UNITED STATES OF AMERICA
Commodity Futures Trading Commission.
In the Matter of
Bradley Steven Ashman,
CFTC Docket No. 91-17
OPINION AND ORDER
Respondent Bradley S. Ashman ("Ashman") appeals from an Order of an Administrative Law Judge ("ALJ") permanently barring him from trading on any market regulated by the Commodity Futures Trading Commission (the "Commission"). Ashman argues that the ALJ erred by assigning Ashman the burden of proof on the issue of his rehabilitation, by refusing to order a Division of Enforcement ("Division") expert to conduct a psychological evaluation of him, and by improperly analyzing his evidentiary showing concerning his rehabilitation. Ashman further argues that, in light of the prior criminal case against him, the administrative enforcement proceeding against him constitutes an unlawful second prosecution in violation of the Double Jeopardy Clause of the Fifth Amendment to the United States Constitution. Finally, Ashman also claims that the ALJ exhibited bias in favor of the Division and against Ashman. The Division opposes the appeal on the merits, arguing that the ALJ’s analysis of the evidence is consistent with Commission precedent establishing guidelines for the imposition of a permanent trading ban. The Division also contends that the double jeopardy and procedural issues raised by Ashman are groundless.
As explained more fully below, we affirm the ALJ’s decision to impose a permanent trading prohibition on Ashman.
This case arose out of a sting operation conducted by the Commission, the Federal Bureau of Investigation ("FBI"), and the United States Attorney’s Office in the soybean futures pit of the Board of Trade of the City of Chicago ("CBOT") during 1988 and 1989. On August 2, 1989, respondent was charged with criminal violations of the Commodity Exchange Act, 7 U.S.C. §§ 1, et seq. ("CEA" or "Act"), and related federal crimes in an indictment filed in the United States District Court for the Northern District of Illinois. In January 1991, a jury found Ashman guilty of 18 felony counts and one misdemeanor count for his role in the fraudulent scheme, consisting of five violations of Section 4b(A) of the CEA, 7 U.S.C. § 6b(A), five violations of Section 4b(B) of the CEA, 7 U.S.C. § 6b(B), four violations of Section 4b(D) of the CEA, 7 U.S.C. § 6b(D), one felony and one misdemeanor violation of Section 4c(a)(A) of the CEA, 7 U.S.C. § 6c(a)(A), one felony violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(d), and two felony violations of the federal mail fraud statute, 18 U.S.C. § 1341. Ashman was sentenced to 30 months in prison and three years of supervised release and was ordered to pay restitution of $3,200 a fine of $3,200 and a special assessment of $900. United States v. Ashman, 89 CR 666-4 (N.D. Ill. 1991); United States v. Dempsey, 768 F. Supp. 1277, 1290-92 (N.D.Ill. 1991). On appeal, the Seventh Circuit affirmed Ashman’s conviction and rejected his challenges to sentencing. United States v. Ashman, 979 F.2d 469 (7th Cir. 1992), cert. denied, sub nom. Barcal v. United States, 510 U.S. 814 (1993).
On June 6, 1991, the Commission issued a five-count administrative enforcement complaint against Ashman based on the misconduct underlying his criminal convictions. Count I alleged that Ashman cheated and defrauded or attempted to cheat and defraud customers in violation of Section 4b(A) of the Act. Count II alleged that Ashman violated Section 4b(B) of the Act by willfully engaging in the entry of false records. Count III alleged that Ashman violated Section 4b(D) of the Act by filling customer orders by offset and becoming a seller with respect to a buying order. Count IV alleged that Ashman willfully aided and abetted others in engaging in accommodation trading in violation of Section 4c(a)(A) of the Act. Finally, Count V alleged that Ashman violated Commission Regulation 1.38(a), 17 C.F.R. § 1.38(a) (1991), by engaging in noncompetitive trading. As potential remedies, the complaint listed issuance of a cease and desist order, suspension or revocation of Ashman’s floor broker registration, a trading prohibition, and civil money penalties.
In his answer to the complaint, Ashman admitted his criminal convictions, but either denied the underlying conduct or admitted the conduct but denied any fraudulent intent in connection with the transactions. In addition to his claim of mitigating factors, Ashman argued that the imposition of any civil monetary penalty would constitute an "additional punishment" in violation of the Double Jeopardy Clause of the Fifth Amendment to the United States Constitution. After Ashman filed his answer, the Division moved for partial summary disposition, arguing that Ashman was collaterally estopped from contesting his liability in this proceeding because the facts material to the violations alleged in the complaint already had been determined against him in the criminal action. Ashman opposed the Division’s motion, primarily on the ground that no basis existed upon which to dispose of his civil liability summarily since he was appealing his criminal liability upon which the Commission’s case was based. In October 1991, the ALJ granted summary disposition on liability. The ALJ imposed sanctions on Ashman in the form of a cease and desist order and a five-year trading prohibition. In re Ashman, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,172 (ALJ Oct. 23, 1991). The Division appealed the length of the trading prohibition.
In August 1993, we issued a decision finding that the ALJ had abused his discretion by denying the parties an opportunity to develop the record on the sanctions issues through an oral hearing. In this regard, we determined that the ALJ had not given substantial weight to the Congressional policy reflected in Section 9(b) of the Act, 7 U.S.C. § 13(b) (1988). In that opinion, we went on to hold that, under Section 9(b) of the Act, the large number of Ashman’s felony convictions under Section 4b of the Act raised a presumption that he should receive a trading prohibition substantially longer than five years. We therefore vacated the five-year trading ban imposed by the ALJ and remanded for a hearing to permit Ashman to attempt to rebut this presumption. Further, we directed the ALJ to impose a permanent trading prohibition on Ashman unless respondent could establish, by the weight of the evidence, that his continued access to the markets regulated by the Commission would pose no substantial risk to their integrity. We directed that respondent’s evidence should focus on the following factors: (1) the nexus between the wrongdoing underlying his conviction and a threat to the market mechanism; (2) circumstances that mitigate the wrongdoing underlying respondent’s conviction (i.e., evidence which tends to show that the weight that ordinarily would be accorded the presumption should be lessened); (3) evidence of rehabilitation (a changed direction in respondent’s activities since the time of the wrongdoing underlying his conviction); and (4) the role respondent intends to play in the markets regulated by the Commission. In re Ashman, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,816 at 40,668-69 (CFTC Aug. 13, 1993) ("Ashman I").
In February 1995, the hearing on remand took place where the sole issue litigated by the parties was whether Ashman had been rehabilitated. In addition to his own testimony, Ashman offered the testimony of his employer and that of two experts--a forensic psychiatrist and a criminal justice consultant. The Division also presented the testimony of two rebuttal experts--a forensic psychologist and a criminologist.
Ashman acknowledged his 14 felony convictions for violating Section 4(b) and also acknowledged that he embarked on his illegal activities at the CBOT only three months after he began trading. Tr. 223. Ashman testified that, although he knew he was "breaking the rules" at the time of his crimes, he thought his behavior was an acceptable, common business practice which did not cheat customers. Tr. 229-31, 233, 235, 237.
Nevertheless, Ashman said that he accepted responsibility for all his actions occurring prior to his conviction. He further stated that he now understands that he did cheat customers. Tr. 230-31. He pointed out that the district court judge in his criminal trial declined to bar him from trading commodities and reduced his sentence after finding that he had accepted responsibility for his actions. Tr. 183, 191. He testified that his family has felt enormous pain as a result of his conviction and punishment and that he will never again risk putting his wife, his family, or himself through the pain that resulted from his violations of the law. Tr. 193, 205.
Ashman testified that he had changed significantly from the person who at age 27 had committed the criminal offenses. Tr. 207. He emphasized that he had traded without incident from the time that he was indicted in August 1989 to his conviction in January 1991. Tr. 184. He also pointed to his successful completion of a six-month Intensive Confinement Center Program, a military-style "boot camp," which resulted in a reduction in his prison term. Tr. 186-94. Ashman also testified that he had been a model prisoner while incarcerated and a model resident of a halfway house for ten months following completion of the boot camp. Tr. 197-98.
Ashman stated that, upon his release from prison, he volunteered to perform charitable work for an organization assisting mentally retarded adults and that he plans to continue charitable work. Affidavit of Bradley Steven Ashman ("Ashman Aff."), Resp. Exh. RX-A, ¶ 20;Tr. 202-203. Ashman further testified that he had become the top salesman at a lumber and construction company, which he joined shortly after admission to the halfway house. Ashman Aff. ¶ 14; Tr. 199-202.
Steven Pinsler, president of a lumber and construction company, testified in support of Ashman’s rehabilitation claim. Pinsler testified that he hired Ashman as a trainee salesman in August 1992 following Ashman’s release from incarceration and knew at the time that Ashman had a criminal record. Affidavit of Steven Pinsler ("Pinsler Aff."), Resp. Exh. RX-A, ¶ 2; Tr. 18-20. Pinsler testified that Ashman’s employment duties included handling finances, collections, litigation, customer payments, and funds. Tr. 21-22. Pinsler stated that, due to his hard work, integrity, and honesty, Ashman had risen from his entry-level position to become the company’s top salesman, a manager, and a 10 percent owner. Tr. 20; Pinsler Aff., ¶¶ 3-7. In addition, Pinsler credited Ashman for a large part of the company’s growth, asserting that the company cannot operate without Ashman. Tr. 20.
On cross-examination, Pinsler was asked about his knowledge of Ashman’s background. He testified that, while he knew that Ashman’s crimes "had something to do with commodities," Tr. 25, he was unaware of the precise nature of his offenses, including Ashman’s fraud against customers, Tr. 24-26, and insisted that he "didn’t care about" Ashman’s prior criminal conduct. Tr. 31.
Joseph H. Jacobs, a professional counselor and college criminal justice instructor, testified concerning whether Ashman was likely to engage in further criminal conduct, specifically focusing on Ashman’s likelihood of being a recidivist. In October 1993, Jacobs conducted a one-hour interview with Ashman. Tr. 49, 51. Relying on the impressions he formed of Ashman during that interview and upon objective criteria purportedly predictive of recidivism, Jacobs testified that Ashman did not meet the criteria of a person who would recidivate or be reincarcerated. Tr. 53. Jacobs assessed Ashman’s likelihood of recidivism as low, quantifying it at one percent. Tr. 54-55.
Jacobs testified that his recidivism analysis looked at how strongly the person appeared deterred by his imprisonment. Tr. 62-63. Based upon Ashman’s description of his prison experience, it was Jacobs’ view that Ashman would never engage again in conduct which could result in incarceration. Tr. 63-64. Jacobs concluded that Ashman would not engage in any future violation of law, rule, regulation, or statute and would pose no substantial risk to the integrity of the commodity markets if he were to resume trading. Tr. 51-54, 64; Jacobs Aff., ¶ 8.
On cross-examination, Jacobs conceded that he had not spoken with Ashman’s parole officer, with anyone at Ashman’s prison or halfway house, or with anyone else regarding the respondent. Tr. 66, 72-73. Jacobs also was unfamiliar with the boot camp program that Ashman attended. Tr. 84-85. While he opined that Ashman "would do anything he could to get out of [going back to] prison including going to a boot camp program," Jacobs admitted that there was nothing about a boot camp program which supports his opinion that Ashman would never commit another crime. Tr. 85.
Jacobs also acknowledged that the statistics that he relied upon in forming his opinion of Ashman’s recidivism risk covered all types of crimes nationwide, state and federal, violent and white collar, felonies and misdemeanors. Tr. 73-74. In general, Jacobs conceded that he had no statistics regarding specific characteristics of white collar criminals. Tr. 75. Moreover, he was unable to cite any authorities or statistical work to support his estimate of Ashman’s risk of recidivism. Tr. 55-56.
Jacobs acknowledged that his opinion that Ashman would not engage in any future violations of law referred only to conduct that might result in a prison sentence. Tr. 105-06, 120. Jacobs conceded that Ashman had not revealed to him that he had been sanctioned by the Chicago Board Options Exchange ("CBOE") for violating its rules. Tr. 104. Jacobs also testified that it was irrelevant to his recidivism analysis whether Ashman accurately and truthfully described his criminal conduct during the interview. Tr. 120-21.
Ashman’s other expert witness, Dr. Mark R. McClung, M.D., a forensic psychiatrist, also testified that Ashman has a low risk of recidivism. McClung explained that he regularly performs psychiatric evaluations of criminals and "at times" evaluates them for their propensity to recidivate. Tr. 126. McClung stated that he had reviewed at length the empirical and theoretical literature dealing with recidivism. Tr. 171. He maintained that an opinion regarding potential recidivism cannot be rendered without a personal interview. Tr. 127.
Based upon a 2½-hour psychiatric evaluation of Ashman that McClung conducted in October 1993, McClung opined that Ashman had neither the type of psychological profile nor any other kind of psychiatric disorder associated with criminal recidivism. McClung Aff., ¶¶ 8, 9; Tr. 132. McClung concluded that Ashman has a low risk of recidivism based upon a variety of factors, including the following: Ashman did not have an anti-social personality disorder; Ashman was deterred from engaging in unlawful conduct because of his criminal punishment and because he no longer believed he was invincible; Ashman was willing to learn how to avoid lawbreaking activity; Ashman maintained an adequate self-interest in terms of supporting himself and his family; and Ashman had no history of impulsiveness, which McClung claimed was a major risk factor for criminal behavior. Tr. 132-34.
McClung testified that Ashman expressed the "sentiment" that he had not done anything wrong and that Ashman described some of his offenses as "common business practices." Tr. 154-55, 161-62. McClung claimed that Ashman had an awareness that people were harmed by his illegal transactions, but that Ashman believed he had not intended to benefit at the expense of others. Tr. 156-57. Ashman, nonetheless, did minimize or trivialize his crimes to McClung. Tr. 176. McClung asserted that while Ashman’s "head" told him that there was no way to beat the government and that its attorneys would say whatever was necessary to win the criminal case, in Ashman’s "heart" he knew he had done wrong. Tr. 166.
According to McClung, Ashman had no psychiatric disorder either prior to the commission of his crimes or at the time of McClung’s October 1993 evaluation. Tr. 143-44. On cross-examination, however, McClung admitted that it is possible for a person without anti-social personality or psychiatric disorders both to commit crime and to recidivate. Tr. 149-50. Although McClung stated that there was no actuarial data regarding a person’s risk of recidivism, he first estimated Ashman’s risk at "significantly less than . . . 49 percent." Tr. 170-71. Upon questioning by the ALJ, McClung reduced his estimate of Ashman’s risk to "under 25 percent." Tr. 171.
The Division offered the testimony of two experts for the purpose of challenging the bases of the opinions of Ashman’s experts regarding his rehabilitation. Tr. 262-63.
Neither expert interviewed or examined Ashman, nor was either asked to render an opinion concerning Ashman’s rehabilitation or his potential to recidivate. Tr. 262, 417, 484-85. The Division’s first rebuttal witness, Dr. Elin Waring, an Assistant Professor at the Rutgers University School of Criminal Justice and a participant in conducting the only two studies that appear in the academic literature on the issue of recidivism by white collar criminals, Tr. 396, testified that in general a white collar felon has a 30 percent chance of being arrested again. Tr. 300-301. With respect to persons convicted for securities fraud, Dr. Waring testified that such offenders were found to recidivate at the highest rate compared to the other offense categories studied (antitrust, bribery, mail fraud, tax fraud, false claims, bank fraud, and bank embezzlement). Waring Dec., ¶ 13; Tr. 276, 286. She also stated that there is no statistically significant evidence that boot camp programs reduce the likelihood of recidivism among white collar criminals. Waring Dec., ¶ 16; Tr. 310, 356-57. According to Waring, it is not surprising that a white collar criminal like Ashman obeyed the law between his indictment and conviction: during processing in the criminal justice system, such offenders tend to be model citizens, acting compliant, exhibiting good self-control, and following rules. Tr. 423-24.
Dr. Waring testified not only that imprisonment of white collar criminals failed to reduce recidivism, but that incarcerated offenders have somewhat higher levels of recidivism than others. Tr. 323, 329-30. She noted that, while it is possible to rate a particular individual as a high or low risk to recidivate, it is impossible to predict with certainty whether any particular individual will or will not recidivate by committing a crime or violating a regulation or statute. Waring Dec., ¶¶ 7, 21; Tr. 292, 304.
Dr. Waring observed that white collar criminals recidivate more slowly than other types of offenders, but emphasized that this is due to the fact that white collar crime requires more time to commit (planning, coordination with others, access to particular resources, and a relationship of trust with potential victims) than other types of crime. Waring Dec., ¶ 18. Therefore, she maintained, it is inappropriate to use lack of recidivism over the short term to classify a white collar criminal as having an extremely low risk of recidivism. Waring Dec., ¶ 17. Dr. Waring also stated that, because white collar criminals often use markets or organizations to commit their offenses, restricting access to those markets or organizations is a logical crime control strategy since it limits access to opportunities to commit crime. Waring Dec., ¶ 19.
The Division’s second expert witness, Eric Ostrov, a board-certified forensic psychologist, testified that Ashman poses an enhanced risk of future misconduct because the most powerful predictor of future criminal behavior is previous criminal behavior. Ostrov Dec., ¶¶ 5, 10. Moreover, because Ashman did not explain why he committed his crimes, Dr. Ostrov concluded that he manifested little insight into the underlying causative factors and thus offered little reassurance that he would not recidivate. Ostrov Dec., ¶¶ 11, 12.
Dr. Ostrov testified that, to evaluate a person’s rehabilitation, it is necessary to conduct a thorough individual assessment of five to seven hours, including psychometric tests, focusing particularly on the "honest" reasons why the person committed the crime in the first place, and then to determine whether those reasons are still present. Tr. 450-51, 453. According to Ostrov, it is a significant omission bearing upon the person’s honesty if he fails to reveal during the evaluation a prior violation or rule infraction. Tr. 471.
Dr. Ostrov testified that the traits that are associated with criminal behavior include a lack of values supporting honest behavior, egocentrism, opportunism, and greed. Tr. 456; Ostrov. Dec., ¶ 6. Ostrov testified that beliefs which are inconsistent with a criminal’s remorse include the belief that the unlawful conduct was a technical violation or a common business practice; that the conviction was due to a poorly educated jury or because there is no way to beat the government; and that stealing from customers is a petty charge because the amounts involved are small. Tr. 464, 466-70. According to Dr. Ostrov, while a criminal may act in a law abiding manner because of the threat of punishment, such person would not be considered rehabilitated because the effectiveness of punishment decreases over time. Tr. 460-61. Ostrov stated, moreover, that expressions of fear of punishment can be feigned. Tr. 462-63.
Commenting on the testimony of Ashman’s expert witnesses, Dr. Ostrov expressed disagreement with Dr. McClung’s opinion that, because Ashman has no psychiatric or anti-social personality disorder, his risk of criminal recidivism is low since Ashman apparently did not have these disorders when he committed his crimes; the absence of such disorders is, therefore, irrelevant. Ostrov Dec., ¶¶ 9-10; Tr. 455, 457. Dr. Ostrov also reviewed Dr. McClung’s notes of his interview with Ashman, during which Ashman stated that he had done nothing wrong, that his illegal conduct was a common business practice and is now legal, and that the charges against him were petty. Commenting on these notes, Dr. Ostrov stated that they do not reflect remorse and that, contrary to accepted psychiatric practice, they show no attempt by McClung to discover why Ashman committed his criminal acts. Tr. 475-79, 484, 526-27.
Dr. Ostrov testified that only some of the factors that Jacobs relied upon to conclude that Ashman is rehabilitated were relevant to either rehabilitation or recidivism, and that they provide no insight into why Ashman committed his crimes in the first place. Ostrov. Dec., ¶ 13; Tr. 481, 483-84. Contrary to Jacobs’ opinion—that Ashman will not engage in any future violation of law—Dr. Ostrov maintained that no one in the behavioral sciences can "honestly" make such an absolute statement. Tr. 481. Ashman’s description of his prison experience, as reflected in Jacobs’ notes, according to Ostrov reflected Ashman’s mastery of the situation, rather than a traumatic, emotionally distraught experience. Tr. 499-500.
The ALJ issued a decision on remand on May 12, 1995. In re Ashman, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,407 (ALJ May 12, 1995). In reviewing the evidence, the ALJ focused on the issue of rehabilitation. The ALJ concluded that Ashman had failed to rebut the presumption that his continued access to the markets regulated by the Commission would pose a substantial risk to their integrity and, accordingly, entered an order permanently prohibiting Ashman from trading directly or indirectly on any of the markets regulated by the Commission. Id. at 42,819-820.
The ALJ’s review of the rehabilitation evidence focused primarily upon the testimony of Ashman’s two experts, Jacobs and McClung. Assessing the testimony of McClung, the ALJ found that, far from assisting Ashman’s cause, it only served to highlight his substantial risk of criminal relapse. Id. at 42,809, 42,816. Although the ALJ did not question the professional competence of McClung as a psychologist, he nevertheless found that McClung’s testimony provided little assistance to Ashman’s case. Id. at 42,816. Indeed, the ALJ found that McClung’s assessment of Ashman’s risk of recidivism at "probably less than 25 percent" actually strengthened the case for a trading ban, since a one in four chance of further misconduct constituted a substantial risk to market integrity. Id.
The ALJ dismissed Ashman’s other expert, former parole officer Jacobs, finding that he "simply lacked credibility," id., and characterizing his testimony as "generally unconvincing." Id. at 42,817. The ALJ rejected as illogical on its face Jacobs’ claim that Ashman represented a low risk of recidivism simply because he does not meet the statistical profile of the typical criminal. Id. at 42,816-817 & n.39. The ALJ criticized Jacobs for his "bold reliance" on statistics in assessing Ashman’s risk of recidivism, pointing out that all of the other experts--including Ashman’s other expert, McClung--cautioned against reliance upon general empirical risk literature to predict the probability of recidivism in a specific case. Id. at 42,817 & nn.41, 42.
The ALJ gave little weight to Ashman’s testimony and that of his employer, Pinsler. The ALJ accorded little weight to Pinsler’s testimony since Pinsler lacked knowledge of Ashman’s felonious conduct and of exchange trading practices and had no expertise on matters of rehabilitation. Id. at 42,818. Likewise, the ALJ discounted Ashman’s acceptance of responsibility for his criminal conduct, which resulted in a reduced prison sentence, because "‘expressions of contrition following detection of wrongdoing do not necessarily indicate a significant change in character.’" Id. quoting In re Horn, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,836 at 36,940 (CFTC Apr. 18, 1990). Indeed, the ALJ characterized Ashman’s apology to the District Court for his actions as "perfunctory" and wrote that it rang "especially hollow" given Ashman’s argument before the 7th Circuit Court of Appeals in his criminal appeal that he did not injure or intend to defraud customers. Id. at 42,818. Noting that even Ashman’s own experts, Jacobs and McClung, had testified that Ashman continues to deny his culpability, id. & n.54, the ALJ was not persuaded that he had undergone a significant change in character. Id. at 42,818.
The ALJ also was unpersuaded by Ashman’s assertion of rehabilitation based upon his boot camp experience, finding that his claim lacked corroboration, and noted that Ashman’s unblemished trading record between indictment and conviction hardly demonstrated a changed direction. Id.
In light of his findings that Ashman had failed to submit persuasive evidence of mitigation of his fraudulent offenses, id. at 42,809, and had presented only "minimal" evidence of rehabilitation, id. at 42,819, the ALJ ordered him permanently banned from trading on the markets regulated by the Commission. Id. at 42,820. Ashman appealed.
On appeal, Ashman renews his double jeopardy argument, contending that under United States v. Halper, 490 U.S. 435 (1989), the Double Jeopardy Clause bars a second prosecution for an offense that was subject to a prior criminal conviction. Resp. App. Br. at 2-3. The gist of Ashman’s argument is that, since the court in his criminal action could have banned him from trading, the Commission’s administrative enforcement proceeding constitutes an unconstitutional second "prosecution" for the same offense. Id. at 4-8.
Ashman also contends that the Commission and the ALJ improperly transferred to him the burden of persuasion on sanctions and that the Division failed to carry its burden as it produced no evidence with respect to Ashman’s lack of rehabilitation at the sanctions hearing. Id. Br. at 8-16.
With respect to his rehabilitation, Ashman contends that the ALJ misjudged or improperly disregarded Ashman’s evidence on this issue, which he alleges "compellingly" demonstrates that his return to the markets raises no substantial risk to the public. Id. at 16. In support of this view, Ashman avers that he has undergone a psychological transformation that will prevent him from ever again engaging in wrongdoing. He maintains that this assessment was confirmed by two independent experts and by his current employer, in contrast to the opinions of the Division’s experts who did not interview or examine him and who rendered no opinion regarding his rehabilitation. Ashman claims that the ALJ erred by "disregarding" the "unrebutted" assessment of his two expert witnesses, id. at 16-29, and by arbitrarily refusing to direct the Division’s expert, Ostrov, to conduct a personal diagnostic examination and evaluation of Ashman, at his expense, so the ALJ would have a full and complete record upon which to rule. Id. at 39-46. Finally, Ashman complains that the ALJ exhibited bias toward him, pointing to the ALJ’s refusal to extend the time to file his post-hearing brief and his revocation of authority he previously granted Ashman to file a reply brief. Id. at 46-50. On the basis of these alleged errors, Ashman argues that the ALJ’s permanent revocation of his trading privileges should be set aside and that the Division’s complaint should be dismissed because he does not pose a substantial risk to the public. Id. at 39, 50.
We consider first Ashman’s constitutional challenge to the Commission’s administrative enforcement proceeding. In our first decision in this matter, we rejected Ashman’s Double Jeopardy Clause challenge to the ALJ’s sanction analysis. Ashman I, ¶ 25,816 at 40,667-68. On appeal, Ashman raises for the fourth time in this proceeding his double jeopardy challenge, arguing that the Commission failed to address his claim that the instant administrative proceeding constitutes a "second prosecution" for the same offense for which he was previously criminally convicted. Although our opinion in Ashman I rejected Ashman’s contention that a trading ban constitutes a "second punishment" for double jeopardy purposes, we explicitly considered and rejected Ashman’s "second prosecution" theory in connection with his motion for reconsideration of Ashman I. See Ashman, ¶ 25,830 at 40,720 & n.2.
Any lingering doubt concerning the issue of whether an administrative enforcement proceeding following a criminal one implicates the Double Jeopardy Clause was foreclosed recently by the Supreme Court decision in Hudson v. United States, --- U.S. ---, 118 S.Ct. 488 (Dec. 10, 1997). In Hudson, the Supreme Court held that administrative proceedings instituted against bank officers by the Office of the Comptroller of Currency for violations of the federal banking laws were "civil, not criminal" in character and thus did not bar a subsequent criminal prosecution for the same conduct. 118 S.Ct.at 491. In Hudson, the Supreme Court reaffirmed its long-held view that a sanction that takes the form of an occupational disbarment (such as a trading ban) is not so punitive in nature as to render it criminal for double jeopardy purposes. Id. at 495. See Helvering v. Mitchell, 303 U.S. 391, 399 & n.2 (1938) ("revocation of a privileged voluntarily granted" such as debarment "is characteristically free of the punitive criminal element"). Furthermore, under Hudson the fact that a sanction is imposed by an administrative agency is "prima facie evidence" that it is "civil" in nature. 118 S.Ct.at 495.
We turn next to Ashman’s procedural challenges to the ALJ’s conduct of the hearing. In an argument that Ashman first raised six weeks after the record had closed, he contends that the Commission violated Section 7(c) of the Administrative Procedure Act ("APA"), 5 U.S.C. § 556(d), by requiring that he bear the burden of proving his fitness after the Commission introduced evidence of his prior convictions. Resp. App. Br. at 8-16. However, the Seventh Circuit has unequivocally rejected this argument and found that the Commission’s burden-shifting approach in the registration context "conformed entirely" with the requirements of the APA. See Savage v. CFTC, 548 F.2d 192, 196 (7th Cir. 1977).
Ashman relies on the Supreme Court’s decision in Greenwich Collieries for the proposition that the proponent of a rule or order cannot shift the burden of persuasion to the party opposing such rule or order. In Greenwich Collieries, however, the Supreme Court also concluded that the burden shifting approach used by the NLRB, which is similar to the one we use, was consistent with Section 7(c) of the APA because the burden of persuasion was shifted to an employer for the purpose of establishing an affirmative defense. 512 U.S. at 278, discussing NLRB v. Transportation Management Corp., 462 U.S. 393 (1983).
Under Section 9(b), proof of a felony conviction, without more, establishes a prima facie case of a respondent’s unfitness to trade. See Ashman I, ¶ 25,816 at 40,668; In re LaCrosse, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,944 at 44,570-71 (CFTC Jan. 21, 1997). Section 9(b) directs the Commission to bar such a respondent from "using, or participating in any manner in, any market regulated by the Commission" for at least five years, unless the Commission determines that its imposition "is not required to protect the public interest." Once the Division proved Ashman’s 14 felony convictions of Section 4(b), his trading privileges could have been revoked. It then became Ashman’s burden to persuade the Commission to exercise its discretion to allow him to trade despite his past convictions. Savage, 548 F.2d at 196. That is, the burden shifted to Ashman to prove what is tantamount to an affirmative defense--that he no longer poses a threat to the markets. Flaxman v. CFTC, 697 F.2d 782, 788 (7th Cir. 1983). As the Supreme Court noted in Greenwich Collieries:
That the proponent of a[n] . . . order has the burden of proof means not only the party initiating the proceeding has the general burden of coming forward with a prima facie case but that other parties, who are proponents of some different result, also for that purpose have a burden to maintain.
512 U.S. at 278, quoting S. Rep. No. 752, 79th Cong., 1st Sess., 22 (1945).
Ashman also contends that the ALJ erred by denying his offer to undergo a psychological evaluation by the Division’s expert, Ostrov. Resp. App. Br. at 39-46. The ALJ’s decision to deny this offer was well-founded as it constituted another attempt on Ashman’s part to shift the burden of proof to the Division with respect to his rehabilitation . Ashman cites no authority for his apparent proposition that the Division was required to help him augment his evidence of rehabilitation through the use of the Division’s own experts. It is well established that an expert employed by one party cannot be compelled to furnish expert testimony for the other "just because the latter offers him compensation." Boynton v. R.J. Reynolds Tobacco Co., 36 F. Supp. 593, 595 (D. Mass. 1941). Accord Hickey v. U.S., 18 F.R.D. 88, 89 (E.D. Pa. 1952). Ashman’s offer constituted another attempt improperly to shift the burden of proof to the Division with respect to his rehabilitation. The ALJ acted within his discretion with respect to the briefing schedule and prohibiting a reply brief. See Commission Regulations 10.6 and 10.82(a)(3), 17 C.F.R. §§ 10.6, 10.82(a)(3) (1995).
We now turn to Ashman’s argument that his evidence of rehabilitation was sufficient to overcome the presumption that he should be permanently prohibited from trading on Commission-regulated markets. Section 9(b) of the Act directs us to impose a trading prohibition of at least five years on any person convicted of a felony under the Act. In Ashman I, ¶ 25,816 at 40,668, we stated that this statutory directive rests on a common sense judgment that, once an individual has committed serious wrongdoing, there is a substantial risk that he will undertake similar wrongdoing in the future. We also stated that, since a single conviction raises a statutory presumption of a five-year trading ban under Section 9(b), the threat to market integrity posed by a person convicted of fourteen such felonies is "sufficiently grave to support a presumption that a permanent trading prohibition is necessary to protect the markets regulated by the Commission." Ashman I, ¶ 25,816 at 40,669.
In Ashman I, we explained that the statutory presumption was not irrebutable. An exception is permitted if the Commission determines that imposition of a trading prohibition "is not required to protect the public interest." Id. at 40,668, quoting Section 9(b) of the Act. As a result, we held that a respondent should be given an opportunity to rebut the presumption by showing that the weight of the evidence indicates that his continued access to markets regulated by the Commission will "pose no substantial risk to their integrity." Id. at 40,668.
As noted supra, in examining the risk a respondent may pose to market integrity, the Commission looks to four factors: (1) the nexus between the wrongdoing and a threat to the market mechanism; (2) evidence of mitigation; (3) evidence of rehabilitation; (4) and the role respondent intends to play in the market. Ashman I, ¶ 25,816 at 40,668-69. We already have determined that there is a nexus between respondent’s wrongdoing and a threat to the market mechanism. Id. at 40,668. Moreover, given Ashman’s numerous violations which involved criminal conduct on the exchange trading floor, it is clear that his violations were serious and repeated. To counter the gravity of his offenses, a respondent ordinarily presents evidence of circumstances that may tend to mitigate the seriousness of his wrongdoing. Here, however, Ashman did not present at the remand hearing any admissible evidence on mitigation, Ashman, ¶ 26,407 at 42,812 n.21, and further does not press this issue on appeal.
With respect to the role that Ashman intends to play in the market, Ashman has proposed to trade under the supervision of his brother. Tr. 207-08. Nowhere in the record, however, does Ashman explain the details and terms of the proposed supervisory arrangement or, indeed, his brother’s qualifications to assume a supervisory responsibility. See Commission Rule 3.60(b)(2)(i), 17 C.F.R. § 3.60(b)(2)(i) (1997) (regarding the terms and conditions of a supervisory arrangement under the statutory disqualification program). In any event, even if Ashman were willing to limit his role in the market by, for example, trading solely for his own account, such limitation would be unavailing since it is not a "substitute for persuasive evidence of mitigation and rehabilitation." Ashman I, ¶ 25,816 at 40,669 n.8,citing Horn, ¶ 24,836 at 36,942 n.23.
Since Ashman made no showing of mitigation at the remand hearing, we therefore turn to the only remaining issue, that of "the changed direction of his activities," which is the focus of a rehabilitation analysis. See Horn, ¶ 24,836 at 36,940; Tipton, ¶ 20,673 at 22,752. Our rehabilitation inquiry begins with "respondent’s activities since the time of the wrongdoing underlying his conviction." Ashman I, ¶ 25,816 at 40,669. In particular, "we look for evidence that should the respondent be allowed continued access to the markets regulated by the Commission, he will not repeat the type of conduct that threatens the integrity of those markets." Id., citing Horn, ¶ 24,836 at 36,940; Tipton, ¶ 20,673 at 22,752.
Ashman argues that he "has undergone a profound transformation," asserting that he has acknowledged responsibility for his crimes and is remorseful. Resp. App. Br. at 37. In corroboration, Ashman points to the two-level sentence reduction he received for accepting responsibility and to his grant of early parole. Id. at 37-38. In the circumstances presented, however, any such acceptance amounts to only a limited first step on the path of rehabilitation. We have previously noted that expressions of contrition following detection deserve significant weight only if the wrongful nature of the conduct was unclear at the time of the violations. Horn, ¶ 24,836 at 36,940. However, there is no evidence in the record to suggest that Ashman was confused about the unlawfulness of his conduct at the time of his wrongdoing. In addition, the two-level reduction benefit that Ashman received was equally offset by a two-level increase that he received for possessing special skills which aided in the commission and concealment of his offenses. Dempsey, 768 F. Supp. at 1283.
Ashman’s purported remorse appears to be based more on the personal consequences of his wrongful activities than on regrets concerning the misconduct itself. See Tr. 205-206. Although Ashman’s appeal brief mentions the harm that he caused to customers, he expresses his feelings of remorse primarily in terms of how "awful" incarceration was for him and his family. Resp. App. Br. at 38-39.
Moreover, the sincerity of Ashman’s apparent remorse and contrition is severely undercut by the fact that, during the course of his criminal appeal, he continued to maintain that he did not injure or intend to harm his customers. Ashman, 979 F.2d at 480. We also are troubled by Ashman’s attempts to minimize his wrongdoing by describing it in terms of an activity (curb trading) that "is now legal," Tr. 111-112, 254-60, and his attempt to excuse his conduct as a "common business practice." Tr. 161-62. Even more damaging is the fact that in this proceeding Ashman continued to deny culpability even to his own expert witnesses. Tr. 111-112, 157, 176, 254-60. In light of this evidence, we decline to view Ashman’s statements as reflecting genuine remorse. In addition to his own testimony, Ashman urges us to consider the character testimony offered by his current employer, Steven Pinsler, president of a lumber and construction company, who vouched for Ashman’s competence, honesty, and integrity. Ashman also urges us to take into account his successful post-conviction employment, his advancement to a managerial role and his acquisition of a part ownership in Pinsler’s company. Resp. App. Br. at 18-20. Pinsler’s testimony suffers in at least three important respects. First, Pinsler did not purport to have expertise on matters of rehabilitation. Our precedent recognizes the limited value of opinions from friends and business acquaintances about the likelihood that a respondent will repeat his misconduct. See, e.g., In re LeClaire, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. ¶ 26,282 at 42,428 (CFTC Dec. 12, 1994) (noting that almost every respondent can produce evidence such as testimony from a friend or colleague attesting to the witness’s trust in respondent and belief he will not repeat his violative conduct). Second, although Pinsler’s testimony addressed respondent’s integrity in his employment relationship, because he did not know Ashman prior to his employment, Resp. App. Br. at 19, he could not address his alleged rehabilitation or any "changed direction in his activities." Tipton, ¶ 20,673 at 22,752. Pinsler’s testimony also is questionable in light of his ignorance of Ashman’s wrongful conduct and his unfamiliarity with the industry’s rules and markets. Pinsler testified that he was unaware of the precise nature of Ashman’s offenses, including Ashman’s fraud against customers, and professed a complete lack of concern about his prior wrongdoing. Tr. 24-31. This limited exposure to Ashman is insufficient to provide a basis for Pinsler to determine whether Ashman has changed in a meaningful and constructive way. See Bryant, ¶ 24,847 at 36,999. Accordingly, we agree with the ALJ that Pinsler was not competent to provide reliable testimony with respect to the risk that Ashman poses and that the ALJ was correct in according his testimony little weight. Ashman, ¶ 26,407 at 42,818.
By contrast, in light of their background and credentials, the opinions of Ashman’s expert witnesses regarding his rehabilitation are entitled to somewhat greater deference. Compare Walter, ¶ 24,215 at 35,015 (probation officer, who worked closely with respondent for significant period, had the type of expertise that buttressed the reliability of his opinion that respondent did not present negative risk to the community). Nonetheless, we are not convinced that the opinions of Ashman’s experts warrant an inference that Ashman poses no substantial risk to the markets.
Both Professor Jacobs and Dr. McClung testified that Ashman was unlikely to recidivate. Jacobs estimated Ashman’s risk of recidivism to be one percent, while McClung estimated it at less than 25 percent. Tr. 55, 171. Their conclusions were based upon some limited personal evaluation of respondent and their general opinions regarding criminal recidivism. Jacobs’ conclusion that Ashman represented a low risk of recidivism was based primarily upon his view that Ashman does not match a statistical profile of incarcerated individuals. Jacobs Aff. ¶¶ 6-8; Tr. 45, 47, 53, 91-99. McClung’s conclusion was based primarily upon his finding that Ashman does not have psychological profile of an individual with an anti-social personality disorder and does not possess any other type of psychiatric disorder associated with criminal recidivism. McClung Aff. ¶¶ 8-9; Tr. 131-32, 146-47. Both witnesses also cited the deterrent effect of prison experience in support of their view that Ashman would not engage in conduct which could result in incarceration. Tr. 52-53, 62-63, 133-34, 152.
The conclusions of both of these witnesses were based upon reasoning and methodology that, in our view, were flawed. Their prediction that Ashman would not recidivate in order to avoid going to prison again was directly contradicted by Dr. Waring, one of the Division’s experts, who testified that prison experience was not statistically significant in predicting recidivism. Tr. 284.
With respect to Jacobs, we believe that his evaluation of Ashman was marred by his failure to interview anyone familiar with Ashman’s criminal case or his period of incarceration, such as his parole officer. Tr. 66, 72-73. We also believe that the impression Jacobs formed during his one-hour interview with Ashman was tainted by Ashman’s lack of candor and accuracy in describing his wrongdoing. Moreover, we cannot give credence to the statistical evidence relied upon by Jacobs to form his opinion as to Ashman’s risk of recidivism, as it was neither meaningful nor reliable. Finally, Jacobs’ estimate of Ashman’s risk of recidivism at one percent was neither credible nor substantiated.
While McClung appeared to provide some testimony probative of Ashman’s rehabilitation, we ultimately find his testimony unpersuasive. McClung’s reliance on the absence of psychiatric and anti-social disorders to support his conclusion was weakened by his admissions that Ashman did not suffer from these disorders when he committed his crimes, Tr. 143,149, and that it is possible for a person without such disorders to commit crime and recidivate. Tr. 149-50. Moreover, we do not find that McClung’s conclusion--that Ashman’s risk of recidivism is low--follows from his premise
--that Ashman has no psychological disorders. Since the presence of such disorders does not account for Ashman’s criminal behavior, the absence of such disorders cannot demonstrate that Ashman poses no risk of recidivism. Moreover, there are other causes of criminal behavior besides the cited disorders, as McClung recognizes.
Furthermore, we believe that McClung’s conclusions are hindered by several methodological shortcomings. For example, McClung did not administer any psychometric test to Ashman to measure his honesty, to identify the existence of any psychopathology, or to analyze Ashman’s character and personality. Tr. 136. Nor did he speak to anyone about Ashman or do any other investigation of him. Tr. 138, 141. McClung never identified Ashman’s idiosyncratic characteristics which caused or contributed to his criminal conduct. McClung also failed to testify that Ashman had identified and understood the reasons why he committed criminal acts. McClung’s estimate of Ashman’s risk of recidivism at under 25 percent was undercut by his acknowledgment that there is no actuarial data regarding a person’s risk of recidivism. Tr. 171-74. Moreover, we do not view a risk of recidivism approaching 25 percent as an insubstantial risk to the market.
These shortcomings in methodology and analysis of Ashman’s experts were affirmed by the Division’s experts. Dr. Ostrov, for example, credibly testified about the proper method for evaluating recidivism and the omissions from McClung’s evaluation of Ashman. He also directly challenged the conclusion of Ashman’s experts that Ashman’s fear of incarceration would prevent him from engaging in wrongdoing again. Testifying that the effect of prison as a deterrent wears off over time unless accompanied by psychological trauma, Ostrov found no evidence of such trauma in Ashman’s case. Tr. 460-63, 479. Moreover, the Division’s other expert, Dr. Waring, a criminologist specializing in white collar crime who participated in the design and implementation of studies of white collar criminals, testified that many of the factors that Jacobs relied on in his evaluation of Ashman have been shown not to be predictive of white collar recidivism. Waring Dec. ¶¶ 12, 16; Tr. 274-75, 284-86. In particular, Waring testified that prison experience is not a statistically significant factor in predicting recidivism of white collar criminals. Tr. 284. We find Waring’s testimony to be compelling in light of her direct experience in this area.
In short, we believe that the ALJ’s conclusion that Ashman failed to present sufficient evidence of rehabilitation is buttressed by the testimony of the Division’s experts. The qualifications and extensive experience of the Division’s witnesses were superior to those of Ashman’s experts, and we therefore accord their testimony, which largely undermines the methodologies, premises, and opinions of Jacobs and McClung, greater weight.
Ashman criticizes the Division’s experts for failing to conduct a personal diagnostic evaluation of him and for neglecting to render an opinion regarding his rehabilitation. Resp. App. Br. at 17, 21, 24, 28, 34, 36. On the basis of these alleged omissions, Ashman claims that the findings of his experts were "uncontradicted." Id. at 16, 21,24. However, this argument is based on a misunderstanding of the Division’s role. While a respondent has the burden to prove his rehabilitation, the Division has no corresponding obligation to disprove his rehabilitation. Rather, as discussed supra, the Division’s role in this case is to defend the presumption of unfitness created by a respondent’s felony convictions. This may be done by challenging the reliability of respondent’s evidence. Walter, ¶ 24,215 at 35,012. See also Savage, 548 F.2d at 197 (Section 8a hearing not designed to add to Division’s burden of proof, but to assure respondent’s due process protections). The testimony of the Division’s experts was properly introduced for the purpose of challenging the validity of the experts’ opinions proffered by Ashman.
Finally, neither Jacobs nor McClung had sufficient direct experience with this particular respondent to render a reliable opinion on rehabilitation. In contrast to the parole officer in Walter, neither of Ashman’s expert witnesses worked "closely" with him "for a significant period of time after [his] conviction." Walter, ¶ 24,215 at 35,015. Although both Jacobs and McClung interviewed Ashman briefly, neither was as familiar with his post-conviction conduct as was the respondent’s parole officer in Walter. Ashman could have buttressed his showing on this issue by producing an official from any of the prisons where he served, from the probation department, or from the halfway house which supervised his activities after his release from prison. In choosing to establish his rehabilitation case without the benefit of such witnesses, Ashman assumed a risk that he would come up short in meeting his burden of persuasion.
In light of our evaluation of the record as a whole, we conclude that Ashman’s evidence of rehabilitation does not establish that his access to the markets would pose no substantial risk to their integrity. When it enacted Section 9(b), Congress clearly intended that a person who has committed multiple felony violations of Section 4b and other wrongful acts on the floor of an exchange is precisely the type of person that the Commission should exclude from trading. Accordingly, we affirm the ALJ’s determination to permanently prohibit Ashman from trading on the markets regulated by the Commission.
In light of Section 9(b)’s mandate and our assessment of the record as a whole, we order that respondent be permanently prohibited from trading on the markets regulated by the Commission. The trading prohibition and the cease and desist order previously imposed by the ALJ shall become effective 30 days from the date this order is served.
IT IS SO ORDERED
By the Commission (Chairperson BORN, and Commissioners TULL, HOLUM, and SPEARS).
Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission
Dated: April 23, 1998