SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 38389 / March 12, 1997 Admin. Proc. File No. 3-8803 ________________________________________________ : In the Matter of : : DEMITRIOS JULIUS SHIVA : : ________________________________________________: OPINION OF THE COMMISSION BROKER-DEALER PROCEEDINGS Grounds for Remedial Action Injunction Where registered representative formerly associated with a registered broker-dealer was enjoined from violating antifraud provisions of the securities laws, held, in the public interest to bar respondent from association with any broker or dealer. APPEARANCES: Demitrios Julius Shiva, pro se. Edward G. Sullivan, for the Commission's Division of Enforcement. Appeal filed: May 6, 1996 Last brief received: October 4, 1996 I. Demitrios Julius Shiva, a registered representative formerly associated with a registered broker-dealer, appeals from the decision of an administrative law judge. The law judge found that, on October 21, 1994, the United States District Court for the District of South Carolina ("Court") issued an order of permanent injunction enjoining Shiva from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. -[1]- ---------FOOTNOTES---------- -[1]- The civil action was brought against Shiva, Premier Capital Corporation ("Premier Capital"), Robert Anderson, the owner of the corporation, and (continued...) ==========================================START OF PAGE 2====== On the basis of the injunction, the law judge barred Shiva from association with any broker or dealer and from participating in any capacity in the placement of Japanese Yen Bond certificates or "prime bank" type instruments of any nature. Our findings are based on an independent review of the record, except with respect to those findings not challenged on appeal. II. From 1993 until July 1994, Shiva was associated with The Investment Center, a registered broker-dealer. The Court found that, in 1994, Shiva attempted to deposit two counterfeit securities in a brokerage account at Prudential Securities, Incorporated ("Prudential") in order to facilitate their eventual sale to the public. -[2]- As part of this effort, Shiva made false and misleading representations that the two certificates represented ownership of Japanese Yen Bonds with a combined value of approximately $1.6 billion. Based on the testimony of an official of the Japanese Ministry of Finance, the Court determined that the two certificates were, in fact, counterfeit and fictitious. The Court further found that, in June 1994, Shiva's employer informed him that the two certificates "appeared to be a scam." The Court also found that Shiva subsequently contacted officials at Prudential "for the purpose of depositing the certificates for eventual sale to the public." -[3]- Shiva misrepresented to Prudential that his employer did not understand the instruments. After conducting due diligence, an employee of Prudential advised Shiva that the certificates were fraudulent. Thereafter, Shiva nonetheless coordinated and attended a meeting at Prudential in an effort to induce Prudential to permit deposit of the certificates for eventual sale to the public. The Court found that violations of the securities laws were "about to occur." The Court found that Shiva was continuing his ---------FOOTNOTES---------- -[1]-(...continued) William Cone. In addition to Shiva, the Court enjoined Premier Capital, Anderson, and Cone. SEC v. Premier Capital Corp., Civil Action File No. 2:94-2374-1 (D.S.C. October 21, 1994). The Court of Appeals affirmed the injunction against Shiva. No. 94-2501, (4th Cir., June 13, 1995)(per curiam). -[2]- It appears that Shiva was acting on behalf of Anderson, Cone, and Premier Capital. -[3]- Prudential was the clearing broker for The Investment Center. ==========================================START OF PAGE 3====== efforts to deposit the securities despite being told by both his employer and an official at Prudential that the certificates were not genuine. The Court further held that Shiva had acted with "a high degree of scienter" because he either knew that the certificates were fraudulent or "purposely ignored the warnings [that the certificates were fraudulent]. . . ." -[4]- The Court imposed an injunction to restrain Shiva and the other defendants "before they succeed in harming any members of the public." In the instant proceeding, the law judge found that Shiva's actions were egregious in that he participated in a "scheme to defraud investors" and persisted in his efforts despite warnings from his supervisors that the certificates were not valid. Moreover, she noted that Shiva's "violations were apparently not isolated" since Shiva had contacted Prudential regarding other alleged Japanese Yen Bond certificates and had been evasive at the hearing when questioned regarding his current business activities. The law judge found that Shiva had failed to make any assurances against future violations and "continues to contend that the bonds are not counterfeit and fictitious." III. Shiva contends that "there is no proof whatsoever" that he "participated in any illegal or fraudulent dealings." He makes various arguments challenging the basis for the injunction issued against him by the Court. -[5]- In these circumstances, we have long refused to permit a respondent to re-litigate issues that were addressed in a previous civil proceeding against the ---------FOOTNOTES---------- -[4]- The Court determined that the fact that Shiva proceeded despite being told that the certificates were counterfeit indicates that he undertook these actions with "a degree of recklessness sufficient to constitute scienter." -[5]- Shiva challenges the evidence that the Japanese Yen Bond certificates were counterfeit. He also claims that the statement by one of his superiors that the certificates were a scam was based on merely the superior's instinct given the enormous value of the certificates, and that this assessment was made before the superior reviewed the documents. Shiva claims that his superiors approved his contacting Prudential to check the authenticity of the certificates. Shiva also asserts that it was not until September 1994 (three months after the Prudential meeting) that he saw a letter from Prudential stating that the certificates were counterfeit. ==========================================START OF PAGE 4====== respondent. -[6]- The doctrine of collateral estoppel precludes this Commission from reconsidering the injunction against Shiva as well as factual issues that were actually litigated and necessary to the Court's decision to issue the injunction. -[7]- The issues regarding the nature of the certificates and Shiva's efforts with respect to the certificates were fully litigated. The appropriate forum for Shiva to challenge the injunction was a federal appeals court, which affirmed the Court's order issuing the injunction. -[8]- Shiva also claims that the law judge was biased against him and made improper rulings on evidence that he and the Division, respectively, sought to introduce. Based upon our independent review of the record, we do not find evidence of any such bias or any basis to question the evidentiary rulings. Specifically, we do not find any evidence of bias or error in the law judge's denial of Shiva's last-minute request to subpoena four Japanese government officials (some of whom may have had diplomatic immunity) and a Commission employee. -[9]- Shiva failed to respond to the law judge's request that he show the "general relevance and reasonable scope" of the testimony he sought from these individuals. -[10]- We also do not find any evidence ---------FOOTNOTES---------- -[6]- Timothy Mobley, Securities Exchange Act Rel. No. 36689 (January 5, 1996), 61 SEC Docket 42, 45; C.R. Richmond & Co., 46 S.E.C. 412, 414 n.12 (1976); and Gibbs & Co., 40 S.E.C. 963, 967-68 (1962). -[7]- Blinder, Robinson & Co., Inc. v. SEC, 837 F.2d 1099, 1109-11 (D.C. Cir. 1988), cert. denied, 488 U.S. 869 (1988). See also, James S. Doyle, 47 S.E.C. 880, 882 (1983). See generally, Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326 n.5 (1979). -[8]- See, n.1 supra. -[9]- See, e.g., International Research & Management Corp., 46 S.E.C. 1167, 1171-72 (1978), aff'd per curiam, 588 F.2d 821 (3d Cir. 1978). Our Rule of Practice 232(b) authorizes a law judge to refuse to issue a subpoena if "after consideration of all the circumstances," its issuance would be "unreasonable, oppressive, excessive in scope, or unduly burdensome." -[10]- We note that, during the civil proceeding, Shiva had the opportunity to participate in the deposition of an official of the Japanese Ministry (continued...) ==========================================START OF PAGE 5====== of bias or error in the law judge's refusal to admit into evidence letters offered by Shiva regarding the authenticity of other, unrelated, Japanese Yen Bond certificates. We concur with the law judge that these letters go to an issue litigated before the Court, and in any event, are not relevant to the issue of the two particular certificates that are the subject of this proceeding. We also do not find evidence that the law judge was biased or incorrect in her decision to admit into evidence Shiva's 1991 sentencing for grand larceny (to which Shiva pled guilty). -[11]- Shiva asserts that, in contrast, the Court appropriately refused to consider this conviction. The record does not set forth the basis for the Court's refusal, but we have considered prior criminal convictions in assessing sanctions. -[12]- We agree with the law judge that Shiva's prior conviction is relevant to the determination of what sanctions are in the public interest. Shiva alleges that the Commission withheld deposition transcripts from him in the civil proceeding. There is no suggestion, however, that he sought discovery of these transcripts in that proceeding. We have not found any basis for such a claim. -[13]- In any event, as we have stated, any ---------FOOTNOTES---------- -[10]-(...continued) of Finance, but he declined to do so. To the extent that Shiva was seeking to subpoena additional officials in this proceeding to demonstrate the validity of the certificates, he was collaterally estopped from doing so, as we discussed above. -[11]- Shiva's attacks on the validity of the conviction must be rejected under the doctrine of collateral estoppel. Charles Phillip Elliott, 50 S.E.C. 1273, 1276-77 (1992), aff'd 36 F.3d 86 (11th Cir. 1994); Robert Blakeney Stevenson, 48 S.E.C. 89, 90, n.4 (1985). -[12]- In determining, under Section 15(b) of the Exchange Act, what sanctions are in the public interest, the Commission has considered prior convictions, particularly where the conviction reflects on a respondent's "trustworthiness in his dealings with others. . . ." Irving Grubman, 40 S.E.C. 671, 674 (1961). -[13]- We deny the Division's motion, under Rule 452 of the Commission's Rules of Practice, for leave to adduce additional evidence. The evidence the (continued...) ==========================================START OF PAGE 6====== substantive or procedural objections that Shiva has with respect to the civil proceeding should have been directed to the federal appeals court. Shiva alleges that he has been unfairly prosecuted. -[14]- To establish a claim of selective prosecution, Shiva would have to demonstrate that this Commission prosecuted him based upon improper considerations such as race, religion, or the desire to prevent the exercise of a constitutionally- protected right. -[15]- He did not do so. Moreover, we note that in addition to bringing proceedings against Shiva, we brought civil proceedings against Premier Capital Corporation, Robert Anderson, and William Cone; they were enjoined. IV. Shiva challenges the sanctions imposed by the law judge and the findings underlying the law judge's determination to impose ---------FOOTNOTES---------- -[13]-(...continued) Division seeks to introduce supports its claim that it provided deposition transcripts to Shiva in October and November of 1995. Shiva concedes that he received those documents at that time. -[14]- Shiva has appeared pro se throughout these proceedings and before the Court. He now appears to complain that his representation was not adequate. Shiva, however, does not have a right to be provided with counsel. Elliot v. SEC, 36 F.3d 86, 88 (11th Cir. 1994)("[T]here is no statutory or constitutional right to counsel in an administrative proceeding of this kind."). Feeney v. SEC, 564 F.2d 260, 262 (8th Cir. 1977), cert. denied, 435 U.S. 969 (1978). Shiva had the opportunity to retain legal counsel to represent him in these proceedings, but did not do so. -[15]- Richard J. Puccio, Securities Exchange Act Rel. No. 37849 (October 22, 1996), 63 SEC Docket 158, 163-64. See also, George H. Rather, Jr., Securities Exchange Act Rel. No. 36688 (January 5, 1996), 61 SEC Docket 36, 39-40 n.5, and the authorities cited therein; and C.E. Carlson, Inc., 48 S.E.C. 564, 568 (1986), aff'd, 859 F.2d 1429, 1437-38 (10th Cir. 1988). ==========================================START OF PAGE 7====== the sanctions. -[16]- The Commission has authority, under Section 15(b)(6)(A)(iii) of the Exchange Act, to sanction Shiva based upon his being enjoined from "engaging in any conduct or practice . . . in connection with the purchase or sale of any security." -[17]- We agree with the law judge that it is in the public interest to bar Shiva from association with any broker or dealer. -[18]- We are disturbed by Shiva's persistence in trying to deposit the securities after being warned by his superior that they were not valid and his continued refusal to recognize that the certificates are not valid despite definitive evidence and the rulings of both the Court and the law judge. While there were no findings that Shiva had succeeded in effectuating the proposed scheme, we note that the amount of the anticipated fraud, $1.6 billion, was enormous. We have also considered the fact that, in 1991, he pled guilty to grand larceny. In his brief, Shiva offers to "not participate in any fraudulent Japanese yen certificates." We find these assurances lack sincerity given both Shiva's refusal to acknowledge that the certificates at issue are not genuine and his attempt to blame the Japanese government for "denying their [sic] own instruments." We also note his evasive responses to questions ---------FOOTNOTES---------- -[16]- With regard to the findings, the Commission is obligated to consider Shiva's arguments relating to the injunction issued against him to the extent that they are relevant to Shiva's "degree of culpability" and the Commission's own determination as to what sanctions are appropriate in the public interest. Blinder, Robinson & Co., Inc. v. SEC, 837 F.2d at 1109-11. See also, Charles Phillip Elliott, 50 S.E.C. at 1276-77. -[17]- Shiva was associated with a broker-dealer at the time of the misconduct. Section 15(b)(6)(A)(iii) of the Exchange Act. -[18]- In determining what sanctions are in the public interest, we have considered the following factors: (1) the egregiousness of Shiva's actions; (2) the isolated or recurrent nature of the infraction; (3) the degree of scienter involved; (4) the sincerity of Shiva's assurances against future violations; (5) Shiva's recognition of the wrongful nature of his conduct; and (6) the likelihood that Shiva's occupation will present opportunities for future violations. Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). ==========================================START OF PAGE 8====== about his current business activities. While he is not now associated with a broker or a dealer, Shiva has indicated his intent to become associated. In conclusion, we find that it is in the public interest to bar Shiva from association with any broker or dealer. We impose no further sanction. An appropriate order will issue. -[19]- By the Commission (Chairman LEVITT and Commissioners WALLMAN, JOHNSON, and HUNT). Jonathan G. Katz Secretary ---------FOOTNOTES---------- -[19]- All the contentions advanced by the parties have been considered. The contentions are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed herein. UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No.38389 Admin. Proc. File No. 3-8803 ________________________________________________ : In the Matter of : : DEMITRIOS JULIUS SHIVA : : ________________________________________________: ORDER IMPOSING REMEDIAL SANCTIONS On the basis of the Commission's opinion issued this day, it is ORDERED that Demitrios Julius Shiva be, and he hereby is, barred from association with any broker or dealer. By the Commission. Jonathan G. Katz Secretary