Thomas Melvin appeals his convictions on six counts of security fraud, in violation of
Briefly stated, Melvin -- a certified public accountant -- disclosed confidential insider information he received from a client about the pending sale of a publicly-traded company. Although Melvin purchased no securities in his own name, he enabled his tippees to make profitable purchases of stock for their own benefit.
As a result of Melvin's conduct, the United States Securities and Exchange Commission ("SEC") filed a civil suit against Melvin for insider trading, in violation of Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78a et seq. ("Exchange Act"). Melvin ultimately settled with the SEC and agreed to pay disgorgement totaling $68,826 (constituting the unlawful profits of two of his four direct tippees plus prejudgment interest),
Meanwhile, the government instituted the criminal proceeding underlying this appeal, based on the same conduct for which Melvin was held responsible in his civil and administrative proceedings. Pertinent to this appeal, Melvin moved to dismiss the indictment, contending that -- in the light of the earlier disgorgement, civil penalty, and professional disqualification -- further criminal prosecution was barred by the Fifth Amendment's Double Jeopardy Clause. The district court denied the motion. Melvin then pleaded guilty pursuant to a plea agreement.
We review de novo possible violations of the Double Jeopardy Clause. Grossfeld v. Commodity Futures Trading Comm'n,
The Double Jeopardy Clause provides that no "person [shall] be subject for the same offence to be twice put in jeopardy of life or limb." U.S. Const., amend. V. "[T]he Double Jeopardy Clause does not prohibit the imposition of any additional sanction that could, in common parlance, be described as punishment." Hudson v. United States,
"Whether a particular punishment is criminal or civil is, at least initially, a matter of statutory construction."
The Supreme Court has identified several factors that serve as "useful guideposts" for conducting this second inquiry. The guideposts include these factors: (1) "whether the sanction involves an affirmative disability or restraint"; (2) "whether it has historically been regarded as a punishment"; (3) "whether it comes into play only on a finding of scienter "; (4) "whether its operation will promote the traditional aims of punishment -- retribution and deterrence"; (5) "whether the behavior to which it applies is already a crime"; (6) "whether an alternative purpose to which it may rationally be connected is assignable for it"; and (7) "whether it appears excessive in relation to the alternative purpose assigned."
About the first inquiry, the monetary penalties provided by Congress in 15 U.S.C. § 78u-1 are labeled expressly as "civil penalties." Congress has also authorized the SEC, under certain situations, to deny a person permanently "the privilege of appearing or practicing before the Commission." 15 U.S.C. § 78d-3(a)(3). Although the penalties provided for under section 78d-3 contain no express "civil" designation, that Congress conferred upon the SEC -- an administrative agency -- the authority to impose such a penalty "is prima facie evidence that Congress intended to provide for a civil sanction." See Hudson,
Having determined that Congress intended the penalties for violating the Exchange Act to be civil in nature, we now determine -- looking only at the statutory language -- whether those penalties are "so punitive in form and effect as to render them criminal despite Congress' intent to the contrary." See ibr.US_Case_Law.Schema.Case_Body:v1">id
Third, none of the penalties "comes into play only on a finding of scienter ." The SEC may impose a monetary penalty against a person whom the SEC determines has merely "violated" the Exchange Act. 15 U.S.C. § 78u-1(a)(1). Although the amount of the penalty imposed is to be determined "in the light of the facts and circumstances" -- which might include consideration of a person's level of culpability -- the statute authorizes the imposition of a penalty even in the absence of scienter. Cf. Hudson,
About the fifth factor, that the conduct triggering the penalties is also criminal in nature is alone "insufficient to render the money penalties and debarment sanctions criminally punitive." See Hudson,
Given all the circumstances, Melvin has failed to demonstrate with the "clearest proof" necessary that the penalties imposed as a result of his earlier civil and administrative proceedings were so punitive that they must be treated as criminal penalties. Melvin's criminal prosecution thus constitutes no violation of the Double Jeopardy Clause. We affirm the district court's denial of Melvin's motion to dismiss the indictment on double jeopardy grounds.
AFFIRMED.
Notes
As part of Melvin's plea agreement, Melvin agreed to a limited waiver of appeal but retained expressly his right to appeal the denial of his motion to dismiss the indictment based on double jeopardy.
Melvin's settlement provided that Melvin was to be held jointly and severally liable with the two tippees for the disgorgement amounts.
On appeal, Melvin argues in large part that the district court erred in failing to consider whether the penalties -- as applied to Melvin (or to a class of similarly-situated defendants who reaped no personal profit as a result of the conduct) -- were punitive in effect. This argument is without merit. The law is clear that, in considering whether a nominally civil remedy rises to the level of a criminal penalty for purposes of the Double Jeopardy Clause, we consider only the statutory language, and not the specific penalties as applied in a particular case. See Hudson,