Joseph P. Galluzzi
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 46405 / August 23, 2002
Admin. Proc. File No. 3-10209
In the Matter of JOSEPH P. GALLUZZI
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ORDER IMPOSING REMEDIAL SANCTION
On the basis of the Commission's opinion issued this day, it is
ORDERED that Joseph P. Galluzzi be, and he hereby is, barred from association with any broker or dealer.
By the Commission.
Jonathan G. Katz
Secretary
__________________________
| 1 | 15 U.S.C. § 78j(b). |
| 2 | 17 C.F.R. § 240.10b-5. |
| 3 | 18 U.S.C. §§ 1341 and 1346. |
| 4 | 18 U.S.C. §§ 1343 and 1346. |
| 5 | 18 U.S.C. § 666. |
| 6 | 18 U.S.C. § 1952. |
| 7 | U.S. v. Galluzzi, Case Number 96-640 (D.N.J. April 24, 1998). |
| 8 | Galluzzi is currently serving his sentence at the Federal Prison Camp in Allenwood, Pennsylvania. |
| 9 | SEC v. Galluzzi, Civ. No. 97-76 (D.N.J. Oct. 21, 1999). In granting the injunction, the District Court, which had also presided over Galluzzi's criminal trial, stated that "[t]he underlying factual allegations of the SEC's complaint are the same as those of the indictment." |
| 10 | U.S. v. Galluzzi, Case No. 98-6351 (3d Cir. May 28, 1999), cert. denied, 528 U.S. 1048 (1999). |
| 11 | 17 C.F.R. § 201.230(a). Rule 230(a) requires the Division to make its investigative files available to opposing parties. The Division represented that they made approximately 97 boxes of materials available to Galluzzi's representative. |
| 12 | 17 C.F.R. §§ 201.230(b) and (c). Rule 230(b) authorizes the Division to withhold documents from its investigative files that are "privileged" or that constitute "attorney work product" and will not be offered in evidence. See nn. 28, 29, infra. Rule 230(c) authorizes the law judge to order the Division to provide opposing parties with a list of documents that have been withheld. |
| 13 | 17 C.F.R. § 201.250. Under Rule of Practice 250, a motion for summary disposition may be granted "if there is no genuine issue with regard to any material fact and the party making the motion is entitled to a summary disposition as a matter of law." 17 C.F.R. § 201.250(b). |
| 14 | Joseph P. Galluzzi, Initial Dec. Rel. No. 187 (Aug. 7, 2001), 75 SEC Docket 1729, 1733. |
| 15 | We recently upheld a bar, which had been imposed on a respondent who had been convicted of securities fraud, based on a motion for summary disposition, finding that "[a]bsent extraordinary mitigating circumstances, such an individual cannot be permitted to remain in the securities industry." John S. Brownson, Exchange Act Rel. No. 46161 (July 3, 2002), __SEC Docket ____. Summary disposition is equally appropriate under the circumstances of this case, even if Galluzzi had not waived a hearing before the law judge. |
| 16 | Id. at 1735. |
| 17 | 15 U.S.C. §§ 78o(b)(6)(A)(ii) and (iii). |
| 18 | See Charles Phillip Elliott, 50 S.E.C. 1273, 1274 (1992)(conviction and injunction "each serves as an independent basis, if the public interest warrants, to bar [respondent] from association with any broker or dealer"), aff'd, 36 F.3d 86 (11th Cir. 1994)(per curiam). |
| 19 | Galluzzi also asks that the Commission "initiate" action to terminate the injunction. We decline to do so. |
| 20 | See, e.g., Demitrios Julius Shiva, 52 S.E.C. 1247, 1249 (1997) (rejecting attempts to challenge basis for injunction and noting that "we have long refused to permit a respondent to re-litigate issues that were addressed in a previous civil proceeding against the respondent"). See also Blinder, Robinson & Co. v. SEC, 837 F.2d 1099, 1108 (D.C. Cir. 1988) (holding that issues that could have been adjudicated in prior injunctive proceeding could not be relitigated in appeal of subsequent administrative proceeding), cert. denied, 488 U.S. 869 (1989).
As discussed further below, Galluzzi also challenges the validity of certain allegations made in the criminal indictment and the validity of his criminal conviction because of what he claims was improper cooperation between the Division's staff and the U.S. Attorney. Galluzzi's conviction is equally immune to attack in this proceeding. See, e.g., Ira W. Scott, 53 S.E.C. 862, 866 (1998) (rejecting respondent's claim that he had been "'wrongfully convicted'" and holding that "'[a] criminal conviction cannot be collaterally attacked in an administrative proceeding.'") (quoting William F. Lincoln, 53 S.E.C. 452, 455 (1998)); Alexander V. Stein, 52 S.E.C. 296, 301 (1995) (respondent in administrative proceeding could not challenge validity of underlying conviction). |
| 21 | Galluzzi asserts in his brief that "Petitioner's avenues of appeal are still open and actively being pursued." Although Galluzzi concedes that the "direct appeal" of his conviction was denied, he claims vaguely that he is still appealing "the sentencing." The Division represented in its brief that the Division was "unaware of any pending appeals," and Galluzzi does not substantiate his claim of pending appeals. In any event, the pendency of an appeal does not preclude us from acting to protect the public interest. See Charles Phillip Elliott, 50 S.E.C. at 1276 (declining to delay derivative administrative proceeding pending appeal of underlying conviction). |
| 22 | See Shiva, 52 S.E.C. at 1249 ("The doctrine of collateral estoppel precludes this Commission from reconsidering . . . factual issues that were actually litigated and necessary to the Court's decision to issue the injunction."). |
| 23 | Galluzzi states that he is not seeking "to re-litigate his criminal conviction, but to unveil to the Commission the unethical action, by the Division, which [is] totally against the public interest." As discussed, Galluzzi is barred from challenging his criminal conviction here. |
| 24 | Galluzzi also complains that, during settlement negotiations in the injunctive proceeding, Division staff members "threatened" him by stating that, if Galluzzi did not agree to the Division's proposed settlement, the Division would move for summary judgement. When Galluzzi refused, the Division, in Galluzzi's words, "followed through with [its] threat, filed a Motion for Summary Judgement, and was successful." Such action, according to Galluzzi, caused him "irreparable harm" because it resulted in denying him access to Commission files. We see nothing improper in the Division's actions. Moreover, here, as noted above, Galluzzi was given access to boxes of materials. See n.11, supra. |
| 25 | It has been held that "[e]ffective enforcement of the securities laws requires that the SEC and Justice be able to investigate possible violations simultaneously." SEC v. Dresser Industries, Inc., 628 F.2d 1368, 1377 (D.C. Cir. 1980), cert. denied, 449 U.S. 993. Moreover, the securities laws "explicitly empower the SEC to investigate possible infractions of the securities laws with a view to both civil and criminal enforcement, and to transmit the fruits of its investigations to Justice in the event of potential criminal proceedings." Id. at 1376. |
| 26 | Galluzzi also argues that the Division improperly denied him access to its investigative files, pursuant to Commission Rule of Practice 230, prior to the institution of proceedings when it provided him with a draft "order instituting proceedings" in connection with settlement negotiations. However, the Rules of Practice are applicable only after the institution of proceedings. |
| 27 | Galluzzi, by that time, was incarcerated and unable to review the documents himself. |
| 28 | See 17 C.F.R. § 201.230(b)(iv) (hearing officer may grant leave to withhold documents "as not relevant to the subject matter of the proceeding"). |
| 29 | The work product doctrine "protects trial preparation materials from discovery." Jeff Anderson, The Work Product Doctrine, 68 Cornel L. Rev. 760, 762 (1983). See also Hickman v. Taylor, 329 U.S. 495, 512 (1947) ("the general policy against invading the privacy of an attorney's course of preparation is so well recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production"). |
| 30 | See, e.g., Fisher v. U.S., 425 U.S. 391, 403 (1976)("Confidential disclosures by a client to an attorney made in order to obtain legal assistance are privileged."). |
| 31 | The law judge found the Division's "invocation of privilege to be well supported." The law judge therefore found it unnecessary to consider the Division's alternative ground that the documents were not relevant. |
| 32 | Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). |
| 33 | Galluzzi specifically challenged this finding by the District Court before the law judge. As is discussed, he is collaterally estopped from doing so. |
| 34 | Galluzzi states that he "surrendered" his NASD Series 7 and Series 63 licenses in 1996. |
| 35 | Although Galluzzi objects to a bar on appeal, at some points before the law judge Galluzzi appeared to accept the propriety of a bar. For example, during one of the pre-hearing conferences, after the Division had raised the possibility of moving for summary disposition, Galluzzi stated that he "had no concern about being barred from" any business activity that "requires an SEC license." |
| 36 | We have considered all of the arguments advanced by the parties. We reject or sustain them to the extent that they are inconsistent or in accord with the views expressed herein. |