Source: https://law.justia.com/cases/federal/appellate-courts/F2/439/351/337444/
Timestamp: 2020-02-18 21:43:58
Document Index: 125766262

Matched Legal Cases: ['§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 144', '§ 77', '§ 77', '§ 1861', '§ 52']

United States of America, Plaintiff-appellee, v. Fred G. Amick et al., Defendants-appellants, 439 F.2d 351 (7th Cir. 1971) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Seventh Circuit › 1971 › United States of America, Plaintiff-appellee, v. Fred G. Amick et al., Defendants-appellants
United States of America, Plaintiff-appellee, v. Fred G. Amick et al., Defendants-appellants, 439 F.2d 351 (7th Cir. 1971)
US Court of Appeals for the Seventh Circuit - 439 F.2d 351 (7th Cir. 1971) January 22, 1971
As Amended on Denial of Rehearing in No. 17091 March 29, 1971
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Stanley B. Miller, U. S. Atty., Indianapolis, Ind., William Hegan, Chicago, Ill., K. Edwin Applegate, U. S. Atty., for plaintiff-appellee; Burton H. Finkelstein, E. George Perdix, Joan H. Saxer, James J. Sexton, III, Attys., S.E.C., Washington, D. C., of counsel.
Vance M. Waggoner, Rushville, Ind., Duge Butler, Jr., Earl N. Davis, Howard J. DeTrude, Jr., Erle A. Kightlinger, Robert A. Garelick, Sidney Mishkin, Alan I. Klineman, James W. Bradford, John D. Raikos, Thomas W. McKean, Indianapolis, Ind., Jerome B. Van Orman, Fort Wayne, Ind., for defendants-appellants; Kightlinger, Young, Gray & Hudson, Raikos, Rockford, Melangton & Dougherty, Indianapolis, Ind., of counsel.
These are appeals by eleven individuals and two corporations from judgments of conviction of violations of 15 U.S.C. § 77q (Section 17 of the Securities Act of 1933, Fraudulent interstate transactions). Eight of the individual appellants and the corporations were convicted by a jury.1 The other three individual appellants were convicted upon pleas of nolo contendere. Others were named in the indictment, but entered pleas or had separate trials, and are not involved on these appeals.
1. The challenge to the array of the grand jury. All appellants contend that the grand jury which indicted them was unlawfully selected. Appellants who stood trial assert the same defect with respect to the petit jury. The challenge is made to an early step in the system by which most names were selected for the jury list from which the names of veniremen were drawn. Documents were placed before the district court in support of and opposition to the challenge. Most of them were the same as those described and considered by Chief Judge Steckler of the same court in overruling a similar challenge at about the same time.2
In November, 1966 several individuals interviewed 79 key men concerning the type of persons whose names each had suggested and prepared affidavits summarizing the interviews. These affidavits were before Judge Dillin as they had been before Judge Steckler. It seems fair to say in summary that most or all the key men said they had some standard in mind as to who would make a "responsible" juror. Indeed, any form of key man system of suggestion would almost necessarily involve the application of some subjective standard of that type. We do not consider, however, that either constitutional concepts or any statutes applicable in 1966 or 1967 compelled a purely random selection from the whole body of qualified persons in the community.4
2. Challenges to form and sufficiency of indictment. The first 38 counts of the indictment charged varying groups of defendants with violations of 15 U.S. C. § 77q(a). The outline is similar to the one discussed in United States v. Birrell.5 Count 39 charged appellants Vollmer and Indiana Investor and Business News, Inc. (Indiana Investor) and others with violation of 15 U.S.C. § 77q (b) in publicizing ASU stock. Count 40 charged several defendants with violation of 15 U.S.C. 77e(a) (2) by mailing ASU stock without a registration statement being in effect. Count 41 charged all defendants with conspiring to commit the offenses charged in the other counts.
The indictment "contains the elements of the offense intended to be charged, `and sufficiently apprises the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction.'"6
Duplicity: 15 U.S.C. § 77q(a) makes it unlawful, in the offer or sale of securities, by the use of the mails, to engage in certain conduct. The proscribed conduct is described as (1), (2) or (3).7 Each count of the first 38 charges that defendants engaged in (1), (2), and (3). It is argued that each count charges three distinct offenses.
An answer was suggested by Crain v. United States.8 There the "statute was directed against certain defined modes for accomplishing a general object, and declaring that the doing of either one of several specified things, each having reference to that object, should be punished. * * * We perceive no sound reason why the doing of the prohibited thing in each and all of the prohibited modes, may not be charged in one count, so that there may be a verdict of guilty upon proof that the accused had done any one of the things constituting a substantive crime under the statute."
"The statute thus embraces in the disjunctive three separate and distinct acts as a crime. The indictment charges the three offenses in the language of the statute, but they are charged in the conjunctive. An indictment charging a statutory offense must follow the statute creating it; but where the statute denounces several acts as a crime, they may be charged in one indictment or in a single count if they are connected in the conjunctive. An indictment drawn in that manner is not duplicitous, and it suffices to prove any one or more of the charges. [citing cases.]"9
Courts have differed as to "the allowable unit of prosecution"10 under this statute.
4. Pretrial publicity and voir dire. Certain appellants contend that prejudicial pretrial publicity required the court to dismiss the indictment or postpone the trial. There had been news stories concerning the indictment, about a year before trial. Two days before trial there had been two news stories. One referred to a "stock swindler" and concerned an unrelated indictment. Another reported the nolo contendere pleas of two of appellants' codefendants, and referred to the "gyroplane swindle". Appellants were not named.
5. Claim of mistrial because of approach to juror. Just before the beginning of the trial, Mr. Morrow, a juror who ultimately became foreman, reported an incident to the district judge. A Mr. Rank, a business associate of Morrow, who was president of a bank, had told Morrow of a call Rank received from appellant Vollmer after selection of the jury. According to Rank, Vollmer had once attempted unsuccessfully to arrange a mortgage for some property that Rank was interested in. Mr. Vollmer asked Rank if Rank thought that Morrow remembered Vollmer and if Morrow's decision as juror would be influenced in any way because Vollmer was unsuccessful in arranging for the mortgage. Morrow told the judge he did not remember Vollmer and had no recollection of the transaction. He said he had not told any other juror of the call and promised not to do so.
Judge Dillin informed the jury substantially as follows: "One of the parties * * * contacted an acquaintance and asked him a question which required the acquaintance to ask a member of the jury for the answer, thus, of course, bringing to the attention of the juror the party who asked the question in the first place. The juror very properly related this to the Clerk, who related it to me, and I have now made it known to the attorneys. * * * I think, on thorough reflection, that nothing improper was intended, although, as I say, it was an irregularity on the part of the person who did it. * * * I am sure nothing out of the way will happen in the future, but if anything does, please report it promptly."
Amick was charged in each of the first 38 counts. 26 of them were submitted to the jury. His active central role makes it seem likely that conviction on all counts, at least those which arose before his resignation, might have been sustained. The jury convicted, however, on 8 counts and acquitted on the rest. Chronologically, the dates of the mailings in 6 of the counts on which he was convicted ran from March 4, 1964 to September 1, 1964. The dates of mailing in the two other counts were October 14 and 21, 1964. Amick did not deal in person with these purchasers. But the jury could clearly find that the forbidden fraudulent practices were employed in these sales and that Amick was wilfully responsible for their employment.
Amick was sentenced to four years imprisonment on count 6 (March 4, 1964) and two years on each other count. The two year terms are concurrent with each other, but consecutive to the four year term. The content of the fraud did not remain static. Disclosures concerning some of the adverse history of Umbaugh were omitted from the prospectus for the second offering, although included in the first. The expectation of benefits from an agreement with a Canadian group in August 1964 were grossly overstated. Deceptive photographs were sent to stockholders just before the October, 1964 offer in order to create the impression that regular production had begun. There were other additional misrepresentations from time to time. As previously stated, there are decisions holding that each mailing or each sale is a distinct offense, and it would logically follow that cumulative penalties could be imposed. Even under a different view, however, we think that the scheme to defraud involved in the various counts was sufficiently different as time went on, and that Amick was sufficiently active in formulating and augmenting the scheme that the use of the scheme in each of the respective counts could fairly be deemed a distinct offense with cumulative penalties, at least to the extent imposed here.
b. The case as to Broderick. Broderick was employed as a salesman for Van Horn Associates, dealer or underwriter for the first public offering. In June, 1964 he was employed by ASU as "stock control manager". He revised the prospectus, omitting material facts, and stating untruths with respect to patents and production, and used it in a number of sales.
Mr. Gray testified that about August 20, 1964, two men called at his office, McQuinn and Broderick. Both discussed ASU stock. He was given the prospectus which Broderick had revised. Gray was unable to say which man made particular statements, but one or the other represented that the company had over a million dollars in backlog orders, which was false, and that the price of the plane would be around $13,900, a matter which was still highly speculative, and that the plane could be flown with three or four hours instruction. The jury could well say that the scheme was employed in the sale.
c. The case as to Vollmer and Indiana Investor. Mr. Vollmer was editor of the Indiana Investor and Business News, published weekly by defendant corporation of similar name. Indiana Investor was devoted to "News of Indiana Business, Industry, and Securities". The record shows that it was frequently a channel by which misleading information concerning ASU stock reached investors and several purchasers testified that their interest in ASU stock had been generated by reading Indiana Investor. The government contends that almost from the beginning of the fraudulent promotion of ASU stock Vollmer frequently visited the company's facilities and was aware of facts in the light of which the news stories and some of his own editorial comments in Indiana Investor were false or misleading. There is evidence to support this contention.
Vollmer and the publishing corporation were charged in 36 of the first 38 counts, with mailing dates ranging from February 19, 1964 to June 1, 1965. 26 of these counts were submitted to the jury. It convicted Vollmer and the corporation on count 26, and acquitted them on all others. They were also charged and convicted on count 39, a violation of 15 U.S.C. § 77q(b).
Count 39 charged Vollmer and Indiana Investor, and two others not on trial, with wilful violation of 15 U.S.C. § 77q (b). The gist of the charge was that they "by the use of the mails, published and * * * circulated * * * newspaper articles * * * which, though not purporting to offer a security for sale, described such security * * * for a consideration received, directly and indirectly, from an issuer, underwriter and dealer without fully disclosing the receipt of such consideration and the amount thereof". The Indiana Investor of January 29, 1965 was alleged to have been mailed on that date.
The January 29 issue reported acquisition of control of ASU by Robert Chappell's company, Investment Corporation of America (ICA) and an investment of "over $2 million", accomplished in major part by the purchase of a block of authorized, but unissued stock. This was itself untrue or, at least, misleading. But the point under count 39 was that Chappell and Vollmer had discussed the preparation and publication of the story, and at Vollmer's suggestion, Chappell had agreed to buy subscriptions for all stockholders of ICA. The testimony was that this would cost $1,000 or $1,200. On February 1, however, Chappell gave Vollmer an ICA check for $2,500. The January 29 issue of Indiana Investor did not disclose that consideration would be received.
Vollmer and Indiana Investor contend that 15 U.S.C. § 77q(b), here found to have been violated, abridges freedom of the press, contrary to the first amendment.
Section 17(b) "is particularly designed to meet the evils of the `tipster sheet' as well as articles in newspaper or periodicals that purport to give an unbiased opinion but which opinions in reality are bought and paid for."18
The substantial interest of the investing public in knowing whether an apparently objective statement in the press concerning a security is motivated by promise of payment is obvious. We see no significant abridgement of freedom of the press in requiring disclosure of a promise of payment if there has been one.19
Olsen was charged in counts 10 to 38, the mailing dates ranging from July 3, 1964 to June 1, 1965. 23 of these counts were submitted to the jury. It convicted Olsen on counts 18, 23, 24, and 25, acquitting him on the others.
Count 25 involved a purchase of 1,000 shares by Mr. and Mrs. Rauer in December. The shares were bought from Commercial Capital and the salesman was appellant Wymer. The price per share was $8.75. Wymer told the Rauers the stock would be worth $12 per share by spring and that ASU had enough backlog of orders to last two years at continuous production. The July 9, 1964 prospectus was given the Rauers.
The evidence establishes that at least by the time of these transactions, Olsen knew material adverse facts concerning the financial situation of the company and the lack of production, and should have known of the lack of firm orders for the plane. As sales manager of Commercial Capital he instructed its salesmen at sales meetings. We think that he could properly be convicted on counts 18 and 23 where he personally made false or misleading statements and failed to make necessary additional statements, and on Count 25 where the representations were not personally made by him, but by a salesman whom he instructed, and were consistent with the pattern of fraudulent conduct with which he was responsibly associated. Olsen had recommended Wymer to Van Horn for employment, saying Wymer was a good salesman "but also very fast in the field and should be watched with a very close eye".
Courts have said that in prosecutions under 15 U.S.C. § 77q(a), at least where a fraudulent scheme was employed, it is unnecessary to prove that a victim parted with money or property in reliance upon misrepresentations.20
Count 32 involved a sale of 50 shares to Mr. and Mrs. Lang, with confirmation mailed April 5, 1965. Mr. Lang also dealt with Von Foerster, was shown the same sales booklet as Gilley and Sears, and was told untrue information about current production, back orders, and the price of the plane.
Dr. Briggs was a medical examiner for the life insurance company. He was first approached by James Dillon, one of Riggs' agents. Dillon said ASU stock was a good buy, and he showed pictures of the plane. Dr. Briggs telephoned Riggs to inquire about the stock. Riggs said it was scarce, was a good buy at $7 and would go up to $10 in a short time. He said about fifteen planes per month were being produced. This was untrue, as well as the representation that the stock was scarce. Briggs bought at $7. A week later he decided to buy more and found he could buy 625 shares through a local bank at $5.62½. Riggs could give no satisfactory answer when told of this. At about the same time as his sale to Briggs, or shortly before, Riggs had been buying ASU stock from a disinterested dealer at about $4.50 per share and selling it to investors at about $6.60 per share. Riggs had visited the plant and was aware that certification of the plane had been held up. Although there is no direct evidence that he was informed of the truth as to lack of production, he admitted that he did not know how many planes were being produced because "I heard all kinds of figures". We think that the jury's finding of wilfulness in misrepresenting production can properly rest upon the proposition that he recklessly made the representation for the purpose of inducing a purchase when he must have had serious question what the facts were, but had failed to use reasonable means at hand to learn them.23
Rulings and findings made by a judge in the course of a judicial proceeding are not in themselves sufficient reasons to believe that the judge has a personal bias or prejudice for or against a party.24 The affidavit was insufficient to oust Judge Dillin under 28 U.S.C. § 144.
8. Challenge to SEC subpoenas. Certain corporate records of Indiana Investor were used against it and against Vollmer. The government had obtained these records by an SEC subpoena issued pursuant to 15 U.S.C. § 77s (b) and enforced by the district court, pursuant to § 77v(b). Appellants Vollmer and Indiana Investor claim that the judicial compulsion exercised was an unreasonable seizure under the Fourth Amendment. No claim is made that the records were other than corporate.
It may well be that any challenge now made became foreclosed by the adverse result of the judicial proceeding which resulted in enforcement of the subpoena. In any event, the subpoena was not the general subpoena dealt with in Hale v. Henkel25 upon which appellants rely. The answer to their claim is summarized in Oklahoma Press Pub. Co. v. Walling as follows:
" [T]he Fifth Amendment affords no protection by virtue of the self-incrimination provision, whether for the corporation or for its officers; and the Fourth, if applicable, at the most guards against abuse only by way of too much indefiniteness or breadth in the things required to be `particularly described,' if also the inquiry is one the demanding agency is authorized by law to make and the materials specified are relevant. The gist of the protection is in the requirement, expressed in terms, that the disclosure sought shall not be unreasonable."26
Irving claims that the court improperly considered the evidence heard at trial. Under the circumstances, where the plea was entered the morning the trial was to begin, and further consideration of the plea was postponed, it would seem very likely that the court would consider the evidence at trial to the extent it bore upon the charges to which Irving had pleaded nolo contendere. It is clear the court did consider the evidence at the criminal trial in determining that there was a prima facie showing that the offenses charged had been committed. Irving appears to claim, however, that a colloquy just after the plea was entered included an understanding that the court was limited to evidence it recalled from the earlier civil litigation and to Irving's own testimony in the SEC investigation. Although those sources were mentioned as appropriate for consideration by the court in making findings of guilt, we can find no limitation to them or exclusion of evidence at trial, express or implied. Indeed counsel for Irving said, in the course of the colloquy: "* * * my understanding was that * * * and I indicated to Mr. Stein [the United States attorney] that the evidence that the Court would hear in the pending case * * * it was my understanding with Mr. Stein that that could be used for the purposes that were indicated."
The third claim is that the seven year total sentence is substantially longer than those imposed in a number of reported cases. The government counters with citations of securities fraud cases where the terms were longer than seven years. Disparity in sentences is not a predicate for appellate review.
Mr. Nash makes contentions similar to some of those made by Mr. Irving and other appellants and already disposed of. In addition he contends in his brief on appeal that the district court "committed error in holding that [he] waived the right to counsel at the time he entered his plea of nolo contendere". He also asserts that when his conviction was set aside he gained the right to liberality in considering his request for leave to withdraw his plea. We do not find the latter argument very persuasive where the conviction was set aside, as here, on grounds arising after the plea. We observe, also, that Nash is not justly entitled, unless there be good reason, to put the government to a long and repetitious trial which would not have been necessary if Nash had maintained his plea of not guilty and stood trial as scheduled.
On the morning of June 1, Nash, Irving, and Mr. Kightlinger, Irving's counsel, were before the court. Mr. Kightlinger stated that he had explained the plea about to be entered to his client and that since Nash was not represented, he had, upon request by Nash, "given him advice as to the effect of the plea which he desires to make". After asking and obtaining Nash's permission, Kightlinger said he was entering nolo contendere pleas for both. The court then carefully and precisely explained the meaning, effect and consequences of a nolo contendere plea. It has not been claimed, nor could it be, that there was any deficiency in compliance with Rule 11, F.R. Cr.P.
After full explanation, the court said: "Now, Mr. Nash is not represented by counsel this morning, but in the past he at one time had counsel. Counsel withdrew his appearance, stating at that time that Mr. Nash was financially able to hire counsel but had not completed his arrangements with counsel. Mr. Nash has never indicated to the Court that he is not financially able to hire counsel. He has appeared here as his own counsel on one or two occasions, the last being yesterday morning, so counsel has not been appointed for Mr. Nash. It has been my finding or opinion, as things have gone, that he has elected to represent himself. Is that right, Mr. Nash?" Mr. Nash replied, "Yes, Your Honor."
Our conclusion is strengthened by the fact that the motion, prepared and filed by Nash's counsel in August, neither claims any lack of understanding about the nature of the charge or the consequences of the plea nor that he did not intelligently waive counsel.
The convictions and sentences of appellant Olsen on count 24, and of appellants Mayne and Securities Services on count 33 are set aside. In all other respects the judgments appealed from are affirmed.
Appellant Nash correctly takes exception to the statement in the opinion that "It has not been claimed, nor could it be, that there was any deficiency in compliance with Rule 11, F.R.Cr.P." We gladly correct it. Nash did advance such claim on appeal and although the district court addressed Nash personally before accepting his plea of nolo contendere, and carefully explained the consequences of the plea, the district court omitted explanation of the nature of the charge. Under McCarthy v. United States, decided April 2, 1969, 394 U.S. 459, 89 S. Ct. 1166, 22 L. Ed. 2d 418, such omission would require affording Nash an opportunity to plead anew. McCarthy, however, has been limited to prospective effect, and does not apply to Nash's plea, accepted June 1, 1967. Halliday v. United States (1969), 394 U.S. 831, 89 S. Ct. 1498, 23 L. Ed. 2d 16. The petition for rehearing is denied.
(5th Cir., 1966), 366 F.2d 34. In a later decision, Mobley v. United States (1967), 379 F.2d 768, 773, the fifth circuit stated that in Rabinowitz "we did not thus declare the `key man' selection system illegal as such."
The indictment and trial preceded enactment of the Jury Selection and Service Act of 1968, 28 U.S.C. §§ 1861-1871, requiring a system of random selection from among those who vote or register to vote
"77q Fraudulent interstate transactions.
United States v. Universal C. I. T. Credit Corp. (1952), 344 U.S. 218, 221, 73 S. Ct. 227, 97 L. Ed. 260
Sanders v. United States (5th Cir., 1969), 415 F.2d 621, 626; United States v. Saporta (E.D.N.Y., 1967), 270 F. Supp. 183, 186. In this circuit it has been said that "the government must show some impact of the scheme on the investor and that the mails were used in those instances where the impact occurred." United States v. Schaefer (7th Cir., 1962), 299 F.2d 625, 629
Cf. United States v. Universal C. I. T. Credit Corp. (1952), 344 U.S. 218, 224, 73 S. Ct. 227, 97 L. Ed. 260; United States v. Ketchum (2d Cir., 1963), 320 F.2d 3, 7
Farrell v. United States (9th Cir., 1963), 321 F.2d 409, 419, cert. den. 375 U.S. 992, 84 S. Ct. 631, 11 L. Ed. 2d 478; Frank v. United States (10th Cir., 1955), 220 F.2d 559, 563; Bobbroff v. United States (9th Cir., 1953), 202 F.2d 389, 391
See cases cited, 35 C.J.S. False Pretenses § 52, including People v. Gordon (2d Dist., 1945), 71 Cal. App. 2d 606, 163 P.2d 110, 124; State v. Hastings (1950), 77 N.D. 146, 41 N.W.2d 305; Corscot v. State (1922), 190 Wis. 661, 671, 178 N.W. 465
Mayne was surely in a position where he is deemed to have known that which could have been learned by inquiry reasonably to be expected. See cases cited infra, fn. 23
See United States v. Ross (2d Cir., 1963), 321 F.2d 61, 65, cert. den. 375 U.S. 894, 84 S. Ct. 170, 11 L. Ed. 2d 123; Irwin v. United States (9th Cir., 1964), 338 F.2d 770, 774, cert. den. 381 U.S. 911, 85 S. Ct. 1530, 14 L. Ed. 2d 433; United States v. Schaefer (7th Cir., 1962), 299 F.2d 625, 629; United States v. Vasen (7th Cir., 1955), 222 F.2d 3, 8, cert. den. 350 U.S. 834, 76 S. Ct. 70, 100 L. Ed. 744