For much of his nearly four-year tenure as chief of enforcement of the Securities and Exchange Commission, John M. Fedders has been the subject of federal and congressional investigations stemming from his role in the late 1970s as an outside counsel to the Southland Corp., which owns the 7-Eleven chain of convenience stores.
Southland was convicted last year of a criminal conspiracy stemming from what federal prosecutors charged was a plan to use a former New York City Council member to pay a $96,500 bribe to New York State officials in return for favorable treatment on sales tax cases.
No charges were ever filed against Fedders and, as far as the SEC is concerned, the matter was officially closed four months ago when the agency's internal investigation concluded that Fedders did not knowingly participate in an illegal cover-up of a bribery plot by Southland officials.
But the case has been a major embarrassment to the SEC enforcement chief. The SEC's own internal review of the case found "troublesome" conflicts in testimony between Fedders and other Southland officials. The case also has forced him repeatedly to defend his actions before a federal grand jury and congressional subcommittees and occupied his time as recently as Feb. 15 when Fedders was called as a defense witness in the criminal trial of two former Southland officials.
In addition, the Southland case has contributed to Fedders' financial and personal problems, according to testimony and documents in his divorce trial in Montgomery County. Fedders contended his line of credit from a bank was cut off after public disclosure that the SEC was investigating him.
Fedders' involvement in the matter dates back to 1976 when, as a lawyer for the firm of Arnold & Porter, he was asked by Southland to assist in the preparation of an internal business ethics review of alleged irregularities at the company.
The internal report that Fedders helped prepare for Southland's board made no mention of a $96,500 corporate payment to Eugene F. Mastropieri, a former New York City council member, that federal prosecutors have charged was intended as a bribe.
Fedders has acknowledged that he was informed of suspicions surrounding the payment, but told a Senate subcommittee in 1983 that he believed at the time "there was insubstantial evidence on which to base a conclusion of illegality."
An internal SEC review of the matter last year found "significant and important irreconcilable differences" in testimony between Fedders and other Southland officials on how much he was told about the Mastropieri payment.
In addition, the report said Fedders was aware of findings that the company had participated in possibly illegal "kickbacks" on the sale of dairy products between 1975 and 1977. But the report said Fedders recommended against disclosing the questionable payments, which totaled more than $2.4 million, to the SEC on the grounds they did not "materially" affect the company.
The SEC internal report recommended against filing any charges against Southland or Fedders and those recommendations were unanimously adopted by the SEC commissioners.
But the report contained some language critical of Fedders, saying that "a more probing inquiry on his part" should have been made.