An irreverent Wall Street Blog
The Paralysed Force of the SEC And Its Gesture Without Motion
May 31, 2016
This is an update of "SEC Can't Reach Federal Inmate For Telephonic Hearing" BrokeAndBroker.com Blog, April 26, 2016)
- Securities and Exchange Commission, Plaintiff, v. Christian Stanley, Inc. and Daniel C.S. Powell, Defendants, --AND - Christian Stanley, LLC, Daniel Christian Stanley Powell Realty Holdings, Inc.,Relief Defendants(Complaint, 11-CV-7147, September 2, 2011); and
- United States of America,Plaintiff, v. Daniel Christian Stanley Powell, Defendant (Indictment, 13-CR-00098, United States District Court for the Central District of California, February 8, 2013).
READ "San Diego Man Who Ran Investment Scam That Promised ‘Reverse Life Insurance' Policies Sentenced To Over 10 Years In Federal Prison" (Press Release, Department of Justice, June 8, 2015).SEC OIPAbout a year after the criminal fireworks died down and the smoke dissipated, on April 19, 2016, the SEC instituted administrative proceedings against Powell . In the Matter of Daniel Christian Stanley Powell, Respondent (Order Instituting Administrative Proceedings, '34 Act Rel. No. 77653; Admin. Proc. File No. 3-17218 / April 19, 2016). The Powell OIP states that on February 24, 2016, Powell was permanently enjoined from future violations of pertinent securities laws in response to the SEC's prior civil Complaint. Hearings in the Public InterestDeeming it necessary and appropriate in the public interest, the SEC had instituted proceedings to determine what, if any, remedial action was appropriate against Powell, who was incarcerated and permanently enjoined. Among the burning social and regulatory issues on the SEC's plate was, for example, should we bar this lowlife from further participation in the securities markets. In order to answer such burning questions, the SEC is required to schedule hearings in order to take evidence and develop the necessary record. On the road to the SEC's hearing in the public's interest concerning Powell's future in the securities industry, we come across a development so idiotic, so comical, so absurd, so moronic, so asinine, that I have cited the circumstances verbatim from the SEC Order in which the nonsense is explained in all its tawdry glory
READ the SEC Order of May 23, 2016UNITED STATES OF AMERICA
Before the SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ADMINISTRATIVE PROCEEDINGS RULINGS Release No. 3861/May 23, 2016ADMINISTRATIVE PROCEEDING File No. 3-17218 In the Matter of DANIEL CHRISTIAN STANLEY POWELL ORDER RESCHEDULING PREHEARING CONFERENCE On April 19, 2016, the Securities and Exchange Commission issued an order instituting proceedings (OIP) against Respondent pursuant to Section 15(b) of the Securities Exchange Act of 1934. On May 18, the Division of Enforcement filed a declaration establishing that Respondent was personally served with the OIP on May 9 at the Taft Correctional Institution in Taft, California. Respondent's answer is therefore due May 31, 2016. OIP at 3; 17 C.F.R. §§ 201.160(a), .220(b). Today, I held a telephonic prehearing conference at which the Division appeared but Respondent did not. Division counsel advised that Respondent was not at fault for his absence; rather, Taft Correctional's phone system does not permit inmates to dial in passcodes to join teleconferences. The Division suggested rescheduling the conference, and said it would make the necessary arrangements to allow Respondent to join. The prehearing conference is RESCHEDULED to May 26, 2016, at 2:00 p.m. Eastern. The Division shall make the necessary arrangements to allow Respondent to telephonically participate. James E. Grimes Administrative Law Judge
Bill Singer's Comment
Powell's in prison and he's gonna be there for about a decade. He was indicted in 2011 and found guilty on the criminal charges in 2014 and sentenced in 2015. The SEC named him in their case in 2013. Here we are, 2016, and we have one arm of the federal government trying to accomplish little more than conducting a prehearing telephonic conference with a federal inmate. Not a plenary hearing, mind you, but just a dinky prehearing. Not live, in-person, with a cast of thousands but largely with a convict on the other end of a telephone call made to his prison. I mean, seriously, what the hell could go wrong with those facts?
Apparently, we got a bunch of SEC lawyers and an Administrative Law Judge listening to dead-air on their end of the teleconference because Respondent/Inmate Powell did not appear for the call. Why didn't Powell appear? Oh, the federal prison has a telephone system that "does not permit inmates to dial in passcodes to join teleconferences."
Maybe I'm just an old-fashioned kind of guy -- and a cranky bastard at that but, geez, is this the first time that the SEC attempted to connect with a federal inmate? More to the point, since I've previously reported about similar snafus between the SEC and federal inmates (see end of this article), did any of those fine young men and women at the SEC who were involved in setting up this call bother to contact the Federal Bureau of Prisons or the Taft Correctional Institution and confirm the protocol for undertaking a teleconference with an inmate BEFORE attempting to make the connection on the scheduled date? It would not have been all that difficult because the penal institution has a dedicated page on the Bureau of Prison's website, has its own online "Fact Sheet" page, its own email, and general telephone number.
Some of you may feel that my critique here borders on being snotty and unreasonable. Wouldn't be the first time that I've been accused of such anti-social behavior. In my defense, consider some of these points:
- On the Federal Bureau of Prison's Taft Correctional Institution website you find an "INMATES" tab atop the page;
- If you click on the INMATES tab, the second of five items on the pull-down menu is "Communications," so let's click on that;
- Atop the "Communications" page is this cheery message:
Stay in TouchStudies show that when inmates maintain relationships with friends and family, it greatly reduces the risk they will recidivate." - Assuming that the good folks at the SEC wanted to avoid having inmate Powell recidivate, they would have been able to choose from among five communication icons: Phone Calls, Email, Send Email, Send Package, and Send Money. I'm thinking that in order to find out how to set up a teleconference between the SEC and inmate Powell that we should click on the "Phone Calls" icon;
- Having pressed on the "Phone Calls" icon, we are directed to a portion of that page titled, of all things, "Phone Calls," which admonishes us of the following:Phone CallsWe extend telephone privileges to inmates to help them maintain ties with their families and other community contacts. Third-party or other alternative call arrangements are not permitted ensuring inmates do not have the opportunity to use phones for criminal or other inappropriate purposes.Who Pays?Ordinarily, the inmate pays for the calls; but in some cases the receiving party pays.RestrictionsLimitations and conditions may be imposed upon an inmate's telephone privileges to ensure they are consistent with our correctional management responsibilities.MonitoringA notice is posted next to each telephone advising inmates that calls are monitored. Unmonitored calls to attorneys are permitted in certain circumstances.
The Federal Bureau of Prisons and its Taft Correctional Institution clearly warn that third-party or other alternative call arrangements are not permitted ensuring inmates do not have the opportunity to use phones for criminal or other inappropriate purposes. Hmmm . . . that strongly suggests that if the SEC wants to make a third-party or teleconference call to an inmate that it will not be permitted. We also learn that "limitations and conditions may be imposed" upon a incoming telephone call to an inmate, so, perhaps, it's a good idea to determine whether a passcode-required teleconference will pass muster.
This is not all the SEC's fault. You'd sort of think that one arm of the federal government could have put in a friendly phone call to another arm of the federal government while there were a bunch of SEC folks listening in to a speakerphone emanating the hiss of no connection, and that someone at the federal Bureau of Prisons might have done the collegial thing and got a hold of some management type at Taft Correctional Institution and cut through the red tape and got the teleconference moving forward. But that would sort of require that the left hand of our federal government knew what the right hand was doing. Judging by the lines at the airports and the incompetency of the Transportation Security Administration and judging by the inability of veterans to make medical appointments at the Veteran's Administration Hospitals, we probably should not expect much more from bureaucrats at the Bureau of Prisons or the SEC.
Thankfully, inmate Powell is incarcerated and somewhat off the shelf. Except, you know, I have this nagging dread that despite all the restrictions against inmates getting passcode-required teleconference calls from federal regulators that those same inmates find ways around the restrictions on their communications with the outside world and obtain contraband and make cellphone calls on smuggled-in phones with far more ease than the SEC has in contacting one inmate in order to conduct a prehearing teleconference.
ALSO READ:
- CD War Between Securities And Exchange Commission And Federal Bureau Of Prisons (BrokeAndBroker.com Blog, February 8, 2016)
- The Ponzi, The Inmate, And The SEC's 43,000 Pages In The Mail (BrokeAndBroker.com Blog, April 16, 2015)
UPDATE: May 31, 2016
Please, someone, anyone -- put me out of my misery with this damn story!
I really, really thought that with the whole teleconference and passcode thing that we had finally come to the end of this sordid saga involving inmate Powell. I mean, you know, Powell's fraud dates back some seven years to 2009 and he was charged in a 2011 SEC Complaint and, thereafter, indicted by the Department of Justice in 2013, and convicted in 2014, and sentenced in 2015. Here we are, half way through 2016 and Powell is in federal prison and the SEC is still investing its time and energy in doing what exactly? Oh, sure, I understand that the federal securities regulator has a mandate to conduct a hearing in the public interest to determine whether Powell should be barred from the industry. I understand that -- and with that understanding comes compassion for the men and women at the SEC who have to go through this Kabuki theater of regulation.
Notwithstanding my recognition of the hands'-tied aspect of setting up and conducting a public-interest hearing, also comes a sense of exasperation with what passes for modern-day Wall Street regulation. As if we needed more examples of the absurdity of the process, on May 27, 2016, we are offered this further morsel:
UNITED STATES OF AMERICA
Before the SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ADMINISTRATIVE PROCEEDINGS RULINGS Release No. 3880/May 27, 2016ADMINISTRATIVE PROCEEDING File No. 3-17218 In the Matter of DANIEL CHRISTIAN STANLEY POWELL ORDER FOLLOW(ING PREHEARING CONFERENCE On April 19, 2016, the Securities and Exchange Commission issued an order instituting proceedings (OIP) against Respondent pursuant to Section 15(b) of the Securities Exchange Act of 1934. Respondent was served with the OIP on May 9 and his answer was originally due May 31, 2016. Daniel Christian Stanley Powell, Admin. Proc. Rulings Release No. 3861, 2016 SEC LEXIS 1822 (ALJ May 23, 2016).Yesterday, I held a telephonic prehearing conference at which both the Division of Enforcement and Respondent appeared. The parties advised that settlement discussions are ongoing. As discussed during the conference, in the event this proceeding is not resolved by settlement, I ORDER the following procedural schedule:
June 21, 2016: Respondent's answer is due.July 1, 2016: The Division's motion for summary disposition is due.July 29, 2016: Respondent's summary disposition opposition is due.August 8, 2016: The Division's summary disposition reply is due.
During the prehearing conference, counsel for the Division informed Respondent that based on information obtained from Respondent's former employer, the dates alleged in the first operative paragraph of the OIP are incorrect. Counsel also stated what he believed are the correct dates. I left it to the Division to determine whether it should move to amend the OIP. Nothing that occurred during the prehearing conference should be construed as an indication by me as to whether the OIP should be amended.James E. Grimes Administrative Law JudgeREAD the SEC Order of May 27, 2016Heading back in time to the April 19, 2016, SEC OIP, we come across this first operative paragraph pertaining to Respondent Powell's alleged dates of employment [Ed: yellow highlighting added]:
A. RESPONDENT
1. From May 2009 through September 2009, which includes a portion of the time in which Respondent engaged in the conduct underlying the complaint described below, Respondent was a registered representative associated with Tradespot Markets Inc., a broker-dealer registered with the Commission.
According to Powell's online FINRA BrokerCheck records as of May 31, 2016, the "Registration History" section discloses that he was registered from 04/2010 - 09/2010 with TRADESPOT Markets INC; and 05/2006 - 08/2006 with INVESTMENT SECURITY CORPORATION; and from 01/2003 - 05/2003 with MORGAN STANLEY DW INC.
Separately, the "Employment History" section of Powell's BrokerCheck records disclose two responsive entries for "up to 10 years of an individual broker's employment history as reported by the individual broker on the most recently filed Form U4: 03/2010 - Present with TRADESPOT MARKETS INC., and 01/2003 - Present with CHRISTIAN STANLEY LLC
So . . . settlement discussions are apparently ongoing between the SEC and Powell. That's nice considering Powell was sentenced about a year ago in June 2015 to some ten years in prison, which he is presently serving; oh, and let's not forget that the SEC's civil Complaint goes back to 2011.
What's the latest hiccup? Apparently, the SEC alleged in its April 19, 2016, OIP that for some period of time from May 2009 through September 2009, Powell " was a registered representative associated with Tradespot Markets Inc. . . ." According to FINRA's BrokerCheck records, that assertion is incorrect because Powell was first registered with Tradespot in April 2010 and first employed with that same firm in March 2010 -- both starting dates begin later than the 2009 dates set forth in the OIP.
At this point, the damage caused to the investing public in SEC v. Powell is no longer the ongoing misconduct by Respondent (now Inmate) Powell, who is incarcerated and will likely remain behind bars for much of the next decade. The present damage being inflicted upon the investing public is the expenditure of time and money by the SEC in trying to get in what comes off as little more than one last kidney shot under the pile-up -- but in attempting to give Powell the business (which he so richly deserves), errant blows are actually landing on SEC staffers and public investors. The time and money spent on setting up and conducting a public-interest hearing is being diverted from more pressing and serious frauds that are still extant and destroying the pensions and life savings of vulnerable victims.
In the end, it's not about putting a con artist in prison because he's there. In the end, it's not about closing down a scamster's business because he's incarcerated for ten years. In the end, it's not really about protecting anyone from some miscreant. No . . . what we have now are failed teleconferences, unusable passcodes, and ongoing settlement discussions with a convict sentenced to a decade of time. Yet another deferral of resolution, this time, in part, predicated upon a concern as to whether a convicted Defendant, who is an inmate and still a Respondent in an SEC administrative proceeding, was employed during parts of 2009 or 2010.
All of which reminds me of T.S. Eliot's epic poem "The Hollow Man" and its word-picture of paralysed force, gesture without motion; and that dire warning:
This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.