Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Securities and Exchange Commission v. Hartman Wright Group, LLP

United States District Court, D. Colorado

November 21, 2018

SECURITIES AND EXCHANGE COMMISSION, Applicant,
v.
HARMAN WRIGHT GROUP, LLC, TYTUS W. HARKINS, and JASON M. WHITE, Respondents.

          ORDER COMPELLING COMPLIANCE WITH ADMINISTRATIVE SUBPOENA

          CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Applicant Securities and Exchange Commission's (“SEC”) Ex Parte Application for Order to Show Cause and for Order Compelling Compliance with Administrative Subpoena. (Doc. # 1.) In response, Respondents have filed a “Brief in Opposition” (Doc. # 9) as well as a motion to vacate the show cause hearing and to dismiss Applicant's motion (Doc. # 8). For the reasons set forth below, Applicant's motion is granted in so far as it seeks to compel Respondents to comply with its administrative subpoenas.

         I. BACKGROUND

         Respondent Harman Wright Group, LLC (“HWG”) is a Colorado limited liability corporation headquartered and operated in Colorado Springs, Colorado. (Doc. # 1 at 2.) HWG “represents itself as a private wealth management company whose focus is on purchasing mobile home parks, refurbishing them, and operating them at a profit.” (Id.) Respondent Tytus Harkins is a founding principal of HWG, and he is the Director of Finance and Fund Management. Respondent Jason White is also a founding principal of HWG, and he is the Director of Acquisitions. (Id.)

         On April 17, 2017, the SEC initiated an investigation into HWG that sought to determine “whether the anti-fraud provisions of the federal securities laws have been or are being violated by any persons or entities, including HWG and its executive officers, Harkins and White.” (Id.) Specifically, the investigation pertains to various HWG investors-most of whom are retirees-who made investments of approximately $13 million in the company “based upon misleading information and exaggerated claims, and who stand to lose much of their savings.” (Id.) In furtherance of its investigation, the SEC issued several subpoenas, which are the basis of the instant action.

         On July 18, 2017, the SEC served a subpoena for documents on HWG. (Id.) Although HWG initially complied with the subpoena by providing various documents, it eventually stopped. On July 27, 2018, Respondent Harkens informed the SEC that “compliance with any requests by the SEC [was] hereby suspended involving [HWG], myself and any of my unemployed former personnel.” (Id.)

         Subsequently, on August 28, 2018, the SEC served Respondent Harkins with a subpoena requiring him to appear for testimony on September 12, 2018. (Doc. # 1-4 at 85.) The SEC is “seeking testimony from Harkins so he can explain his role in HWG's offerings, his knowledge of information communicated to investors about the offerings, and how HWG used proceeds from the various offerings.” (Doc. # 1 at 4.) However, Respondent Harkins did not appear for his testimony.

         Similarly, the SEC also served a subpoena on Respondent White on August 28, 2018, requiring him to appear for testimony on September 13, 2018. (Doc. # 1-4 at 109.) As with Respondent Harkins, the SEC is “seeking testimony from White so he can explain his role in HWG's offerings, his knowledge of information communicated to investors about the offerings, how HWG used proceeds from the various offerings, and HWG's business operations.” (Doc. # 1 at 4.) However, despite initially indicating a willingness to comply, Respondent White sought to reschedule his testimony but would not commit to a date and eventually asked the SEC to cease communications with him. (Id.)

         As a result, the SEC sought judicial enforcement of the relevant subpoenas and initiated the instant action. On October 3, 2018 this Court granted the SEC's Application for an Order to Show Cause and set a hearing at which Respondents were directed to show cause why an Order Compelling Compliance with Administrative Subpoena should not be granted. (Doc. # 3 at 1-2.) In response, Respondents filed a brief arguing that they have substantially complied with the SEC's investigation and should not be forced to appear at the Show Cause hearing. (Doc. # 9.) Respondents also indicated that they “would not state any further facts at the show cause hearing and therefore request[] the court consider this brief a response to the Order to Show Cause.” (Id. at 7.)

         II. ANALYSIS

         Federal securities law authorizes the SEC to seek an order from this Court requiring compliance with a subpoena in a summary proceeding. See 15 U.S.C. § 78u(e); Fed.R.Civ.P. 81(a)(5); see also SEC v. McCarthy, 322 F.3d 650, 658 (9th Cir. 2003) (noting that summary proceedings are appropriate for SEC subpoena enforcement actions); SEC v. Sprecher, 594 F.2d 317, 319-20 (2d Cir. 1979) (same). Further, a prompt ruling on the SEC's application is warranted to avoid further delay in the investigation. SEC v. First Sec. Bank, 447 F.2d 166, 168 (10th Cir. 1971) (“Questions concerning agency subpoenas should be promptly determined so that the subpoenas, if valid, may be speedily enforced”); see also SEC v. Lavin, 111 F.3d 921, 926 (D.C. Cir. 1997) (noting that subpoena enforcement actions “are generally summary in nature and must be expedited.”).

         Courts enforce administrative agency investigative subpoenas if (1) the agency's “investigation will be conducted pursuant to a legitimate purpose, ” (2) the subpoena seeks information that “may be relevant to the purpose, ” (3) “the information sought is not already within the [agency's] possession, ” and (4) all “administrative steps required . . . have been followed.” United States v. Powell, 379 U.S. 48, 57-58 (1964) (enforcing IRS subpoena); see also RNR Enter., Inc. v. SEC, 122 F.3d 93, 96 (2d Cir. 1997) (Powell test applied to SEC subpoenas); Application to Enforce Administrative Subpoenas Duces Tecum of SEC v. Knowles, 87 F.3d 413, 415 (10th Cir. 1996) (same). The government's burden in meeting this test is a “slight one, ” and “‘[t]he requisite showing is generally made by affidavit of the agent who issued the summons and who is seeking enforcement.'” United States v. Balanced Fin. Mgmt., Inc., 769 F.2d 1440, 1443 (10th Cir. 1985) (quoting United States. v. Garden State Nat'l Bank, 607 F.2d 61, 68 (3d Cir.1979)). In this case, the SEC has met all four requirements.

         First, the inquiry is being conducted pursuant to a legitimate purpose. “Congress has vested the [SEC] with broad authority to conduct investigations into possible violations of the federal securities laws and to demand production of evidence relevant to such investigations.” SEC v. Jerry T. O'Brien, Inc., 467 U.S. 735, 741 (1984). Additionally, the SEC authorized this investigation by issuing a Formal Order on April 17, 2017, to investigate possible violations of federal securities laws. (Doc. # 1-1 at 1.)

         Second, the information sought by the SEC subpoenas relate to the business of HWG and investments in that business. Accordingly, the information is clearly relevant to the SEC's investigation into whether HWG's business practices have violated federal law. Moreover, the 10th Circuit has held that “[a]dministrative agencies vested with investigatory power have broad discretion to require the disclosure of information concerning matters within their jurisdiction.” Philips Petroleum Co. v. Lujan, 951 F.2d 257, 260 (10th Cir. 1991). As a result, relevance is established when the information sought is not “plainly incompetent or irrelevant to any lawful ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.