Court Opinion

ID: 154144
Source: CourtListenerOpinion
Date Created: 2010-08-14 03:51:56+00
Date Added: 2024-06-11T09:41:47.850408
License: Public Domain

UNITED STATES COURT OF APPEALS
Filed 11/6/96
                                  TENTH CIRCUIT

 SECURITIES AND EXCHANGE COMMISSION,

          Petitioner-Appellee,

 v.
                                                              No. 96-4052
 KEVIN ORTON,                                            (D.C. No. 96-CV-41-C)
                                                                (D. Utah)
          Respondent-Appellant.

 ROGER GREER,

          Respondent.

                            ORDER AND JUDGMENT *

Before BRORBY, EBEL and HENRY, Circuit Judges.

      After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

      *
        This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      The district court entered an order compelling Mr. Orton to comply with an

administrative subpoena duces tecum issued by the Securities and Exchange

Commission. Mr. Orton appeals, and we affirm the order of the district court.

      The significant facts are simple and uncontested. In 1992, the Commission

staff reported to the Commission it had information tending to show that during

the period from September 1989 through January 1992, PanWorld Minerals

International, Inc., violated the antifraud provisions of the federal securities laws

by, among other things, filing financial statements with the Commission that

falsely valued the company's assets and fraudulently misstated its financial

condition. The Commission in January 1992 issued a formal order of

investigation concerning PanWorld Minerals International, Inc. During the course

of the investigation, the Commission developed concerns about PanWorld's 1994

financial statements. Mr. Orton audited the allegedly false 1994 financial

statements. In 1995, the Commission's staff issued a subpoena to Mr. Orton

requiring him to produce his audit work papers and other documents relating to

his audit of the 1994 financial statements. Mr. Orton did not comply with the

subpoena. The Commission then applied to the district court for an order

requiring compliance with the subpoena.

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      Mr. Orton argued to the district court that the Formal Order issued by the

Commission authorized an investigation only of the events from 1989 through the

issuance of the order in 1992. Stated differently, Mr. Orton argued the documents

sought (the work papers pertaining to the 1994 audit) were not relevant to the

subject matter of the investigation authorized by the Commission's 1992 Formal

Order. The district court disagreed with Mr. Orton and ordered compliance.

      Mr. Orton complied with the order of the district court and then appealed

from the district court's order, apparently seeking the return or the destruction of

the documents. 1

      Mr. Orton raised three issues, which we restate simply by asking if the

district court abused its discretion by ordering Mr. Orton to comply with the

subpoena. See Covey Oil Co. v. Continental Oil Co., 340 F.2d 993, 999 (10th

Cir.), cert. denied, 380 U.S. 964 (1965).

      1
         Mr. Orton's production of the documents does not moot his appeal. See
Church of Scientology v. United States, 506 U.S. 9, 13 n.6 (1992), holding a case
such as this is not moot as the court has the power to order an agency to return or
destroy any copies of subpoenaed materials it may have in its possession.

                                          -3-
      The record on appeal shows the Commission issued the subpoena pursuant

to a Formal Order of Investigation, which authorized an investigation into, inter

alia, possible securities fraud in connection with audited financial statements

filed with the Commission. The Formal Order recited various acts and practices

occurring between audited financial statements filed with the Commission. The

Formal Order recited various acts and practices occurring between 1989 and 1992

as a basis for authorizing an investigation, and it authorized the Commission to

investigate whether the company or any persons connected with it, or any other

person "have engaged, or are about to engage, in any of the reported acts or

practices or in any acts or practices of similar purport or object."

      For the Commission's subpoenas to be judicially enforced, it must show its

"inquiry is not too indefinite, is reasonably relevant to an investigation which the

agency has authority to conduct, and all administrative prerequisites have been

met." SEC v. Blackfoot Bituminous, Inc., 622 F.2d 512, 514 (10th Cir.), cert.

denied, 449 U.S. 955 (1980).

      Mr. Orton challenges the subpoena on only one ground -- whether the

documents are relevant to the subject matter of the investigation authorized by the

                                          -4-
Formal Order. We therefore ask whether the documents "are reasonably relevant"

to its investigation.

       Because the Commission was concerned that in PanWorld's 1994 financial

statements it was using the same inappropriate method of valuing assets as on the

1992 financial statements, the documents sought in the subpoena relate to an

investigation of "acts or practices of similar purport or object" to acts in 1992. As

a result, Mr. Orton's 1994 audit documents are reasonably relevant to an

investigation the Commission has authority to conduct. The documents are also

relevant to the financial statement specifically mentioned in the 1992 order as one

of the factors that affects whether injunctive relief is warranted is whether the

misconduct is an isolated occurrence or recurrent. The Supreme Court has held

that administrative agencies "'can investigate merely on suspicion that the law is

being violated, or even just because it wants assurance that it is not.'" United

States v. Powell, 379 U.S. 48, 57 (1964) (quoting United States v. Morton Salt

Co., 338 U.S. 632, 642-43 (1949)).

       Knowing the parameter of the legal analysis, we now look at the 1992

Formal Order. It commanded an investigation into both past and future violations

-- "have engaged, or are about to engage." Mr. Orton's argument that the

                                          -5-
documents sought are not relevant to the investigation authorized fade in the light

of the plain language of the Formal Order.

      The judgment of the district court is AFFIRMED.

                                       Entered for the Court

                                       WADE BRORBY
                                       United States Circuit Judge

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