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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
POSNER SHARES DISTRICT COURT APPEALS VOTING VOTE TRUSTEE SECURITIES LITIGATION AFFIRMANCE DIRECTING SHAREHOLDERS PROPORTIONATE SALEM MERGER PUBLIC COMPANY VIOLATIONS RELIEF EXCHANGE COMMISSION CIR ACQUISITION SECURITIES LAWS OFFICER CONTROLLING VOTING TRUST DEPART JUDGEMENT NON-POSNER SHARES UNPUBLISHED OPINION |
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 14842 / March 12, 1996
SEC v. Drexel Burnham Lambert Inc., et al.,
(No. 95-6217) (2d Cir.)
The Securities and Exchange Commission announced that on
March 8, 1996, the United States Court of Appeals for the Second
Circuit affirmed an order entered by the district court in this
case on June 30, 1995 (88 Civ. 6209(MP)) (Pollack, J.) which
prohibits Victor Posner from directing how his shares of Salem
Corp. are voted on any proposed merger or other acquisition of
the company.
In a 1993 decision, 837 F. Supp. 587 (S.D.N.Y. 1993), the
district court had found that Posner violated various provisions
of the securities laws, repeatedly abused his position as an
officer and director of public corporations, and enriched himself
at the expense of public shareholders. Among the relief ordered
was an order barring Posner from serving as an officer or
director of any public company and directing that Posner's shares
of any public company he controlled be placed in a voting trust.
The court of appeals affirmed the relief in a 1994 decision. SEC
v. Posner, 16 F.3d 520 (2d Cir. 1994), cert. denied, 115 S.Ct.
724 (1995)(see Litigation Release No. 13977).
The voting trust order, entered March 2, 1994, provided that
in any matter requiring a shareholder vote, the Trustee should
vote Posner's shares proportionately to how the other
shareholders vote. It provided that the Trustee could depart
from proportionate voting only if necessary to carry out the
purposes of the final judgment against Posner and only if the
district court, after notice of the Trustee's intention to depart
from proportionate voting, did not direct otherwise.
In June 1995, the Trustee notified the court that interest
had been expressed in the possible acquisition of Salem Corp., in
which Posner is a controlling shareholder. The Trustee informed
the court that if a merger were proposed for Salem, he
anticipated voting the shares with respect to the merger as
directed by Posner, unless otherwise instructed by the court.
The SEC opposed that course of action and on June 30 the district
court ordered the Trustee not to follow that course, but rather
to vote the shares proportionately to how the non-Posner shares
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