. 1970, 56 L.Ed.2d 525 (1978) (no special immunity for the press from search warrants). 28 We do not understand McGoff, Global, and Sacramento to challenge their legal obligation to comply with SEC disclosure rules. Indeed, they have regularly filed § 13(d) statements without objection. Rather, they assert that the SEC has reached too far, that it should have limited its inquiries to contacts with South Africa relating specifically to Panax stock acquisitions. Reply Brief for Appellants at 4-5. 29 The SEC, on the other hand, points out that the Erasmus Report describes a covert operation; it indicates but does not spell out financing and other agreements with McGoff. J.A. 203-04. To determine what the public has a right to know regarding Panax's financial and control arrangements, the SEC claims it must uncoil the skein of dealings in which McGoff was involved during the periods in which he may have negotiated the fund transfer with South African officials, when he so substantially augmented his Panax holdings, and when he transferred the Suburbia newspapers to Panax for $1 million in cash. 30 We have no doubt that the information the SEC demands in this case bears a sufficient relationship to possible violations of disclosure rules to fit comfortably within the general standard for enforcement of administrative subpoenas. See FTC v. Carter, 636 F.2d 781 at 788 (D.C.Cir.1980); SEC v. Arthur Young & Co., 584 F.2d 1018, 1028-31 (D.C.Cir.1978) (information may be obtained if reasonably relevant to an inquiry within the authority of the agency), cert. denied, 439 U.S. 1071, 99 S.Ct. 841, 59 L.Ed.2d 37 (1979). There are suggestions in recent opinions, however, that while press figures enjoy no special privilege exempting them from laws of general applicability, some balancing or special sensitivity is required in view of the vital function the press serves in a self-governing society. See Branzburg v. Hayes, supra, 408 U.S. at 709-10, 92 S.Ct. at 2670-2671 (Powell, J., concurring); Zurcher v. Stanford Daily, supra, 436 U.S. at 564, 98 S.Ct. at 1980 (where First Amendment interests are at stake, Fourth Amendment requirements should be applied with scrupulous exactitude). 31 The district court believed, and we agree, that an accommodation was required to avoid unnecessary encroachment upon McGoff's activities and associations as a newspaper publisher and writer. Judge Gesell therefore authorized McGoff to retain documentation relating solely to editorial policy or news gathering. Under controlling precedent, see Branzburg v. Hayes, supra, McGoff was not entitled to more. 32 McGoff characterizes the exception for news gathering and editorial material as meaningless. Brief for Appellants at 1. Because the word solely is employed in the exception, 5 McGoff contends that memoranda relating to editorial policy in part and to financial expectations in part, apparently would be disclosable in their entirety. Brief for Appellants at 40 n.14. We believe that the order, read together with Judge Gesell's statement from the bench, 6 could be understood to permit the withholding of any segregable portion of a document falling within the excepted category. Moreover, we note that McGoff, who was to make the judgment in the first instance whether an item fell within the exception, might have sought clarification from the district court if he genuinely believed the order did nothing to protect 7 his editorial or news gathering activity. 33 Nor can we credit McGoff's arguments 8 that the subpoenas, in light of their impact on his publishing activity and political associations with prominent South Africans, should be rejected as more drastic than necessary, and as lacking an adequate foundation. In Branzburg v. Hayes, supra, 408 U.S. at 701-06, 92 S.Ct. at 2666-2669, the Supreme Court turned aside similar claims by reporters who sought to shield their sources and information given to them in confidence from a grand jury probe. Accord, In re Possible Violations of 18 U.S.C. 371, 641, 1503, 564 F.2d 567, 570-71 (D.C.Cir.1977). 34 McGoff does not argue, nor do we find, that Branzburg is inapplicable here because an agency rather than a grand jury issued the subpoenas. Moreover, in an important respect, McGoff's case is less compelling than that of the reporters in Branzburg. McGoff is not in any sense a disinterested third party called upon to supply evidence. 9 He is the principal actor in the matters the SEC seeks to investigate 10 and the corporate parties subpoenaed are wholly owned by him. 11 35 Accepting McGoff's position that his publishing and political association concerns should attract sensitive review, however, we believe that the SEC has indicated more than a reasonably relevant link between the information it seeks and an authorized inquiry. It has shown a substantial relationship between the information sought and an important government interest. 36 The SEC pursues here no minor infraction of a technical rule. United States ties to South Africa are the subject of widespread public debate, as McGoff well understands. Investors and potential investors in Panax have a clear stake in knowing, and a congressionally mandated right to disclosure, if South African funds have been used to finance sizable Panax share acquisitions. Similarly, they have a right to know the facts if McGoff has pledged to use Panax newspapers to promote South African interests. Further, if McGoff unfairly structured Panax's purchase of the Suburbia newspapers, current or future stockholders of Panax may be the losers. It seems to us plain, therefore, that the SEC investigation serves an important government interest in assuring full disclosure to the investing public. The SEC suspicions, aroused by the Erasmus inquiry in South Africa, may not be borne out by the Commission's probe, but it is well within the agency's mission to investigate the matter. 37 Substantial links tie the government interest asserted to the information sought by the SEC. McGoff, Global, Sacramento, and Panax are closely intertwined. Tracing the covered path of South African funds may well require scrutiny of the financial records of Global and Sacramento and of Global's predecessor, Star. Documents concerning transactions with the foreign entities that channeled South African government funds to McGoff, Union Bank of Switzerland and Thesaurus Continental Securities Corp., bear an obvious relationship to the tracing the SEC wishes to undertake. Documents describing McGoff's contacts with South Africa and its officials may reveal whether McGoff agreed to use Panax newspapers to promote South African interests. Such an agreement, if it existed, is more likely to be implicit in a long course of dealings than explicit in a single precise writing. Documents concerning the attempted acquisition of the Washington Star and the substituted purchase of the Sacramento Union may shed light on the controversy indicated in the Erasmus Report over the reciprocal undertakings of McGoff and South African officials; they bear a clear relationship to the SEC's purpose both to trace the disposition of South African funds and to determine whether agreements with South Africa bear on operation of any Panax newspapers. Inquiry into the acquisition and disposition of the Suburbia newspapers, finally, is plainly tied to determining whether the transaction, in which McGoff may have had a personal interest, was unfair to other Panax shareholders. 38 McGoff and his companies emphasize the breadth of the SEC subpoenas. We agree that the demands are broad. 12 But the nature of the inquiry precludes a trim list of requests. It bears emphasis that the SEC's non-public investigation involves no abusive governmental agency bent on  'expos(ing) for the sake of exposure,'   'prob(ing) at will and without relation to existing need,'  or forcing wholesale disclosure of names and organizational affiliations for a purpose not germane to the agency's mission. Branzburg, supra, 408 U.S. at 700, 92 S.Ct. at 2666 (citing with approval and distinguishing Watkins v. United States, 354 U.S. 178, 200, 77 S.Ct. 1173, 1185, 1 L.Ed.2d 1273 (1957); DeGregory v. Attorney General of New Hampshire, 383 U.S. 825, 829, 86 S.Ct. 1148, 1151, 16 L.Ed.2d 292 (1966); NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 78 S.Ct. 1163, 2 L.Ed.2d 1488 (1958); NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963); Bates v. City of Little Rock, 361 U.S. 516, 80 S.Ct. 412, 4 L.Ed.2d 480 (1960)). Nor is this SEC inquiry a broad-scale legislative or executive foray into political activity and associations implicating direct sanctions against the exercise of First Amendment liberties. Cf. Gibson v. Florida Legislative Investigation Committee, 372 U.S. 539, 83 S.Ct. 889, 9 L.Ed.2d 929 (1963). 39 In sum, we conclude that Judge Gesell's order enforcing the SEC's subpoenas as modified appropriately weighed the competing interests in light of controlling Supreme Court precedent and merits our full approbation.