Fog Cutter Capital Group, Inc. v. Securities and Exchange Commission
The National Association of Securities Dealers (NASD) is an electronic securities exchange that is listed on securities exchange. Under Rules 4300 and 4330, NASD has its disposal a legal authority to put in place extra or more stringent rules to issuers listed on Nada in case an "event, condition, or circumstance" makes application of stricter standards advisable. 14/ NASD can apply additional or more stringent standards to issuers as well to ward off fraud or manipulation of any kind and encourage just and equitable principles of trade, and to guard investors and the public interest. 15/ Fog Cutter does not dispute that Wiederhorn pleaded guilty to two felonies, payment of an illegal gratuity and filing a false income tax return.
Fog Cutter does not challenge the facts that came as the response from Board following Wiederhorn’g guilty plea. Nevertheless, Fog Cutter does contend that these events that these events substantiate the finding of Fog Cutter that its continued listing on Nasdaq undermined the public interest or integrity of Nasdaq that attempted to justify delisting Fog Cutter.
Fog Cutter maintains that the payment of an illegal gratuity does not necessarily include criminal intent. It does not suggest that filing a false tax return require intent.(Miller & Jenz, 2009)
The conviction for the crime of filing a false tax return requires a solid proof that the taxpayer had really willfully signed a tax return which he or she knew to be false.
The Supreme Court of the United States maintains that in the case of filing a false tax
return, the term "willful" connotes a "voluntary, intentional violation of a known legal
duty." United States v. Bishop, 412 U.S. 346, 360 (1973) (summarizing previous
holdings that "willful" means "bad faith or evil intent," or "evil motive and want of
justification in view of all the financial circumstances of the taxpayer," or knowledge that
the taxpayer "should have reported more income than he did").
NASD maintained that Wiederhorn was Fog Cutter's Chairman, CEO, and majority of shareholder and tried to exert influence and control over Fog Cutter's state of affairs even during imprisonment. NASD failed to find any serious attempt on the part of Fog Cutter to hold back Wiiederhorn’s influence over the company despite his felony convictions.
Fog Cutter concedes that Wiederhorn is critical to its operations.
We conclude that as Fog Cutter contends, the individual in JJGN was accused and convicted for filing a false tax return in regards to another business. On the other hand, Wiederhorn’s recent tax conviction was related to a personal return but such a distinction does not
We recognize that, as Fog Cutter argues, the individual in JJFN was convicted for filing a false tax return in connection with another business while Wiederhorn's very recent tax conviction pertained to a personal return, but that distinction does not weaken the applicability of JJFN to Fog Cutter's situation.
The untruthful taxpayer commits a wrong if he or she files an untruthful tax return to the agency that depends on the truthful and credible reporting of an economic activity. The nature of this crime does not provide any reprieve to the taxpayer who has asked for either personal or business tax return.