U.S. District Court Judge Louis F. Oberdorfer yesterday denied a motion to quash a major investigation by the Securities and Exchange Commission into a series of questionable transactions by a large Philadelphia-based company and its chairman.
The judge also scheduled a hearing for Nov. 21 on possible conflicts of interest by the attorneys for the defendants, Morgan Lewis & Bockius. The SEC had accused the prestigious Philadelphia-Washington firm of "significant conflicts."
The company, IU International Corp., a $2.3 billion diversified industrial services firm, had argued that the SEC had no right to reopen a case against it that was settled last year.
Last April, IU settled a suit brought by the SEC that alleged the company failed to disclose it had picked up hundreds of thousands of personal legal expenses incurred by its chairman, John M. Seabrook.
IU argued among other things, that a renewed investigation by the SEC was a breach of the April settlement. But the SEC countered - and the Judge agreed - that starting new information that came to the SEC's atention subsequent to the settlement justified a further investigation.
Moreover, in its filings with the court, the SEC raised the possibility that it may recommend to the Justice Department that Seabrook be prosecuted for perjury for his testimony in the commission's initial probe.
Seabrook has consistently denied any wrongdoing. A spokesman for IU said yesterday that company was "disappointed," but he said the company reserved comment until IU's attorneys had read Judge Oberdorfer's opinion.
Among the new SEC allegations against Seabrook made in court filings:
Significant amounts were spent in IU in the United States and Switzerland to disguise the existence of a Swiss bank account set up by Seabrook.
Seabrook agreed to pay an undisclosed amount to a Swiss firm, Unitechnic AG, for a feasibility study for a proposed IU project on the West Coast. The SEC called the study "apparently worthless."
Another study by a Swiss concern on a proposed New York state project was labeled a sham by the SEC. It said the report was "simply a vehicle for obtaining monies to make improper payments to a New York congressman and certain members of the New York City Council, among others." The SEC does not name the politicians who got the money.
The SEC, in criticizing "sigificant conflicts" by Morgan, Lewis Bockius, said the law firm represented both IU and Seabrook in certain legal matters central to the SEC investigation.