The opinion of the court was delivered by: Wayne R. Andersen District Judge
MEMORANDUM OPINION AND ORDER
This matter is before the Court on a limited remand from the United States Court of Appeals for the Seventh Circuit ("Seventh Circuit"). See SEC v. Koenig, 557 F.3d 736 (7th Cir. 2009). For the following reasons, defendant James E. Koenig's ("Koenig") motion to modify the judgment to comport with the Seventh Circuit's opinion and order  is denied.
This case involves securities law violations dating back to 1992 and a final resolution is near. On March 26, 2002, the Securities and Exchange Commission ("SEC") filed a civil action against Koenig and five other officers of Waste Management, Inc. ("Waste Management"). All of Koenig's co-defendants settled with the SEC. Koenig proceeded to a jury trial on liability in 2006. The jury found that, as Chief Financial Officer ("CFO") of Waste Management, Koenig committed sixty securities law violations between 1992 and 1996. On appeal, Koenig conceded that the trial evidence was sufficient to support that verdict.
After the verdict, the Court conducted a two-day hearing on November 14 and 16, 2007 to determine the appropriate remedies. After considering testimony from both parties' financial experts and reviewing other evidence, the Court imposed a civil penalty of approximately $2.1 million and ordered Koenig to disgorge the bonuses he received from Waste Management for 1992, 1994, and 1995, plus prejudgment interest. Those bonuses totaled $831,500 ($161,500 for 1992; $250,000 for 1994; and $420,000 for 1995). All parties agreed that Koenig did not receive -- and was not entitled to -- a bonus in 1993, and the SEC did not seek disgorgement of Koenig's 1996 bonus. This Court ordered disgorgement of more than $2 million ($831,500 plus more than $1.2 million in prejudgment interest). We also enjoined Koenig from, among other things, future service as a director or top manager of a public company.
According to the Seventh Circuit, Koenig raised six principal arguments on appeal. The Seventh Circuit affirmed this Court's judgment as to all of those issues except for a finding that "[t]he district judge did not explain why Koenig's proper bonus for 1992 nonetheless should be set at zero." Koenig, 557 F.3d at 746. The Seventh Circuit took issue with our perceived failure to discuss how the methodology of the SEC's accounting expert, Roman Weil ("Weil"), applied to Koenig's 1992 bonus. After carefully reviewing the Seventh Circuit's opinion and the parties' briefs on remand, we find that our original disgorgement figure of $831,500 plus more than $1.2 million in prejudgment interest was correct and supported by the evidence in the record. Per the Seventh Circuit's request, we expound on the bases for that conclusion below. To the extent necessary, we also address other issues raised in the parties' remand briefs.
During the remedies hearing, Koenig and the SEC presented reports and testimony from competing financial experts. Koenig's expert was Frederick C. Dunbar ("Dunbar") and the SEC's expert was Weil. We were not -- and still are not -- persuaded by Dunbar's testimony, or expert report.
As stated above, the relevant time period in this case was 1992-1996. During those five years, Koenig committed sixty securities law violations. As a result of those violations, in 1998, Waste Management restated its financial results for 1992 through the first three quarters of 1997. Waste Management did not restate its financial results for the years prior to 1992. Instead, Waste Management chose to "write-down" $198.6 million in earnings for errors in its financial reporting prior to 1992. There are no findings of violations in the record regarding Waste Management's financial results prior to 1992. Based on Waste Management's restated financial results for 1992 through the first three quarters of 1997, Weil and Dunbar calculated and opined on what they believed Waste Management's earnings per share ("EPS") would have been in 1992-1996 "but-for" Koenig's securities law violations. Both experts also opined on what that believed Koenig's bonuses should have been for 1992-1996 in that "but-for" world. Only Dunbar opined about what Waste Management's 1991 EPS would have been but for in his "butfor" world.
Dunbar's most troubling conclusion was that, despite Koenig's five years of unlawful conduct resulting in at least $1.45 billion in shareholder loss, Koenig's 1994 bonus should have been $500,000 -- double the $250,000 he actually received. That conclusion is illogical to us and reinforced our decision not to rely on Dunbar's methodology or findings. We also found Dunbar's $1.46 estimated EPS figure for 1991 unreliable and speculative. In its opinion, the Seventh Circuit mistakenly attributed that figure to Weil. The $1.46 figure was not supported by the facts in the record. 1991 was outside the relevant time period in this case and there was no evidence of securities violations related to Waste Management's 1991 EPS figure. Dunbar's decision to and method for "adjusting" the 1991 ESP figure based on an assumption that the 1991 EPS was overstated is speculative at best.
As the Seventh Circuit found, Weil's methods and conclusions were reliable. See Koenig, 557 F.3d at 745. Weil adopted a simple, straightforward, and logical method for determining Koenig's 1992-1996 bonuses in a "but for" world. For each of the years in question, 1992-1996, Waste Management's Compensation Committee ("Compensation Committee") utilized a formula for calculating bonuses for Waste Management executives, including Koenig. The formula was: Bonus = [Award as a % of Target] x [Employee's Target Award] x [Employee's Salary]
The "employee's target award" figure was a preset percentage of the employee's salary that the Compensation Committee set as a target bonus. For example, if that number was 50%, which it was for Koenig in 1994, and Koenig's salary that year was $500,000, then Koenig's target bonus was $250,000. The "award as a % of target" figure was less precise. That figure had two components and represented Waste Management's targeted EPS growth rate from year to year. Each year, the Compensation Committee considered a number of factors in determining a targeted EPS figure. To determine the "% of target" growth, the Compensation Committee compared its targeted figure to Waste Management's actual (pre-restatement) EPS Figure. If the actual EPS figure equaled the targeted EPS figure, the "award as a % of target" was 100% ...