Court Opinion

ID: 3062954
Source: CourtListenerOpinion
Date Created: 2015-10-14 20:54:52.002157+00
Date Added: 2024-06-11T12:45:18.530458
License: Public Domain

[DO NOT PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                       ________________________           FILED
                                                 U.S. COURT OF APPEALS
                              No. 09-13908         ELEVENTH CIRCUIT
                                                        APR 9, 2010
                          Non-Argument Calendar
                                                        JOHN LEY
                        ________________________
                                                          CLERK

                     D.C. Docket No. 06-20975-CV-PCH

SECURITIES AND EXCHANGE COMMISSION,

                                                      Plaintiff-Appellee,

                                   versus

JOHN P. UTSICK,

                                                      Defendant-Appellant.

                        ________________________

                 Appeal from the United States District Court
                     for the Southern District of Florida
                       ________________________

                               (April 9, 2010)

Before TJOFLAT, WILSON and COX, Circuit Judges.

PER CURIAM:

     John P. Utsick sold securities and ran entertainment ventures through his

wholly-owned companies, Worldwide Entertainment, Inc. and Entertainment Group
Fund, Inc. The Securities and Exchange Commission (SEC) filed a civil enforcement

action against Utsick, his two companies, and other defendants. The SEC’s complaint

alleged, in part, that Utsick and his companies violated the Securities Act, the

Exchange Act, and rules promulgated thereunder by selling unregistered securities

and defrauding investors. (R.1-1.) Utsick and his companies consented to the entry

of a judgment, which included a permanent injunction and other relief barring further

violations of the Securities Act and the Exchange Act, ordering that Utsick pay

disgorgement, prejudgment interest, and a civil penalty, and providing for an asset

freeze to remain in effect until entry of a final judgment. (R.1-5.) In the consent for

an injunction, Utsick neither admitted nor denied the allegations of the complaint, but

he agreed that for purposes of any proceeding to determine the amounts of

disgorgement and civil penalty that he would be precluded from arguing that he did

not violate the federal securities laws as alleged in the complaint. (Id. at 4-5.)

      The court entered a judgment, which included a permanent injunction,

appointed a receiver to manage and control the two companies, and entered a freeze

of Utsick’s personal assets. The asset freeze excluded costs for living expenses and

attorneys’ fees. The SEC and Utsick did not reach agreement as to the amount of

disgorgement, prejudgment interest, or civil penalty, and pursuant to a provision in

the consent for an injunction, the SEC filed a motion for final judgment to decide the

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issues. After an evidentiary hearing, the district court entered a final judgment

against Utsick ordering disgorgement in the amount of $4,035,479.31, prejudgment

interest of $921,708.84, and a civil penalty of $120,000. (R.14-545.) In this appeal,

Utsick does not contest liability for violating the securities laws; rather, he challenges

three rulings of the district court related to its order determining the amounts of

disgorgement, prejudgment interest, and the civil penalty. We conclude that Utsick’s

arguments are without merit, and we affirm.

      First, Utsick contends that the court abused its discretion in denying his motion

to require Worldwide, one of his companies in receivership, to advance his attorneys’

fees. After depleting his personal assets, Utsick requested that the receiver authorize

Worldwide to advance future legal expenses. The receiver rejected this request, and

Utsick moved the court to lift a stay against litigation relating to the companies so

that he could petition the Chancery Court for the State of Delaware to seek the

advances. (R.4-132.) Rather than lift the stay, the district court decided the issue

(R.6-190), and it held that Utsick was not entitled to the advances. (R.6-211 at 3.)

After review of the record, we conclude that the court did not abuse its discretion in

declining to lift the stay against litigation to permit Utsick to petition the Chancery

Court for the State of Delaware. We also conclude that because Utsick failed to

provide an adequate undertaking to guarantee reimbursement to the receivership

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estate if it were ultimately determined that he was not entitled to be indemnified, the

court did not abuse its discretion in denying Utsick’s request for advances. And, we

agree with the court’s well-reasoned analysis concluding that Utsick does not have

a constitutional right to advances from Worldwide to pay for his legal expenses. (Id.

at 2-3.)

       Second, Utsick contends that the court abused its discretion by imposing

sanctions for his failure to appear for a deposition. Prior to the hearing to determine

the amounts of disgorgement, prejudgment interest, and civil penalty, the court set a

schedule for mutual discovery. But, Utsick refused to appear for his deposition

because he had relocated to Brazil and feared arrest should he return to the United

States. The parties filed a number of motions related to Utsick’s unavailability for

discovery, and the court attempted to accommodate Utsick by “requiring Plaintiff to

pay his expenses for deposition in Miami, granting two months of extensions from

the initial discovery period, fulfilling his requests to have the deposition taken in a

third country, and entering a protective order that his counsel agreed would assuage

his concerns regarding arrest.” (R.12-504 at 3.) Even so, Utsick failed to appear for

his deposition. The court ultimately granted a motion by the SEC for sanctions, in

which it struck Utsick’s pleadings, ordered that he pay the SEC’s attorneys’ fees and

costs incurred in attempting to take his deposition, and ordered that he not be allowed

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to testify at the hearing on the SEC’s final judgment motion unless he appear for a

deposition.

      A court’s authority to impose sanctions for refusal to comply with discovery

orders is broad. Reversible error exists only where “important historical findings are

clearly erroneous or—by the imposition of sanctions which are not ‘just’—there has

been an abuse of discretion.” Jaffe v. Grant, 793 F.2d 1182, 1189 (11th Cir. 1986)

(citation and quotation omitted). Our review of the record reveals that the court went

to great lengths to accommodate Utsick’s concerns and did not abuse its discretion

in sanctioning Utsick for failing to appear for his deposition.

      Third, Utsick challenges the amount of the disgorgement order. He argues that

the court’s findings that certain expenses were ill-gotten gains from his violations of

securities laws were clearly erroneous. “The SEC is entitled to disgorgement upon

producing a reasonable approximation of a defendant’s ill-gotten gains. The burden

then shifts to the defendant to demonstrate that the SEC’s estimate is not a reasonable

approximation.” S.E.C. v. Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004) (citations

omitted).

      The SEC presented testimony of a forensic accountant and the receiver, who

testified that a review of the companies’ records revealed that the companies paid

over $4 million to Utsick or to third parties on his behalf. (R.14-541 at 10.) And, the

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SEC presented evidence that the funds paid to Utsick came from investors. (Id. at

21.) Utsick admitted for purposes of the disgorgement proceedings that he raised at

least $300 million from investors and violated federal securities laws in the process.

(Id. at 5-8.) And, he did not present persuasive evidence showing that the payments

were legitimate compensation and not the ill-gotten gains of his illegal activities.

Therefore, the court did not err in concluding that Utsick failed to show that the

SEC’s estimate was not a reasonable approximation of his ill-gotten gains and by

ordering him to pay $4,035,479.31 in disgorgement.

      AFFIRMED.

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