Founder and former president of Lines Overseas Management Brian Lines may appeal a Bermuda Supreme Court declaration enabling his former company to hand over client records as well as telephone recordings to the United States Securities and Exchange Commission.

LOM and its managing director Scott Lines, who co-founded the company with brother Brian, sought a declaration from the Bermuda court last month authorising their release of the records to the SEC after a US District Court Judge upheld an order for their compliance with four administrative subpoenas served on them in April 2004.

The subpoenas relate to SEC probes of alleged securities fraud linked to bulletin board listed securities SHEP Technologies Inc. and Sedona Software Solutions Inc. While some documents sought by the SEC were specific to these companies, others concerned clients and customers of LOM. The SEC also sought all records from telephones used by Scott or Brian Lines between December 1, 2002 through February 3, 2003. LOM was in the practice of tape recording all calls made during that time period.

LOM and the Lines brothers deny any wrongdoing, however they have been fighting the enforcement of the subpoenas in the US for almost two years citing jurisdictional issues as well as possible violation of Bermuda law if they were to disclose confidential client information requested by the subpoenas.

While Bermuda Supreme Court Justice Geoffrey Bell noted that there was no issue as to the existence and nature of a duty of confidentiality owed by LOM to its customers or employee Brian Lines, he found that LOM was excused from this duty since its own interests required disclosure.

"It was clear", he said, "that there are likely to be consequences to LOM if it does fail to comply.with the subpoena because of concerns that to do so would breach confidentiality". Equally clear was that "the consequences for LOM are likely to be less severe if it is restrained from disclosure by an injunction of this Court", he said.

He deemed it "regrettable" that LOM did not notify parties who might be affected more than a year ago when a US Magistrate Judge rendered his opinion on the subpoenas a year ago.

"No doubt LOM must have considered its options at that time, included in which would have been making the application then which it has made now. The application which is now made is for the purpose of providing a safeguard to LOM in the form of protection from claims which might be made by its customers complaining of a breach of duty of confidentiality, when those customers have not been heard by this Court," he said.

He granted LOM the declaration it sought to release the telephone recordings of conversations and LOM customer documents, but said that Brian Lines was entitled to an injunction restraining LOM from disclosing details of his telephone conversations involving personal conversations or conversations with his attorneys since "the need to preserve material which is the subject of legal professional privilege in this case outweighs the competing public interest require disclosure", he said.

The injunction also applies to transcripts of two interviews given by Brian Lines to the BMA during its parallel investigation of the Sedona transaction since LOM had only agreed to allow his interview by the BMA Inspector after receiving "very specific and detailed assurances of confidentiality".

It remains to be seen whether any of the information that Mr. Justice Bell authorised for distribution to the SEC will end up in SEC hands in the near future. Brian Lines has told the Bermuda Supreme Court that he will seek a stay of the Bermuda court's order pending his decision whether to appeal Mr. Justice Bell's ruling.

In Washington, lawyers for LOM and Scott Lines have secured a stay against a District Court enforcement order of the four subpoenas while they appeal that court's ruling. That appeal was, however, remanded back to the District Court by the US Court of Appeals last week for clarification as to the standard of review the District Court applied in its review of the order requiring obedience to subpoenas.

The Court of Appeals also asked the District Court to take into consideration material change in circumstances that have occurred ? including the Bermuda decision ? since the District Court denied reconsideration on January 12.