U.S. Securities & Exchange Commission

Litigation Release No. 16340 / October 21, 1999

Securities and Exchange Commission v. Richard K. Wells, U.S. District Court For The District Of Columbia (MS-99-252 (EGS))

COURT JAILS WITNESS FOR IGNORING SEC SUBPOENAS AND COURT ORDER ENFORCING THE SUBPOENAS

Richard K. Wells, a witness subpoenaed by the Securities and Exchange Commission ("Commission") in one of its investigations, was incarcerated on October 19, 1999 for ignoring two Commission subpoenas and a Court order enforcing those subpoenas. At 9:30 a.m. that day, Respondent Wells appeared pro se at a hearing to show cause why he should not be held in contempt for failing to obey the Court's order enforcing the Commission's subpoenas. Wells failed to show cause why he should not be held in contempt, and failed to respond when the Court asked him if he intended to obey its Order. The District Court Judge ordered the United States Marshals to immediately take Wells into custody in the courtroom, and Wells was led from the courtroom in handcuffs.

Wells' incarceration resulted from his failure to obey two Commission subpoenas issued on May 12, 1999, requiring him to produce documents and appear for testimony. After Wells failed to obey its subpoenas, on July 29, 1999, the Commission filed a subpoena enforcement action in the United States District Court for the District of Columbia. At a hearing held on September 17, 1999, Wells asserted various objections to the subpoenas that the Court found were "totally frivolous" and "devoid of merit." The Court ordered Wells to produce documents on September 24, 1999, and to appear at the Commission's Washington offices for testimony on October 1, 1999.

Wells filed a notice of an appeal, and sought immediate reconsideration and a stay of the District Court's Order which was denied on September 23, 1999. Nevertheless, Wells failed to produce documents on September 24. On September 30, Wells sought a stay of the District Court's Order from the Court of Appeals for the District of Columbia. The Commission promptly responded, and the Court of Appeals denied Wells' motion for a stay on the morning of October 1, prior to the time Wells had been ordered to testify. Despite the fact that his request for a stay had been rejected, Wells failed to appear for testimony as required by the District Court's Order.

On October 4, the Commission moved for an order for Wells to show cause why he should not be held in contempt of Court.

On October 5, Wells filed a separate action in the Southern District of New York against the Commission and the United States Attorney for the Southern District of New York, seeking to have that court enjoin enforcement of the Commission's subpoenas. Wells' motion in the Southern District was denied on October 5, and Wells immediately noticed an appeal and sought a stay from the Court of Appeals for the Second Circuit. The Second Circuit denied Wells' motion on October 18, 1999.

On October 12, the District of Columbia Court issued an Order requiring Wells to appear on October 19, 1999, at 9:30 a.m., to show cause why he should not be held in contempt for failure to obey its order and the Commission's subpoenas. In response, on October 15 Wells sought reconsideration of the denial of his stay by the Court of Appeals for the District of Columbia. Again, the Commission promptly responded, and the Court of Appeals denied the motion for reconsideration on October 18, 1999.

At the October 19 hearing, the District Court found Wells in contempt for his failure to obey the Court's Order enforcing the Commission's subpoenas, and ordered Wells taken into custody immediately. Wells was subsequently released from jail upon his bond that he would comply with a new Order to respond to the subpoenas on specific dates. The Court continued the contempt hearing until the day after Wells is required to comply with the subpoenas to assure Wells' compliance with its Order and the Commission's subpoenas.