Securities and Exchange Commission v. Bronson et al

Filing 230

ORDER with respect to 229 LETTER MOTION for Discovery Sanctions for Contempt Order Violation. Mr. Bronson is to respond to this letter by 2/10/21. So Ordered. (Signed by Judge Kenneth M. Karas on 2/5/2021) (jca)

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Case 7:12-cv-06421-KMK Document 229 Filed 02/05/21 Page 1 of 3
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
BROO KFIELD PLACE , 200 VESEY S T REET , SU I TE 400
NEW YOR K, NY 10281-1022

MEMO ENDORSED

Ne;WYOft:K
R!:.G- I 0NAL Ol"'P'IC!:.

February 5, 2021
Via ECF
Hon. Kenneth M. Karas
United States District Court
United States Courthouse
300 Quarropas Street, Chambers 533
White Plains, New York 10601-4150
Re:

US. Securities and .Exchange Commission v. Bronson et al. ,
12-CV-6421 (KMK)

Dear Judge Karas:
Plaintiff Securities and Exchange Commission (the "Commission") respectfully
requests that the Court impose additional coercive sanctions on Defendant Edward
Bronson ("Defendant") because he has again violated the Court' s January 19, 2021
Contempt Order ("January 19 Order"). In particular, Defendant has not produced to the
Commission complete financial records, documents and an accounting within two weeks
as ordered by the Court. DE 223.
As background, the Court's January 19, 2021 Order held Defendant in contempt
and ordered him, among other things, to make a good-faith payment within a week from
entry of the January 19 Order and "produce all fmancial records and other documents
requested by the SEC-including records and documents for Dawn Bronson and V2IP-no
later than two weeks from entry of this Order, along with a full accounting of all assets
and income. " DE 223. When Defendant failed to make the good-faith payment in a
timely manner, the Court ordered Defendant to pay by January 29 and to file an affidavit
explaining the delay (the "Affidavit"). DE 225, 227. Defendant filed the Affidavit on
February 2nd • DE 228. Concerning the ordered document requests, the Affidavit states
that: "[t]o the best of [Defendant's] knowledge, there are currently no unsatisfied
document requests from the SEC." Id. ,r11 .
Defendant's claim, essentially that the productions for Defendant, Dawn Bronson
and V2IP are complete, is inaccurate. First, Defendant has not produced documents
"through the present" as the document request to Defendant and subpoenas to Dawn
Bronson and V2IP, attached here as Exlubits A, Band C, respectively, required.
Defendant last produced documents to the Commission around May 2020. Thus, at the
very least, Defendant has not produced fmancial account statements for recent periods.
Such current information is essential to the Commission' s collection efforts. 1
1 Indeed,

V2IP 's current bank statement will reveal whether Defendant in fact needed to
"work ... diligently ... to gather the funds" for the good-faith payment or whether they were

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After entry of the January 19 Order, in emails attached here as Exhibit D,
Commission counsel reminded Mr. Rachmuth that ''the subpoenas and document request
require production of documents through the present. Thus, current statements for
financial institutions should be included in the production." Mr. Rachmuth did not
dispute - or even address the Commission's statement. In addition, Defendant made no
proactive effort to confirm that the Commission shared his understanding that there are
no outstanding document requests before making this representation to the Court.
Second, the Bronsons' January 2020 document request and subpoena responses
acknowledge that they did not produce all the documents the Commission sought. 2
Dawn Bronson declined to produce any documents pertaining to her sources of income,
gifts received, loans received, certain transfers to her bank account, certain fmancial
arrangements and her employment history. In his document request response, Defendant
claimed that he had responsive documents for only one of the categories of documents
the Commission sought. See Exhibit F. Although Defendant's second attorney produced
more records, he did not complete the productions by any stretch, and has not produced
documents since around May 2020.
Finally, Defendant has neither provided the accounting ordered by the Court nor
explained his failure to do so. Thus, the Defendant has repeatedly violated the Court's
January 19 Order. To quote the Court's January 28 Order, "Enough is enough." DE 225.
"The purpose of civil contempt, broadly stated, is to compel a reluctant party to
do what a court requires of him." Badgley v. Santacroce, 800 F.2d 33, 36 (2d Cir.1986).
Because Defendant has twice violated the January 19 Order, the Commission asks the
Court to impose more coercive sanctions. The Court has suggested that it may
incarcerate Bronson if he ''violates any provisions of this Order." DE 223. While
incarceration "is not an insignificant measure," it "is within the Court's authority and is a
well-recognized method of coercing compliance with court orders." Adams v. New York
State Educ. Dept., 959 F. Supp. 2d 517, 520 (S.D.N.Y. Aug. 1, 2013); SECv. Bremont,
2003 WL 21398932, *6 (S.D.N.Y. June 18, 2003).

readily available when due. DE 228 if4. Effectively deposing the Bronsons requires
current information. If Commission counsel does not receive the documents well in
advance these depositions, currently scheduled for February 24 and 25, the Commission
may seek the Court's permission to delay them.
Though it is not clear how Defendant can truthfully assert there are no outstanding
document requests, Commission counsel respectfully asks the Court to order Defendant
to identify the bates references for each category of documents Defendant claims he has
provided for Defendant, Dawn Bronson and V2IP . As the Defendant changed law firms
and produced some new documents by May 2020, they were not designated by person or
entity and request. So even if the productions were complete, this exercise would be
useful.
2

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The Court has given Defendant every chance to comply with the January 19
Order - and warned of the potential consequences if he did not. Yet, he has not. Rather
than comply, Defendant has now twice violated the Court' s January 19 Order. Nothing
short of incarceration may "produce compliance." DEs 223, 225 ; SEC v. Durante , 2013
WL 6800226, *14 (S.D .N .Y. December 19, 2013) ("No lesser coercive sanction [than
incarceration] will produce compliance. Imposing fines on a defendant.. .who has failed
to pay a multi-million dollar judgment is an exercise in futility. "); SEC v. Solow, 682 F.
Supp. 2d 1312, 1336 (S.D. FL. 2010) (ordering defendant incarcerated until he complies
with the Court' s order when the defendant "has had ample time to make efforts to (1)
simply pay the disgorgement; (2) avoid taking steps that tie up his assets, or (3) take steps
to unwind his assets and make a payment to the Registry of the Court.")
Besides coercion, "imprisonment has also an incidental effect.. .. there is ... a
vindication of the court's authority." Id. at 443. Gompers v. Buck 's Stove & Range Co .,
221 U.S. 418, 443, 31 S. Ct. 492, 498 (1 911). Thus, incarceration ensures the "integrity
of the Court' s orders." Adams v. New York State Educ. Dept., 959 F. Supp. 2d 517, 520
(S.D .N.Y. Aug. 1, 2013) (finding incarceration necessary because of Defendant' s
"repeated and intransigent failures to make any payment on the Sanction and in the
interests of protecting the integrity of the Court's orders.") If imprisoned, Defendant
controls his release as he "' carries the keys to his prison in his own pocket. ' He can end
the sentence and discharge himself at any moment by doing what he had previously
refused to do." Gompers v. Buck 's Stove & Range Co ., 221 U.S. 418, 442, 31 S. Ct. 492,
498 (1911) (internal citation omitted).
For these reasons, the Commission asks the Court to impose additional coercive
sanctions up to imprisonment on Defendant until he proves compliance with the Court' s
orders by providing a full accounting of assets and income and all financial records and
documents sought by the Commission.
Respectfully submitted,
s/Maureen Pey ton King
Mr. Bronson is to respond to this letter by 2/10/21 .
So Ordered .

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