UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 50954 / January 3, 2005

Admin. Proc. File No. 3-11626

ORDER DISPOSING OF MOTIONS TO SEVER AS TO CERTAIN RESPONDENTS

On November 12, 2004, the Division of Enforcement moved to sever the charges against Alfred Peeper, Mark N. Dohlen, and Paul A. Giles from this proceeding pursuant to Commission Rule of Practice 201(b).¹ On December 1, 2004, Respondents Spencer Edwards, Inc. ("SEI") and Edward H. Price separately opposed the Division's Motion and, in the same filing, interposed their own Alternative Motions to Sever and Stay Proceedings requesting that, if the Commission grants the Division's motion, the Commission also sever SEI and Price from the proceedings and join the claims against SEI and Price with the claims against the Unserved Respondents.²

Rule of Practice 201(b) provides that any proceeding may be severed with respect to some or all parties upon a showing of good cause.³ The Division has asserted that it has not been able to serve with the Order Instituting Proceedings ("OIP") Peeper, Dohlen, and Giles ("Unserved Respondents").⁴ The inability to serve the Unserved Respondents could delay the commencement of the hearing as to the remaining eight respondents who have been served. Severance of the charges against the Unserved Respondents would allow the hearings as to the remaining respondents to go forward without delay.

The Division has also proposed that the Commission stay proceedings against the Unserved Respondents for six months after which the Division will report on the status of their efforts to perfect service of the OIP on them. The Division acknowledges that severing the proceedings may require some duplication of effort at any future hearings involving the Unserved Respondents but notes that such duplication is preferable to the open-ended delay threatening the proceedings without severance. The Division further asserts that a six-month stay would not prejudice any party to the proceedings.

The Division has demonstrated that severance is appropriate under Rule of Practice 201(b). If the requested severance is not granted, the proceedings against those Respondents who have already been served could be delayed for an indeterminate time. The potential for such delay argues in favor of the severance. The risk that there will be some duplication of effort in litigating the case against the Unserved Respondents should the case against them proceed to hearing in the future is outweighed by the potential for harm to the already-served Respondents and the public interest if the proceedings against them are delayed.

We do not, however, believe that there is any necessity for staying proceedings against the Unserved Respondents as requested by the Division. The time period for completion of the case by the law judge set forth in the OIP does not begin to run until the OIP is served on a respondent.⁵ Nonetheless, we direct the Division to report on the status of its efforts to obtain service on the Unserved Respondents six months from the date of this order.

SEI and Price argue that they would be prejudiced by severance of the Unserved Respondents because they have a right to benefit from the evidence and argument that they expect the Unserved Respondents to bring forward at the hearing, and therefore that the Unserved Respondents are indispensable parties who may not be severed.⁶ SEI and Price claim that the Unserved Respondents are "the major players and participants in the alleged . . . violations." However, the allegations against SEI and Price are that they failed adequately to supervise SEI employees Eugene C. Geiger and Thomas A. Kaufmann.⁷ The Unserved Respondents neither are nor were employed by SEI.

We are unpersuaded by SEI's and Price's arguments. SEI and Price do not substantiate their claims that they will not be able to provide evidence necessary to their defenses without the Unserved Respondents at the hearing. Moreover, it is not clear how evidence from the Unserved Respondents is relevant to SEI's and Price's supervision of Geiger and Kaufmann.

Accordingly, IT IS ORDERED that the motion to sever filed by the Division of Enforcement as to Alfred Peeper, Mark N. Dohlen, and Paul A. Giles be, and it hereby is, granted; and it is further

ORDERED that the motion for a stay of proceedings as to Alfred Peeper, Mark N. Dohlen, and Paul A. Giles filed by the Division of Enforcement be, and it hereby is, denied; and it is further

ORDERED that the Division of Enforcement report on the status of its efforts to serve the Order Instituting Proceedings on Alfred Peeper, Mark N. Dohlen, and Paul A. Giles by July 5, 2005; and it is further

ORDERED that the Alternative Motions to Sever and Stay Proceedings With Respect to Spencer Edwards, Inc. filed by Spencer Edwards, Inc. and Edward H. Price be, and they hereby are, denied.

By the Commission.

Endnotes

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¹ 69 Fed. Reg. 13177 (March 19, 2004) (to be codified at 17 C.F.R. § 201.201(b)).

² SEI's and Price's oppositions were untimely. Nonetheless, in our discretion we have determined to consider them.

³ 69 Fed. Reg. at 13177.

⁴ The Division has not been able to locate Dohlen and Giles. Although the Division has been able to locate Peeper, it has not been able to serve him.

⁵ Rule of Practice 360 (a)(2), 17 C.F.R. § 201.360(a)(2).

⁶ The cases cited by SEI and Price in support of their arguments are inapposite here. United States v. Edwards, 69 F.3d 419, 434 (10th Cir. 1995) defines prejudice in a criminal case to encompass a situation in which a defendant's "specific trial right" is compromised. Our administrative proceedings are not criminal actions, and SEI and Price do not identify the "specific trial right" under the Commission's Rules of Practice that severance would threaten with compromise. Philips Electronics N.A. Corp. v. Contec, Corp., 220 F.R.D. 415 (D. Del. 2004) describes the prejudice that would arise from not severing improperly joined parties and is, therefore, inapplicable here. The other cases cited by SEI and Price involve the Federal Rules of Civil Procedure and we have held repeatedly that our proceedings are not governed by the Federal Rules of Civil Procedure. Putnam Investment Management, LLC, 2004 SEC LEXIS 865 at *3 (Apr. 7, 2004) ("The Federal Rules of Civil Procedure do not govern administrative proceedings before the Commission . . . .").

⁷ Geiger and Kaufmann are Respondents and have been served with the OIP. SEI and Price state that the OIP alleges that "Geiger and Kaufmann conducted transactions on behalf of Peeper and other Respondents."

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