A U.S. Court of Appeals panel in Pennsylvania reversed a court decision that a Securities and Exchange Commission subpoena against a steel company should not be enforced because of the appearance of improper interference in the SEC investigation by Sen. Lowell Weicker (R-Conn.).
The three-judge panel struck down a December ruling by a federal judge in U.S. District Court for the Western District of Pennsylvania invalidating an SEC subpoena for information from Wheeling-Pittsburgh Steel Corp.
Knocking down the subpoena, the lower court had found the SEC investigation was in an area of inquiry authorized by law and in good faith but that the process had been abused by third parties, including Weicker.
Reversing that decision, the Court of Appeals said that where "an agency undertakes an investigation in good faith pursuit of the enforcement purposes authorized by Congress, a court should not decline to enforce a summons . . . simply because it does not approve of the political objectives that prompted a public official to call to the attention of the agency instances of possible wrongdoing."
The SEC investigation involved representations that Wheeling-Pittsburgh's officials made at a 1979 stockholders meeting that it had obtained federal loan guarantee "commitments" for $140,000.
The company had sought the guarantees from the federal Economic Development Administration and the Farmers Home Administration to help the company acquire money from private lenders. What the company received from the agencies were "letters of intent" to "recommend" loan guarantees totaling $140,000.
Three rival companies that also produce steel rails had opposed the federal guarantees. Weicker, who opposed the loan guarantee program, attacked the EDA guarantee.
Weicker had called Wheeling-Pittsburgh President and Chief Executive Officer Dennis J. Carney before a Senate subcommittee after the meeting of stockholders to explain the company's position and questioned Carney about his use of the word "commitments."
Three days later, a letter from Weicker was hand-delivered to Stanley Sporkin, director of the SEC's enforcement division, questioning if Carney's use of the word "commitments" in any way violated SEC rules.
Weicker's office was in close touch with the SEC in the early days of the investigation and referred the agency to an attorney retained by a rival company.
"We recognize the potential dangers presented when members of Congress or the Executive Branch suggest that an enforcement agency undertake an investigation," said the Court of Appeals." . . . But not every investigative referral by a congressman or other official should be considered suspect of condemned per se."