-------------------- BEGINNING OF PAGE #1 ------------------- UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 36678 / January 4, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8915 ------------------------------ : ORDER INSTITUTING CEASE AND In the Matter of : DESIST PROCEEDINGS : PURSUANT TO SECTION 21C OF ROBERT D. CARL, III, : THE SECURITIES EXCHANGE ACT : OF 1934 AND FINDINGS AND Respondent. : ORDER OF THE COMMISSION : ------------------------------: I. The Commission deems it appropriate and in the public interest to institute public administrative proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Robert D. Carl, III (the "Respondent") failed to comply with Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3, and former Rule 16a-1, promulgated thereunder. II. In anticipation of the institution of these administrative proceedings, the Respondent has submitted an Offer of Settlement which the Commission has determined to accept. Solel}$for purposd  LgH$$I DY b"Bg89 gt by or on behalf of the Commission or to which the Commission is a party, the Respondent, without admitting or denying the matters set forth herein, consents to the issuance of this Order Instituting Cease and Desist Proceedings Pursuant to Section 21C -------------------- BEGINNING OF PAGE #2 ------------------- of the Securities Exchange Act of 1934 and Findings and Order of the Commission ("the Order"), and to the entry of the findings, and the imposition of the remedial sanctions, set forth below.-[1]- III. The Commission finds the following: A. FACTS 1. The Respondent Robert D. Carl, III is, and during the relevant period was, Chairman, Chief Executive Officer, and President of Health Images, Inc. ("Health Images"). Carl resides in Marietta, Georgia. He is a graduate of Emory Law School and had a general law practice in Decatur, Georgia from approximately 1978-1981, prior to joining Health Images. At all times during the relevant period, Carl was the beneficial owner of more than five percent of the outstanding common stock of Health Images. 2. The Issuer Health Images is a Delaware corporation having its principal place of business in Atlanta, Georgia. The company operates magnetic resonance imaging ("MRI") centers, manufactures MRI scanners, and provides MRI equipment maintenance services to third-party customers. The common stock of Health Images is registered pursuant to Section 12(b) of the Exchange Act and, during the relevant period, traded on the NASDAQ National Market System. The stock currently trades on the New York Stock Exchange. As of March 17, 1995, according to the company's most recent Annual Report on Form 10-K, approximately 11.6 million shares of Health Images common stock were issued and outstanding. -[1]- Simultaneously with the entry of this Order, the Commission filed a civil action pursuant to Section 21(d)(3) of the Exchange Act seeking a $10,000 civil penalty against Carl based on the violations of Section 16(a) of the Exchange Act described herein. Carl consented to entry of a final judgment imposing the penalty without admitting or denying the allegations of the Commission's Complaint. -------------------- BEGINNING OF PAGE #3 ------------------- B. APPLICABLE LAW Section 16(a) of the Exchange Act-[2]- requires that beneficial owners of more than ten percent of any class of any equity security registered pursuant to Section 12 of the Exchange Act, and the officers and directors of the issuer of any such security (hereinafter "insiders"), file a statement with the Commission by the effective date of a registration statement filed pursuant to Section 12 of the Exchange Act, or within ten days of becoming such officer, director or beneficial owner, reporting the amount of all equity securities of such issuer of which they are a beneficial owner. Section 16(a) also requires an insider to file with the Commission within ten days after the close of each calendar month, if there has been a change in the insider's ownership of the issuer's equity securities during such month, a statement indicating such changes. The rules enacted pursuant to Section 16(a) provide that an initial statement by an insider is to be made on a Form 3 and subsequent statements of changes in beneficial ownership are to be made on a Form 4 or a Form 5. For purposes of determining the number of beneficially owned shares that an insider must report on Forms 3, 4, and 5, Rule 16a-1(a)(2) defines "beneficial owner" to mean "any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the equity securities" at issue. The rule goes on to define "pecuniary interest" as "the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities." Thus, a person is deemed the beneficial owner of securities held in the name of another family member where the person obtains "benefits substantially equivalent to ownership, e.g., application of the income derived from such securities . . . to meet expenses which such person otherwise would meet from other sources." Rel. No. 34-7793, 31 Fed. Reg. 1005 (January 19, 1966); cf. Whiting v. Dow Chemical Co., 523 F.2d 680, 684-89 (2d Cir. 1975) (although wife's assets and investment accounts were segregated from husband's, husband deemed beneficial owner of her shares where her resources, including dividends and profits from her stock holdings, were used to satisfy a significant portion of family expenses). C. THE RESPONDENT'S VIOLATIONS OF SECTION 16(a) AND THE RULES THEREUNDER From August 1985 until August 1995, the Respondent failed to report on Forms 4 or Forms 5 numerous changes in his beneficial ownership of Health Images stock that resulted from purchases and sales of the stock in his mother's brokerage accounts during the -[2]- Until May 1, 1991, the statutory filing requirements under Section 16 of the Exchange Act were implemented by Rule 16a-1. On January 10, 1991, the Commission adopted a comprehensive revision of the rules under Section 16 which became effective on May 1, 1991. See Rel. 34-28869, 56 Fed. Reg. 7242 (Feb 21, 1991). Among other things, these amendments place the implementation of the former Rule 16a-1 filing requirements in new Rules 16a-2 and 16a-3. Accordingly, this Order, at paragraph V, below, orders that Respondent cease and desist from violating Rules 16a-2 and 16a-3. -------------------- BEGINNING OF PAGE #4 ------------------- period July 1985 through December 1992. The Respondent had a pecuniary interest in the shares bought and sold in his mother's accounts, and thus was a beneficial owner of such shares for purposes of Rule 16a-1(a)(2), because, among other things: (i) the Respondent provided substantial financial support to his mother; (ii) the Respondent commingled his mother's assets with his own; (iii) the Respondent provided a substantial portion of the assets used by his mother to purchase the shares at issue; and (iv) the Respondent's mother returned to him a substantial portion of the proceeds from sales of the shares at issue.-[3]- Since 1988, Carl has also been late on three occasions in reporting transactions involving Health Images securities in his own accounts. The Respondent's history of delinquency with respect to reporting the transactions in his mother's accounts is set forth below in Table A: -[3]- In July 1995, Respondent Carl disgorged to Health Images $92,400 in short-swing profits realized as a result of the trading in Health Images stock in his mother's accounts, plus interest on such profits in the amount of $52,600. -------------------- BEGINNING OF PAGE #5 ------------------- * * * * * * TABLE A Robert D. Carl, III. Transactions and Filings Involving Shares of the Common Stock of Health Images, Inc. 1985 through August 16, 1995 Month Price Apprx. of No. of Per Total Date Date Yrs/Mos/ Trans. Type Shares Share* $Value Due Rec'd Wks.Late 07-85 Purchase 5,000 2.00 10,000 08-12-85 08-16-95 10y 08-85 Purchase 2,500 2.13 5,325 09-10-85 08-16-95 9y11m1w 11-85 Purchase 2,500 2.13 5,325 12-10-85 08-16-95 9y8m1w 1,000 2.44 2,440 7,765 11-86 Purchase 10,000 3.88 38,800 12-10-86 08-16-95 8y8m1w 12-86 Purchase 5,000 4.00 20,000 01-12-87 08-16-95 8y7m 01-87 Sale 5,000 4.38 21,900 02-10-87 08-16-95 8y6m1w 02-87 Sale 2,500 5.00 12,500 03-10-87 08-16-95 8y5m1w 2,500 5.00 12,500 25,000 07-87 Purchase 1,000 4.50 4,500 08-10-87 08-16-95 8y1w 08-87 Sale 1,000 5.00 5,000 09-10-87 08-16-95 8y1w 09-87 Sale 1,000 6.00 6,000 10-13-87 08-16-95 7y10m 10-87 Sale 1,000 6.00 6,000 11-10-87 08-16-95 7y9m1w 12-87 Sale 1,500 3.38 5,070 01-11-88 08-16-95 7y7m -------------------- BEGINNING OF PAGE #6 ------------------- TABLE A (cont.) Month Price Apprx. of No. of Per Total Date Date Yrs/Mos/ Trans. Type Shares Share* $Value Due Rec'd Wks.Late 02-88 Purchase 3,000 3.69 11,070 03-10-88 08-16-95 7y5m1w 06-88 Sale 1,000 5.00 5,000 07-11-88 08-16-95 7y1m 1,000 5.06 5,060 10,060 07-88 Sale 1,000 6.00 6,000 08-10-88 08-16-95 7y1w 08-88 Sale 1,500 5.75 8,625 09-12-88 08-16-95 6y11m 09-88 Sale 5,000 6.00 30,000 10-11-88 08-16-95 6y10m 1,000 6.19 6,190 36,190 02-89 Sale 2,500 6.00 15,000 03-10-89 08-16-95 6y5m1w 03-89 Sale 2,500 6.13 15,325 04-10-89 08-16-95 6y4m1w 11-89 Purchase 1,000 5.94 5,940 12-11-89 08-16-95 5y8m Sale 1,000 6.25 6,250 12,190 04-90 Purchase 1,000 7.56 7,560 05-10-90 08-16-95 5y3m1w 1,000 7.63 7,630 15,190 05-90 Purchase 3,000 8.19 24,570 06-11-90 08-16-95 5y2m 1,000 8.13 8,130 32,700 06-90 Sale 1,000 10.25 10,250 07-10-90 08-16-95 5y1m1w 08-90 Sale 1,000 10.38 10,380 09-10-90 08-16-95 4y11m1w 09-90 Purchase 1,000 9.38 9,380 10-10-90 08-16-95 4y10m1w 3,200 7.94 25,408 34,788 10-90 Purchase 5,000 7.50 37,500 11-12-90 08-16-95 4y9m -------------------- BEGINNING OF PAGE #7 ------------------- 10-90 Sale 1,000 7.75 7,750 11-12-90 08-16-95 4y9m 1,000 7.94 7,940 15,690 -------------------- BEGINNING OF PAGE #8 ------------------- TABLE A (cont.) Month Price Apprx. of No. of Per Total Date Date Yrs/Mos/ Trans. Type Shares Share* $Value Due Rec'd Wks.Late 11-90 Sale 2,000 7.94 15,880 12-10-90 08-16-95 4y8m1w 2,000 8.25 16,500 2,200 8.00 17,600 1,000 9.00 9,000 58,980 12-90 Purchase 100 11.63 1,163 01-10-91 08-16-95 4y7m1w 01-91 Sale 4,100 11.06 45,346 02-11-91 08-16-95 4y6m 03-91 Purchase 2,000 13.50 27,000 04-10-91 08-16-95 4y4m1w 03-91 Sale 1,000 14.13 14,130 04-10-91 08-16-95 4y4m1w 1,000 14.25 14,250 28,380 06-91 Purchase 1,000 9.56 9,560 07-10-91 08-16-95 4y1m1w 06-91 Sale 1,000 10.56 10,560 07-10-91 08-16-95 4y1m1w 09-91 Purchase 5,000 11.88 59,400 10-10-91 08-16-95 3y10m1w 09-91 Sale 5,000 13.25 66,250 10-10-91 08-16-95 3y10m1w 12-91 Purchase 1,000 12.00 12,000 01-10-92 08-16-95 3y7m1w FY-91 Form 5 02-14-92 08-16-95 3y6m 01-92 Sale 1,000 13.00 13,000 02-10-92 08-16-95 3y6m1w 01-92 Purchase 10,000 10.00 100,000 02-10-92 08-16-95 3y6m1w 600 9.88 5,928 105,928 10-92 Purchase 10,000 7.88 78,800 11-10-92 08-16-95 2y9m1w 10-92 Sale 10,000 8.63 86,300 11-10-92 08-16-95 2y9m1w -------------------- BEGINNING OF PAGE #9 ------------------- TABLE A (cont.) Month Price Apprx. of No. of Per Total Date Date Yrs/Mos/ Trans. Type Shares Share* $Value Due Rec'd Wks.Late 12-92 Sale 10,000 8.75 87,500 01-11-93 08-16-95 2y7m1w FY-92 Form 5 02-16-93 08-16-95 2y6m Total value late reported transactions: $ 1,116,485 * = Prices per share are rounded off. * * * * * * IV. FINDINGS Based on the above, the Commission finds that the Respondent violated Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3, and former Rule 16a-1, promulgated thereunder. V. ORDER Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that the Respondent, Robert D. Carl, III, cease and desist from committing or causing any violation of, and committing or causing any future violation of, Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder. By the Commission. Jonathan G. Katz Secretary