Plaintiffs now seek to amend the complaint with new claims for violations of state and federal law and obtain similar equitable relief with respect to the newly named defendants Robert Maxwell a/k/a Robert Lebovich ("Maxwell"), Amalgamated Redemption Centers, Inc. ("ARC"), Michael Jebrock ("Jebrock") and Transworld Metals Corporation ("TWM"). Specifically, plaintiffs seek a court order which freezes defendants' assets, gives plaintiffs access to their books, enjoins defendants from offering, selling or accepting funds for the offer and sale of securities, appoints a receiver to marshall, account for and distribute assets for the benefit of the corporate investors, and requires the individual defendants to make an accounting of their assets. Defendants have vigorously opposed the issuance of such relief.
II. STANDARD FOR STATUTORY INJUNCTIVE RELIEF
Pursuant to U.S.C. § 13a-1, injunctive relief may issue upon a showing that the defendants "engaged in, [are] engaging in or [are] about to engage in any act or practice" which constitutes a violation of any provision of the CEA. Thus, in order to issue such relief, the court must consider past violations as well as whether or not there is a reasonable likelihood of continued and future violations. CFTC v. Hunt, 591 F.2d 1211, 1220 (7th Cir.), cert. denied, 442 U.S. 921, 61 L. Ed. 2d 290, 99 S. Ct. 2848 (1979), CFTC v. Commodities Fluctuations Systems, Inc., 583 F. Supp. 1382 (S.D.N.Y. 1984). Whether or not there is a reasonable likelihood of future violations depends upon a consideration of the totality of the circumstances and may be inferred, or even presumed, from past unlawful conduct, and the absence of proof to the contrary. Hunt, supra; CFTC v. British American Commodity Options, 560 F.2d 135, 142 (2d Cir. 1977), cert. denied, 438 U.S. 905, 57 L. Ed. 2d 1147, 98 S. Ct. 3123 (1978), CFTC v. Heritage Capital Advisory Services, Ltd., [80-82 Transfer Binder] Fed.Comm.Fut.L.Rep. para. 26, 627 (N.D. Ill. 1982), CFTC v. Morgan Harris & Scott, Ltd., 484 F. Supp. 669, 676-71 (S.D.N.Y. 1979). See also SEC v. Management Dynamics, Inc., 515 F.2d 801, 807 (2d Cir. 1975). Proof of irreparable harm is not required for the issuance of this statutorily provided injunctive relief. See e.g., Morgan, Harris, supra at 676 and cases cited therein.
Furthermore, under the CEA, the court may, in its sound discretion, appoint a receiver and order ancillary relief in the form of an accounting, disgorgement of profits, freezing of assets, and maintenance of the status quo based upon a consideration of violations of the CEA and the need to protect the public interest in preventing the diversion of corporate assets, detering future fraud, and impeding defendants from benefiting from their misconduct. CFTC v. Co. Petro Marketing Corp., 680 F.2d 573, 582-83 (9th Cir. 1982); Morgan, Harris, supra; CFTC ex rel Kelley v. Skorupskas, 605 F. Supp. 923 (E.D. Mich. 1985).
As the defendants asserted that there are issues of fact in dispute, see Hearing Transcript, dated February 10, 1988, the court conducted a series of evidentiary hearings on March 28, 29, 30, 31 and April 4 and 5, 1988, during which time testimony was heard and evidence was received in support of and in opposition to plaintiffs' application. Additionally, the Court accepted, pursuant to the stipulation of the parties, see e.g. Hearing Transcript dated April 5, 1988 at 72, depositions and documentary evidence in lieu of live testimony. Thus, in addition to the briefs and exhibits submitted to the court prior to the hearing, the court has considered the depositions of Rene Champagne, Richard Cowen, Barry Gladden, Michael Jebrock, Carol Kahan, Robert Maxwell, John McNamara, Helen Reynolds, James Stephens, Martin Stein, Shirley Stier and Daniel Weiner.
I have also considered all exhibits which were included with these depositions, those offered prior to and at the hearing,
as well as the "Report to Thomas W. Greelish, Esq., Temporary Equity Receiver for American Metals, et al " ("Accountants Report) and attachments thereto. I accepted all evidence mindful that hearsay materials and evidence other than live testimony are properly considered by the Court in preliminary injunction proceedings. Asseo v. Pan American Grain Co., 805 F.2d 23, 26 (1st Cir. 1986); Wounded Knee Legal Defense/Offense Committee v. FBI, 507 F.2d 1281, 1287 (8th Cir. 1974); National Organization for Reform Marijuana Laws v. Mullen, 608 F. Supp. 945, 950 n.5 (N.D. Ca. 1985); Bracco v. Lackner, 462 F. Supp. 436, 442 n.3 (N.D. Ca. 1978); SEC v. Vesco, 358 F. Supp. 1186, 1188 (S.D.N.Y. 1973). Thus, I considered evidence which is not necessarily the sort which would be admissible in a final trial on the merits since in the context of a request for emergent relief, the rules of evidence are relaxed so as to provide swift relief, avoid lengthy proceedings and prevent irreparable harm. Fed. R. Civ. P. 65(a)(2), and advisory committee note; Flynt Distributing Co. Inc. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984); Wounded Knee, supra at 1287 and cases from the Second, Fifth and Ninth Circuits cited therein; SEC v. General Refractories Co., 400 F. Supp. 1248, 1255 (D.C.D.C. 1975); Vesco, supra.
III. FINDINGS OF FACT
Having reviewed the record in light of this request for interlocutery injunctive relief, I make the following findings of fact, as required under Fed. R. Civ. P. 52 (a).
A. KEY PLAYERS
Before explaining the commodities program at issue, I shall first explain the corporations and individuals who established the challenged program.
i. ANGLO SWISS
Defendant Anglo Swiss was incorporated in the Republic of Panama on June 9, 1986, "for the explicit purpose and ownership of all outstanding and issued shares of American Metals Exhchange."
See Shareholders Agreement at 3, submitted as Reynolds Ex. 2, Maxwell Ex. 27, MJ 80; MJ 82. Among shareholders of Anglo Swiss are Robert Maxwell, Bill Frank, Michael Wallach, Michael Jebrock and Steven Kramer.
See Shareholders Agreement at 45, 46; Deposition of Michael Jebrock at 185, MJ 82; Accountants Report at 3; Deposition of Martin Stein at 40, 47. In addition, Messrs Frank, Maxwell and Jebrock are listed as directors of AME. Mr. Frank is also listed as its President and Mr. Jebrock as First Vice President.
Shareholders Agreement at 6; Accountants Report at 5, 35.
ii. ROLE OF ROBERT MAXWELL
While not named as an officer, the evidence reflects a perception as well as the reality that Mr. Maxwell controlled Anglo Swiss. Deposition of Martin Stein at 88-87. Reynolds Ex. 2. For example, the testimony reveals that Maxwell instructed his law firm, Phillips, Nizer, Benjamin, Krim and Ballon to incorporate Anglo Swiss in Panama. Deposition of Martin Stein, Esq., formerly a partner with that firm, at 85-87; Deposition of Michael Jebrock dated April 6, 1988 at 42; Deposition of Rene Champagne at 20; Statement of Michael Wallach, dated October 23, 1987 at 9; Hearing Testimony of Steven Kramer, dated March 31, 1988 at 52. See also Statement of Michael Wallach, dated October 28, 1987, at 2 in which he stated Maxwell formed Anglo Swiss to hold the stock of AME, TC&M and LIC. Moreover, his company, Contract Furnishing and Systems, Ltd. was billed for the incorporation. See MS 120. Most importantly, Maxwell and his associates agreed to contribute $ 5 million to establish Anglo Swiss.
Specifically by letter from Ronald Luzim, Esq., to Michael Jebrock, dated June 19, 1986, Mr. Jebrock was informed that there
. . . exists a financial committment from Messers Maxwell, Gold and Edson of $ 4,800,000.00 for the above described corporation which is made up of a $ 50,000.00 cash capitalization, $ 250,000.00 bank account located in the country of Panama, and a letter of credit issued through Citibank for $ 4,500,000.00 contributed by Messrs. Maxwell, Gold and Edson.