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420 F.3d 1225
SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee,v.Richard P. SMYTH, Michael J. Becker et al., Defendants,Arnold E. Johns, Jr., Defendant-Appellant.
 No. 04-11985.
United States Court of Appeals, Eleventh Circuit.
 August 10, 2005.
I.Michael K. Wolensky, Ethan H. Cohen, Schiff Hardin, LLP, Atlanta, GA,for Johns.Leslie E. Smith, SEC, Washington, DC, for SEC.Appeal from the United States District Court Northern District of Georgia.Before EDMONDSON, Chief Judge, and TJOFLAT and KRAVITCH,Circuit Judges.TJOFLAT, Circuit Judge:1In this case, the Securities and Exchange Commission obtained a judgmentagainst Arnold E. Johns, Jr., for $743,127.02, which represented the profits hereaped from insider trading in the shares of Vista 2000, Inc. Johns appeals the judgment, contending that the procedure the district court employed indetermining the profits he should disgorge denied him due process. We agreeand therefore vacate the judgment and remand the case for further proceedings.2Johns was president and a director of Vista 2000, Inc. (Vista), a Delawarecorporation based in Roswell, Georgia, from February 1995 to the summer of 1996.
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 Vista designed and sold a variety of consumer safety products, includingtrigger guards for firearms and radon and carbon monoxide detectors for homes. When Johns joined the company, Vista was a public company, having
 
completed an initial public offering in October 1994. Johns answered toRichard Smyth, Vista's CEO and the officer primarily responsible for thecompany's day-to-day operations.3Johns signed on with a starting annual salary of $125,000, and he receivedoptions to purchase Vista stock—up to 200,000 shares—at an exercise price of $1.28 per share. As president, Johns acquired a wealth of material and adverseinside information about the company, and he ultimately exercised some of hisoptions and sold the resulting shares of stock before any of this information became public.4Almost immediately after coming to Vista, Johns was called upon to performfunctions in the role of "Chief Financial Officer." Specifically, Smyth chargedhim with signing and filing the quarterly Form 10-Q for the period endingMarch 31, 1995.
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 Although Vista hired Michael Becker in June 1995 to takeover its financial reporting duties, Johns also signed and filed the 10-Q for the period ending June 30, 1995. Both quarterly forms had been prepared by other employees at Vista and contained materially incorrect information due to themethod used to calculate quarterly earnings and shares outstanding. Johns feltthat the content of the June 30 10-Q was misleading and expressed his concernto Smyth, telling him that he would not sign the document. Smyth instructedhim to sign it, and Johns relented, and he signed and filed the 10-Q.5In May and August 1995, Vista issued press releases indicating that it hadacquired Alabaster, Inc. The May release stated that the product lines of the twocompanies had already been integrated; the August release gave an effectiveacquisition date of June 30. Both of these statements were false. Johnsconfronted Smyth, insisting that the press releases were inaccurate, but themisstatements stood uncorrected.6In December 1995, Steven Cunningham, Vista's outside counsel, advisedBecker that the company's 10-Qs would have to be restated because of theimproper method Vista had employed in computing earnings per share. Becker went to Smyth, and Smyth disregarded Cunningham's advice. The 10-Qs werenot amended. Later that month, Johns contacted Cunningham to discuss the possibility of exercising his options. On December 21, 1995, Johns exercisedsome of his options in a cashless exercise. Around the same time, Vista's newcontroller, Mary Beth Warwick, told Johns that the company's books were notin order.7On February 7, 1996, Cunningham sent a letter to Johns and Smyth reiterating
 
II.his concerns about the company's 10-Qs for the periods ending March 31, June30, and September 30, 1995, and instructing them to tell the officers anddirectors not to sell any Vista securities until the misstatements in the 10-Qshad been cured. Two days later, Johns exercised additional options; he soldstock the exercises had yielded at various times over the remaining days of themonth. Altogether, the sales yielded nearly $550,000. At Johns's selling points,Vista's stock was trading at prices ranging from $10.56 to $12.50 a share.8On March 22, 1996, Cunningham resigned as Vista's counsel, citing thecompany's continued refusal to follow his advice on the conduct of its affairs.On March 26, 1996, Vista issued a press release indicating that it would beamending its 10-Qs and other filings to reflect a net loss of $5,000,000 for 1995.
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 On March 26, Vista's stock was trading at $12.875 a share. The nextday, on a volume nearly five times that of March 26, the stock declined twenty-two percent in value to close at $10.062 a share.9On April 15, 1996, Vista issued another press release stating that Smyth hadresigned and that its audit committee had found "material accounting andfinancial improprieties that the Company will have to remedy through theissuance of restated financials for several historical periods." The stock, whichhad been in a steady decline since the March 26 press release, declined further,sliding to $2.50 a share by April 18.10At some point during 1996, the Securities and Exchange Commission (SEC)launched an investigation into Vista's financial affairs. Its investigationculminated in this lawsuit, which the SEC brought against Johns, Smyth, andtwo other Vista officers on May 25, 2001.
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11In its complaint, the SEC alleged that Johns violated various provisions of theSecurities Act and the Securities Exchange Act, and rules promulgatedthereunder, and engaged in insider trading while an officer at Vista.
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 Asremedies, the SEC sought a permanent injunction barring Johns from further violation of the securities laws and the disgorgement of his insider-trading profits. Johns, in his answer, denied liability and asserted several affirmativedefenses, none of which is relevant here.
6
 Following some discovery, Johns andthe SEC entered into a stipulation under which Johns withdrew his answer tothe extent that it denied liability and consented to the issuance of a permanentinjunction. The stipulation reserved for further proceedings the amount of the profits Johns would disgorge; that is, Johns reserved the right to litigate theamount of the disgorgement and prejudgment interest.
7
 The parties attached to

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