Securities And Exchange Commission v. Amundsen

Filing 39

ORDER RE MOTION FOR CONTEMPT by Judge William Alsup [granting in part and denying in part 24 Motion for Sanctions]. (whasec, COURT STAFF) (Filed on 1/19/2012) Modified on 1/19/2012 (wsn, COURT STAFF). (Additional attachment(s) added on 1/19/2012: # 1 Certificate/Proof of Service) (wsn, COURT STAFF).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SECURITIES AND EXCHANGE
COMMISSION,
No. C 83-00711 WHA

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For the Northern District of California

United States District Court

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Plaintiff,
v.
ORDER RE MOTION
FOR CONTEMPT

JOSEPH S. AMUNDSEN,

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Defendant.
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In 1983, defendant Joseph S. Amundsen, a certified public accountant, voluntarily

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entered into a consent decree barring him from “practicing” before the Commission. This arose

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due to his deficient audit report on a financial statement for Olympic Oil and Gas Company, Inc.

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He had no lawyer. He never appeared in court. He signed a consent form prepared by lawyers

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for the Commission. In a parallel filing, however, he acknowledged the voluntariness of his

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consent.

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From 1983 until at least 1998, Mr. Amundsen was not licensed as a certified public

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accountant and prepared no documents filed with the Commission. By 2003, however,

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Mr. Amundsen had regained his license. He began a niche practice of auditing financial

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statements of broker-dealers, which financial statements, together with his audit reports, were

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then filed with the Commission. He did so more than one thousand times.

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Problem is, the consent decree had enjoined him permanently from “appearing or

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practicing before the Commission in any way.” When the Commission learned of this practice,

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it brought this motion to hold defendant in contempt. A full hearing was held on this motion and

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at least three requests were made afterwards by the Court for follow-up submissions. This was

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done in order to be as fair as possible to defendant in light of the professional stakes at issue

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for him.

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The question is whether or not defendant’s auditing of financial statements of

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broker-dealers destined for filing with the Commission constituted “appearing or practicing

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before the Commission in any way.”

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The answer is yes. The Commission’s regulations define “appearing or practicing” to

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include “preparation of any statement, opinion or other paper by any . . . accountant . . . filed

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with the Commission in any . . . report or other document with the consent of such . . .

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For the Northern District of California

United States District Court

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accountant.” 17 C.F.R. 201.102(f). The regulation in 1983 likewise said the same.
Were we back in 2003, this issue would have been straightforward: The consent decree

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should have been construed to prohibit the signing of audit reports for broker-dealers destined

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for filing with the Commission. The regulations at the time of the decree as well as 2003 (as

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well as now) made clear that such activity constituted “appearing or practicing.” Nothing in the

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record shows that the Commission ever misled defendant with respect to what he could or could

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not do under the decree.

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The issue, however, did not come up in 2003. It has come up almost nine years later.

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In the meantime, defendant has developed an entire practice, having regained his CPA license,

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performing work that is allegedly barred by the consent decree. There is no proof that any of the

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audit reports have been deficient. It would have been better had the Commission spotted the

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problem earlier but it cannot be expected to do everything perfectly.

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The Court is reluctant to shut down an entire line of business of a licensed CPA but after

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considerable deliberation over this motion, the Court is convinced, in light of his consent decree,

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that defendant should never have begun the practice in question in the first place and was at least

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on fair notice that the intended practice was covered by the prohibition in the decree. Any doubt

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thereon could have been removed by consulting the regulation and/or by petitioning the Court

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for relief. Instead, in the teeth of the no-practice bar, defendant forged ahead. Although he has

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subsequently explained that he believed the consent decree only barred audit reports for public
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companies, the decree did not so read and such a narrow reading was unreasonable in light of

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the regulation, as it read then as well as now.

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For the foregoing reasons, this order directs defendant Joseph Amundsen to cease

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preparation of all audit reports destined for filing with the Commission, including audit reports

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on financial statements for broker-dealers so destined for filing with the Commission. He must

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immediately notify all clients involved in such pending matters of this order. He must file with

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the Court a complete list of all audit reports for broker-dealers he has signed since 2003,

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identifying each by date and name of the broker-dealer. This must be filed within 28 calendar

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days. This order, however, declines to compel defendant to disgorge any fees earned by him

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For the Northern District of California

United States District Court

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since 2003.
In its most recent filing, the Commission further contends that defendant may not even

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prepare unaudited financial statements to be filed by others, i.e., that the no-practice bar goes

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beyond preparing signed audit reports destined for the Commission. Perhaps this is so but

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Mr. Amundsen has not yet had an opportunity to brief this point and the Court would prefer to

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address it in a more concrete setting, so this issue will be left to the future.

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Defendant Amundsen has represented himself at all times herein. He is fond of posing

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flurries of hypothetical questions as to what he can and cannot do under the consent decree.

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There is no occasion for the Court to render advisory opinions in the absence of a showing that

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he is poised to pursue an endeavor. He would be well-advised to retain counsel to advise him on

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this score and to frame, if he is so inclined, a cogent and persuasive motion to modify the scope

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of the injunction. Whether or not such a motion would be granted would depend on its own

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merits and this order does not intimate one way or the other.

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IT IS SO ORDERED.

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Dated: January 19, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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