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S.E.C. v. ANTAR

November 17, 2000

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
V.
SAM M. ANTAR, ALLEN ANTAR, AND BENJAMIN KUSZER, DEFENDANTS, AND RORI ANTAR, SAM A. ANTAR, MICHELLE ANTAR, ADAM KUSZER, SAM KUSZER, SIMON KUSZER, ROSE ANTAR, AND SAM M. ANTAR, RELIEF DEFENDANTS. SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF, V. ROSE ANTAR, ELLEN ANTAR KUSZER, JILL ANTAR, R.A.S. PARTNERSHIP, L.P., AND S.T. PARTNERSHIP, L.P., RELIEF DEFENDANTS.



The opinion of the court was delivered by: Ackerman, District Judge.

  OPINION

This matter comes before the court on the motion of plaintiff Securities and Exchange Commission ("SEC") for summary judgment on its claims against relief defendants Rose Antar, R.A.S. Partnership, L.P. and S.T. Partnership, L.P. The relief defendants oppose the motion on the grounds that it is both premature and without merit. For the reasons set forth below, plaintiff's motion for summary judgment is granted.

Factual and Procedural Background

On December 1 and 4, 1998, the court held an evidentiary hearing on the amounts of disgorgement to be paid by the defendants and relief defendants. Before the court rendered a decision on that issue, a consent judgment was entered against relief defendants Adam Kuszer, Sam Kuszer and Simon Kuszer in favor of the SEC. See Order of March 20, 2000. Thereafter, on April 27, 2000, this court issued an opinion setting forth the amounts of illegal profits and pre-judgment interest to be disgorged by the defendants and the remaining three relief defendants. See SEC v. Antar, 97 F. Supp.2d at 587-88. Final judgment was entered against defendants Sam M. Antar, Allen Antar and Benjamin Kuszer and relief defendants Rori Antar, Sam A. Antar and Michelle Antar on May 15, 2000. Sam M. Antar was ordered to disgorge $15.087 million plus $42,423,642 in pre-judgment interest. Allen Antar was ordered to disgorge $3.438 million plus $8,473,045 in pre-judgment interest. Benjamin Kuszer was ordered to disgorge $850,000 plus $2,456,240 in pre-judgment interest. Relief defendants Rori, Sam A. and Michelle Antar were each ordered to disgorge $425,000 plus $303,805 in pre-judgment interest.

Meanwhile, on October 6, 1999, the court granted the SEC leave to file an amended and supplemental complaint asserting new claims against additional relief defendants. On October 7, 1999, the SEC filed the Amended and Supplemental Complaint. The SEC alleged that prior to the 1997 trial in this action, various assets were transferred from the defendants to relief defendants Rose Antar, Ellen Antar Kuszer, Jill Antar, R.A.S. Partnership, L.P. and S.T. Partnership, L.P. The SEC asserted that the transfers were fraudulent under New Jersey's Uniform Fraudulent Transfers Act and that the relief defendants were unjustly enriched by the transfers. The SEC requested that the transfers be voided as fraudulent, that the assets be placed in a constructive trust and that the relief defendants convey title to the assets or disgorge the value of the assets. On October 15, 1999, the SEC filed a motion for summary judgment on the claims set forth in the Amended and Supplemental Complaint. The court heard oral argument on the motion on June 16, 2000.

The SEC's claims against two of the five relief defendants named in the Amended and Supplemental Complaint have since been resolved. Final judgment by consent was entered against relief defendant Ellen Antar Kuszer on February 28, 2000. Relief defendant Jill Antar was never served with the summons and Amended and Supplemental Complaint and the SEC voluntarily dismissed the action against her. This court entered an order dismissing the action against Jill Antar on September 28, 2000. Thus, the SEC's only outstanding claims are against Rose Antar, R.A.S. Partnership, L.P. and S.T. Partnership, L.P. (hereinafter "relief defendants").

The SEC's claims pertain to several transfers of property by defendant Sam M. Antar to relief defendant Rose Antar in 1991 and 1997. The SEC alleges that after several of the transfers, Rose Antar, in turn, transferred the assets to herself and her daughter as trustees and to the entities R.A.S. Partnership, L.P. and S.T. Partnership, L.P. The alleged 1997 transfers are as follows:

On April 8, 1997, Sam M. Antar transferred his 25 percent interest in S & E Realty Partnership to Rose Antar. (10/27/98 Sam M. Antar Interrogatory Responses, attached as Exhibit 1 to the Declaration of Richard E. Simpson ("Simpson Dec.") at 4). This partnership is the nominal owner of a piece of real estate in Nogales, Arizona. (Id.) Sam M. has estimated his partnership interest to be worth $175,000. (Id.) His interest is now purportedly owned by the S.T. Partnership, L.P. (11/11/98 Sam M. Antar Dep., Simpson Dec. Exh. 2 at 90). The purported owner of S.T. Partnership is Rose Antar.

On April 9, 1997, Sam M. Antar conveyed to Rose Antar the former family residence at 2146 East Third Street in Brooklyn, New York. (4/9/97 Deed, Simpson Dec. Exh. 3). The market value of the property for tax purposes is $270,000. (Simpson Dec. Exh. 1 at 4). Sam M. claims that he transferred the property to Rose "[b]ecause my grandchildren live there now, that is why. I wanted to make sure they live there forever." (Simpson Dec. Exh. 2 at 93).

On April 30, 1997, Sam M. Antar transferred his 50 percent interest in an entity called "S & E Realty, Inc." to Rose Antar. (Simpson Dec. Exh. 1 at 4). This corporate entity is the nominal owner of real property located at 68 Roosevelt Avenue in Deal, New Jersey. (8/25/98 Mortgage, Simpson Dec. Exh. 4). Sam M. has estimated that his 50 percent interest in S & E Realty, Inc. is worth $750,000 (11/11/98 Letter from Adam S. Ravin to Richard E. Simpson, Simpson Dec. Exh. 5). On August 25, 1998 Rose Antar, purportedly on behalf of S & E Realty, Inc., encumbered 68 Roosevelt Avenue by granting a $500,000 mortgage to Saiber, Schlesinger, Satz & Goldstein.*fn1 (Simpson Dec. Exh. 4).

On May 15, 1997, Sam M. Antar transferred to Rose Antar his interest in his residence at 717 Ocean Avenue, Unit No. 710, and Cabana No. 46, West End, New Jersey. (5/15/97 Deed, Simpson Dec. Exh. 6). On the same day, Rose transferred the entire property to herself and Ellen Antar Kuszer, as trustees of the "Rose Antar Qualified Personal Residence Trust # 1 dated May 15, 1997." (5/15/97 Deed, Simpson Dec. Exh. 7). Sam M. has estimated his one-half interest to be worth $225,000. (Simpson Dec. Exh. 1 at 3). In the two years since he transferred his interest to Rose, Sam M. has continued living in the residence.

On May 15, 1997, Sam M. Antar transferred to Rose Antar the commercial property located at 2155 route 22 West in Union, New Jersey (5/15/97 Deed, Simpson Dec. Exh. 8). He has estimated that the property is worth $950,000. (Simpson Dec. Exh. 1 at 4). On the same day that Sam M. recorded his transfer of the property in the Union County, New Jersey clerk's office, Rose conveyed the property to the "R.A.S. Partnership, L.P." (8/8/97 Deed, Simpson Dec. Exh. 9). The mailing address of this partnership is Sam M. and Rose Antar's residence.

The SEC alleges earlier transfers as well. The SEC asserts that in 1991 Sam M. Antar transferred over $1.7 million of securities to Rose Antar. Specifically, on March 15 and 18, Sam M. transferred securities worth $464,879 from his brokerage account at Shearson Lehman Brothers to a brokerage account in Rose's name. (Sam M. Antar trading records, Simpson Dec. Exh. 12, at 7-10). On October 16 and 17, Sam M. transferred an additional $912,728 worth of securities from his brokerage account at Oppenheimer & Company to a brokerage account in Rose's name. (Id. at 1-4). Also on October 17, Sam M. transferred $333,275 worth of securities from his brokerage account at Shearson Lehman Brothers to a brokerage account in Rose's name. (Id. at 15-18).

The SEC notes that the October 1991 transfers began the day after Sam M. appeared at a deposition in the case In re Crazy Eddie, Inc. Securities Litigation, Civ. No. 87-0033 (E.D.N.Y.). During the deposition, Sam M. invoked his Fifth Amendment privilege against self-incrimination in response to questions concerning his knowledge and participation in cash-skimming and insider trading activities at Crazy Eddie, Inc.

Additionally, in November of 1991, the SEC alleges that Sam M. gave Rose a mortgage he held on property located at 51 Columbia Place, Brooklyn, New York. (8/19/98 Declaration of Sam M. Antar, Simpson Dec. Exh. 13, ¶ 9). On February 24, 1997, the mortgagees transferred the property to Rose. (2/24/97 Deed, Simpson Dec. Exh. 15). The market value of the property for tax purposes is $460,000.

The SEC asserts that each and all of these transfers violated New Jersey's Uniform Fraudulent Transfers Act. The SEC also contends that the relief defendants were unjustly enriched by the transfers. Accordingly, the SEC requests that the transfers be voided as fraudulent, that the assets be placed in a constructive trust and that the relief defendants convey title to the assets or disgorge the value of the assets. In the present motion, the SEC seeks entry of summary judgment on its claims against the relief defendants. The relief defendants oppose the motion on several grounds.

Discussion

At the outset, the relief defendants contend that this court does not have subject matter jurisdiction over the SEC's claims because there is no demonstrable nexus between the property transferred and the illegal actions of Sam M. Antar. The relief defendants argue that, in the absence of evidence showing that the assets transferred constitute illegal profits from Sam M.'s securities fraud, this court lacks subject matter jurisdiction. The SEC responds that there are two bases for jurisdiction over its claims. First, the SEC asserts that the Securities Acts of 1933 and 1934 provide jurisdiction over a wide range of actions designed to enforce the securities laws. The SEC does not contest the relief defendants' assertion that the assets transferred are not necessarily fruits of Sam M.'s fraud; rather, the SEC asserts that there is no "traceability" requirement for jurisdiction. Second, the SEC argues that its claims fall within the ancillary enforcement jurisdiction of this court. The SEC submits that state statutory mechanisms such as New Jersey's Uniform Fraudulent Transfers Act, as well as equitable remedies, may always be used to enforce a federal judgment.

The Securities Acts of 1933 and 1934 provide the district courts with jurisdiction over "all suits in equity and actions at law brought to enforce any liability or duty" created by the securities laws. 15 U.S.C. § 77v(a), 78aa. The SEC submits that its claims against the relief defendants represent an effort to enforce the judgment entered against Sam M. Antar for violations of the securities laws. See 15 U.S.C. § 77v(a), 78aa. As such, the SEC asserts that its claims are designed to enforce a liability created by the securities laws and thus fall within the jurisdictional provisions of the Securities Acts. The SEC also points to the decision of the United States Supreme Court in Deckert v. Independence Shares Corp., 311 U.S. 282, 61 S.Ct. 229, 85 L.Ed. 189 (1940). In that case, the Court held that 15 U.S.C. § 77v(a) empowers federal courts in securities cases "to utilize any of the procedures or actions normally available to the litigant according to the exigencies of the particular case." Deckert, 311 U.S. at 288, 61 S.Ct. 229. Here, the SEC argues that it is simply using ordinary procedures available to a litigant to ensure enforcement and satisfaction of a judgment under the securities laws. See Deckert, 311 U.S. at 288, 61 S.Ct. 229. Thus, the SEC contends that this court has subject matter jurisdiction over its claims against the relief defendants.

The relief defendants respond that the seemingly broad grant of jurisdiction set forth in the securities laws does not reach as far as the SEC suggests it does. The relief defendants argue that this court does not have jurisdiction over a "garden variety" fraudulent transfer action, or an action in equity, in the absence of proof that the assets transferred were obtained as a result of illegal activity. Rather, the relief defendants contend that this court only has jurisdiction over the SEC's claims to the extent that such claims involve the "fruits" of Sam M.'s securities fraud. The relief defendants submit that because they are not culpable parties under the securities laws and they did not receive the fruits of Sam M.'s fraud, this court lacks jurisdiction. In support of their argument, the relief defendants rely on several cases. However, each and all of the cases cited are either distinguishable from the present case or address a different jurisdictional question than that presented in this case.

First, the relief defendants cite the court's decision in SEC v. Deborah Rosen Antar, 831 F. Supp. 380 (D.N.J. 1993) (Politan, J.). In that case, the court determined that it had jurisdiction, pursuant to the securities laws, over claims against non-violators who possessed illegal profits generated by securities fraud. See Deborah Rosen Antar, 831 F. Supp. at 401. The court concluded that it had jurisdiction over the assets held by the nominal defendants; the assets were traceable to Eddie Antar's securities fraud and the nominal defendants had no legitimate claim to the assets. See id. at 399, 402-03. The court, however, did not hold that "traceability" is a necessary requirement for jurisdiction. Indeed, the court held that "the touchstone for jurisdiction is whether the non-party's claim to the property is legitimate." Id. at 399. Moreover, in its opinion, the court cited Int'l Controls Corp. v. Vesco, 490 F.2d 1334, 1351 (2d Cir. 1974) and SEC v. Glauberman, 1992 WL 175270 at *1-2 (S.D.N.Y. July 16, 1992), both of which held that a court may exercise jurisdiction over claims against non-violators even when the assets held are not necessarily fruits of the securities fraud. See Deborah Rosen Antar, 831 F. Supp. at 399-401.

The relief defendants also rely on SEC v. Bilzerian, 814 F. Supp. 116 (D.D.C. 1993), in support of their argument that this court lacks jurisdiction over the SEC's claims. The Bilzerian case involved a claim for disgorgement against a violator of the securities laws. In that case, it was held that "[t]he court may exercise its equitable power only over property causally related to the wrongdoing . . . [a]s such, the loss complained of must proceed directly and proximately from the violation claimed and not be attributable to some supervening cause." 814 F. Supp. at 121 (internal citations omitted). As such, the court held that, in determining the appropriate amount of disgorgement, it is important to distinguish between "benefits from lawful conduct and benefits from unlawful conduct." See id. Indeed, the amount of disgorgement ordered must always represent a reasonable approximation of the illegal profits gained and must not extend to legal profits. See id. The present case is in an entirely different posture. Here, a judgment and an order of disgorgement have already been entered against the parties who violated the securities laws. The amount of disgorgement set forth in the judgment reflects the amount of illegal profits gained by the violators. ...


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