“You’re gonna have a pretty easy time with this one,” McCree said.
“I’m not so sure,” Pitt said
Chief Justice Burger, blessed with a deep, commanding voice, began the proceedings. “We’ll hear arguments next in Securities and Exchange Commission against … Sloan.” He paused theatrically, as though he needed to glance at his notes to verify the name of a respondent he knew very well.
Harvey Pitt stepped up to the podium, and launched into a cogent defense of a position even he thought was untenable. He claimed that the SEC had issued suspensions in a responsible manner, with each of the five commissioners weighing in on a “separate and fresh review” of facts for each ten-day suspension.
Justice William Rehnquist interrupted with the obvious question: Should there be any kind of limit on the SEC’s suspension power? Yes, Pitt said. The SEC’s authority to suspend the sale of stocks should be limited to when consecutive suspensions amounted to an abuse of discretion.
Then Justice Burger screwed up. “What about 36 consecutive suspensions of ten days each?” he asked. “Where would that fall?”
This was, in fact, the exact number of suspensions listed in the SEC brief, which put Pitt in an awkward position. He dodged and weaved, until Rehnquist came to the rescue. He changed the question from 36 suspensions to a hypothetical 20. This enabled Pitt to get back to an even keel, arguing that the Canadian Javelin case had been very complicated, involving fugitives from justice and manipulators in both foreign and domestic markets. It might well take an extended period of time to prepare materials for a judge, he said, to whom the SEC could appeal for a much longer suspension—as long as a year.
Justice Potter Stewart noted that Canadian Javelin had already been suspended for more than a year—ten days at a time. Pitt repeated that it was a complicated case.
“For how long?” Justice John Paul Stevens asked. “How long should be required to get enough evidence to make out a case?”
Pitt refused to specify—not even 50 days would be sufficient in all cases.
“I’m just wondering,” Stevens persisted, “if you have the ten-day power you claim, why would you ever run to court for” a year-long suspension?
Pitt responded nonsensically, and tacked toward his conclusion. He appealed to the justices to rule on the merits of the case. If they did not, Sloan would surely take them back to the Second Circuit. The matter was before the Court now only because Sloan, this time, had not first gone to the district court, which had found all his previous claims to be frivolous.
“Well,” Stewart quipped, “I guess he took it as a lesson never to try that route again.”
Supreme Court arguments are hushed, sedate affairs. Emotions inserted into the proceedings tend to have an exaggerated effect. Tepid jokes become riotously funny. Mild slights become devastating insults. At Stewart’s quip, a throaty gurgle of laughter rose up from the audience seated behind the litigants. It was more than amusement at the break from formality. Stewart’s joke had a subtext. The suggestion was that an issue with merit had managed to come before the Court only because Sloan had refused to play by the rules. Perhaps a lawyer—one with “moral character”—would have been unwilling to execute an end-run around the judicial chain of command.
Pitt laughed along with the audience. “Indeed, Sloan has learned well,” he said, and quickly concluded his presentation.
The day was nearly finished when Sloan rose to the podium. What came next was, according to the Brennan narrative, the one thing that made SEC v. Sloan significant. Before Sloan had a chance to speak, Chief Justice Burger demanded to know whether Sloan had received the usual “notice to counsel” that was sent when lawyers were granted leave to appear before the Court. The exchange that followed was “amazing,” and left Brennan “incensed”:
SLOAN: I have not received anything.
BURGER: March 1 letter, you have not received?
SLOAN: No, I have not.
BURGER: Are you aware that the rules of the Court require that counsel … must register with the Deputy Clerk in Room 22D at 9:00 AM or shortly after that on the day assigned for argument?
SLOAN: No, I am not aware of that rule.
BURGER: Then you better check your mail, because you are in violation of that rule. You did not appear here until 2:30 today, and the Court cannot organize its business if it doesn’t know that arguing counsel is going to be present. Now you may proceed.
SLOAN: Thank you very much, Your Honor. Gentlemen, Mr. Chief Justice, and may it please the Court.
Sloan made it only two or three minutes into his argument before Burger interrupted to adjourn to the following morning. Harvey Pitt told me that after the argument’s first day, Burger’s “enormous hostility” to Sloan made him believe that an unwinnable case just might be winnable, after all.
After adjournment, Justice Brennan cornered Clerk of the Court Mike Rodak. Earlier in the day, Rodak had slipped Burger proof that Sloan had received the March 1 letter. So Burger knew Sloan had lied. Now, cornered by Brennan, Rodak fessed up: Pitt, too, had checked in late. He’d arrived only 45 minutes before Sloan.
Brennan burst into his chambers, complaining to his clerks that Burger had treated Sloan “like a dog.” The Chief had feared that Sloan would disgrace the Court, but now he had disgraced it himself.
Brennan immediately dictated a note, and a terse exchange of letters on the afternoon of March 27, 1978, sent to the entire conference—all justices receiving a copy—may mark a low point in the history of intra-chamber correspondence at the Supreme Court. Brennan insisted that Pitt be compelled to acknowledge that he was tardy, as well. Burger claimed innocence, and blamed Rodak for failing to inform him that both sides were late. He suggested a letter of reprimand to the SEC.
When the proceedings resumed the following morning, Sloan had shifted into full Perry Mason mode. “I wish to bring to the attention of the Court a small factual matter which came to my attention yesterday,” he said. He reminded them that the day before, Chief Justice Burger had asked a question about 36 consecutive suspensions. Overnight, Sloan had noticed that the SEC’s filing had failed to include a single suspension dated December 25, 1976.
Burger now recognized his mistake. He tried to backtrack. “The question I put, Mr. Sloan, was purely hypothetical. It was deliberately made one less to make it a hypothetical.”
Sloan chuckled. That was the problem. Thirty-six was exactly what was in the SEC filing. If Burger had wanted to reduce the number by one, he would have said 35. The total number of suspensions, including the one dated Christmas day, was 37. Burger had been caught lying.
Sloan next went into a complicated sequence to argue that both of the previously consolidated cases of SEC v. Sloan should now be before the Court. He slyly suggested that his own appeal should have been granted cert, and should be considered now. Justice Thurgood Marshall saw right through it, and chastised Sloan accordingly. (“Do you understand that the other case is not before us? Well, let me tell you it is not. Will that help you?”) Next, Sloan attacked the various reasons the SEC had relied on in issuing suspensions, until Rehnquist sensed a hole in his argument and prodded Sloan (“Do you concede or don’t you that there are circumstances under which they could issue more than one ten-day consecutive suspension?”) to acknowledge that the SEC might be right about the law after all. Sloan’s refusal (“No, I do not make that concession!”) was delivered with all the passion of a Hollywood courtroom drama.
Justice White interrupted to establish that Sloan’s position was about consecutive suspensions only. This exchange sank deep into the legal weeds. Sloan explained that Section 19 (a) of the Securities Exchange Act of 1934 included four provisions, of which, (1), (2), and (3) all required the SEC to provide notice of a suspension. 19 (a) (2) had become provision 12 (j) of the newer law, but the SEC had been relying on 12 (k), originally 19 (a) (4), to issue ten-day suspensions, even though they had had more elaborate resources available to them since 1934.
Four decades later, halfway-dressed, seated among his pylons of books and occasionally fielding calls from his wives asking for money, Sloan told me that at one moment during the oral argument Justice Brennan reached across to tug the sleeve of Chief Justice Burger’s robe. Brennan nodded in Sloan’s direction, as though to say, “See, I told you so.” He had known all along that Sloan’s argument would prevail. Sloan did not recall precisely at what moment this occurred, but it was surely during this speech—when the Justices stopped holding Sloan to the merits of the case, stopped scolding him, stopped attempting to trick him into making concessions, and turned instead to simply asking him to clarify vagaries of the law’s history. Suddenly, everyone in the room realized that Sam Sloan—an embodiment of the absence of “moral character”—understood the law better than anyone present. The justices fumbled a bit with their laymen’s understanding of finance. For an extended period, Sloan seemed almost to forget himself. He accelerated to the climax of his presentation:
SLOAN: I would like to point out that in this particular case, the SEC suspended trading for three-hundred-and-seventy days, which is more than one year. Therefore, what they are saying is that they can suspend a stock for a longer period of time under 12 (k), without notice, than they can under 12 (j), with notice, and I am sure that this could not possibly be what Congress intended.
He paused, expecting to be interrupted. He wasn’t. The case had been reduced to its simplest denominator. The SEC had violated the law, not just in this single case, but hundreds of times over. Like it or not, Sam Sloan was right.
It took him a moment to compose himself and go on. He pointed out that the very first suspension order had gone into effect three days before it was signed by the commissioners. How could they possibly have approved of it? After some further back and forth, Sloan’s time expired. Pitt had three minutes remaining. Burger gave him ten.
Justice Stevens barely let him speak. He asked after the Christmas Day suspension order, which had gone unremarked upon since Sloan first mentioned it, half an hour earlier. Was it true, Stevens asked, that an order had been entered on that day? Pitt admitted that it had. This unleashed a frenzy of judicial sarcasm, various justices chiming in to remark on the great deliberation that the commissioners of the SEC had likely given the order when they showed up to work on a holiday. These wry remarks also had a subtext. The suggestion was that the SEC had deliberately omitted the date from their filing, so as to not call attention to the fact that suspension orders were communicated in a loose fashion, orally, without any paper trail. The scheme had come to light only because Sloan had noticed that on the first day of argument Chief Justice Burger botched his attempt to pose a hypothetical question to Harvey Pitt. And now Pitt was forced to suffer through what even he recalled as a vicious round of questioning, until his time was up.
“Thank you, gentleman,” Burger said. “The case is submitted.”
The outcome was a foregone conclusion, but the drama wasn’t over. A former clerk told me that when the justices gathered in conference, Justice Brennan proclaimed that Sloan had performed splendidly. Burger scowled. The Brennan narrative concluded that “all but the Chief agreed [that Sloan’s argument] was among the best of the Term.”
Burger was reluctant to join with the rest of his colleagues in officially siding with Sloan. Justice Rehnquist’s chambers penned a tepidly-worded opinion, drafts of which passed from chamber to chamber, the various justices joining with what was clearly going to be a lopsided decision. All except the Chief Justice, that is. At last, on May 6, 1978, Burger sent a quick note to Rehnquist to say that his “reservations” had now been “resolved.” It’s unclear whether any of the justices knew that when their unanimous decision was handed down on May 15, 1978, Sloan was in a Central Asian jail on suspicion of being a spy.
I obtained files on SEC v. Sloan from the archived papers of seven of the nine justices who heard the case. I received permission to submit questions to Justice John Paul Stevens a month before he died in July 2019. His papers will not be made available until fall 2020. The only remaining file I have yet to consult is that of the central player in the Sloan drama: Chief Justice Warren Burger. Burger’s papers are held at Swem Library at the College of William and Mary, where he served as chancellor until shortly before his death. Access to them is controlled by Leonora Burger, the widow of Burger’s son. Leonora Burger, I was told, does not wish to be disturbed and does not care about “the impact on historical inquiry.” She did not return requests for comment.
The impact of SEC v. Sloan appears to have been two-fold. One result would seem to be a change to the Securities and Exchange Act, which has been amended a number of times since 1978. The portion of the law that now covers extensions of emergency suspension orders is Section 12 (g) (2) (k) (2) (C). The power to extend a ten-day suspension remains, but paragraph (C) ends unambiguously: “In no event shall an order of the Commission under this paragraph continue in effect for more than 30 days.”
A less direct consequence of SEC v. Sloan would appear to be the 2013 change to the rules of the Court. I contacted the office of the Clerk of the Supreme Court several times. Why did the Court decide to prohibit non-lawyers from arguing? Who proposes changes to the rules of the Court? How are proposed changes approved? Do the justices argue or vote? The Court’s Public Information Office promised a speedy reply. I never heard back.
“It’s funny,” one of the clerks from the 1977 term told me. “You don’t have to be a lawyer to be a Supreme Court judge. Why should you have to be a lawyer to argue before them?”
After Sloan won his case he didn’t bother to try to get his trading license reinstated. There wasn’t any point, as the law had changed. Rather than $5,000, broker-dealers were required to demonstrate a minimum of $25,000 in assets.
He began to travel again, accumulating more wives and children. For a time, he worked on the fringes of the finance world, preparing for corporations financial reports required by the SEC, and he authored a number of books, including Khowar-English Dictionary (1981), Chinese Chess for Beginners (1989), and How to Take Over a Publicly Held Corporation (1992).
In the mid-nineties, not long after he was released from prison in Virginia, Sloan says he road-tripped to California, where a legal mix-up involving one of his wives resulted in his being incarcerated for an additional 42 days. Then came the years of driving a taxi, the years of fighting his way onto the Board of the U.S. Chess Federation, the years of publishing books that had already been published, and the years of running for office.
The last time I saw Sloan, at the National Archives, he announced that a day or two earlier he had driven from New York to New Hampshire to pay the $1,000 required to enter the Democratic primary. He is once again running for president of the United States. He has imminent plans to reprint Catch-22 and Chess: A History. Finally, he received word that the highest court in South Carolina had refused to hear the case of a long-running feud in Sloan’s immediate family. Sloan had asserted that his brother was not his brother, and that his mother had been kidnapped and held against her will for 13 years.
His last recourse is the Supreme Court. He intends to appeal.
Poland and Sloan co-wrote a book about the Berkeley chapter of the Sexual Freedom League, Sex Marchers (1968). Poland later changed his name to “Jefferson Clitlick Poland” and pleaded guilty in 1983 to molesting a young girl. ↑
Sloan’s line—“Hey, play by the rules, will ya?”—is a fair summary of the Supreme Court’s decision in SEC v. Sloan.↑
As it happens, Sheldon Kanoff, one of the lead investigators of Sloan, years later pleaded guilty to participating in a trading scheme intended to funnel money to “unnamed organized crime figures.”↑
Including, Sloan claims, a number of transactions with Bernie Madoff.↑
Doyle wiggled his way out of trouble, too. He was first accused in 1960 of spiriting $4.8 million in Canadian Javelin stock from Canada to Liechtenstein, but the case was thrown out of court. Later, when he was questioned in a fraud investigation, he charmed two FBI agents into buying Canadian Javelin stock. In 1963, he pleaded guilty to another charge, but balked at three months of jail time. He escaped to Canada—securities crimes were non-extraditable—and later to Panama.↑
There were actually two suspensions of Canadian Javelin lasting more than a year. The first began on November 29, 1973, and remained in place until January 27, 1975, almost thirteen months. Another suspension began on April 29, 1975, and lasted until May 2, 1976, 370 days, and it is this suspension that was discussed at length in the oral arguments of SEC v. Sloan.↑
The initial suit was Sloan v. SEC. It became SEC v. Sloan when the Supreme Court agreed to hear the SEC’s appeal.↑
A bench memo prepared for Justice Harry Blackmun found that between 1964 and 1976, the SEC had issued ten-day suspensions no fewer than 235 times.↑
In the margin of a bench memo prepared for Justice Lewis Powell, which suggested that Sloan’s brief was not likely to be “very helpful,” Powell scribbled two words: Burn it.↑
Sloan claims to have spent quality time with Fischer just before Fischer turned the match around, winning what amounted to propaganda skirmish of the Cold War.↑
It was at the U.S. embassy in Pakistan that Sloan learned he had won his Supreme Court case. The decision had been announced while he was imprisoned.↑
The justices discussed Sloan v. Nixon in their conference on May 25, 1973.↑
Only Justice Thurgood Marshall preserved Burger’s motion. The document became publicly available through the Library of Congress when Marshall died in 1993.↑
In the Supreme Court, where the emphasis is less on guilt and innocence in the case at hand, and more on future disputes and legislation, it’s held to be desirable for hypothetical questions to present facts that vary significantly from a particular case.↑
No such letter was sent.↑
The Brennan narrative is a lingering mystery. The narratives were written by clerks, but all of Brennan’s clerks from the 1977 term deny having produced the account of SEC v. Sloan. Its authorship remains unknown.↑
A clerk told me that Rehnquist was known to “salt” opinions with commentary on other opinions that the Court had recently decided. It’s likely that Burger withheld his vote until Rehnquist salted the SEC v. Sloan decision with commentary on a more controversial decision, Adamo Wrecking v. United States, from earlier in the term. This, in turn, resulted in a concurring opinion from Justice Brennan that offered a blistering attack on the SEC and his fellow justices.↑