STANLEY S. HARRIS, District Judge.
Before the Court are defendant Bilzerian's submissions in response to the Court's August 21, 2000, Opinion and Order setting temporary conditions for purging the Court's finding of contempt in that Order, and plaintiff SEC's response thereto.
As the parties in this case are well familiar with its background, the Court only briefly sets forth certain relevant facts. In 1991, the Court found Bilzerian liable for securities fraud.
In November 1998, the SEC moved this Court to hold Bilzerian in civil contempt of the 1993 disgorgement orders because he had not made any payments on the $62 million judgment. Bilzerian argued that he was unable to comply with the disgorgement orders essentially because he had no financial resources. On August 21, 2000, after receiving substantial briefing from the parties and holding a hearing, the Court found Bilzerian in contempt of its 1993 disgorgement orders. The Court found that (1) Bilzerian had not demonstrated his financial inability to comply "categorically and in detail" as required by case law; (2) Bilzerian had not made all reasonable efforts to comply with the orders; and (3) any financial inability to comply was self-created because Bilzerian had separated his assets from himself and funneled them to shell companies, partnerships, and trust entities (collectively, the "Bilzerian-related entities") through outright transfers as well as payment arrangements
On October 2, 2000, the Court received a package from Bilzerian containing a letter, a $5,000 check, and various documents and declarations purporting to provide the accounting ordered by the Court.
On October 4, 2000, Bilzerian submitted a motion to modify the Court's August 21, 2000, Opinion and Order, which the SEC opposes. On October 30, 2000, the Court received a reply memorandum from Bilzerian, along with another $5,000 check, and a request for oral argument. On November 30, 2000, Bilzerian sent a letter containing a third check, this time for only $2,500, as well as additional documentation.
On December 22, 2000, the Court issued an Order granting an ex parte motion by the SEC for the appointment of a receiver, Deborah R. Meshulam ("Receivership Order"). By correspondence dated December 22 and 26, 2000, she served the "Bilzerian Related Entities" and various related persons and entities with copies of the Receivership Order, requesting the immediate surrender "of all assets as well as immediate access to any assets, books, records or other property of Bilzerian in which the Court has found Bilzerian to have an interest." On January 2, 2001, Bilzerian filed for Chapter 7 bankruptcy again in the United States Bankruptcy Court for the Middle District of Florida.
Before the Court proceeds with its analysis, the Court denies Bilzerian's request for oral argument. Given the nature of the requested information, the Court can best evaluate its adequacy from the written submissions and thus sees no reason to delay these proceedings further.
A. Jurisdiction of the Court
The Court first addresses whether this proceeding is affected by the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a), by virtue of Bilzerian's
Under 11 U.S.C. § 362(a), almost all proceedings against a debtor are stayed upon declaring bankruptcy. Certain proceedings, however, are excepted from the automatic stay. The Court finds that this proceeding — currently in a civil contempt phase — is excepted from the automatic stay for two reasons: (1) the exception for a governmental unit to exercise its powers under 11 U.S.C. § 362(b)(4) applies, and (2) the Court may conduct proceedings to uphold the dignity of the Court and to vindicate the authority of the Court to enforce its orders.
1. 11 U.S.C. § 362(b)(4)
11 U.S.C. § 362(b) sets forth certain proceedings that are excepted from a stay. One such exception is contained in 11 U.S.C. § 362(b)(4), which allows:
This exception (sometimes referred to as the "police power exception") does not apply to governmental actions that are brought to enforce a money judgment.
The Court finds that any order regarding Bilzerian's contempt of court until he produces a full accounting of his assets to purge his contempt of the 1993 disgorgement orders does not constitute enforcement of a money judgment. A court may go so far as to enter a money judgment, see, e.g., NLRB v. 15th Ave. Iron Works, Inc. 964 F.2d 1336, 1337 (2d Cir. 1992); however, "anything beyond the mere entry of a money judgment against a debtor is prohibited by the automatic stay." SEC v. Brennan, 230 F.3d 65, 71 (2d Cir.2000). See also 2 Daniel R. Cowans et al., Cowans Bankruptcy Law and Practice § 11.5 at 517 (1994) ("Steps preparatory to money collection ... have been properly barred as not within the exception ."); Sawulski, 158 B.R. at 978 ("It is [the] seizure of a defendant-debtor's property, to satisfy the judgment obtained by a plaintiff-creditor, which is proscribed ....") (quotation omitted). See, e.g., Brennan, 230 F.3d at 71 (a repatriation order requiring that a defendant repatriate assets in an offshore trust to the Court's registry for distribution by the bankruptcy court was held to be enforcement of a money judgment); EEOC v. Rath Packing Co., 787 F.2d 318 (8th Cir.1986) (the district court's entry of a specific payment schedule went beyond the entry of a money judgment).
The Court is not, by this Opinion and its accompanying Order, requiring payment of the disgorgement or seizing assets. Rather, the Court is addressing whether Bilzerian has complied with the temporary purgation conditions insofar as they require an accounting of his assets in the contempt context. Requiring an accounting of assets does not violate the automatic stay. See SEC v. Kenton Capital, Ltd., 983 F.Supp. 13, 14-15 (D.D.C. 1997) ("[T]his Court can take actions consistent with a civil contempt proceeding. The Court has the right to determine whether or not defendant Smith has defrauded the Court by not paying the disgorgement due well before the bankruptcy stay.")
2. Vindicating the authority of the Court
This is part of a civil contempt proceeding against Bilzerian. There are,
Id. at 156. Similarly, in Sawulski, 158 B.R. at 977, the Special Master found that proceedings to determine whether defendant had purged himself of contempt were not barred by the automatic stay, after finding that the primary purpose of the contempt proceeding was to vindicate the dignity and authority of the court. See also In re Marini, 28 B.R. 262 (Bankr. E.D.N.Y.1983); In re Gedeon, 31 B.R. 942 (Bankr.D.Colo.1983).
The Court finds that this contempt proceeding clearly is to vindicate the integrity of the Court. The Court has previously found Bilzerian in contempt of its 1993 disgorgement orders, and, as will be discussed in this Opinion, he has not complied even minimally with the Court's temporary purgation conditions. The Court has inherent power to ensure compliance with its orders. As the Buscher court stated:
The Court declines to allow Bilzerian to seek shelter once again in the bankruptcy court from this Court's inherent power to enforce its orders.
B. Compliance with the August 21, 2000 Order
As for the monthly payment requirement, the Court finds that Bilzerian did comply for the months of October and November, but that his December monthly payment was only half of the required amount. Bilzerian explains in his cover letter dated November 30, 2000, that given his financial circumstances arising from this lawsuit and other lawsuits, he was unable to make the full $5,000 payment. At this point, the Court merely states that Bilzerian has not complied strictly with the Court's requirement for a December payment, but is unable to determine whether the noncompliance was legitimately caused by financial hardship or by Bilzerian's choices in managing his assets.
First, Bilzerian did not submit copies of the trust instruments of the Paul A. Bilzerian and Terri L. Steffan Revocable Trust of 1995 (the "Family Trust") and the Paul A. Bilzerian and Terri L. Steffan Irrevocable Trust of 1994 (the "Children's Trust") as required by ¶ 9 of the order, or copies of the formation documents of Bicoastal Holding Company, Overseas Holdings Limited Partnership, and Overseas Holding Company, as required by ¶ 10.
Bilzerian's stated reasons for not providing any of the formation documents or financial records of the Bilzerian-related entities are that the trustee and trust protector of the Family Trust — which directly or indirectly controls all of the other Bilzerian-related entities save the Children's Trust — and the trustee of the Children's Trust declined to turn the documents over to him, and that he lacks legal authority to provide them to the Court. These alleged reasons are neither credible nor sufficient to establish his inability to comply with the Court's Order. First, Bilzerian does not allege that he does not have access to the relevant documents, only that he may not turn them over.
Bilzerian also provided his personal income tax returns for 1996, 1998, and 1999, as required by the order for an accounting. Although it is hard to assess Bilzerian's purported financial resources in a vacuum, his declaration still appears deficient under the terms of the Court's Order. For example, the Court directed him to disclose each account he has with any financial institution, including the account statements from each institution. See Order ¶ 1b. Although Bilzerian indicated that he has an account with Bank of America (containing under $1,500), he did not provide an account statement because he "ha[s] not received any bank statements for the account." Bilzerian Decl. ¶ 1b. The Court's order clearly required "the account statements from each financial institution or brokerage firm," not simply statements that he happened to receive. Even if the Court were to believe that Bilzerian has not received any bank statements, the Court sees no reason preventing Bilzerian from obtaining statements for his own financial or brokerage accounts. Bilzerian's failure to request the statements from his financial institution or brokerage firm falls far below a reasonable effort to comply with the Court's order, and suggests a clear attempt to conceal activity in his accounts.
Another example of the deficiency of Bilzerian's accounting is his statement that he has not received any "material" assets from any person or entity since January 1, 1997, apart from the noted $7,000 transfer last month. See id. ¶ 3. The Order directed Bilzerian to document all of the assets he has received since January 1, 1997, not only those qualifying as "material" (a qualifier which Bilzerian leaves undefined). By including this limitation, Bilzerian may be trying to conceal relatively small asset transfers that, as a whole, prove to be significant. It simply strains credulity that Bilzerian could have lived for three years without receiving any assets. Nor does it appear that his wife could have supported him during this period because, according to their joint federal income tax returns for 1996-1999, she (and he) did not earn any income. While Bilzerian may respond that his living expenses were paid by Bicoastal or Cimetrix, this draws attention to another possible deficiency of his submission to the Court: Bilzerian claims that he cannot recall any expenditures exceeding $1,000 that were made on his behalf during the last three years except for "routine business expenses made in the ordinary course of business for Cimetrix and Bicoastal Holding Company and for the benefit of those entities." Id. ¶ 4. This "routine business expenses" category appears deliberately vague because what is for the benefit of Cimetrix and Bicoastal undoubtedly is for the benefit of Bilzerian as well, and likely covers his living expenses.
Given Bilzerian's facially deficient accounting, the only remedy is to incarcerate Bilzerian until he provides the information covered by the Court's order or, at a minimum, until he demonstrates a credible and good faith effort to do so. The August 21 Opinion and Order clearly warned Bilzerian that failure to comply with the temporary purgation conditions would result in his incarceration. Once Bilzerian provides an appropriate accounting, the Court will set final purgation conditions with respect to its finding that Bilzerian is in contempt of the 1993 disgorgement orders.
The Court's primary concern at this point in time is with Bilzerian's failure to provide the requisite financial information. That concern, coupled with the possibility that Bilzerian may claim that he will not be entitled to receive his monthly salary, prompts the Court now to suspend the provision of the August 21st Order requiring him to make monthly payments of $5,000.
For the foregoing reasons, the Court finds that defendant Bilzerian has not met the temporary purgation requirements. The Court will incarcerate Bilzerian until such time that he meets the purgation requirements (excluding the monthly payment provision). An appropriate Order directing defendant's incarceration accompanies this Opinion.
For the reasons stated in the accompanying Opinion, it hereby is
ORDERED, that defendant Bilzerian's Motion To Modify the Court's August 21, 2000, Opinion and Order is denied. It hereby further is
ORDERED, that defendant Bilzerian shall surrender to the custody of the U.S. Marshals Office for the Middle District of Florida, located in the United States Courthouse, 801 N. Florida Avenue, 4th Floor, Tampa, Florida, by 10:00 a.m. on Friday, January 19, 2001.
ORDERED, that the U.S. Marshals Service shall request designation from the
ORDERED, that the U.S. Marshals Office for the Middle District of Florida shall notify the Court of the fact of defendant Bilzerian's appearance or non-appearance on January 19, 2001. It hereby further is
ORDERED, that defendant Bilzerian shall remain incarcerated until such time that Bilzerian has complied with the conditions set forth in the Court's August 21, 2000, Opinion and Order, with the exception of paying $5,000 into the Registry of the Court on the first day of each month, as determined by further order of this Court It hereby further is
ORDERED, that if defendant does not appear voluntarily by 10:00 a .m. on January 19, 2001, the U.S. Marshals Service shall take him into custody, and to effectuate the arrest, may enter his residence at 16229 Villareal de Avila, Tampa, Florida 33613 and use such force as deemed necessary. It hereby further is
ORDERED, that this Opinion and Order shall be served on defendant Bilzerian at his residence by both Federal Express overnight mail and facsimile.
Furthermore, on December 1, 2000, Bilzerian sent a letter to the Court with his monthly check to the Court registry and an accounting of his income and expenses from September 27, 2000, to November 30, 2000, and other documentation. The Court finds little in Bilzerian's cover letter that requires a response, other than noting his submission of a $2,500 (instead of $5,000) check and his request to be relieved of the monthly fine until he gains other employment.
Opinion at 22 n. 23. Bilzerian also serves as President of Bicoastal Holding Company and, thus, has access to its formation documents and financial records. Bilzerian has provided nothing to rebut the inference that he has access to the relevant trust and company documents.