A US District Court Judge has stated that a recent decision by the Supreme Court of Bermuda "refutes" Lines Overseas Management's claim that it is constrained by Bermuda statute or case law from complying with the US Securities and Exchange Commission subpoenas

District Court Judge Richard Roberts said in fact the Bermuda decision supports his conclusion last month that Lines Overseas Management failed to demonstrate any entitlement to a stay of a magistrate judge's order forcing it and its managing director to comply with four US subpoenas for information related to alleged securities fraud linked to bulletin board listed securities SHEP Technologies Inc. and Sedona Software Solutions Inc.

Last month, LOM appealed Judge Roberts' order denying reconsideration of the Magistrate Judge's order to the US Court of Appeals, however last week the Appeals Court returned the record to Judge Roberts so he could clarify the "standard of review" his court applied when reviewing the magistrate judge's decision.

After addressing his review, Judge Roberts also spoke to the changes in circumstance that had taken place since he handed down his order on January 12.

Shortly afterwards, Puisne Judge Geoffrey Bell of the Bermuda Supreme Court established that under Bermuda law, LOM is entitled to disclose to the SEC the vast majority of documents sought by the SEC in its four subpoenas. This includes documents containing confidential information of customers and clients and recordings of transcripts of conversations on the telephone extensions of Scott Lines and Brian Lines that fall within the scope of subpoenas.

Mr. Justice Bell drew two narrow categories of documents from which LOM is enjoined from producing ? recordings, transcripts, summaries or excerpts of telephone conversations by Brian Lines which are subject to legal professional privilege or relate to the personal affairs of Brian Lines.

Judge Roberts said it is unclear whether the SEC subpoenas even sought those exempted items, but even so "these exemptions do not alter in any material way the documents to which the SEC is entitled" since the subpoenas did not seek to capture documents revealing the "personal affairs" of Brian Lines, he said.

The judge also noted that the instructions accompanying the subpoena itself acknowledge and provide for exemptions for privileged communications.

"Nothing has altered the reach of the SEC's subpoena as a result of this first exception identified by the Bermuda court," he said. Mr. Justice Bell also set out a second Bermuda court exemption for "recordings, transcripts, summaries or excerpts of interviews undertaken by the [Bermuda Monetary Authority inspector" who was conducting a parallel investigation of trading in Sedona Software Solutions.

Judge Roberts found that exemption too had not altered the reach of the SEC's subpoena since the SEC subpoena does not actually seek the text of the interviews with the inspector but rather the production of documents sought by the BMA in its investigation. The Bermuda decision does constitute a material change in circumstances on a different issue, he said in that it refutes "speculation that compliance with the SEC's subpoenas would violate Bermuda's Telecommunications Act, subject respondents to civil and criminal liability, and thus subject them to irreparable harm absent a stay".

On that issue, Judge Roberts noted that Mr. Justice Bell had made it quite clear that from the outset he had a "real difficulty accepting that the LOM system of recording offended this section" and did "not believe that it has any relevance for the purpose of this application".

The Bermuda decision "disproves" LOM's claim of irreparable harm, Judge Roberts said, adding that it lends support to his conclusion that LOM failed to meet their burden in demonstrating any entitlement to a stay of the magistrate judge's order.

LOM is "not constrained by Bermuda statue or case law from complying with the SEC subpoenas to produce the vast majority, and perhaps all, of the documents sought. The decision of the Supreme Court of Bermuda does not alter this court's assessment or conclusions reached in orders that are subject to this appeal," he told the Court of Appeals.