Meadows v. SEC

                 REVISED, AUGUST 26, 1997
                   UNITED STATES COURT OF APPEALS
                        For the Fifth Circuit



                               No. 96-60328




                         JAY HOUSTON MEADOWS

                                                                Petitioner


                                  VERSUS


                 SECURITIES AND EXCHANGE COMMISSION

                                                                Respondent



             On Petition for Review of an Order of the
                 Securities and Exchange Commission

                           August 22, 1997

Before   DUHÉ, BENAVIDES, and STEWART, Circuit Judges.

DUHÉ, Circuit Judge:

     Petitioner Jay Houston Meadows seeks review of an order of the
Securities and Exchange Commission sustaining sanctions imposed on

him by an administrative law judge for violations of § 17(a) of the

Securities Act of 1933, 15 U.S.C. § 77q(a), § 10(b) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-

5, 17 C.F.R. § 240.10b-5, promulgated thereunder.           We affirm.

                                    I

     At all relevant times, Jay Houston Meadows was a registered

representative    affiliated    with    Rauscher   Pierce    Refnes,     Inc.
(“RPR”), a registered broker-dealer.      In late 1990, Meadows, along

with Marc W. Gunderson and William Craig Harriger,1 formed Mundiger

International, Inc. (“Mundiger”) and Mira Golf International, Inc.

(“Mira Golf”) (collectively, the “Companies”) to engage in two

businesses:   Mira Golf was to wholesale recycled golf balls, and

Mundiger was to use the sale proceeds of the recycled golf balls to

drill and operate gas wells.2

     The three principals, along with Brian Catlin, shouldered the

management obligations for both Companies.      Gunderson, the brains

behind the ventures, claimed to have much experience in both

businesses and thus assumed the daily operating responsibilities;

Harriger, an attorney, provided legal and administrative support;

Catlin served as the Companies’ CPA; and Meadows joined purportedly

to assist Gunderson with managerial duties, to provide labor at

Mira Golf, and to invest Mundiger’s excess cash flow. The Division

of Enforcement (“Division”)3 contends, however, that Gunderson and

Harriger   recruited   Meadows   solely   to   raise   capital,   noting


      1
      In May 1994, Gunderson and Harriger, without admitting or
denying any of the allegations in the complaints against them,
consented to the entry of permanent injunctions enjoining them from
violating the antifraud provisions of the securities acts.
      2
       Initially, Mundiger was to perform both businesses. The
principals created Mira Golf only after Meadows’s RPR compliance
officer informed Meadows that he could not serve as an officer or
director in any venture that sought to raise capital through the
sale of gas well interests.    RPR also prohibited Meadows from
soliciting interests in either venture and from owning more than
10% of Mundiger’s stock.
      3
       All references to the Division are to the Securities and
Exchange Commission’s Division of Enforcement, the Respondent in
this action.

                                   2
Meadows’s lack of relevant business experience other than his

contacts to potential investors. Whether Meadows did in fact raise

capital forms the basis of this appeal.

     Pursuant   to   RPR’s    instructions,   Meadows   took   no   formal

position at Mundiger, and he confined his investment in Mundiger to

$10,000, for which he received 10% of its stock.           Meadows also

invested $100 in Mira Golf, for which he received an 8½% interest,

and was appointed its secretary-treasurer and one of its directors.

     Meadows and Harriger presented Mundiger to the “Masterminds,”

a small networking group established solely to discuss money-making

opportunities,4 and they arranged for Gunderson to speak at an

upcoming meeting.     At this meeting, Gunderson enthusiastically

represented the Companies’ prospects, promising that investors

could expect high returns within months of their investment.

Gunderson explained he had retained a lease on valuable gas-

producing property in the Fort Worth Basin (“Property”), and that

Mundiger had a contract to supply gas to the Texas Utility and Fuel

Company (“TUFCO”), a local Texas utility, at a price above the

current market price.        He indicated he sought investors to help

finance the drilling on the Property before the TUFCO contract

expired in two-and-one-half years. Gunderson represented there was

only a six-percent possibility--a figure he attributed largely to

human error--that a particular well would fail to produce. Meadows

challenged none of these assertions. Rather, he echoed Gunderson’s

enthusiasm, claiming Mundiger would hit gas wherever it drilled.

     4
      Meadows and Harriger were members of the Masterminds.

                                    3
      Meadows, however, never seriously investigated the validity of

such claims.     He testified he relied largely on both Harriger’s

opinion of Gunderson and Gunderson himself.           The only independent

inquiry   Meadows   made   was   in   late    1990   when   he   visited    the

Companies’ offices after regular business hours--and in the absence

of   Gunderson   and   Harriger--to       verify   Mira   Golf’s   golf    ball

inventory.     When Harriger learned of the unannounced visit, he

changed the locks and temporarily refused to give Meadows a key.

Meadows, who was one of Mira Golf’s officers and directors, was

somehow untroubled by Harriger’s action, testifying he knew he

still had authority to inspect the books during business hours.

Meadows, however, never chose at any time to examine any of the

books because he “trusted that it was being taken care of.”

      Following the initial Masterminds meeting, Meadows, either

alone or with Gunderson and/or Harriger, met in the RPR offices and

elsewhere with Masterminds members and other potential investors to

encourage their investment in the Companies. Between late 1990 and

early 1991, Mundiger raised approximately $800,000 from over twenty

investors through the sale of participation interests in several

separate drilling programs.       Mira Golf raised $78,000 from nine

investors.   Of the twenty or so investors in these Companies, ten

were Meadows’s RPR clients.5

      Mundiger drilled its first two gas wells in early 1991.

Output was far short of that represented by the principals; in

      5
       The Division does not suggest that any of the investments
passed through RPR or that Meadows received any commission from RPR
for the investments made.

                                      4
fact, production costs far exceeded revenues, a pattern that

continued for six of the ten wells Mundiger drilled.               Gunderson,

however, falsely represented otherwise, claiming these wells were

profitable.       In a February 1991 memo to Meadows and Catlin,

Gunderson and Harriger wrote that “we have grossly underestimated

our wells[’] production[,]” and urged Meadows and Catlin to solicit

more investors for future programs.          Without verifying Gunderson’s

claims of above-expectation well production, Meadows repeated them

to   potential    investors.       Investors    testified   that    Meadows’s

positive characterizations of the wells’ successes influenced their

investment decisions.

      In April 1991, Mundiger began paying investors their purported

pro rata shares of revenues earned from gas production and sales to

TUFCO.   These distributions, however, were in excess of investors’

actual shares but still significantly less than what Gunderson,

Harriger,   and    Meadows   had     represented.    Mundiger      apparently

obtained the funds for these overpayments from investor funds

furnished for subsequent well programs.

      In May 1991, Meadows resigned his positions at Mira Golf

following various salary disputes with Gunderson and Harriger.

Thereafter, he sold back some of his ownership interests in the

Companies for an initial payment of $10,000 and additional monthly

payments of $1,000 for one year.               The monthly payments were

conditioned, however, upon Meadows’s silence as to the Companies’

financial   situation.       Under    this   agreement,   Meadows    received

$13,000 in total, approximately $3,000 more than his aggregate


                                       5
investment just over seven months earlier.

       In August 1991, Harriger told Catlin he suspected Gunderson of

misappropriating Mundiger funds. In September 1991, Catlin assumed

managerial responsibilities for Mundiger and discovered that in

fact    both        Gunderson     and     Harriger    had    been    misappropriating

corporate funds for their personal uses.                    Catlin also learned that

Gunderson had grossly misrepresented the Property’s productive

capacity;      most     of    the    wells    had    gone    dry.      Catlin   further

ascertained that the Companies had never been profitable; in fact,

he   determined        that     Mundiger     was    insolvent.      Contrary    to   the

promises       of     Gunderson,     Harriger,       and    Meadows,    none    of   the

investors, except Meadows, recouped his or her initial investment.

       In   January      1994,      the   Securities       and   Exchange   Commission

(“Commission”)          instituted        administrative         proceedings    against

Meadows. It alleged that Meadows, in connection with the offer and

sale of the Companies’ securities, willfully violated § 17(a) of

the Securities Act of 1933, § 10(b) of the Securities and Exchange

Act of 1934, and Rule 10b-5 promulgated thereunder.                             The ALJ

agreed, finding Meadows had misrepresented to investors the risks

of investing in the Companies, the likelihood the ventures would be

profitable, and the speed with which investors would recoup their

investments. The ALJ then barred Meadows from association with any

broker-dealer with a right to reapply in two years; ordered Meadows

to permanently cease and desist from committing or causing any

violation of the antifraud provisions; and fined Meadows $100,000.

On appeal, the Commission affirmed.                  Meadows appeals.


                                              6
                                     II

     We uphold an agency’s decision unless it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance

with law.”     5 U.S.C. § 706(2)(A); accord Hawkins v. Agricultural

Marketing Serv., 10 F.3d 1125, 1128 (5th Cir. 1993).         We uphold the

Commission’s factual findings if supported by substantial evidence.

See 15 U.S.C. § 78y(a)(4); Whiteside & Co. v. SEC, 883 F.2d 7, 9

(5th Cir. 1989).     “Substantial evidence is such relevant evidence

as a reasonable mind might accept to support a conclusion.            It is

more than a mere scintilla and less than a preponderance.”           Ripley

v. Chater, 67 F.3d 552, 555 (5th Cir. 1995) (footnotes omitted).

It is not the function of an appellate court to reweigh the

evidence or to substitute its judgment for that of the Commission.

See id.

     By contrast, legal conclusions are “for the courts to resolve,

although even in considering such issues the courts are to give

some deference to the [agency’s] informed judgment.’”              Faour v.

United States Dept. of Agriculture, 985 F.2d 217, 219 (5th Cir.

1993) (quoting Federal Trade Comm’n v. Indiana Fed’n of Dentists,

476 U.S. 447, 454 (1986)).

                                     II

     Section    17(a)   of   the   Securities   Act   of   1933   states   in

pertinent part:

       It shall be unlawful for any person in the offer or
       sale of any securities . . ., directly or
       indirectly--

               (1)   to employ any device, scheme, or artifice
                     to defraud, or

                                     7
             (2)   to obtain money or property by means of
                   any untrue statement of a material fact or
                   any omission to state a material fact
                   necessary in order to make the statements
                   made . . . not misleading, or

             (3)   to engage in any transaction, practice, or
                   course of business which operates or would
                   operate as a fraud or deceit upon the
                   purchaser.

15 U.S.C. § 77q(a).     Meadows insists we cannot hold him culpable

under this section.6    We disagree.

                                  A

     Meadows reasons that § 17(a) culpability attaches only to

“offerors” or “sellers” of securities, and he maintains he acted as

neither in the offer and sale of the Companies’ securities.     The

Division disputes Meadows’s interpretation of § 17(a), arguing that

§ 17(a) encompasses more than just “offerors” or “sellers” because

it applies to “any person in the offer or sale of any security”

(emphasis added).7     We need not resolve this interpretive issue.8

     6
      Meadows insists the Division conceded he did not act as a
“seller” under § 17(a) when it informed the ALJ that it is not
“alleging that Mr. Meadows quote unquote sold the securities.”
Meadows’s allegation blatantly ignores the context in which this
statement was made.   In response to the ALJ’s confusion as to
exactly what charges Meadows faced and exactly in what capacity
Meadows was charged, the Division explained, “We are not alleging
§ 5 [i.e., 15 U.S.C. § 78e, which prohibits any broker or dealer
from selling unregistered securities].     We are not alleging,
although . . . it’s implicit in much of the testimony . . . that
Mr. Meadows quote unquote sold the securities. We are alleging
nothing more than § 10(b) and § 17 may require . . . .”
         7
        The Division does not specify, however, the class of
defendants it believes is contemplated by § 17(a).
     8
      Our research has uncovered no case squarely resolving this
question.   We recognize the Supreme Court has stated that the
language of § 17(a) “does not require that the fraud occur in any
particular phase of the selling transaction,” United States v.

                                  8
Even if we assume, without deciding, that § 17(a) applies only to

offerors   or   seller,   Meadows’s       argument   still   fails   because

substantial evidence demonstrates Meadows was, in fact, a “seller.”

     A “seller” is one who (1)   “engages in solicitation,”          Pinter

v. Dahl, 486 U.S. 622, 643 (1988), and (2)           is “motivated at least

in part by a desire to serve his own financial interests or those

of the securities owner.”    Pinter, 486 U.S. at 647.9         Meadows fits

squarely within this definition.

                                      1

     In the investment context, one who solicits attempts to

produce the sale by urging or persuading another to act.             See id.

at 646.    Persuasion can take many forms.             Here, Meadows, who

testified he considers himself a terrific salesman, admitted he

could initiate a sale simply by informing a customer that he liked

a certain investment or had invested in a particular venture.

Substantial evidence shows Meadows exploited these sales tactics to

raise capital for Mundiger and Mira Golf.            By characterizing the

Companies as opportunities too good to pass up, Meadows solicited

many investors to furnish capital for worthless projects.



Naftalin, 441 U.S. 768, 773 (1979), and that “[t]he statutory terms
[offer and sale] . . . are expansive enough to encompass the entire
selling process, including the seller/agent transaction.”       Id.
Naftalin, however, dealt with the single issue whether a seller
could be held liable under § 17(a)(1) for fraudulent conduct
directed against his broker.
    9
     Although Pinter involved § 12 of the 1933 Act, it interpreted
language identical to that found in § 17(a), viz., the terms
“offer” and “sale.”     The ALJ’s decision to apply the Pinter
definitions to the instant case was therefore proper and is not
questioned by the parties.

                                      9
     In particular, the record demonstrates Meadows recommended the

Companies to investors;10 claimed that Mundiger would hit gas

wherever it drilled; avowed that an investment in Mundiger was a

“sweetheart” or “slam dunk” deal; estimated that Mira Golf’s

potential profit on each recycled golf ball was between $.19 and

$.50; assured that an investment in Mira Golf was “pretty safe”;

maintained that investors could expect payback within six-months;

conveyed that the first two wells “came in real well” but that the

latest well package was “the most sure thing” and a “huge plum”;

asserted that investments in Mundiger and Mira Golf would help

realize the investor’s investment goals; advised investors on means

by which they could procure funds to invest in the Companies;

remarked that demand to participate in the well programs was

greater than the supply of participation interests; commented that

all his RPR clients invested in the Companies; and disclosed that

he had done the same.11

     Notably, the record also reveals that others perceived Meadows

as a fundraiser.   Investors testified they considered Meadows the



    10
     Four investors testified that Meadows recommended investments
in one or both of the Companies; three of the four were Meadows’s
RPR clients. At least two investors testified they would not have
become involved with the Companies absent Meadows’s recommendation.
     11
      Meadows points to four witnesses who testified that he did
not solicit their investment. Nonetheless, two of these investors
later testified they relied on Meadows’s investment suggestions;
one later testified he wouldn’t have gotten involved had Meadows
not recommended the investment; and another testified he tendered
payment to Meadows.   In any event, that some witnesses did not
testify against Meadows does not refute others’ statements that
Meadows had solicited them.

                                10
“salesperson” of the Companies’ three principals.12        Gunderson and

Harriger viewed Meadows similarly.          When Mundiger was short on

capital, they wrote to Meadows and Catlin asking them to “contact

[their] investors” and to “get [their] feelers out now.”         Meadows

himself understood his role to be that of a salesman.              After

another client made the decision to invest, Meadows declared, “Boy,

I wish all my sales were that easy.”         The evidence establishes,

therefore,      that    Meadows   engaged   in   the   solicitation   of

investments.13

                                     2

     Liability will extend to Meadows, however, only if substantial

evidence shows that his solicitations were motivated by personal

financial gain.        See Pinter, 486 U.S. at 647.    “Congress did not

intend to impose [liability] on a person who urges the purchase but

whose motivation is solely to benefit the buyer.”          Id.   Meadows

claims his motivations were pure, arguing that the evidence shows

only that he was motivated by a gratuitous desire to share an

attractive investment opportunity with his fellow country club

members and others.        In support, he notes he received neither a

salary from the Companies nor a commission from RPR.        These facts,


      12
       The testimony shows that Meadows used his RPR offices to
solicit or to participate in the solicitation of investors; that he
personally picked up an investment check at an investor’s home; and
that he accepted investment checks from investors at his RPR
offices. Such utilization of his RPR offices lends further support
to investors’ perceptions of Meadows as a salesman.
           13
         We emphasize that we considered the totality of the
circumstances in finding that Meadows solicited investors.     No
particular factor played a determinative role in our decision.

                                     11
however, are not dispositive.      Where a defendant “anticipat[es] a

share of the profits,” the Supreme Court has held that he has

solicited    for   personal   financial   benefit.   See   id.   at   654

(alteration in original).        Meadows was a shareholder of both

Mundiger and Mira Golf and thereby stood to benefit personally from

the additional investments he solicited.14     We conclude, therefore,

that substantial evidence supports the Commission’s finding that

Meadows acted as a seller under § 17(a).

                                    B

     Meadows also complains he cannot be held culpable under §

17(a) insofar as substantial evidence fails to show he acted with

scienter.15 Liability under § 17(a)(1) attaches only upon a showing

of severe recklessness.       See Securities and Exchange Comm’n v.

Southwest Coal and Energy Comm’n, 624 F.2d 1312, 1320-21 & n.17

(5th Cir. 1980).     Severe recklessness is:

          limited to those highly unreasonable omissions or
          misrepresentations that involve not merely simple or
          even   inexcusable   negligence,   but  an   extreme
          departure from the standards of ordinary care, and
          that present a danger of misleading buyers or
          sellers which is either known to the defendant or is
          so obvious that the defendant must have been aware
          of it.

See Broad v. Rockwell Int’l Corp., 642 F.2d 929, 961 (5th Cir.

     14
      Though Meadows did not invest directly in any of Mundiger’s
well programs, Mundiger itself held a 22½ % to 63% working interest
in each drilling program.
     15
      Meadows was charged with violating all three subsections of
§ 17(a). Scienter is not an element of a § 17(a)(2) or § 17(a)(3)
cause of action, however.    See Aaron v. Securities & Exchange
Comm’n, 446 U.S. 680, 697 (1980).       Under these subsections,
culpability is established merely by a showing of negligence. See
id.

                                   12
1981) (en banc); Southwest Coal, 624 F.2d at 1321 n.17.                             Although

Meadows insists the record does not show that he knew or should

have known his conduct presented a danger of misleading others, the

substantial weight of the evidence demonstrates otherwise.

      Meadows        solicited         investors      with       materially       false    and

misleading         claims     that     Mundiger      and   Mira    Golf      were   low-risk

investments that were virtually certain to yield a high return.16

Moreover, Meadows failed to disclose many material facts, including

that:        he,    an   officer       and    director     of     Mira    Golf,     had   been

temporarily denied after-hours access to the Companies’ books; he

had never conducted a background investigation into Gunderson, any

of Gunderson’s assertions, or the Companies’ purported successes

and   that     therefore,         he    had     no    basis      for     recommending      the

investments; he was aware Gunderson recently had been accused of

misappropriation; he was aware Gunderson, while unemployed, was

known as a big spender; he was aware Gunderson had a reputation for

being able to “sell ice to an Eskimo”; he was aware Gunderson and

Harriger      refused       to    follow      Catlin’s     recommendation         that    they

maintain separate bank accounts for each of Mundiger’s drilling

programs; he discovered the funds for each drilling project were

commingled;        and   he      had   been    forced      out    of   the    Companies     by

Gunderson and Harriger, who also paid him to be silent about the

Companies’ financial situation.

      In light of his knowledge of these disturbing facts, to say



      16
           See supra Part II.A.1.

                                               13
that Meadows, a securities professional,17 knew or should have known

that his recitations of Gunderson’s consistently optimistic claims

of the Companies’ successes presented a danger of misleading buyers

is an understatement.18    We conclude, therefore, that substantial

evidence supports the Commission’s determinations.

                                  III

     The Commission also found that Meadows willfully violated §

10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b),

and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder.

Meadows disputes only whether substantial evidence supports the

Commission’s finding that he acted with scienter. As with § 17(a),

liability under § 10(b) and Rule 10b-5 attaches upon a showing of

severe recklessness.    See Broad, 642 F.2d at 961-62.    As discussed

above, we have concluded that Meadows acted with the requisite

scienter.     We thus affirm the Commission’s findings.


    17
      Meadows attacks certain language in the Commission’s opinion
as erroneously imposing upon him those due diligence obligations
pertinent only to a securities professional acting in that
capacity. Because the Division does not allege Meadows acted as a
registered representative with respect to the sale of interests in
the Companies, Meadows argues we must reverse.
   At one point in its opinion, the Commission referred to a
stockbroker’s obligation to investigate any highly optimistic
claims he or she makes.       This reference notwithstanding, we
conclude the Commission’s finding of scienter turned on its
determination that Meadows, whether acting as a registered
representative or otherwise, exhibited conduct that represents an
extreme departure from the standards of ordinary care. Meadows
made material misrepresentations and omitted material facts when he
had strong reasons to do otherwise, and his actions or lack thereof
presented a clear danger of misleading buyers. We therefore find
Meadows’s argument without merit.
         18
           The Commission rejected Meadows’s explanations for his
conduct.     Substantial evidence supports this decision.

                                  14
                                  IV

     Meadows next alleges the ALJ denied him a fair hearing.

                                   A

     Meadows claims first that the ALJ failed to give any reasons

both for his decision to reject testimony indicating Meadows did

not solicit investors and for his conclusion that Harriger, a less-

than-trustworthy    individual,   was   a   credible   witness   for   the

Division.     We are bound by an ALJ’s credibility determinations.

See Helena Laboratories Corp. v. NLRB, 557 F.2d 1183, 1187 (5th

Cir. 1977).    “If, however, the credibility choice is based on an

inadequate reason, or no reason at all, we are not compelled to

respect it, and shall not do so.”       NLRB v. Moore Business Forms,

Inc., 574 F.2d 835, 843 (5th Cir. 1978).

     We disagree with Meadows’s contention that the ALJ failed to

give any reasons for his decision.      The ALJ stated he reviewed the

testimony and found it does not support Meadows’s claim of an

unfair hearing.    Our review of the record satisfies us that the

ALJ’s reason is adequate.    As to Harriger’s credibility, we point

out that the Commission noted its findings of Meadows’s culpability

do not rest on Harriger’s testimony.        On appellate review, our job

is not to reweigh the evidence.    Our job is to review the record to

determine if substantial evidence supports the judge’s finding. It

does.19

                                   B

     19
      We note that Meadows has failed to point to anything in the
record suggesting the ALJ’s credibility assessments should not be
upheld.

                                  15
       Meadows next argues that the ALJ evidenced a pattern of bias

or prejudice against him. He claims the ALJ aggressively supported

the    Division’s     case   by    vigorously    cross-examining       Meadows’s

witnesses, by restricting the evidence exculpating Meadows of

fraudulent conduct, and by targeting Meadows and his counsel with

sarcastic comments.

       In Liteky v. United States, 114 S. Ct. 1147 (1994), the

Supreme Court set forth the standard for establishing bias.                    The

Court said, “[J]udicial remarks during the course of a trial that

are critical or disapproving of, or even hostile to, counsel, the

parties, or their cases, ordinarily do not support a bias or

partiality challenge” unless “they reveal such a high degree of

favoritism or antagonism as to make fair judgment impossible.” Id.

at    1157.    The    Commission    considered    Meadows’s      allegation    of

procedural impropriety and concluded the ALJ treated both sides

equally.      Substantial evidence supports this finding:               the ALJ

cross-examined witnesses on both sides, limited the number of

witnesses each party could call, finding the testimony repetitive,

and plied both parties with sarcasm.

                                        V

       Meadows next argues that the sanctions imposed on him by the

Commission--a bar from association with any broker or dealer with

the right to reapply in two years, a cease and desist order, and a

$100,000 fine--are unwarranted.             We will affirm the Commission’s

imposition     of    sanctions    absent    arbitrariness   or    an   abuse   of

discretion.     See Whiteside, 883 F.2d at 10.        Moreover, “[i]t would


                                       16
be a gross abuse of discretion to bar an investment advisor from

the industry on the basis of isolated negligent violations.”

Steadman v. Securities & Exchange Comm’n, 603 F.2d 1126, 1141 (5th

Cir. 1979), aff’d on other grounds, 450 U.S. 91 (1981).

     Meadows gives us no reason to disturb the Commission’s choice

of sanctions.          The temporary bar from association is neither

arbitrary nor an abuse of discretion.               The record demonstrates

Meadows engaged in a continual pattern of culpable behavior with

severe recklessness and with almost no thought to those he would

harm.20        The temporary bar from association is thus an appropriate

remedy designed to protect the public from future misconduct.21

     Moreover, the $100,000 fine is justified.            Section 21B(b) of

the Exchange Act, 15 U.S.C. § 78u-2(b), grants the Commission

authority to assess penalties of $100,000 for each fraudulent act

or omission if it resulted in substantial losses.              Every investor,

except Meadows, suffered losses.             By the close of 1993, Mundiger

investors        had   received   a   return   of   $167,445    on   aggregate

          20
       Meadows relies on Johnson v. SEC, 87 F.3d 484 (D.C. Cir.
1996), for the proposition that a temporary bar from the securities
industry is a punitive rather than remedial sanction. Meadows’s
reliance on Johnson is misplaced, however. Johnson emphasized that
the imposition of a six-month suspension is less penal in nature
where the reason for the sanction is the degree of risk petitioner
poses to the public and is based upon findings demonstrating
petitioner’s unfitness to serve the investing public. See id. at
489. In the instant action, the ALJ made such findings.
     21
      Meadows argues the temporary bar from the brokerage industry
sounds the death knell for his career as a stockbroker. We note,
however, that re-entry following a temporary bar is neither
illusory nor unwelcome. See In re Arthur H. Ross, Exchange Act
Release No. 34-30956, 1992 WL 188932, at *2-3 (SEC July 27, 1992);
In re Paul Edward Van Dusen, Exchange Act Release No. 34-18284,
1981 WL 27886, at *3 (SEC Nov. 24, 1981).

                                        17
investments of $783,126; Mira Golf investors lost more than 90% of

their     investment.   The   imposed    sanctions   are   thus   not

disproportionate to Meadows’s conduct.

                                VI

     For the foregoing reasons, we

AFFIRM.




                                18