author: GARRITY, District Judge.

text:
    Tallulah MORGAN et al., Plaintiffs, v. John A. NUCCI et al., Defendants.
    Civ. A. No. 72-911-G.
    United States District Court, D. Massachusetts.
    Sept. 3, 1985.
    Memorandum Regarding Final Orders Nov. 1, 1985.

      Robert Pressman, Center for Law & Educ., Cambridge, Mass., Laurence S. Fordham, Foley, Hoag & Eliot, Boston, Mass., for plaintiffs.
    Caroline Playter, Kehoe, Doyle, Playter, Novick & Strimaitis, Boston, Mass., Kenneth Kimerling, Puerto Rican Legal Defense & Education Fund, Inc., New York City, for El Comite.
    Robert Blumenthal, State Bd. of Educ., Quincy, Mass., Joan Entmacher, Asst. Atty. Gen., Boston, Mass., for State Bd. of Educ.
    Steven P. Perlmutter, Asst. Corp. Counsel, City Law Dept., Boston, Mass., for Mayor, City of Boston.
    James T. Grady, Grady, Dumont & Dwyer, Boston, Mass., for BTU-Boston Teachers Union.
    Richard W. Coleman, Segal, Roitman & Coleman, Boston, Mass., for BASAS-Bos-ton Ass’n of School Adm’rs and Supervisor.
    Henry C. Dinger, Goodwin, Procter & Hoar, Boston, Mass., for defendants.
    Martin A. Walsh, Community Relations Service, Dept, of Justice, Boston, Mass., for Community Relations.
    Lucille Koch, Evalena Higginbottom, Acting co-Executive Directors, Citywide Parents Council, Boston, Mass., for Transition Committee.
    Marshall Simonds, Henry C. Dinger, Goodwin, Procter & Hoar, Michael Betcher, Boston School Committee, Shirley Burke, Director of ELU, Boston School Committee, Dept, of Implementation, Boston, Mass., for Special Counsel Boston School Committee and Boston School Dept,
    Nancy Gertner, Silvergate, Gertner, Baker & pjne) Boston, Mass., Grover G. Han-kinS; Gen. Counsel, N.A.A.C.P. Special Contribution Fund, Thomas I. Atkins, Brook-]yn, N.Y., for Concerned Black Educators of Boston.
   . FINAL ORDERS

GARRITY, District Judge.

After hearing and consideration of the parties’ comments and positions on the draft' final judgment issued on July 5, 1985, and on the basis of all orders and memoranda of decisions previously entered in these proceedings, it is ORDERED and ADJUDGED that the school defendants, viz., members of the Boston school committee, Superintendent of Schools, their officers, agents, servants employees, attorneys, and all other persons in active concert or participation with them who have actual notice of these orders:

Unified Facilities Plan

(1) shall take all steps reasonably necessary, jointly with the city and state defendants, to whom this paragraph also applies, to implement the Unified Facilities Plan as approved and modified by orders entered contemporaneously herewith.

Permanent Injunction

(2) be permanently enjoined from discriminating on the basis of race in the operation of the public schools of the City of Boston and from creating, promoting or maintaining racial segregation in any school or other facility in the Boston public school system;

Student Assignments

(3) (a) shall compose enrollments at each school so that its racial/ethnic proportions shall be consistent with current guidelines which shall be derived, with respect to citywide magnet schools and programs, from the citywide public school population and, with respect to district schools, from the public school populations of their current districts or consolidations thereof; and procedures for assigning students shall be objective, written and available to the public.

(b) alternatively, may beginning with the 1986-87 school year or thereafter use a single, citywide guideline for assigning students by composing enrollments at every school (except District 8 schools) so that its racial/ethnic proportions exclusive of entering K-l students are within a range determined by a factor of .25 times the percent of each racial/ethnic group and are based upon the citywide public school population in K-l through 12 as of about April 1 of the previous school year, minus (i) students enrolled in bilingual classes, (ii) students with special needs who are classified as substantially separate and (iii) students residing in District 8; provided further that, where necessary, the Department of Implementation may assign no other minority students to selected elementary schools, in which event their absence shall be offset by additional white students; and provided further that procedures for assigning students shall be objective, written and available to the public.

Parent Councils

(4) shall promote the court-established parent councils, and any successor organizations, and assist them in functioning as self-governing organizations capable of meeting their court-ordered responsibilities; and shall fund them for at least three years from this date; and shall appoint to any School Improvement Council formed at any school pursuant to Chapter 188 of the Acts of 1985, parent membership elected by the related School Parent Council or successor organization.

Faculty and Staff

(5) shall achieve and maintain a desegregated faculty and administrative staff which are each comprised of not less than 25% blacks and 10% other minorities, by increasing the proportions of black faculty and administrative staff at a rate of not less than one-half percent annually and the proportion of other minority faculty at the rate of not less than one-quarter percent annually, and of other minority administrative staff in accordance with the parties’ agreement for a one out of three hiring ratio, approved and ordered by the court on November 26, 1984 and July 5, 1985.

Department of Implementation

(6) shall maintain the Department of Implementation as a distinct unit, adequately staffed and with full access to computer facilities, capable of meeting its court-ordered responsibilities;

Previous Orders

(7) shall carry out all existing orders imposing a duty on the school defendants previously entered in areas in which the court has not terminated its jurisdiction and, if modified as hereinafter provided, such modified orders.

Modification Procedure

(8) The school defendants may propose modifications to any order previously entered in these proceedings provided (a) that such proposed modification is specific and does not violate the permanent orders stated in the seven preceding paragraphs and (b) that notice and opportunity to be heard is given, as follows: they shall issue a public notice identifying the order to be modified and the proposed modification; and shall mail copies to (a) the State Board of Education, (b) the Attorney General for the Commonwealth, (c) the Mayor, (d) the Citywide Parent Council (e) the Boston chapter of the NAACP and (f) the Council of Administrators of Hispanic Agencies in Boston (CAHA), to all of whom the Department of Implementation shall promptly make available all relevant data reasonably requested. The Board of Education shall within three weeks initiate and moderate negotiations concerning the proposed modification or determine that the proposed modification is insubstantial or an emergency matter which the School Committee may adopt without negotiation. After agreement has been reached or the Board has determined that further negotiations would not result in agreement, or more than three months have passed since the public notice was given, whichever is earliest, the School Committee may (unless State Board approval is necessary under state law and has not been obtained) adopt or reject such proposed modification either as initially proposed or amended during negotiations.

MEMORANDUM REGARDING FINAL ORDERS

The school defendants’ recent compliance with some aspects of the student desegregation plan issued years ago warrants the entry of final orders in this case. On the other hand, considerable unfinished business in the prolonged process of desegregating Boston’s public schools requires the court’s retention of standby jurisdiction in six of the twelve categories of its remedial orders. In these respects the orders dated September 3, 1985 are the “logical next step” in the court’s disengagement, forecast in its memorandum dated December 23, 1982, as well as the court’s response to the State Board’s recommendation in its July 15, 1985 report, seconded by Mayor Raymond L. Flynn in his letter dated July 26, 1985, that “the disengagement of the Court will not impede further progress toward the realization of a unified school system in Boston.”

The final orders are based not only upon the findings and conclusions stated herein and in the July 5 memorandum and at hearings in open court, but also upon mem-oranda and orders previously entered in these proceedings, especially those cited post, and the five semi-annual monitoring reports filed by the State Board, the first dated July 15, 1983 and the last, July 15, 1985. These comprehensive volumes reported to the court and parties the compli-anee vel non achieved by the school defendants with court orders in the twelve subdivisions of the student desegregation plan. Familiarity with the State Board reports is virtually indispensable to an understanding of all orders entered in these proceedings during the past two years.

Final orders are now appropriate because the school defendants have taken several major steps within the past year toward curing the deficiencies in compliance described in the series of State Board reports. In particular, inter alia, (a) they obtained agreement from the parties and court approval by order entered November 26, 1984 of a new plan for appointing and promoting administrators, so as to correct the situation whereby approximately half the administrators in the system held their positions only in an acting capacity; (b) as detailed in a report filed February 4, 1985, they reduced systemwide capacity by 1,719 seats so as to reflect current and projected enrollments, thereby lessening the prospect of resegregation; (c) by motions filed December 20, 1984, they proposed numerous changes in student assignment procedures that were adopted, with various modifications, by court orders entered on February 20, May 24 and May 30, 1985, including a new assignment pattern for community districts 3 and 4, all toward increasing existing options for student assignments; (d) on March 25, 1985 they joined with the city and state defendants in filing the long-promised Unified Facilities Plan (UFP), adopted by the court with modifications; (e) on April 30,1985, they adopted a revised Voluntary Lau Compliance Plan, vindicating the rights of limited English speaking children, which replaced a 1979 plan that had never been carried out; and (f) on August 28, 1985 they reached final agreement with the State Board on a new Unified Plan for Occupational and Vocational Education. (UPV), adopted by the court on September 3, 1985, replacing a 1978 UPV they had ignored in many respects.

Also, the court’s concerns have been narrowed substantially by cessation of its jurisdiction in half of the original twelve categories in which it issued remedial orders. By orders dated October 31, 1984, May 17, 1985 and August 8, 1985, entered after notice and hearing, jurisdiction ended with respect to (i) special education, (ii) pairings of colleges, universities and business institutions with particular schools and community districts, (iii) school safety and security, (iv) student discipline, (v) bilingual education, and (vi) student transportation. The court will no longer entertain motions or applications based upon provisions of the 1975 plan or separate orders relating to these six subject matters.

The remaining categories, five instead of six because the State Board’s final report No. 5 combined “student assignments” and “special desegregation measures”, formerly separate, into one category, are (i) vocational and occupational education, (ii) school facilities, (iii) student assignments and special desegregation measures, (iv) staff desegregation, and (v) parent and student organizations. While significant progress has been achieved in these areas, the State Board reports show that each entails some unfinished planning, implementation or monitoring. For examples, (i) the vocational and occupational education plan (UPV) completed and agreed upon by school defendants, State Board, and plaintiffs and plaintiff intervenors in August 1985, schedules various dates in 1986 for filing with the State Board plans with respect to an admissions policy for the Humphrey Occupational Resource Center (HORC), the merger of HORC and Madison Park High School, bilingual vocational education, career guidance and counseling, and other program matters, (ii) The Unified Facilities Plan (UFP) filed with the court in March 1985, had only this to say about proposed capital improvement and construction intentions for the two Latin schools, “An architect is preparing plans for this project” and “all of the particulars have yet to be developed.” No plans, either partial or comprehensive, have been presented to date to the State Board, whose approval is a condition precedent to court approval, (iii) New student assignment procedures proposed by school defendants and approved by the court depend in part upon the school defendants’ performance in maintaining desegregation at the level achieved in some districts during the 1984-85 school year. In addition, de-segregative reservation of some seats in 27 schools without regard to student residence was frozen for two years and made subject to monitoring and evaluation by the State Board. More generally, the school defendants have never fully implemented the 1975 student desegregation plan with respect to assignments. This finding is supported by the State Board monitoring reports and various court memoranda, e.g., the memorandum dated May 24, 1985. (iv) Staff desegregation compliance remains incomplete because the school defendants have made very little progress since 1981 toward achieving the goals of the 25% black and 10% other minority composition of the certified and teaching personnel. In its Report No. 5, at p. 395, the State Board concluded, “The integration of the teaching staff ... has stalled_ In filling teacher vacancies, Boston has barely maintained the minimum requirements set by the Court, and has made no progress toward the affirmative action goals.” (v) Of parent organizations, State Board Report No. 5, at p. 465, concluded, “Strong efforts must continue in order to create a stable and effective parent organization.” In the light of such findings, this case is not ripe for entry of final judgment. The relatively recent commitments by the school defendants to carry out longstanding orders of the court in these areas are too inchoate to deny outright to plaintiffs and plaintiff-intervenors all opportunity for judicial review.

Therefore a middle course seems appropriate, one charted by Judge McMillan under comparable circumstances in the Charlotte, North Carolina, schools desegregation case, namely, to remove the cause from the active.docket and close the file. As explained in Swann v. Charlotte-Mecklenburg Board of Education, W.D.N.C. 1975, 67 F.R.D. 648,

Though continuing problems remain, as hangovers from previous active discrimination, defendants are actively and intelligently addressing these problems without court intervention. It is time, in the tenor of the previous order, to be “closing the suit as an active matter of litigation ...”
Dismissal is neither usual nor correct in a case like this where continuing in-junctive or mandatory relief has been required. Facts and issues once decided on their merits ought, generally, to remain decided. This case contains many orders of continuing effect, and could be re-opened upon proper showing that those orders are not being observed. The court does not anticipate any action by the defendants to justify a re-opening; does not anticipate any motion by plaintiffs to re-open; and does not intend lightly to grant any such motion if made. This order intends therefore to close the file; to leave the constitutional operation of the schools to the Board, which assumed that burden after the latest election; and to express again a deep appreciation to the Board members, community leaders, school administrators, teachers and parents who have made it possible to end this litigation.

(1)

Turning to the eight numbered paragraphs of the final orders, facilities’ renovation heads the list because of its surpassing importance. Not much can be added to the UFP orders, which are incorporated by reference, and the court’s explanatory memorandum, both dated September 3, 1985, except this: if the president and members of the school committee and the mayor and members of the city council of Boston really care about public education in the city, as they keep professing, they will address and remedy the disgraceful physical condition of its public school buildings.

Unfortunately, every Boston public school construction or renovation project is plagued by indecision and inefficiency. For instance, it took several years and court appointment of a special monitor to build Madison Park High. Most recently, on May 9, 1985, the court entered an order approving, in advance of other parts of the UFP, so-called first year projects for new roofs and heating plants urgently needed at ten schools. The school defendants had filed a motion on April 29 noting “the need for these first year renovations to take place during the summer.” An assenting memorandum filed by the plaintiffs on May 7 stated, “the first year alterations and repairs were represented to be of a crisis nature, bearing upon the fitness of buildings for use.” Yet at a hearing on October 2, 1985 it was disclosed that plans for only three of these ten emergency projects had been submitted to the State Board in time for their approval before the beginning of the 1985-86 school year. In fact, as of October 2, 1985 plans for the remaining seven projects had not even been filed with the State Board! The first year projects are but a small part of the total UFP. The question inevitably arises: will the joint planners persevere and carry out their promises made in the UFP? In view of the dismal record to date, plaintiffs and plaintiff-intervenors will simply have to keep their fingers crossed.

(2)

As for the permanent injunction in paragraph (2), all parties accepted the draft order language proposed on July 5, 1985; and so it is retained. As there explained, this order repeats the injunction prohibiting discrimination and segregation on the basis of race which was initially issued in 1974 as a partial judgment following the court’s finding of liability. Morgan v. Hennigan, D.Mass.1974, 379 F.Supp. 410, 484. It is a broad, partial statement of the plaintiffs’ rights in the remedial stage of a desegregation case; partial because plaintiffs are also entitled to specific affirmative relief from the continuing effects of past discrimination. Green v. County School Board of New Kent County, 1968, 391 U.S. 430, 437-438, 88 S.Ct. 1689, 1693-94, 20 L.Ed.2d 716.

(3)

Two provisions for student assignments are made in paragraph (3). The first continues the current student assignment guidelines which the school defendants may employ in 1986-87 or thereafter. These guidelines are not the ones set forth in the 1975 student desegregation plan and left in place with occasional minor modifications from 1975 through June of 1985. Rather, they are guidelines that were extensively modified on the basis of proposals moved by the school defendants on December 20, 1984, and revised after court hearings between that date and June 1985. Those proposals were designed, according to the school defendants, to improve the fit between a decade of demographic changes in Boston and the terms of student access to educational opportunities; to enlarge the range of options available to parents; to stimulate outreach and recruitment of students across racial lines by individual schools and community districts; to lessen the rigidity inherent in assignment procedures; and to safeguard the school system against tendencies toward resegregation in some community districts.

The 1985 changes made in the student assignment guidelines and procedures, explained in court memoranda dated February 20, April 2, May 24 and May 30, 1985, demonstrated two differences between conditions in 1975 and 1985. First, the parties cooperated with each other and with the court; whereas such cooperation was wholly lacking in 1975. Second, the changes underscored the school defendants’ freedom in 1985 to adopt new assignment methods as long as the resulting enrollments reflect the racial/ethnic proportions of the relevant public school student population.

The student assignment portion of the 1975 desegregation plan contains two major components. One is the method of assigning students to community district schools, viz., according to the geocode in which they reside, while incorporating magnet school assignment options exercised by parents on a citywide basis. In practice, about 70% of parents choose community district assignment and about 30% choose citywide magnet schools. Under paragraph (3) of the final orders and the 1985 changes, this component of the assignment remedy may be amended or discontinued as a court order, after compliance with the modification procedure spelled out in paragraph (8). On the other hand, all or parts of it may be kept in place by the school defendants.

The other is the racial/ethnic composition of school enrollments. This component is preserved under paragraph (3), although no longer tied to district boundaries, geocodes, grade structures, or other mechanisms used as part of the first component. Examination of the particulars underlying the guidelines will indicate why, in the court’s opinion, the guidelines governing school enrollments are essential for remedial equity and for the operation of a racially unitary system which functions without racial discrimination and without the continuing effects of past discrimination.

The enrollment guidelines are based upon the racial/ethnic composition of the public school population within each community district and at each grade level: elementary, middle, and high school. Thus they vary as a function of diverse racial/ethnic distributions by residence and of the age groupings of students. They may change over time as these distributions change and they are designed to prevent the imposition of an arbitrary standard. They are flexible in another respect as well: assignment totals at a particular school may diverge from the community district standard within a range established by adding and subtracting 25% from each racial/ethnic group’s proportion (except in the case of black students assigned to community district schools in districts 4 and 5, where the allowable range is limited to a 10% departure from the black student proportions). Thus, for example, if 48% of the elementary school students residing in a subdistrict consisted of a particular racial/ethnic group, 25% of 48, i.e., 12, would be added and subtracted to result in an allowable range from 36% to 60% for the assignment of these students to each elementary school in the community district.

The enrollment guidelines applicable to magnet school district 9 are based on the racial/ethnic makeup of the public school student population of the entire city, exclusive of district 8, at each grade level. The range of permissible assignments to district 9 schools is narrower than the range allowed for community district schools, partly in order that assignments to the magnet schools will not interfere with compliance with the community district school guidelines. Each school must be assigned students so that the percentage of each of two racial/ethnic groups is within five percentage points of the citywide percentage. Thus, assuming a citywide public high school population of 50% black students and 50% combined white and other minority, the range of permissible assignments for both groups would be 45-55%.

There are two exceptions to the uniform application of the magnet school guidelines. The Hernandez School and schools based on the Hernandez model are permitted to enroll a population up to 50% of the non-English-speaking group being served. This exception is necessary to create a truly bicultural environment at the schools. The second exception is the examination schools, Boston Latin, Latin Academy, and Technical High School, which are required to accept student enrollments in entering classes which are at least 35% black and hispanic, provided that no student with an exam score below the 50th percentile will be admitted.

In addition, schools in any district whose enrollments fall outside the ranges set by the guidelines solely because of appropriate bilingual or special education assignments for students with severe special needs are deemed to be in compliance with enrollment guidelines. Similarly, since the court’s order of March 24, 1982, compliance has not been affected by enrollments falling outside the guidelines in locations where other minority students make up less than 10% of the relevant community district population.

In the final orders, the integrity of the guidelines for community district schools is maintained by requiring that they continue to be derived from the present eight community districts or consolidations thereof, because the absence of this requirement would allow the redrawing of district lines in ways permitting the return of racial isolation of students within racially identifiable schools. For example, if district lines were to be changed so as to make them congruent with election districts for School Committee members, the results would induce a return to segregated schools. The final orders also prevent the evolution of new district lines, for whatever reason, which might render the residential composition to be skewed greatly from one community district to the next. Thus, there is no requirement under paragraph (3) that students assigned to a particular school be residents of the district in which the facility is located, yet each school’s enrollment must reflect the racial/ethnic proportions of the public school student population of the district in which it is located. Absent such a linkage, any one school’s racial iden-tifiability might be rationalized as an accident of housing patterns — a return to conditions characteristic of 1972.

The final orders do not return full control over student assignments to the school defendants, because compliance with the student desegregation plan, as amended, has never been achieved and because changes made during 1985 have yet to be fully implemented or evaluated. It is also true that they prevent the revival of a neighborhood school policy, found in 1974 in Morgan v. Hennigan, D.Mass.1974, 379 F.Supp. 410, 473, to have been “so selective as hardly to have amounted to a policy at all ... a reality only in areas of the city where residential segregation is firmly entrenched.” Rather the final orders seek to provide assignment guidelines for future years which are as flexible as consistency with a workable student desegregation plan permits; and an irreducible minimum of safeguards for insuring a future in which the Boston public schools may flourish on a racially unitary, racially unidentifiable, yet flexible and clear foundation of equal access and equal educational opportunity for all students.

A departure from the geocode method of assigning students, analogous to the new assignment pattern for districts 3 and 4, is provided in alternative paragraph (3)(b). The school system has changed in so many ways since 1975 that a new, simplified method of assigning students may, in the judgment of the school defendants, be preferable to the current guidelines. The eight community districts whose configuration was at the heart of the 1975 plan and whose racial/ethnic public school student populations, except for district 8, corresponded generally to that of the city as a whole, now differ widely from one another in population composition. For example, other minority students comprise approximately 25% of the citywide population, but one district is now 50% other minority and another is 4%. Under the 1975 plan, community districts were to be relatively autonomous, with district councils of principals and parents working with the district superintendent to plan programs best suited to the district. The former trend toward decentralization has been reversed since 1980 and control has been centralized at school department headquarters; the number of community superintendents and staff has been reduced from 8 to 4; and principals’ councils and community district supervisory councils exist in name only. It was expected in 1975 that each community district would be able to house programs for its bilingual and substantially separate special needs students. However, within five years bilingual students increased threefold and substantially separate special needs students by sixfold, and it became necessary to assign large numbers of them across district boundaries. The 1975 plan anticipated changes in geocodes attached to particular schools and subdividing geo-codes to meet changes in demographic and other conditions. This was never done except when required by school closings. Allowance of the school defendants’ motions filed December 20, 1984 and the court’s order dated May 24, 1985 and other orders have sharply increased the number of student assignments across community district boundaries.

If implemented by the school defendants, paragraph (3)(a) would work to increase the flexibility of student assignment procedures relative to the 1975 court plan, but those procedures would remain quite complex. Paragraph (3)(b) provides an alternative for voluntary adoption by the school defendants which appears to be workable and flexible but which is also simpler for educators, parents, and students to understand and more readily administered by the Department of Implementation. Under paragraph (3)(b), a single guideline would be calculated by setting aside students enrolled in bilingual classes, students with severe special needs which require substantially separate classrooms, and students residing in East Boston (now Community District 8). All other public school students in the city would be pooled to compute an annual racial/ethnic composition of current enrollments. Students would then be assigned to each school within a range obtained by adding and subtracting Vi of the citywide percentage — the range already long-established in Boston. To test this guideline, the court made approximations using enrollments for the 1984-85 school year. These indicated percentages of 56% black, 27% white, and 17% other minority. Thus, after applying the Vi permissible range factor, each school would be from 42% to 70% black, 20% to 34% white, and 13% to 21% other minority.

Four readily implemented departures from the single assignment guideline would be permitted: (a) the examination schools would continue to be composed on the basis of competitive entrance examinations under the terms currently specified; (b) public school students residing in East Boston would be assigned desegregatively to local facilities in proportion to their racial/ethnic composition; (c) because some elementary school sites are located so remotely from Asian, Hispanic, and Native American residential concentrations as to impose an inequitable transportation burden on these other minority students, the Department of Implementation (DI) would have discretion to assign no other minority students to elementary schools which would require their excessive transportation; and (d) in that event, their absence would be offset by the addition of white students.

Further study and simulated assignments by the school defendants may reveal other problems, advantages, and disadvantages to the single guideline here suggested. The obvious advantage is that the complexities of the present procedure would be largely eliminated. The school defendants would be free (a) to revise community district boundaries or eliminate them altogether, (b) to introduce citywide the new assignment pattern authorized for districts 3 and 4, (c) to convert some district schools to magnet schools and vice versa, (d) to change magnet programs and grade structures, and (e) to retain all or part or none of the present geocode basis for community district assignments. The school defendants could themselves decide how to meet their responsibility to maintain desegregated student bodies at all schools.

Both parts of paragraph (3) specify that the procedures for assigning students be objective, written and available to the public. This requirement has been the cornerstone of student assignment procedures since 1974 and must remain. Since its formation the DI has been under constant pressure from officials within and without the school system to make assignments arbitrarily in favor of parents with the right connections. Under the leadership of Senior Officer John R. Coakley, the DI has stood fast and the 1975 student assignment plan has been implemented conscientiously. Otherwise assignment procedures would be a shambles and, in the court’s opinion, the system would now be well on the road to resegregation.

(4)

The history of the creation and reorganizations of parent councils has been amply documented in previous court orders, including those issued on October 4, 1974, November 8, 1976, September 1, 1977, September 15, 1978, July 20, 1982 and August 25, 1982.

The basic courtroom position of the school defendants has been that they support parent participation conceptually and financially, but only if done voluntarily rather than pursuant to court order. Their position in the Court of Appeals was that the district court, in ordering a continuation of school department funding of the parent councils, had exceeded its authority because some of the activities of the councils were directed toward improving the quality of public education rather than desegregation; and that the court had not made findings of fact linking its order to “valid desegregation goals as yet unfulfilled.” The school defendants also objected on the ground that the August, 1982 order was open-ended, i.e., did not include a termination date beyond which the order would not extend.

As directed by the appellate court, the district court scheduled a hearing as to the school defendants’ funding of the parent councils for August 17, 1984. On August 16, 1984, the school defendants and Citywide Parents Council filed the following stipulation:

The School Defendants and the Citywide Parents Council hereby stipulate and agree that the Fiscal Year 1984 budget for the Citywide Parents Council shall be $577,400.00 and that the School Defendants shall, in addition, comply with the provisions of the October 4, 1974 Memorandum and Order Establishing Racial-Ethnic Councils regarding postage and stationery.

Substantially the same scenario was reenacted this year: mindful of (a) the uninterrupted funding of the parent councils by the school defendants for more than a decade, (b) the formal agreement between the school defendants and the parent groups filed with the court on November 17, 1982, (c) the new importance of parent council monitoring due to the dimunition of the State Board’s monitoring role, (d) the recent creation of School Improvement Councils by the Massachusetts Education Reform Act of 1985, and (e) the dedication and courage of hundreds of parents, in the face of efforts to discredit them, in monitoring compliance with court orders, paragraph (4) of the court’s draft orders dated July 5, 1985 provided that the school defendants

shall maintain the Citywide Parents Council and School Parent Councils as adequately funded, self-governing organizations capable of meeting their court-ordered responsibilities;

The school defendants’ response was filed on July 81, 1985. While seeking to preserve their customary, multiple objections on principle, they again stipulated as follows:

To dispel any inference that the School Defendants are seeking to undermine the parent councils by opposing paragraph 4, the School Defendants are prepared to agree to the requirements of this order for a fixed, limited period of time: three years_ They will waive their opposition to an order limited to a period not exceeding three years.

So paragraph (4), in reliance upon their waiver, contains a fixed, limited period of time: three years.

The next three years will be the most critical to the future success of the school system’s continuing progress in student and staff desegregation and facility renovations, and during this time funding of the parent councils must be guaranteed. However, the need for amendments to the councils’ bylaws is widely recognized. The parent councils should consider reorganization in a manner which will enable them, three years hence, to win voluntary financial support from the school defendants or some other source on the basis of their performance and positive impact on the school system, or become self-supporting. A possible approach would be to negotiate a restructuring plan with the school department which would include future funding. A broader involvement of other interested parties might be achieved by establishing a three-member mediation board comprised of a representative of the parent councils and of the school defendants and a neutral third party to screen and study various reorganization proposals. Another possibility would be to conduct a referendum of parents, perhaps by mail, identifying competing proposals.

The last clause of the paragraph is occasioned by new Massachusetts legislation improving and modernizing public elementary and secondary education throughout the state. Among its far-reaching reforms is provision (in section 29 of the Act, amending Mass. G.L. c. 71 effective July 1, 1985 by adding a new § 88 to c. 71) for the establishment and state funding of a School Improvement Council (SIC) at every public school. Each SIC will be composed of twelve elected members, four parents, teachers and students, and from eight to ten appointed members. The statute provides that parent members shall be “elected by the parents of the children in that school.” Unlike other cities and towns in the Commonwealth, Boston public schools already have school parent councils (SPCs) elected by the parents of the children. On the basis of the history of parent councils in Boston, including their 1982 formal agreement with the school committee, the importance of their role in the court’s student desegregation plan and their need for strengthened official support, the final order supersedes the comparable provision of the state statute by providing a two-step instead of a one-step procedure for electing parent members of SICs in Boston: parents elected to SPCs will elect parent members of SICs. There is precedent for this approach: the revised administrator screening and rating procedures proposed by the school defendants and adopted in pertinent part by order dated November 26, 1984 provides, at p. 9, that parent membership on screening committees for school-based positions shall be selected by SPCs.

(5)

The draft paragraph on faculty and staff generated more objections and briefs than any other paragraph. It sought to tie the percentage of blacks to city population proportions, currently approximately 23%, and made no provision for other minorities whose rights it felt were adequately protected by orders entered November 26, 1984 and July 5, 1985. Acknowledging the validity of various criticisms, the court proposed a second draft at the hearing on August 7, 1985 and on the following day distributed to the parties statistical tables it had cited at the hearing. The August 7 proposal eliminated the link to population proportions and called for specific annual increases until 25% goals first set in orders dated January 28, 1975 and February 24, 1976 should be achieved.

The final order provides for more gradual attainment of the 25% faculty goal than was proposed by both plaintiffs and school defendants. Their proposal would require increases in black faculty and administrators so that the 25% goal would be reached by the 1988-89 school year. The final order provides that this goal shall be attained with annual increments of at least .5% and does not specify a year for completion.

The difference between the parties’ proposal and the final order stems from an empirical analysis and projection which disclosed the likelihood of faculty reductions in force due to steep declines in secondary school enrollments in the 1986-1990 period. If attainment of the 25% goal were fixed for 1988, white teacher discharges in fairly large numbers would have to take place simultaneously with the recruitment of significant numbers of black teachers. In the court’s opinion, the current level of black faculty, 20.86%, is too low to enable an increase to 25% in the same three-year period of time when faculty layoffs may reach large numbers. Since faculty desegregation is a remedy intended to strengthen equal access and equal educational opportunities for students, the instability that could result from very high rates of teacher turnover coupled with the effects of bumping due to the exercise of seniority is a condition that could frustrate those purposes.

The hypotheses underlying this opinion appear in the court’s August 8 memorandum and tables. Assuming a turnover of 140, apportioned 112 non-black and 28 black, approximately 195 (307 minus 112) non-black teachers would be fired in 1986-87 contemporaneously with 50 (22 plus 28) black teachers being hired. Under the final order, the same analysis and assumption of a faculty retrenchment crunch in 1986-87 produce a lesser number of non-black firings, about 151 (263 minus 112), and about 12 black firings as well (40 minus 28).

The other main advantage to the more gradual increases required by the final order is that the average annual turnover of 140 is more than enough to permit compliance without discharges except in one year and without seniority, certification, retirement and other disputes occasioned by reductions in force. It should be noted, too, that, if the court’s assumptions regarding student declines, faculty layoffs and retirements, student-teacher ratios and the like prove to be mistaken, there is of course nothing in paragraph (5) to prevent the school defendants from reaching the 25% goal sooner than ordered.

While early elementary grade enrollments will remain stable or may even increase gradually during the 1986-1990 period, providing an opportunity for swifter recruitment of black elementary teachers by the school defendants, there is a solid factual foundation for anticipating a steep decline in high school enrollments in this period. White teachers are more heavily concentrated in the high schools. In addition, reductions in force at the high school level entail formidable administrative difficulties in view of the need to preserve the comprehensive character of programs which require staffing by teachers from more than 20 different certificated fields of specialization. In proposing to attain the 25% black faculty goal by 1988, the school defendants did not develop, or at least did not share with the court and the parties, any analysis of how the twin difficulties of faculty reduction and black teacher representation in the high schools would be resolved.

The final orders reinstate the January 28, 1975 order, suspended on June 2, 1981, that the school defendants actively recruit black applicants for faculty appointments until black teachers constitute 25% of the total faculty. The 1981 suspension expired when all tenured teachers discharged in 1981 had been recalled. The Boston Teachers Union (BTU) developed a “recall roster” in 1981, and for four years each qualified person on that roster has been given a chance to refuse acceptance of a faculty vacancy before it was offered to a new applicant. Not only have recallable teachers thus been canvassed repeatedly, but approximately two white teachers have been hired for every one black or other minority teacher over the period ending in June 1985. No teachers discharged in 1981 have been ignored when recall invitations have been extended, although many chose not to accept. Teachers’ recall rights were expanded under the collective bargaining agreement between the BTU and school committee covering the three-year period beginning September 1, 1983. However, the court’s 1981 order was not thereby modified or extended.

The problems thus far described pertain only to black faculty, not to administrators, whose percentages according to the State Board report dated July 15, 1985 are for black principals 23.77% and black administrators 24.21%. The final order mandates an annual .5% increase in their number too, but no major problems are foreseen in this area.

The final order also requires progress in the level of other minority faculty and staff. It adopts the goal of ten percent other minority administrators and the means for achieving it, established in the court’s orders dated November 26, 1984 and July 5, 1985. Because the present level of other minority faculty, 8.74%, is not far below the goal of ten percent, and in order to permit its realization within the limits of average annual turnover of faculty, the minimum level of annual increase for this group is set at one-fourth of one percent per year.

The tables attached to the August 8, 1985 memorandum focused upon black faculty and therefore included other minority and white faculty under the heading “non-black”. Having expanded paragraph (5) so as to include other minority faculty and administrative staff, the following table breaking out the numbers and percentages of each of the three groups, white, black, and other minority, becomes relevant. Note that, on the premises assumed, the faculty will be 25% black by 1993-94 and 10% other minority by 1990-91.

Year White No. Change Black No. Change Other Minority No. % Change 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 3111 70.40 3082 69.65 2835 68.90 2769 68.15 2727 67.40 2697 66.65 2697 65.90 2659 65.15 2665 64.40 2644 63.65 -29 -247 -66 -42 -30 0 -30 +6 -21 922 940 900 908 925 945 976 1024 1029 1053 20.86 21.36 21.86 22.36 22.86 23.36 23.86 24.36 24.86 25.36 + 18 -40 +8 + 17 + 20 +31 +48 + 5 +24 386 396 380 385 394 404 8.74 8.99 9.24 9.49 9.74 9.99 419 10.24 432 10.49 444 10.74 457 10.99 + 10 -16 + 5 +9 + 10 +15 +13 +12 + 13

(6)

The final order is the same as the July 5, 1985 draft, to which no party objected. The requirement of “full access to computer facilities” is crucial.

(7)

Referring again to the precedent established in Charlotte, North Carolina, the Boston case, too, “contains many orders of continuing effect, and could be reopened upon proper showing that those orders are not being observed_ The duty to comply with existing court orders respecting pupil assignment of course remains.” Swann v. Charlotte-Mecklenburg Board of Education, supra, at 649. On the other hand, such orders are relatively few in number. Since the court terminated its jurisdiction with respect to six subdivisions of the desegregation plan, there are no longer in this case any orders of continuing effect with respect to transportation, discipline, safety and security, special needs education, bilingual education and pairings of academic and business institutions. In the five areas of continuing orders (student assignments, faculty desegregation, vocational education, facilities and parent councils) many orders previously issued have expired by their own terms, e.g., procedural orders and those of limited duration. The number of orders entered in this case that are no longer operative far exceeds the number that still are.

Paragraph (7) is open to the criticism, based upon Rule 65(d), Fed.R.Civ.P., that it omits specification of the orders that must be carried out. This deficiency is addressed in a procedural order entered contemporaneously herewith. Meanwhile they may be readily located either in State Board Report No. 5 dated July 15, 1985 or in this memorandum or in the memoranda and orders dated September 3, 1985. Unless an order has been referred to herein, it is safe to assume that it is no longer applicable.

(8)

The procedure prescribed here applies only to the five areas of the case in which the court is retaining standby jurisdiction (student assignments, faculty desegregation, vocational education, facilities and parent councils) and, in those areas, only to orders that can be modified consistently with the provisions of paragraphs (l)-(6). For example, while jurisdiction over vocational education is retained, only the method of assigning students is permanent; other provisions of the UPV may be changed after notice and negotiations as provided in paragraph (8). For another example, the geocode method of assigning students to community district schools may be changed or eliminated after notice and negotiations as provided; but the enrollment guidelines specified in paragraph (3) may not be changed.

The issue contested by the parties has been whether responsibility for proposing and making changes should be lodged solely with the school defendants. The court’s resolution of this issue rests principally on the record of the school defendants during the past year when they have proved in many ways their commitment to desegregation and intention to complete implementation of the student desegregation plan. The present school committee, with John A. Nucci as its president, has earned the confi-' dence of other parties and of the court. It is evident that it understands that the remaining desegregation plan is an integrated one, i.e., that the orders still existing are interdependent. For instance, problems in the area of student assignments will probably disappear when special desegregation measures have been carried out and facilities have been renovated, but not until then.

The State Board has monitored compliance expertly and supported the Boston school department at every turn. A considerable amount of State Board monitoring will of course continue as required by state statute. Now, however, there will be less need for involvement by the State Board in Boston public school affairs. Moreover, the State Board will itself be unable to give the same priority to school problems in Boston during the years to come as it has during the past decade. Implementation of the new state education reform legislation, chapter 188 of the Acts of 1985, will receive top priority at the State Board for the foreseeable future.

Conclusion

The function of this memorandum has been to explain the derivation and purpose of the final orders entered on September 3, 1985, whose every paragraph incorporates a large measure of the parties’ consent. The procedure for obtaining it followed a pattern established in these proceedings several years ago. On the basis of reports from Robert A. Dentler and Marvin B. Scott, the court-appointed experts, or from Martin A. Walsh, Regional Director of the Community Relations Service of the Department of Justice or from John P. Dris-coll, Jr., Esquire, who served pro bono as the court’s liaison to the academic and business communities, or a similar neutral source, the court would prepare and file a draft order believed to be supported by at least most of the parties. Time would be allowed for the parties’ comments and objections and a hearing would be scheduled. After the hearing, a revised and refined draft might be issued as a court order. Thus, for example, the Draft Order Toward Closing Case issued on August 3,1982 built directly on reports to the court regarding the progress of the consent decree negotiations initiated in June, 1981 by Gregory R. Anrig, then Massachusetts Commissioner of Education; and they in turn led to the Orders of Disengagement dated December 23, 1982, pursuant to which the State Board filed its five monitoring reports.

The court’s memorandum dated August 2, 1983 acknowledged the first State Board . report as “a long step toward a common ground from which the parties can discuss and confront issues of compliance and noncompliance in an intelligent and informed fashion.” The five State Board reports will remain an indispensable source of accurate information of what did and did not happen in the schools and in the case.

The memorandum’s purpose has not been to set the record straight regarding the course of these proceedings generally or the current condition of the Boston public schools. A memorandum twice as long could be devoted to that endeavor, erroneous accounts having been published on every side. For example, an absolutely amazing article appears in the latest issue of New Perspectives, the quarterly journal published by the United States Commission on Civil Rights, nowadays known as the so-called Civil Rights Commission. Enti-tied “Education by Decree”, it frames and answers, with slight regard for the facts, the question “Why was desegregation in Boston such a self-defeating exercise?” and speaks of “massive chaos throughout the school system”, “teacher strikes, student ‘sick-outs,’ and so many changes in pupil and teacher assignments that all sense of continuity and loyalty was obliterated”, and “as late as 1982 ... still frequent racial skirmishes at South Boston and other schools”. News media coverage, while excellent generally, was also sometimes woefully mistaken. However, whether the court placed the school system in receivership and controlled its daily operations and ordered school supplies and forced superintendents’ resignations and blocked plans for the Latin School and issued so many other imaginary orders is unimportant now. As Emerson said, “History is all party pamphlets.” What matters is that the final orders are another long step toward complete control and concomitant accountability of elected officials.

PROCEDURAL ORDER

Referring to paragraph (7) of the Final Orders dated September 3, 1985, and the memorandum regarding that paragraph filed contemporaneously herewith, any party wishing a comprehensive compilation of still existing orders may obtain one by first drafting such a compilation, then serving it on other parties and filing it with the Clerk on or before November 20, 1985. Other parties may file comments or point out errors on or before November 27, 1985, after which the court will issue an official compilation.

CITY DEFENDANT MOTION TO ENLARGE THE TIME FOR FILING NOTICE OF APPEAL

The city defendants move, pursuant to Fed.R.App.P. 4(a)(5), that this court enter an order extending the time the parties may file a notice of appeal as to all the orders entered on September 3, 1985 until December 3, 1985. In support of this motion, the city defendants state as follows:

1. The court initially enlarged the time to appeal until November 2, 1985 in part because it had not issued the forthcoming memorandum referred to in the September 3, 1985 orders. That memorandum has still not been issued by the district court and the city defendants believe that the parties should have an opportunity to review that memorandum before making a final decision on whether or not to appeal any of the September 3, 1985 orders.

2. On or about September 10, 1985, the city defendants filed a motion for modification of the September 3,1985 UFP Orders. On October 17, 1985, the parties filed a letter containing the parties agreement with regard to the modification of paragraph 2(a) and 2(b) of that order. However, to date the district court has not acted on the pending motion. The city defendants believe that the parties should be afforded the opportunity to review the court’s disposition of the pending motion before making a final decision on whether or not to appeal any of the September 3, 1985 orders.

GARRITY, District Judge.

11/1/85

Allowed to the extent of an enlargement until 11/29/85; and so ordered.

      . In titling these orders “Final Orders” instead of "Final Judgment", as first drafted, we follow the precedent and adopt the reasoning of Judge McMillan in removing the cause from the active docket and closing the file in Swann v. Charlotte-Mecklenburg Board of Education, W.D.N.C. 1975, 67 F.R.D. 648.

      . A memorandum regarding these final orders will be filed at a later date.

      . This memorandum is supplementary to the court’s July 5, 1985 memorandum and should be read in conjunction with it.

      . In its efforts to develop a comprehensive consent decree during 1981 and 1982, the State Board organized all remedial orders issued by the court between 1974 and 1981 into twelve categories. This breakdown was carried forward in the court’s memorandum and orders of disengagement issued on December 23, 1982, Appendix I, and the State Board undertook to monitor progress toward compliance by school defendants within each of these categories. The aim of the court and the parties at that time was to lay a foundation of fact on which to erect decisions as to final disengagement. Two monitoring reports were filed in each year from 1983 to 1985, five in all, on the basis of which and by orders dated October 31, 1984, May 17, 1985, and August 8, 1985, entered after notice and hearing, jurisdiction ended with respect to these six categories.

      . And maintain them decently. A minimum level of funding of annual maintenance and repairs is a bone of contention between the city and school defendants, on the one hand, and the State Board, which has conditioned its commitments in the UFP to Boston’s raising this minimum from its present level of $6,000,000 to $8,000,000. See pp. 17-19 of court's memorandum on UFP orders dated September 3, 1985.

      . The draft of this paragraph proposed by the court on July 5, 1985, set, as the standard of compliance, assignment of students "so that to the greatest degree practicable the racial/ethnic composition of each community district school reflects the public school student population. ...” The final order is partly a response to one of the objections advanced by the school defendants to the original draft, viz., that the “greatest degree practicable" standard, though taken verbatim from the decision of the Supreme Court in Swann v. Charlotte Mecklenberg Board of Education, supra, 402 U.S. 1, 91 S.Ct. 1267, 1281, 28 L.Ed.2d 554 (1971), is insufficiently specific and objective to comply with Rule 65(d), Fed.R.Civ.P.

      . This component makes provision for a proportion of voluntary preferences for magnet schools that is substantially greater than the proportion available in all but four of the nation’s thirty largest public school districts.

      . As provided in an order dated May 24, 1985, each of the least populous groups, white and other minority students, which are combined for assignments to magnet schools, shall be assigned to each school in numbers roughly reflecting their respective percentages of citywide public school student population.

      . The Hernandez has proven to be a successful and attractive bilingual school and the school committee voted to transfer it to a larger facility and expand the program to include a middle school by September 1986. Its development and magnet program are described in R. Dent-ler and M. Scott, SCHOOLS ON TRIAL, An Inside Account of the Boston Desegregation Case, at 160-62 (1981).

      . The order of August 25, 1982 was vacated by the Court of Appeals on February 2, 1984 and remanded for further proceedings not inconsistent with its opinion in Morgan v. McKeigue, 1 Cir.1984, 726 F.2d 33.

      . This was an inadvertence by the court, conceded at hearings in open court almost immediately after issuance of the order.

      . At the hearing on August 7, 1985 the court submitted to the parties a second draft of paragraph (4) which included the last clause as finally ordered.

      . The state legislature’s policy idea for creating SICs drew directly from research on Boston’s SPCs.

      . The cited motion, appended proposals and court order appear at pp. 513-539 of volume II of State Board Report No. 4 dated February 1, 1985.

      .Assumption (d) in the August 8, 1985 memorandum pertains to the average annual faculty turnover, i.e., number of retirements, resignations, extended leaves of absence etc. It should be clarified by the addition of three words, "that should be”, which were omitted inadvertently, so that the phrase reads, "which is the figure that should be used in calculating net changes.”

      .As shown in Table 1 attached to the court’s August 8 memorandum, hundreds of teachers, mostly white, were laid off in 1981. On June 2, 1981, the court ordered that recall rights of tenured teachers be protected and suspended the recruiting obligations of the school defendants. While white teachers were being recalled, there was scant recruitment of black applicants for faculty appointments. Last year, for example, only a single recruiting trip, to Howard University, was made. Also, as shown in the same table, the percentage of black faculty increased by a total of only 1.8%, from 19.1% to 20.9%, from 1981 until 1985.

      . The figures 307 and 22 are found in Table 2, Model A, which shows increases in black faculty needed to achieve a citywide population proportion of 23% by 1988-89, 2% less than the 25% target for that year urged jointly by the plaintiffs and school defendants.

      . The figures 263 and 40 appear in Model B of Table 2, which shows increases in numbers of black teachers at the rate of .5% per year, from 20.86 to 21.36 to 21.86 etc., as required by the final order.

      . The order for desegregation of administrative staff dated February 24, 1976, in para. 10, requires relatively even distribution of black administrators throughout the system.

      . The records of the Clerk of the United States Court for the Western District of North Carolina show that the Swann case has been dormant for ten years. Only once, about five years ago, did a party, the school defendant, apply for the modification of an order. Evidently some cases never die; they just fade away.

      . Also the remaining orders do not apply to the city and state defendants, except for those pertaining to the UFP.

      .Paragraphs (3) and (8) are mutually exclusive, i.e., should the school defendants decide to use the single citywide guideline for all student assignments, they would not be required to issue the public notice and conduct the negotiations described in paragraph (8).

      . Mass.G.L. c. 15, § 1G provides that the State Board "shall see to it that all school committees comply with all laws relating to the operation of the public schools.” The "laws” referred to would seem to include the State and Federal Constitutions, Board of Education v. School Committee of Springfield, 1976, 370 Mass. 37, 60 n. 27, 345 N.E.2d 345.

      . It is not beyond the realm of possibility that the final orders of September 3, 1985 might trigger a resumption of consent decree negotiations whereby all or portions of the final orders would become the final judgment in the case.


source: Caselaw Access Project

author: EDWARD C. REED, Jr., District Judge.

license: Public Domain

text:
    SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. ELMAS TRADING CORPORATION, Republic Overseas Bank, Ltd., James L. Attarian, and Donald D. Smith, Defendants.
    No. CV-R-85-263-ECR.
    United States District Court, D. Nevada.
    Sept. 3, 1985.

      Kerry C. Feffer, Caludia Z. Grossfeld and Robert D. LaFramenta, S.E.C., Los Angeles, Cal., for plaintiff.
    Thomas Nolan, Maryann Marzano, James Ridley Ferrand and Thomas L. Taylor, III, Beverly Hills, Cal., for Republic Overseas Bank, Ltd.
    Robert J. Fry, Reno, Nev., for Elmas Trading Corp.
    John Vandevelde and Stephen B. Sadow-sky, Los Angeles, Cal., for Attarian & Smith.
   ORDER

EDWARD C. REED, Jr., District Judge.

The permanent Receiver in this case moves this Court for an order modifying the Permanent Injunction and the Order Appointing Permanent Receiver previously entered on June 24, 1985. Our June 24, 1985, order prohibited the disposition or transfer of assets, documents and records on accounts and entities related to or affiliated with Elmas and/or ROBL. The Receiver seeks a modification of these orders to include the designation of certain entities and accounts as being related to, or affiliated with, Elmas and ROBL. This would extend the prohibition and restraint of the transfer or disposition of any assets, documents and records pertaining to the Receiver’s proposed entities or accounts.

This case represents a complex set of interrelated companies. The Receiver has done an admirable job of making his way through the difficult web of entities and corporations. More and more we read of investment schemes set up in this way in order to hide assets in an attempt to keep innocent investors from receiving the return of their money. As this Court noted at the August 28, 1985, hearing, it is crucial that defendants James Attarian and Donald Smith are not able to dissipate money that rightfully belongs to those investors in Elmas and/or ROBL and their related affiliates or subsidiaries.

This Court has, however, reviewed the motion with the view that the Receiver must show beyond mere speculation that these entities should be brought within the Receivership.

In support of his argument that these entities should be included within the Receivership, the Receiver argues that we should pierce the corporate veil. Further, he argues that these various entities are merely the alter egos of the entities already within the Receivership.

In opposition to the Receiver’s motion, defendants argue that not only are these entities separate and distinct, but to include them within the Receivership violates the due process rights of the entities. If this Court finds that these entities are not separate and distinct from Elmas and ROBL, then there would be no problem of any taking of property without due process. If, however, this Court finds that these entities are separate and distinct, then sufficient notice would be needed before further action could be taken.

The alter ego doctrine, which is remedial in nature, is not applied to eliminate the consequences of corporate operations, but to avoid inequitable results. To invoke the doctrine against a party, we must find that the party was an actor in the course of conduct constituting the abuse of corporate privilege-we may not apply the doctrine to prejudice an innocent third party.

Under the doctrine of alter ego liability, this Court may disregard the corporate entity and treat the acts of the corporation as if they were done by the controlling corporation lying behind the corporate shell or the individuals. Kersh v. General Council of the Assemblies of God, 535 F.Supp. 494, 496 (N.D.Cal.1982), citing 6 Witkin, Summary of California Law: Corporations § 5. We must determine under the facts presented to us and for the purposes of this motion only, whether to disregard the corporate entities.

To pierce the corporate veil, fraud or other wrongful purpose need not be proven. Schattner v. Girard, Ind., 668 F.2d 1366, 1370 (D.C.Cir.1982). Just as with the alter ego doctrine, it is sufficient that if we recognized the separate corporate existence, we would bring about an inequitable result. Cunningham v. Rendezvous, Inc., 699 F.2d 676, 680 (4th Cir.1983).

Other factors to be considered in piercing the corporate veil are: failure to observe corporate formalities; nonpayment of dividends; the insolvency of the debtor corporation at the time; siphoning of funds of the corporation by the dominant stockholder; nonfunctioning of other officers or director; absence of corporate records; use of the same office or business location by the corporation and its individual stockholders; and the fact that the corporation is merely a facade for the operations of the dominant stockholder or stockholders. The conclusion to disregard the corporate entity does not, however, rest on a single factor, but often involves a consideration of the mentioned factors; the particular situation must generally present an element of injustice or fundamental unfairness. See 1 W. Fletcher, Cyclopedia of the Law of Private Corporations § 41 (rev. perm. ed. 1980).

Consideration can also be given to: the comingling of funds and other assets; the unauthorized diversion of funds or assets to other than corporate purposes; the treatment by an individual of corporate assets as his own; the failure to maintain minutes or adequate corporate records and the confusion of the records of the separate entities; the identity of equitable ownership in the two entities; the identity of the officers and directors of the two entities, or of the supervision and management; the absence of corporate assets; the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; the concealment and misrepresentation of the identity of the responsible ownership, management, and financial interest or concealment of personal business activities; the disregard of legal formalities and the failure to maintain arm’s length relationships among related entities; the use of the corporate entity to procure labor, services, or merchandise for another person or entity; the diversion of assets from a corporation by or to a stockholder or other person or entity to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; the contracting with another with intent to avoid performance by the use of a corporation as a subterfuge of illegal transactions; and the formation and use of a corporation to transfer to it the existing liability of another person or entity. Arnold v. Browne, 27 Cal.App.3d 386, 103 Cal.Rptr. 775, 781-782 (1972); Amfac Mechanical Supply Co. v. Federer, 645 P.2d 73, 77-78 (Wyo.1982).

Under federal law, a corporate entity may be disregarded in the interests of public convenience, fairness, and equity, and in applying this rule the federal courts will look closely at the purpose of the federal statute involved to determine whether it places importance on the corporate form. See Town of Brookline v. Gorsuch, 667 F.2d 215, 220 (1st Cir.1981); Capital Telephone Comp. Inc. v. F.C.C., 498 F.2d 734, 738 (D.C.Cir.1974). Federal analysis gives less respect to the corporate form than does the strict common-law alter ego doctrine. Id.

This case arose under the Securities and Exchange Act and was brought by the Securities and Exchange Commission, the principal watchdog of those violating the securities’ laws. The government has a keen interest in preventing the unlawful manipulation and use of securities.

Further, the Receiver’s primary objective in this case is to ensure that all available assets are brought within the Receivership and may then be properly distributed to creditors. We will, therefore, apply a more flexible approach in determining whether the corporate entity should be disregarded.

Initially, we note several facts which provide an umbrella to the discussion of the individual entities. Money flowed between Elmas, ROBL and the various entities. The Receiver has discovered numerous checks between several of the companies. On many, James Attarian is the signatory. Further, the Receiver has found no explanations for several of the transactions. It appears that no services were performed by some of the companies. There are apparently no records of legitimate business purposes and the Receiver has been unable to find normal business records.

Defendants Attarian and Smith intermingled funds of Elmas and ROBL with the subsidiary and affiliate entities and the records and ledgers maintained for them are incomplete and do not conform to standard business practices. In many instances Elmas and ROBL were treated as shell corporations through which Attarian and Smith operated. It also appears that several of these entities relied heavily on Elmas and ROBL for any business transactions. This raises the inference of intertwined operations and mere corporate shells.

This Court notes that several of these entities were incorporated within a few months of each other and during the same period that Attarian and Smith were raising millions of dollars from investors. Also, several were incorporated by the same company, Laughlin and Associates.' The inference from this is that these entities are a part of the complex web which Attarian and Smith wove. In addition, many of the entities list Attarian, Smith and/or relatives as officers of the corporations.

Finally, we note that the Receiver noticed a request to examine defendants James Attarian and Donald Smith for the August 23, 1985, hearing. Through their attorney, both refused to be examined at the hearing or to attend the hearing. Their attorney represented to this Court that they would not testify because of their assertion of the fifth amendment privilege against self-incrimination and/or the attorney-client privilege. At the hearing, the Court acknowledged our consideration of the assertion of the fifth amendment in deciding the Receiver’s motion for modification. Not only did Attarian and Smith refuse to testify, they did not submit any affidavits with their opposition to the Receiver’s motion. The Receiver is correct when he notes that these two men may be the only ones who possess the information of the status of these various entities. Thus, this assertion is a pivotal issue in trying to determine whether to include the Receiver’s proposed entities in the Receivership.

Keeping in mind the general principles of law and facts previously discussed, we turn to the individual entities. The parties have stipulated that the following entities are related to, affiliates of, or subsidiaries to Elmas and/or ROBL:

1. Trust Equities, Ltd.;
2. International Management and Accounting (IMAC);
3. COMPAC Technologies, Inc.;
4. Elmas Mining Corporation; and
5. Paychute Mining Corporation.

The motion to modify the Order Appointing Receiver and Preliminary Injunction will be granted as to these entities.

The following list is those entities in dispute: Elite Corp.; EMC Corp.; Ehlmas Corp.; Lynx Mining Corp.; Eden Financial Corp.; Arbour Financial, N.V.; Truth Share, Inc.; Elmatec, S.A.; ETC Corp.; Ass’n of Financial Consultants, Inc.; For-tex Corp.; and Gold Equities, Ltd.

Elite Corp.

Elite Corporation (Elite) is a Nevada corporation formed by defendant Attarian and his wife, Phyllis, which ostensibly performed consulting services for Elmas. Pursuant to documents filed with the Nevada Secretary of State, Elite was incorporated on May 29, 1984, by Laughlin Associates, Inc., and its present officers are:

(a) Edwin L. Johnson, President (who is also the President of IMAC and son-in-law of defendant Attarian);
(b) defendant Attarian, Secretary (defendant Attarian was previously the President of Elite); and
(c) Phyllis Attarian, Treasurer.

The principal place of business of Elite is listed as Reno, Nevada, and its corporate purpose is to engage in “all legal activities.” Its name was changed on August 20, 1984, from “Elite Investors, Inc.” to its present name.

From business records, the Receiver was unable to determine what, if any, consulting services were actually performed by Elite for Elmas, although Elite has received a total of $32,512.50 from Elmas and IMAC as compensation for such services. Elite also maintained an account with ROBL and the balance in such account as of April of 1985 was $31,750.00.

It was frustrating for this Court to learn at the August 23,1985, hearing that money which had been in an account for Elite at the time this motion was made has now been entirely withdrawn.

We find that Elite should be included in the Receivership.

EMC Comp.

EMC Company (EMC) is a company formed under the laws of Turks & Caicos Islands, British West Indies. The imprinted checks utilized by EMC drawn on an account with the Valley Bank of Nevada evidence a mailing address and telephone number in the Turks & Caicos Islands. Ledgers maintained by Elmas recording monthly distribution of checks, reveal that two payments had been made by Elmas to EMC for an "advance on expenses" in the total sum of $7,000.00. Such payment were made by Elmas to EMC during the months of May and June of 1984.

Further, the Receiver's review of the various accounting and other records of Elmas and ROBL uncovered files for EMC containing bank statements, bank registers, cancelled checks and deposit slips. Bank statements for EMC from the Valley Bank of Nevada were transmitted to EMC at an address in Reno, Nevada, which in fact is the same address utilized by Elite, defendant Attarian's "consultant corporation." The EMC bank account with the Valley Bank of Nevada was evidently closed in July of 1984. Following the review of returned cancelled checks payable on the EMC bank account with the Valley Bank of Nevada, it appeared that the majority of disbursements were of a personal nature, or to religious organizations or societies. All checks reviewed bore the signature of defendant Attarian.

The Receiver has, therefore, demonstrated that EMC used the same business location, intermingled business records with El-mas and ROBL and used assets for personal interest. We, therefore, reject the recognition of EMC as distinct and will grant the Receiver's motion as to EMC.

Ehimas Corp.

The place of incorporation of Ehi-mas Corporation (Ehimas) is presently unknown. Following a search of corporate records on file with the Nevada Secretary of State, the Receiver determined that Ehl-mas was not a Nevada corporation. Following a review of ledgers and bank statements either maintained or received by El-mas, the Receiver determined that payments totaling $13,000.00 were made to Ehlmas by Elmas.

In addition, an invoice bearing the date of August 13, 1984, prepared and sent by FORMAR ELECTRONICS, INC. (FOR-MAR) (a company located in Santa Barbara, California) to Ehimas at the same address utilized by Elmas and ROBL reflects that "trading supervision, operation and maintenance" services were performed by FORMAR on behalf of Ehlmas. The total equity in Ehimas' account with FOR-MAR totaled $2,721,247.39 as of July 31, 1984. Both Ehimas and Elmas use the same office suite and mailing address. Further, a similar contractual relationship exists between FORMAR (such contract was originally entered with Advanced Market Technology, a Utah Corporation which later merged with FORMAR on June 21, 1983) and Elmas for FORMAR to perform the very services referred to on FOR-MAR's invoice with Ehlmas. Attarian and Smith argue that the second contract reflected a typographical error and should also have read "Ehimas."

Although Ehlmas utilized the same address, the Receiver was unable to provide any information concerning the ownership, control or organization of Ehlmas. Thus, while the Receiver was able to raise an issue as to whether Ehlmas should be included in the Receivership, this Court is unable to include it. The motion will, therefore, be denied as to Ehimas.

Lynx Mining Corp.

Lynx Mining Corporation (Lynx) incorporated in Nevada in 1983, held itself out to the public as a Nevada corporation formed in 1982. It was incorporated by Robert J. Fry, Esq., an attorney with the law firm which is counsel of record in this case for Elmas and ROBL. The officers of Lynx include:

(a) Jay Landis, President; and
(b) Richard H. Sanborn, Secretary.

The Receiver notes that Jay Landis appears to have been an officer of Paychute Mining Company (Paychute). The Receiver asserts that Lynx was the predecessor to Paychute. Counsel for defendants Attari-an and Smith concede that Paychute is related to Elmas and ROBL and should be included in the Receivership. Lynx, arguing through Mr. Fry, contends Lynx was not the predecessor to Paychute. The financial statements for the period August 19, 1982, through October 31, 1983, prepared by the Reno, Nevada, accounting firm of Pangborn & Co., Ltd. (which firm had performed accounting services for El-mas, ROBL and other related entities up until approximately May of 1985), support the Receiver’s assertion that Lynx was the predecessor in interest to Paychute.

In further support of his argument, the ■ Receiver contends that Elmas Mining Corporation (which has been stipulated to be included in the Receivership) offered to investors the right, title and interest to a specific, divided mineral claim for the recovery of gold. In approximately April of 1984, Elmas Mining had contracted with and advanced working capital to Lynx and its successor Paychute. Pursuant to its agreement with Elmas Mining, Lynx was obligated to provide certain mining services including mine site management and improvement and mining processes. Lynx also contracted with the individual investors to extract, process and deliver gold from the individual’s mineral claims.

Jay Landis, who is listed in the Mining Services Offering as a Director of Lynx, also appears to have been an authorized signatory on or an officer of Paychute as reflected on a check dated March 22, 1985, drawn on the Paychute account at the Valley Bank of Nevada and made payable to Lynx in the sum of $30,000.00.

Following a review of accounting ledgers reflecting cash inflows, the Receiver determined that Lynx received the following payments:

1. March, 1985: $75,000.00 from Elmas
2. December, 1983: $100,000.00 from Trust Equities
3.January, 1982 through February, 1985: $1,686,500.00 from Elmas Mining

In addition, supporting documentation has been discovered evidencing transfers totaling $200,000.00 from Elmas Mining to Lynx.

Notes to the Financial Statement prepared by the Pangborn & Co. accounting firm for Elmas Mining reveal that a $1,313,817 advance to Lynx stated no interest and had an indeterminable payment period. The financial statement also revealed that Lynx’ operations had not generated earnings as of October 31, 1983.

Thus, although defendants Attarian and Smith are not listed as officers and directors of Lynx, sufficient evidence exists to include Lynx within the Receivership. Eden Financial

Eden Financial Corporation (Eden) is a Nevada corporation incorporated on February 29,1984. Pursuant to documents filed with the Secretary of State for the State of Nevada, Eden was incorporated by Laughlin Associates, Inc. Its officers include:

(a) defendant Smith, President;
(b) defendant Attarian, Secretary; and
(c) Phyllis Attarian, Treasurer.

Its principal place of business is listed as Reno, Nevada, and its corporate purpose is to engage in “all legal activities.”

IMAC, already subject to the provisions of the Permanent Injunction, is a wholly-owned subsidiary of Eden. Upon review of ledgers maintained by IMAC and copies of cancelled checks, the Receiver determined that IMAC paid to Eden approximately $171,000.00. Of that sum, Eden received $5,000.00 as “advances” and $63,900.00 as a “loan.” The sum of $2,280.48 was paid as a “loan” to an entity by the name of Eden Ins. Co., which may be affiliated with Eden. Moreover, from a previously unidentified account in the name of Eden at Security Pacific National Bank in Fresno, California, monthly automatic payments of $540.00 are continuing to be made for application to a home mortgage loan in the name of defendant Attarian for a residence occupied by his daughter. The Court finds that Eden should be included within the Receivership.

Arbour Financial

Arbour Financial, N.V. (Arbour Financial) is not a Nevada corporation, and its place of incorporation, if any, is unknown. Arbour Financial may be a Cayman Island company which utilizes a London, England, office address. The Receiver was advised by Robert Attarian (defendant Attarian’s son) that defendant Attarian utilized funds of ROBL and/or Elmas to purchase, through Arbour Financial, 800,-000 shares in Process Control, Inc. Process Control, Inc., an Arizona Electronics Company of which Robert Attarian is the Secretary, Vice-President and one of its Directors, is presently believed to be a third party entity, not specifically related to Elmas and/or ROBL. (The Receiver does note, however, that Process Control received payments totaling $150,000.00 out of ROBL/Elmas funds for an unaccountable purpose.)

In addition, a draft balance sheet of the Elmas companies prepared by Pangborn & Co. and dated March 29, 1985, listed an asset of $2,200,000 entitled Campbell National Bank. This $2,200,000 represented a loan made by Arbour Financial to certain persons who planned on subscribing to a stock offering made by Campbell bank. This demonstrates a comingling of Arbour and Elmas assets. This Court should be concerned that in the interests of justice, the corporate veil of Arbour should be pierced and, thus, the Receiver’s motion should be granted.

Truth Share, Inc.

Truth Share, Inc. (Truth Share) is a Nevada corporation purported to be a nonprofit organization engaging in “educational,” “religious” and “charitable” activities. It was incorporated on May 24, 1984, by Laughlin Associates, Inc. Its officers include:

(a) defendant Attarian, President;
(b) Phyllis Attarian, Secretary; and
(c)Phyllis Attarian, Treasurer.

Defendants Attarian and Smith, and Phyllis Attarian, are also directors of Trust Share. Its principal place of business is Reno, Nevada. The address utilized by Truth Share is identical to that of Elmas and ROBL.

There are bank accounts in the name of Truth Share at Security Bank of Nevada, and one bank account at the Valley Bank of Nevada. As of December 4, 1984, the two accounts at Security Bank of Nevada were shown to have a balance of approximately $54,000.00. According to a bank statement from Valley Bank of Nevada dated June 19, 1984, a balance of approximately $8,000.00 existed in that account. The source and use of those funds have not as yet been determined, nor has a current balance been ascertained in either of those accounts.

The Receiver has demonstrated a similar business location, personal use of assets, and similar directors. In conjunction with the umbrella this Court noted above, Truth Share should be included within the Receivership. The Receiver’s motion should, therefore, be granted.

Elmatec, S.A.

The Receiver has been unable to determine the legal status of Elmatec, S.A. (aka Elma Tec). By virtue of its “S.A.” designation, it may be a foreign corporation. Corporate records on file with the Nevada Secretary of State reveal that El-matec, S.A. is not a Nevada corporation.

Pursuant to ledgers and receipts evidencing wire transfers, however, it has been determined that Elmatec, S.A. received $9.5 million from ROBL. Those wire transfers occurred in October and December of 1984. Such funds were wire transferred from Security Bank of Nevada to Swiss Bank Corp., New York, for the account of Swiss Bank & Trust Corp., Grand Cayman in favor of Elmatec, S.A. One such wire transfer bears account number 0-573-359025-00 for Elmatec, S.A. at Swiss Bank & Trust Corp., Grand Cayman. The source of the funds transmitted via wire transfer were clearly from ROBL; however, the business purpose for such transfers is unknown.

This Court is forced to find that this transfer standing alone is insufficient to find Elmatec is an affiliate or subsidiary. However, it may be appropriate for the Receiver to place a high priority on either garnering more facts in support of piercing Elmatec’s corporate veil or instituting a separate action against Elmatec.

ETC Corp.

ETC Company is already within the Receivership and, thus, subject to the Permanent Injunction freezing its assets. Documents and records reviewed thus far have evidenced the use of the designation “Corporation” with reference to ETC. Thus, ETC Corporation should be included within the Receivership.

Association of Financial Consultants, Inc.

The Association of Financial Consultants, Inc. (AFCI) is a Nevada corporation incorporated on May 10, 1984. Previously known as “Financial Accounting Services, Inc.”, it changed its corporate name on August 27, 1984. Its officers are:

(a) Robert C. Isom, President;
(b) Phyllis W. Attarian, Secretary; and
(c) Phyllis W. Attarian, Treasurer.

Its mailing address was 2527 No. Carson St., Suite 205, Carson City, Nevada 89701.

The Receiver asserts that defendants At-tarian and Smith organized AFCI to disseminate information covering “income producing vehicles” to financial consultants soliciting investments for ROBL for recommendation to investor groups in ROBL.

There was no opposition to the inclusion of this entity. However, the facts are insufficient to include AFCI in the Receivership. The Receiver’s motion as to AFCI should be denied.

Fortex Corp.

Fortex Corporation (Fortex) was incorporated on March 22, 1985, in the State of Nevada by Laughlin Associates, Inc., the same organization utilized by defendants Attarian and Smith to incorporate many of their other related companies. Its officers include:

(a) Gordon DeLeon, President; and
(b) Helen Markowitz, Secretary.

Mr. DeLeon, one of the major financial consultants for Elmas and ROBL, has been subject to a desist and refrain order issued by the Commissioner of the California Department of Corporations in March of 1983 (this order was issued against Elmas and Defendants Attarian and Smith as well) enjoining the offer and sale of unregistered securities, and has been subpoenaed to produce documents pertaining to ROBL, El-mas, the Association of Financial Consultants (AFCI), International Management & Accounting Corporation (IMAC), and others, by regulatory agencies in a number of states.

Ms. Markowitz is defendant Attarian’s daughter and lives in a residence located at 4718 E. Alamos, Fresno, California. As noted above, the home loan mortgage payment for that residence is automatically paid through a bank account maintained at Security Pacific Bank, Fresno Center Office, in the name of Eden Financial Corporation. (As discussed above, Eden will be included in the Receivership.)

Bank signature cards were executed by Mr. DeLeon and Ms. Markowitz as officers of Fortex and were utilized in connection with opening two accounts in April of 1985 at National InterCity Bank in Sunnyvale, California. Approximately $3 million was deposited into those accounts via wire transfers from an ETC (included in the Receivership) account at FSI Futures, Inc. Pursuant to additional documentation obtained from National InterCity Bank, it has been determined that almost the entire $3 million deposited was later disbursed to Elmas/ROBL investors and financial consultants, as follows:

(a) Paid to consultants: $1,550,419.00
(b) Paid to investors: $1,447,065.00

The Receiver has demonstrated that the funds in Fortex were comingled with assets of Elmas and ROBL. The Receiver’s motion to include Fortex should be granted.

Gold Equities, Limited

Gold Equities, Limited (Gold Equities) is apparently a Cayman Island corporation. Defendant James Attarian is the Secretary and a director.

Following a review of ledgers and other records maintained by IMAC, it has been determined that records pertaining to Gold Equities were in fact maintained by IMAC and such records, including investor records, were basically maintained in the offices of IMAC and Compac in Reno, Nevada. Cash transfers were made from Trust Equities and IMAC to Gold Equities as follows:

1. July 18, 1984 — three checks from Trust Equities in the following amounts:
$10,000.00
$ 7,000.00
$29,432.00
2. November 20, 1984 — one check from IMAC: $10,000.00.
3. November 17, 1984 — one check from IMAC: $44,000.00.

The foregoing transfers total $100,-432.00. The Receiver was unable to verify if any additional transfers were made. Based upon the review of the limited Gold Equities records available to date, the Receiver determined that the above-referenced transfers were made utilizing assets of ROBL as investments in Gold Equities. The above-referenced transactions and the documentation reflect that individual depositors of ROBL were able directly to move monies from ROBL to Gold Equities. The fact that funds could be moved rather easily from an account with ROBL to another account within Gold Equities suggests that a direct relationship existed between ROBL and Gold Equities.

In addition, financial consultants for ROBL (and its predecessor, Trust Equities) also solicited investments from investors into Gold Equities. Moreover, Gold Equities utilized the same address as Elmas and kept equipment, books and records of the corporation at Elmas’ office. All of its money is listed in the Royal Bank of Canada and FSI futures under the name of ETC Co. which is included in this Receivership. Its office equipment is in the name of IMAC which is also included in the Receivership.

While this Court finds there is sufficient evidence to include Gold Equities within the Receivership, we are faced with the fact that on June 28, 1985, defendant James Attarian filed in this district for voluntary bankruptcy under Chapter Eleven. The bankruptcy petition lists cash assets of $3,000,000, gold assets of $500,000 and liabilities of approximately $1.5 million. The liabilities include $76,000 allegedly owing defendants Attarian and Smith for “wages for services.”

Gold Equities’ attorney, Bruce Beesley, Esq., admitted at the August 23, 1985, hearing that the sole purpose for filing for bankruptcy was to avoid the Receivership and argued this Court is without jurisdiction pursuant to 28 U.S.C. § 1471(e).

Beesley’s argument that this Court is divested of jurisdiction by the filing of the bankruptcy petition pursuant to 28 U.S.C. § 1471(e) is wholly without merit. See Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 87, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598 (1982). Not only is 28 U.S.C. § 1471(e) no longer in force, but the filing of Gold Equities’ petition for bankruptcy does not operate to stay the action before this Court. 11 U.S.C. § 362(b)(4). Section 362(b)(4) provides that the filing of the bankruptcy petition does not automatically operate as a stay in an action or proceeding by a governmental unit to enforce such governmental unit’s police or regulatory power. 11 U.S.C. § 362(b)(4). “The policy behind this ‘police or regulatory exception’ to the automatic stay is to prevent the bankruptcy court from becoming a haven for wrongdoers.” Commodity Futures Trading Commission v. Co Petro Marketing, 700 F.2d 1279, 1283 (9th Cir.1983) (discussing the exception for the enforcement of a judgment under 11 U.S.C. § 362(b)(5)). Cf. Securities and Exchange Commission v. First Financial Group of Texas, 645 F.2d 429, 437 (5th Cir.1981) (relying on § 362(b)(4) and (5), the court found that a continuing civil enforcement proceeding brought by a governmental unit and the enforcement of injunctive relief obtained therein are exempted from the automatic stay provisions of § 362(a)). As noted above, the SEC brought this case in its regulatory capacity. Thus, the exception to the automatic stay provisions found in U.S.C. § 362(b)(4) enables this Court to properly rule on the Receiver’s motion to include Gold Equities in the Receivership. We find that this motion should be granted.

Although we enter an order including the above entities within the Receivership estate, we do so without prejudice to further proceedings if proof surfaces that these entities have a separate and distinct charac- • ter.

IT IS, THEREFORE, HEREBY ORDERED that the Permanent Injunction and Order Appointing Permanent Receiver shall be modified in accordance with this order.