United States v. Solomon

In April 1973, leaders of Weis Securities, Inc., a brokerage and investment-banking firm and member of the New York Stock Exchange (NYSE), notified the NYSE of its financial difficulties and warned that some bookkeeping inadequacies might have led to the understatement of its operating losses by over $3 million. The NYSE, a self-regulatory organization, immediately began its own investigation and advised the Securities and Exchange Commission (SEC) (plaintiff), as required by law, of the situation. The NYSE began providing the SEC with regular updates about its investigation. In May 1973, Alan Solomon (defendant) appeared before the NYSE Department of Member Firms and testified, on and off the record. At that time, the chief interrogator on behalf of the NYSE reminded Solomon of the sanctions he would face if he failed to testify. Solomon admitted that it had been his idea to purposefully misidentify a series of convertible bonds in order to fake the appearance of a better financial situation for Weis. In July 1973, five of Weis’s officers, including Solomon, were indicted. After a bench trial, Solomon was found guilty on one substantive count of creating and maintaining false books and records. Solomon was placed on probation for a year and given a $5,000 fine. Solomon appealed, arguing that the NYSE Department of Member Firms was a state actor such that his Fifth Amendment privilege against self-incrimination should apply. Specifically, Solomon contended that the reliance in the indictment and during trial upon his testimony to the Department of Member Firms violated his Fifth Amendment privilege against self-incrimination.