Securities and Exchange Commission v. Court, et al.

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 
Case No. 03-80612-Civ-MardVitunac 
SECURITIES 
AND EXCHANGE COMMISSION, 
VS. 
MICHAEL LAUER, 
MAR 2 3 2005 
LANCER MANAGEMENT GROUP, L.L.C. and 
CLARENCE MADOOX 
CLERK U.S. OIST, CT.
LANCER MANAGEMENT 
GROUP 11, L.L.C., 
5.0. OF FLA. -W.P.B. 
d 

Defendants, 
and 
LANCER OFFSHORE, INC., 
LANCER 
PARTNERS, LP, OMNFUND, LTD., 
LSPV, INC. and LSPC, L.L.C., 
Relief Defendants. 
1
-
REPORT AND RECOMMENDATION 
THlS CAUSE is before the  Court on Order of Reference (DE 515) froin United States 
District 
Judge Kenneth A. Marra "for appropriate disposition of all pre-trial discovery motions, and 
all motions that relate directly to these motions," and Order of Reference (DE 594) "for appropriate 
disposition 
of Plaintiffs Application for an Order to Show Cause Why Defendant Michael Lauer 
Should Not 
be Held in Contempt of the Court's Assct Freeze Order (DE 567)." Pending before the 
Court are 
the following: 
1) 
Order to Show Cause Why Defendant Michael Laucr Should Not be Held in 
Contempt of the Court's Asset Freeze Order 
(DE 6471, filed December 3,2004; 
Laucr's Response to Plaintiffs Application  for an Ordcr to Show Cause Why Lauer 
Should Not 
be Held in Contempt of the Court's Asset Freeze Order (DE 685), filcd 
December 
27,2004; 
4-

SEC's Reply to Defendant Lauer's Opposition to Plaintiffs Application for an Order 
to Show Cause (DE 727),  filed January 18,2005; 
Supplement to Plaintiffs Application for 
an Order to Show Causc Why Defendant 
Lauer Should Not 
be Held in Contempt of the Court's Asset Freeze Order (DE 728), 
filed January 18,2005; 
Receiver's Joinder With Plaiutiff SEC's Application for 
an Order to Show Cause 
Why Dciendant Lauer Should Not be Hcld in Contempt of the Court's Asset Freeze 
Order 
(DE 759),  filed February 1,2005; 
Order to Show Cause Why Defcndant  Michael Lauer Should  Not be  Held  in 
Contenlpt 
of the Court's December 3, 2004 Order Requiring Him to  Provide a 
Disclosure Statement Within Five Days (DE 691), filed December 23,2004; 
Respondent Lauer's Compliance 
With Rule 26(a)(l) of the Federal Rules of Civil 
Procedure 
(DE 703), filed January 3,2005; 
Order to Show Cause 
Why Respondent Should Not be Held in Contempt for 
Violating the November 8,2004 Order 
(DE 675), filed December 17, 2004; 
Lauer's Response to the Court's Order 
10 Show Cause Why the Respondent Should 
Not be Hcld 
in Contcrnpt for Violating thc November 8,2004 Order (DE 726), filed 
Januaryl3, 2005; 
SEC's Reply to Lauer's Opposition in Response to the Court's Order to Show Cause 
Why Lauer Should Not  be Held in Contempt for Violating  the November 8, 2004 
Order 
(DE 738)'  filed January 24, 2005; 
Order 
to Show Causc Why Lauer Should Not be Held in Contempt of this Court's 
December 
22, 2004 and January 5, 2005 Orders Requiring Him to Appear for His 
Duly Noticed 
Deposition (DE 719), filed January 13,2005; 
Lnuer's Response Affidavit 
to Court's Order to Show Cause Why the Respondent 
Should Not be Held in Civil Contempt (DE 754), filed January 27,2005; 
SEC's Reply to Lauer's Opposition to the Court's order to Show Cause 
why Lauer 
Should Not be Held in Contempt of the Court's December 22,2004 and January 
4, 
2005 Orders Requiring Him to Appear for His Duly Noticed Deposition (DE 770), 
filed February 4, 2005. 
The Assct Freeze Order 
On July 10, 2003, the Court entered 
a Temporary Restraining  Order (DE 19) that  froze all 
2 

oflauer's assets and required him to provide a sworn accounting. One week later, the Court entered 
a Preliminary Injunction Order (DE 22), by consent.  The Preliminary Injunction Order continued 
the blanket freeze on Lauer's assets ("Asset Freeze Order"). The asset freeze, in pertinent part, 
stated the following: 
Defendants 
. . . are [I restrained from, directly or indirectly, transferring, setting OK, 
receiving, changing, selling, pledging, assigning, liquidating or othcnvise disposing 
of, or  withdrawing any assets  or property owned  by, controlled 
by, or in  the 
possession of any Defendant 
. . . . This asset freeze shall apply to any accounts, 
banking, brokerage or otherwise in the names of third parties on which Lauer is a 
signatory. 
This asset ireeze acted 
as a blanket freeze on all "assets or property owned by, controlIed by, or in 
tlie possession" of Lauer. (DE 22, at 5-6). 
The SEC claims that Lauer secreted $19,812 in dividends from the Millennium Fund  into a 
bank account over which hc exercised clefticto control in violation of the Assct Frecze Order. 
Specifically, the SEC states that Lauer  endorsed  a Deccniber 12, 2003 distribution check in the 
amount of 
$1 1,011 to Hcidi Carens.  Carens then deposited the check in her business bank account 
which, according to  the 
SEC, has a  business address identical to Lauer's  personal  residence. 
Thereafter, on April 7,2004, the 
SEC alleges that Lauer endorsed a second distribution check in the 
amount of $8,801 
to Judith Brisman. In both instances, the SEC claims that Lauer violated the Asset 
Freeze Order 
by transferring or assigning his interests. 
In addition, the SEC lists  instances  when it claims that  Lauer  made transfers into the 
CarendLauer account, including 
a check for $21,500 from the sale of a Mini C-ooper, and $1 1,500 
from the sale ofa BMW Motorcycle. In its Supplement to the Motion for Contempt (DE 727), the 
SEC details  additional assets diverted by Lauer  in willful violation of the Asset Freeze Order, 

including $139,258 fkom the liquidation of an insurance policy ', and 571,571 from the sale of luxury 
furniture and from  rental income. The SEC reiterates that Lauer failed to disclose any of these 
transactions. Thc 
SEC believes that Lauer has divcrtcd at least 5263,641 in frozen assets and has 
hidden millions of dollars 
worth of assets,  including a C-11 Mercedes race car appraised  for $5 
million. 
Lauer responds that 
the SEC's Application for an Order to Show Cause is nolhingmorc than 
he agency's  attempt to shift foci~s away from the fact that the SEC lacks any evidence to proceed 
to trial. Lauer claims 
that he was not  involvcd in the sale of the Mini Cooper which resulted in a 
profit of 
$21,500. Although Lauer admits depositing other checks in Carens' bank account- he states 
hat he did so because his own bank accounts were frozen. With regard lo the $1 1,011 check and 
the $8,801 check, Lmer argues that these checks were issued after the Assel Freeze Order went into 
effect, 
and thus,  these proceeds were  not covered by the Order. Lauer does not respond to the 
allegations contained in the SEC's Supplcment 
(DE 727). Instead, Lauer chooses to dispute the facts 
underlying the original  Asset  Freeze  Order. In doing so, Lauer attempts lo challenge the actual 
Order rather than establish that he has 
made in good faith all reasonable efforts to meet the terms of 
the 
Order. 
The Disclosure Staternent 
Pursuant to Federal Rule 
of Civil Procedure 26, the SEC requested Lauer's  disclosure 
' The SEC details the facts surrounding the liquidation of the insurance policy.  After 
Sovereign Bank issued Lauer a check for 
$1 39,258.23, Lauer endorsed the check to Brisman. 
One week  later, Brisman wrote Lauer a check for the same mount. Lauer and Carens than 
deposited the check into the Lava Group account ("CarensILauer bank account"). 

statemenl in  January of 2004.' Lauer failed to provide the statement. On August 19,2004, the SEC 
filed a Motion (DE 470) seeking to compel Lauer to provide the disclosure statement. The Distnct 
Court  ordered Lauer to provide 
his disclosure  statement to the SEC no later than September 22, 
2004. (DE 49 1 ). However. Lauer  failed to meet  this deadline. 
On December 3, 2004, this Court 
entered an Ordcr 
(DE 649) requiring Lauer to provide thc SEC with his initial disclosure statement 
within five days. 
On December 21, 2004, after Lauer filled to meet the Court's deadline, the SEC 
filed an Application for Order to Show Cause (LIE 677). 1h~s (DECourt wanted the Appl~cat~on 
691) on December 22, 2004. Lauer filcd a Motion requesting additional tirnc to filc the disclosure 
statement, and the Court denied his request 
(DE 709). On January 3,2005, Tmer filed his disclosure 
statement 
(DE 703), one year after it was first requested. 
The Court's November 
8. 2004 Order 
On July 10,2003, the SEC served its First Set of Interrogatories upon Lauer. On December 
10,2003, the 
SEC requested that Lauer answer thc interrogatories by January 10,2004. After Lauer 
filled to 
do so. the SEC filed a Motion to Compel. The Court entered an Order (DE 184) granting 
the Motion to Compel and specifically ordered Lauer to prov~de full and con~plete responses to the 
interrogatories no later than March 3,2004. The 
SEC stated that Lauer provided wholly inadequate 
responses to the interrogatories,  and thus, the 
SEC filed a motion  to hold Lauer in contempt. On 
May 10,2004, thc Court issued an Order (DE 332) giving Lauer until May 28,2004 to serve full and 
complete responses to the interrogatories. 
The Court also warned Lauer that if he failed to comply 
with the Order, the Court would entertain 
an appropriate  motion for sanctions. On June 2, 2004, 
2 
Although  Lauer eventually provided the disclosure statement, the Court includes a 
rendition of the SEC's efforts to obtain the disclosure statement as an additional example of 
Lauer's  repeated failures lo comply with various court orders. 

Lauer filed a  Request to  Extend Time for a Morc Comprehensive Response to the SEC's 
Interrogatories 
(DE 372). On Augus~ 19, 2004, the Co~~rtissued an Order (DE 491) extending the 
deadline to September 22, 
2004. On September 22"" Lauer again filed a Motion to Extend the 
Anlount of Time to respond to the inten-ogatories. On November 
8. 2004, this  Court  entered an 
Order (DE 596) requiring Lauer to rcspond to Plaintiffs interrogatories by no later than November 
22, 2004. 
Lauer failed to follow this Court's instn~ctions. On December 16, 2004. this Court 
granted the SEC's Applicalion for 
an Order to SIlow Cause (DE 075). 
Lauer responds that 
he answered the interrogatories to the best ofhis ability. However, Lauer 
admits that he refused to answer interrogatories that he considered irrelevant or too broad. 
Thus, 
rather than seeking specific redress from the Court, Lauer chose to ignore certain interrogatories. 
Furthcr, Lauer attempted to 
gain an extension of time by claiming that he rcquired copies of 
certain docurncnts in order to answer the interroya~ories. These documents had been lawfillly seized 
by the Receiver.   Upon  receiving compact discs  containing thc documents requested,  Lauer was 
dissatisfied beca~lse 
the discs did not contain an indcx nor a directory.   Lauer filed a  Motion to 
Compel an index or directory for the documents contained on the discs. The Court denied Lauer's 
~otion.~ 
hportantly, Lauer  does  not  assert  that he is unable to comply with the  Order requiring 
answers to interrogatories.    Instead,  Lauer  continues 
to maintain that the scopc of the SEC's 
inlerrogatones should be limited and narrowed. In doing so, Lauer attempts to challenge the actual 
The Court found that no such index nor directory existcd prior to the Receiver  lawfully 
seizing the documents in question. The Court refused to order the Receiver to expend the time 
and resources required lo create such 
an index. Althougli Lauer believes that the Court has not 
yet ruled on his Motion to Compel (Lauer's Rcsponse to Order to Show Cause, at 
4), the Court 
clearly denied Lauer's Motion. 
(DE 596). 

Order to Show Cause rather than establish that he has made in good  faith all reasonable efforts to 
mcet the terms of the Order. 
The SEC replics that Lauer has acted in bad faith throughout thc discovcry process. Thc SEC 
urges this Court to view the totality  of Lauer's actions, ~nclucting his steadfist refusal  to this day to 
provide required d~cumcnts.~ 
The January 5-6. 2005 Deposition 
This Court cntered tllrec different Orders (DES OOO, 696, and 7 19)requiring Lauer to appear 
for his duly  noticed  deposition on January 5-6, 2005. The Court notes that it  received Lauer's 
Enlcrgency Motion  for Reconsidcration 
(DE 693) on January 4, 2005. Thc Court immediately 
denied the Motion. The Court's Order 
(DE 696) was immediately docketed,  and  the Court 
personally emailed Lauer a copy of the Order to cnsure propcr noticc. 
111 addition, the SEC states 
that 
it also scrvcd Laucr with a copy of the Order via facsimile and Fed-Ex on January 4, 2005. 
Further, the Rcceiver also emailed 
a copy ofthc Court's Order to Lauer on January 4,2005. Despite 
thcse numerous efforts, Lauerclaims that he did not receive notice orthe Court's Order until January 
5,2005. Thc Court finds this hard  lo believe. The SEC states that it spoke to Lauer on January 5, 
2005 at which time Lauer informed the SEC that he would not appear for the deposition. 
Ln his Response, Lauer  reiterates his belief  that  the Court erred in denying his various 
motions to cancel 
the deposition.   Lauer again attempts to challenge the actual Order to Show Cause 
rather 
than establish that he has made in good  faith all reasonable  efforts to meet the terms of the 
Order.  Lauer does not assert an inability 
to comply with thc Orders requiring his appearance at the 
'On February 28,2005, the Court granted the SEC's Emersency Motion to Compel 
Lauer to produce documents 
in response to the first and second requests  for production. &g DE 
827. 

depositions. 
Civil Contempt Sanctions 
It is well settled that "[c]o~lrts have inherent power Lo enrorce compliance with thcir lawful 
orders through civil conten~pt." Citronelle-Mobile Gatherine, Inc. v. Watkins, 
943 F.2d 1297,1301 
(1 lfhCir. 1991) (quoting Shillitani v. United States, 384 U.S. 364, 370 (1966)). In order to hold a 
person in  contempt, 
the Court ]nust determine whether  there is clear and convincing cvidence that 
(I) the allegedly  violated  order was \Aid and lawful; (2) the order was clear,  definite and 
unanlbiguous; 
and (3) the alleged violator had the ability to comply with the order. McCreeor v. 
Chicrico, 206 F.3d  1378 (I 1th Cir. 2000). Fcderal Rule of Civil Procedure 37(b)(2)  states in 
pertinent part: 
If 
a party. . . fails to obey an order to provide or pennit discovery. . . the court in 
which the action 
is pending may make such orders in regard to the failure as are just, 
and among othcrs the following: 
(B) An order refusing to allow the disobedient party to support or oppose designatcd 
claims or defenses, or prohibiting that party from introducingdesignated matters into 
evidence; 
(C) 
An order striking out pleadings or parts thereof, . . . or dismissing the 
action or proceeding or any part thereof, or rendering a judgment 
by default 
against thc 
disobedient party; . . . . 
In lieu of any of the foregoing orders or in addition thereto, the court shall require the party 
failing to obey the order. 
..to pay thereasonable expenses, including attorney's fees, caused 
by the failure, udess the court finds that the failurc was substantially justified or that other 
circumstances make 
an award of expenses unjust. 
The 
SEC has met its initial burden of proving, by clear and convincing evidence, that Lauer 
violated the Asset Freeze Order, the Order requiring  a disclosure statement, the Ordcr requiring 
answers to interrogatories, and the Orders requiring Laucr's appearance at dcpositions. 
The 
SEC having made this prima facic showing, the burden of production shifts to Lauer to 
defend his failurc on the grounds 
that he was unable to comply with the Orders. CFTC v. Wellington 

Precious  Metals. Inc., 950 F.2d 1525, 1529 (1 llh Cir.  1992) (citing United States v. Rvlander, 460 
U.S. 752,  757 (1983). However, in order to satisfy this burden, Lauer must offer proof bcyond  a 
"mere assertion ofinability" and introduce specific evidence to support his claim. Citronelle-Mobile 
Garherinc,  Inc., 
943 F.2d at 1301 (q~~oting United States v. Haves, 722 F.2d 723, 725 (I 1"' Cir. 
1984)). Lauer  can only meet this burden by demonstrating that  he has "made  in good faith all 
reasonable efforts to comply." Citronclle-Mobile Gathering, Inc., 943 F.2d at 1301 (quoting United 
States 
v. Ryan, 402 U.S. 530, 534 (1971)). If and only if Laucr can make \his showing, the burden 
then shifts 
back to the SEC to provc Lauer's ability to comply with the various ~rders.~ 
Rather than claiming that 
he is unable to comply with the directives, Lauer instead attempts 
to challenge the legal or factual basis underlying the various Orders to Show Cause. However, it is 
well settled that a contemnor cannot ask 
the Court to reconsider the legal or Sactual basis of the Order 
at issue. See Mae~iov. Zcitz, 333 U.S. 56, 69 (1 948). Lauer cannot excuse his defiance of this 
Court's Orders 
by simply stating that, in his opinion, the Orders were unlawful.   Lauer asks this 
Court "to consider [his] pro se status which [] militates  for a degree of leniency." " Howcver, as 
Judge Zloch noted  in his February 25,2004 Order, "prose litigants, such as Lauer, are not excused 
from compliance with orders, relevant case 
law and thc rules of court, includi~~g the Federal Rules 
of Civil Procedure."  (citing Moon 
v. Newsome, 863 F.2d 835, 838 (1 lIhcir. 1989)). DE 184. The 
fact remains  that Lauer blatantly  ignored  this Court's specific  Orders, 
and hc cannot offer any 
evidence of his inability to comply with said Orders. 
Before the District Court can hold Lauer in contempt, "[dlue process requires that 
the court 
"The party seeking the contempt  citation retains the ultimate burden 
of proof. . ." 
CFTC, 950 F.2d at 1529 (quoting In re Battaelia, 653 F.2d 4 19, 423 (9IhCir. 1981)). 
6 
Lauer's Rcsponse to Order to Show Cause, at 7. 
9 

inform the alleged contemnor of the contemptuous  conduct, and provide a hearing in which the 
allegcd contemnor may explain why the court should not make a contempt finding." Citronelle-
Mobile Gatherinn, Inc., 
943 F.2d at 1304(quoting Mercer v. Mitchell, 908 F.2d 763,766 (1 lthCir. 
1990)). 
Recommendation 
The record clearly demonstrates that Respondent Lauer has acted in bad faith, failed to take 
part in the discovery process, and repeatedly violated Court Orders. After cvnsidering the totality of 
Lauer's conduct, it is hereby 
RECOMMENDED that thc District  Court GRANT  thc Rcspondent's Motion  for Court 
Hearing Addressing Issues Raised in Plaintiffs Contempt and Sanctions Seeking Campaign Against 
Respondent 
(DE 8021, filed on February 15,2005. 
RECOMMENDED that ifthe District Court holds Lauer in civil contempt, the Court should 
inipose 
the following sanctions up011 Respondent, Michael Lauer: 
1. 
hcarcerate Lauer until such time that Laucr fully complies with all outstanding Court 
Orders; 
2. 
Require Lauer to pay a dailymonetary fine in the amount of $1 000.00 until such time 
that Lauer complies with all outstanding Court Orders; 
3. 
Require Lauer to reimburse the SEC for costs incurred in seeking the above-listed 
Orders to Show Cause. 
The SEC is instructed to submit a schedule of its attorneys' 
fees and costs within twenty days of the conclusion of the contempt proceeding; 
4. 
Require Lauer to reimburse the SEC for travel costs and expenses incurred in 
traveling to New York for the January 5-6,2005 depositions. The SEC is instructed 
to 
submit a  schedule of its attorneys' fecs and costs  within twenty days of the 

conclusion of the contempt proceedings. 
Any party may serve 
and file written objections to this Report and Recommendation with 
the Hoi-torableKenneth A. Marra, within ten (I 0)days after being served with a copy. 
28 U.S.C. 
$ 636(b)(I)(C). Failurc to file timely objcctions may limit the scope of appellate review of factual 
findings contained herein. 
United States v. Warren, 687 F.2d 347, 348 (I 1th Cir. 1982) cert. 
denied, 460 US. 1087 (1 983). 
DONE and RECOMMENDED in Chambers a1 Furl Pierce in lht: Southern District of 
-72
Florida, this 5$ day of March 2005. 
/ 
Chief United States Magistrate Judge 
Copies to: 
I 
Honorable Kenneth A. Marra 
Michael Lauer, pro se 
Christopher Martin, Esq. 
Kevin Eckhardt, Esq.,shall serve acopy of this Order upon all parties in interest who are not already 
listed above 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

Case No. 03-80612-Civ-MardVitunac 

SECURITIES AND EXCHANGE COMMISSION, 

VS. 

MICHAEL LAUER, MAR 2 3 2005 
LANCER MANAGEMENT GROUP, L.L.C. and 

CLARENCE MADOOX 
CLERK U .S .  OIST, CT.LANCER MANAGEMENT GROUP 11, L.L.C., 
5.0. OF FLA. - W.P.B. 

d 


Defendants, 

and 

LANCER OFFSHORE, INC., 
LANCER PARTNERS, LP, OMNFUND, LTD., 
LSPV, INC. and LSPC, L.L.C., 

Relief Defendants. 
1-

REPORT AND RECOMMENDATION 

THlS CAUSE is before the Court on Order of Reference (DE 515) froin United States 

District Judge Kenneth A. Marra "for appropriate disposition of all pre-trial discovery motions, and 

all motions that relate directly to these motions," and Order of Reference (DE 594) "for appropriate 

disposition of Plaintiffs Application for an Order to Show Cause Why Defendant Michael Lauer 

Should Not be Held in Contempt of the Court's Assct Freeze Order (DE 567)." Pending before the 

Court are the following: 

1)  Order to Show Cause Why Defendant Michael Laucr Should Not be Held in 
Contempt of the Court's Asset Freeze Order (DE 6471, filed December 3,2004; 

Laucr's Response to Plaintiffs Application for an Ordcr to Show Cause Why Lauer 
Should Not be Held in Contempt of the Court's Asset Freeze Order (DE 685), filcd 
December 27,2004; 

4-



SEC's Reply to Defendant Lauer's Opposition to Plaintiffs Application for an Order 
to Show Cause (DE 727), filed January 18,2005; 

Supplement to Plaintiffs Application for an Order to Show Causc Why Defendant 
Lauer Should Not be Held in Contempt of the Court's Asset Freeze Order (DE 728), 
filed January 18,2005; 

Receiver's Joinder With Plaiutiff SEC's Application for an Order to Show Cause 
Why Dciendant Lauer Should Not be Hcld in Contempt of the Court's Asset Freeze 
Order (DE 759), filed February 1,2005; 

Order to Show Cause Why Defcndant Michael Lauer Should Not be Held in 
Contenlpt of the Court's December 3, 2004 Order Requiring Him to Provide a 
Disclosure Statement Within Five Days (DE 691), filed December 23,2004; 

Respondent Lauer's Compliance With Rule 26(a)(l) of the Federal Rules of Civil 
Procedure (DE 703), filed January 3,2005; 

Order to Show Cause Why Respondent Should Not be Held in Contempt for 
Violating the November 8,2004 Order (DE 675), filed December 17, 2004; 

Lauer's Response to the Court's Order 10 Show Cause Why the Respondent Should 
Not be Hcld in Contcrnpt for Violating thc November 8,2004 Order (DE 726), filed 
Januaryl3, 2005; 

SEC's Reply to Lauer's Opposition in Response to the Court's Order to Show Cause 
Why Lauer Should Not be Held in Contempt for Violating the November 8, 2004 
Order (DE 738)' filed January 24, 2005; 

Order to Show Causc Why Lauer Should Not be Held in Contempt of this Court's 
December 22, 2004 and January 5, 2005 Orders Requiring Him to Appear for His 
Duly Noticed Deposition (DE 719), filed January 13,2005; 

Lnuer's Response Affidavit to Court's Order to Show Cause Why the Respondent 
Should Not be Held in Civil Contempt (DE 754), filed January 27,2005; 

SEC's Reply to Lauer's Opposition to the Court's order to Show Cause why Lauer 
Should Not be Held in Contempt of the Court's December 22,2004 and January 4, 
2005 Orders Requiring Him to Appear for His Duly Noticed Deposition (DE 770), 
filed February 4, 2005. 

The Assct Freeze Order 

On July 10, 2003, the Court entered a Temporary Restraining Order (DE 19) that froze all 

2 



oflauer's assets and required him to provide a sworn accounting. One week later, the Court entered 

a Preliminary Injunction Order (DE 22), by consent. The Preliminary Injunction Order continued 

the blanket freeze on Lauer's assets ("Asset Freeze Order"). The asset freeze, in pertinent part, 

stated the following: 

Defendants . . . are [ I  restrained from, directly or indirectly, transferring, setting OK, 
receiving, changing, selling, pledging, assigning, liquidating or othcnvise disposing 
of, or withdrawing any assets or property owned by, controlled by, or in the 
possession of any Defendant . . . . This asset freeze shall apply to any accounts, 
banking, brokerage or otherwise in the names of third parties on which Lauer is a 
signatory. 

This asset ireeze acted as a blanket freeze on all "assets or property owned by, controlIed by, or in 

tlie possession" of Lauer. (DE 22, at 5-6). 

The SEC claims that Lauer secreted $19,812 in dividends from the Millennium Fund into a 

bank account over which hc exercised clefticto control in violation of the Assct Frecze Order. 

Specifically, the SEC states that Lauer endorsed a Deccniber 12, 2003 distribution check in the 

amount of $1 1,011 to Hcidi Carens. Carens then deposited the check in her business bank account 

which, according to the SEC, has a business address identical to Lauer's personal residence. 

Thereafter, on April 7,2004, the SEC alleges that Lauer endorsed a second distribution check in the 

amount of $8,801 to Judith Brisman. In both instances, the SEC claims that Lauer violated the Asset 

Freeze Order by transferring or assigning his interests. 

In addition, the SEC lists instances when it claims that Lauer made transfers into the 

CarendLauer account, including a check for $21,500 from the sale of a Mini C-ooper, and $1 1,500 

from the sale o f a  BMW Motorcycle. In its Supplement to the Motion for Contempt (DE 727), the 

SEC details additional assets diverted by Lauer in willful violation of the Asset Freeze Order, 



including $139,258 fkom the liquidation of an insurance policy ', and 571,571 from the sale of luxury 

furniture and from rental income. The SEC reiterates that Lauer failed to disclose any of these 

transactions. Thc SEC believes that Lauer has divcrtcd at least 5263,641 in frozen assets and has 

hidden millions of dollars worth of assets, including a C-11 Mercedes race car appraised for $5 

million. 

Lauer responds that the SEC's Application for an Order to Show Cause is nolhingmorc than 

h e  agency's attempt to shift foci~s away from the fact that the SEC lacks any evidence to proceed 

to trial. Lauer claims that he was not involvcd in the sale of the Mini Cooper which resulted in a 

profit of $21,500. Although Lauer admits depositing other checks in Carens' bank account- he states 

h a t  he did so because his own bank accounts were frozen. With regard lo the $1 1,011 check and 

the $8,801 check, Lmer argues that these checks were issued after the Assel Freeze Order went into 

effect, and thus, these proceeds were not covered by the Order. Lauer does not respond to the 

allegations contained in the SEC's Supplcment (DE 727). Instead, Lauer chooses to dispute the facts 

underlying the original Asset Freeze Order. In doing so, Lauer attempts lo challenge the actual 

Order rather than establish that he has made in good faith all reasonable efforts to meet the terms of 

the Order. 

The Disclosure Staternent 

Pursuant to Federal Rule of Civil Procedure 26, the SEC requested Lauer's disclosure 

' The SEC details the facts surrounding the liquidation of the insurance policy. After 
Sovereign Bank issued Lauer a check for $1 39,258.23, Lauer endorsed the check to Brisman. 
One week later, Brisman wrote Lauer a check for the same mount .  Lauer and Carens than 
deposited the check into the Lava Group account ("CarensILauer bank account"). 



statemenl in January of 2004.' Lauer failed to provide the statement. On August 19,2004, the SEC 

filed a Motion (DE 470) seeking to compel Lauer to provide the disclosure statement. The Distnct 

Court ordered Lauer to provide his disclosure statement to the SEC no later than September 22, 

2004. (DE 49 1 ). However. Lauer failed to meet this deadline. On December 3, 2004, this Court 

entered an Ordcr (DE 649) requiring Lauer to provide thc SEC with his initial disclosure statement 

within five days. On December 21, 2004, after Lauer filled to meet the Court's deadline, the SEC 

filed an Application for Order to Show Cause (LIE 677). 1h ~ s  (DECourt wanted the Appl~cat~on 

691) on December 22, 2004. Lauer filcd a Motion requesting additional tirnc to filc the disclosure 

statement, and the Court denied his request (DE 709). On January 3,2005, Tmer filed his disclosure 

statement (DE 703), one year after i t  was f i rst  requested. 

The Court's November 8. 2004 Order 

On July 10,2003, the SEC served its First Set of Interrogatories upon Lauer. On December 

10,2003, the SEC requested that Lauer answer thc interrogatories by January 10,2004. After Lauer 

filled to do so. the SEC filed a Motion to Compel. The Court entered an Order (DE 184) granting 

the Motion to Compel and specifically ordered Lauer to prov~de full and con~plete responses to the 

interrogatories no later than March 3,2004. The SEC stated that Lauer provided wholly inadequate 

responses to the interrogatories, and thus, the SEC filed a motion to hold Lauer in contempt. On 

May 10,2004, thc Court issued an Order (DE 332) giving Lauer until May 28,2004 to serve full and 

complete responses to the interrogatories. The Court also warned Lauer that if he failed to comply 

with the Order, the Court would entertain an appropriate motion for sanctions. On June 2, 2004, 

2 Although Lauer eventually provided the disclosure statement, the Court includes a 
rendition of the SEC's efforts to obtain the disclosure statement as an additional example of 
Lauer's repeated failures lo comply with various court orders. 



Lauer filed a Request to Extend Time for a Morc Comprehensive Response to the SEC's 

Interrogatories (DE 372). On Augus~ 19, 2004, the C o ~ ~ r tissued an Order (DE 491) extending the 

deadline to September 22, 2004. On September 22"" Lauer again filed a Motion to Extend the 

Anlount of Time to respond to the inten-ogatories. On November 8. 2004, this Court entered an 

Order (DE 596) requiring Lauer to rcspond to Plaintiffs interrogatories by no later than November 

22, 2004. Lauer failed to follow this Court's instn~ctions. On December 16, 2004. this Court 

granted the SEC's Applicalion for an Order to SIlow Cause (DE 075). 

Lauer responds that he answered the interrogatories to the best ofhis ability. However, Lauer 

admits that he refused to answer interrogatories that he considered irrelevant or too broad. Thus, 

rather than seeking specific redress from the Court, Lauer chose to ignore certain interrogatories. 

Furthcr, Lauer attempted to gain an extension of time by claiming that he rcquired copies of 

certain docurncnts in order to answer the interroya~ories. These documents had been lawfillly seized 

by the Receiver. Upon receiving compact discs containing thc documents requested, Lauer was 

dissatisfied beca~lse the discs did not contain an indcx nor a directory. Lauer filed a Motion to 

Compel an index or directory for the documents contained on the discs. The Court denied Lauer's 

~ o t i o n . ~  

hportantly, Lauer does not assert that he is unable to comply with the Order requiring 

answers to interrogatories. Instead, Lauer continues to maintain that the scopc of the SEC's 

inlerrogatones should be limited and narrowed. In doing so, Lauer attempts to challenge the actual 

The Court found that no such index nor directory existcd prior to the Receiver lawfully 
seizing the documents in question. The Court refused to order the Receiver to expend the time 
and resources required lo create such an index. Althougli Lauer believes that the Court has not 
yet ruled on his Motion to Compel (Lauer's Rcsponse to Order to Show Cause, at 4), the Court 
clearly denied Lauer's Motion. (DE 596). 



Order to Show Cause rather than establish that he has made in good faith all reasonable efforts to 

mcet the terms of the Order. 

The SEC replics that Lauer has acted in bad faith throughout thc discovcry process. Thc SEC 

urges this Court to view the totality of Lauer's actions, ~nclucting his steadfist refusal to this day to 

provide required d ~ c u m c n t s . ~  

The January 5-6. 2005 Deposition 

This Court cntered tllrec different Orders (DES OOO, 696, and 7 19)requiring Lauer to appear 

for his duly noticed deposition on January 5-6, 2005. The Court notes that it received Lauer's 

Enlcrgency Motion for Reconsidcration (DE 693) on January 4, 2005. Thc Court immediately 

denied the Motion. The Court's Order (DE 696) was immediately docketed, and the Court 

personally emailed Lauer a copy of the Order to cnsure propcr noticc. 111 addition, the SEC states 

that it also scrvcd Laucr with a copy of the Order via facsimile and Fed-Ex on January 4, 2005. 

Further, the Rcceiver also emailed a copy ofthc Court's Order to Lauer on January 4,2005. Despite 

thcse numerous efforts, Lauerclaims that he did not receive notice orthe Court's Order until January 

5,2005. Thc Court finds this hard lo believe. The SEC states that i t  spoke to Lauer on January 5, 

2005 at which time Lauer informed the SEC that he would not appear for the deposition. 

Ln his Response, Lauer reiterates his belief that the Court erred in denying his various 

motions to cancel the deposition. Lauer again attempts to challenge the actual Order to Show Cause 

rather than establish that he has made in good faith all reasonable efforts to meet the terms of the 

Order. Lauer does not assert an inability to comply with thc Orders requiring his appearance at the 

'On February 28,2005, the Court granted the SEC's Emersency Motion to Compel 
Lauer to produce documents in response to the first and second requests for production. &g DE 
827. 



depositions. 

Civil Contempt Sanctions 

It is well settled that "[c]o~lrts have inherent power Lo enrorce compliance with thcir lawful 

orders through civil conten~pt." Citronelle-Mobile Gatherine, Inc. v. Watkins, 943 F.2d 1297,1301 

( 1  l f hCir. 1991) (quoting Shillitani v. United States, 384 U.S. 364, 370 (1966)). In order to hold a 

person in contempt, the Court ]nust determine whether there is clear and convincing cvidence that 

( I )  the allegedly violated order was \Aid  and lawful; (2)  the order was clear, definite and 

unanlbiguous; and (3) the alleged violator had the ability to comply with the order. McCreeor v. 

Chicrico, 206 F.3d 1378 ( I  1th Cir. 2000). Fcderal Rule of Civil Procedure 37(b)(2) states in 

pertinent part: 

If a party. . . fails to obey an order to provide or pennit discovery. . . the court in 
which the action is pending may make such orders in regard to the failure as are just, 
and among othcrs the following: 

(B) An order refusing to allow the disobedient party to support or oppose designatcd 
claims or defenses, or prohibiting that party from introducingdesignated matters into 
evidence; 
(C) An order striking out pleadings or parts thereof, . . . or dismissing the 
action or proceeding or any part thereof, or rendering a judgment by default 
against thc disobedient party; . . . . 

In lieu of any of the foregoing orders or in addition thereto, the court shall require the party 
failing to obey the order. . . to pay thereasonable expenses, including attorney's fees, caused 
by the failure, udess the court finds that the failurc was substantially justified or that other 
circumstances make an award of expenses unjust. 

The SEC has met its initial burden of proving, by clear and convincing evidence, that Lauer 

violated the Asset Freeze Order, the Order requiring a disclosure statement, the Ordcr requiring 

answers to interrogatories, and the Orders requiring Laucr's appearance at dcpositions. 

The SEC having made this prima facic showing, the burden of production shifts to Lauer to 

defend his failurc on the grounds that he was unable to comply with the Orders. CFTC v. Wellington 



Precious Metals. Inc., 950 F.2d 1525, 1529 ( 1  llh Cir. 1992) (citing United States v. Rvlander, 460 

U.S. 752, 757 (1983). However, in order to satisfy this burden, Lauer must offer proof bcyond a 

"mere assertion ofinability" and introduce specific evidence to support his claim. Citronelle-Mobile 

Garherinc, Inc., 943 F.2d at 1301 (q~~ot ing  United States v. Haves, 722 F.2d 723, 725 ( I  1"' Cir. 

1984)). Lauer can only meet this burden by demonstrating that he has "made in good faith all 

reasonable efforts to comply." Citronclle-Mobile Gathering, Inc., 943 F.2d at 1301 (quoting United 

States v. Ryan, 402 U.S. 530, 534 (1971)). If and only if Laucr can make \his showing, the burden 

then shifts back to the SEC to provc Lauer's ability to comply with the various ~ r d e r s . ~  

Rather than claiming that he is unable to comply with the directives, Lauer instead attempts 

to challenge the legal or factual basis underlying the various Orders to Show Cause. However, it is 

well settled that a contemnor cannot ask the Court to reconsider the legal or Sactual basis of the Order 

at issue. See M a e ~ i ov. Zcitz, 333 U.S. 56, 69 ( 1  948). Lauer cannot excuse his defiance of this 

Court's Orders by simply stating that, in his opinion, the Orders were unlawful. Lauer asks this 

Court "to consider [his] pro se status which [] militates for a degree of leniency." " Howcver, as 

Judge Zloch noted in his February 25,2004 Order, "prose litigants, such as Lauer, are not excused 

from compliance with orders, relevant case law and thc rules of court, includi~~g the Federal Rules 

of Civil Procedure." (citing Moon v. Newsome, 863 F.2d 835, 838 (1 lIhcir .  1989)). DE 184. The 

fact remains that Lauer blatantly ignored this Court's specific Orders, and hc cannot offer any 

evidence of his inability to comply with said Orders. 

Before the District Court can hold Lauer in contempt, "[dlue process requires that the court 

"The party seeking the contempt citation retains the ultimate burden of proof. . ." 
CFTC, 950 F.2d at 1529 (quoting In re Battaelia, 653 F.2d 4 19, 423 (9IhCir. 1981)). 

6 Lauer's Rcsponse to Order to Show Cause, at 7 .  

9 



inform the alleged contemnor of the contemptuous conduct, and provide a hearing in which the 

allegcd contemnor may explain why the court should not make a contempt finding." Citronelle-

Mobile Gatherinn, Inc., 943 F.2d at 1304(quoting Mercer v .  Mitchell, 908 F.2d 763,766 (1 lthCir. 

1990)). 

Recommendation 

The record clearly demonstrates that Respondent Lauer has acted in bad faith, failed to take 

part in the discovery process, and repeatedly violated Court Orders. After cvnsidering the totality of 

Lauer's conduct, it is hereby 

RECOMMENDED that thc District Court GRANT thc Rcspondent's Motion for Court 

Hearing Addressing Issues Raised in Plaintiffs Contempt and Sanctions Seeking Campaign Against 

Respondent (DE 8021, filed on February 15,2005. 

RECOMMENDED that ifthe District Court holds Lauer in civil contempt, the Court should 

inipose the following sanctions up011 Respondent, Michael Lauer: 

1. hcarcerate Lauer until such time that Laucr fully complies with all outstanding Court 

Orders; 

2. Require Lauer to pay a dailymonetary fine in the amount of $1 000.00 until such time 

that Lauer complies with all outstanding Court Orders; 

3. Require Lauer to reimburse the SEC for costs incurred in seeking the above-listed 

Orders to Show Cause. The SEC is instructed to submit a schedule of its attorneys' 

fees and costs within twenty days of the conclusion of the contempt proceeding; 

4. Require Lauer to reimburse the SEC for travel costs and expenses incurred in 

traveling to New York for the January 5-6,2005 depositions. The SEC is instructed 

to submit a schedule of its attorneys' fecs and costs within twenty days of the 



conclusion of the contempt proceedings. 

Any party may serve and file written objections to this Report and Recommendation with 

the Hoi-torableKenneth A. Marra, within ten ( I  0)days after being served with a copy. 28 U.S.C. 

$ 636(b)(I)(C). Failurc to file timely objcctions may limit the scope of appellate review of factual 

findings contained herein. United States v. Warren, 687 F.2d 347, 348 ( I  1 th Cir. 1982) cert. 

denied, 460 US. 1087 ( 1  983). 

DONE and RECOMMENDED in Chambers a1 Furl Pierce in lht: Southern District of 

-72Florida, this 5$ day of March 2005. 

/ Chief United States Magistrate Judge 

Copies to: I 

Honorable Kenneth A. Marra 
Michael Lauer, pro se 
Christopher Martin, Esq. 
Kevin Eckhardt, Esq.,shall serve acopy of this Order upon all parties in interest who are not already 
listed above