Opinion ID: 255084
Heading Depth: 2
Heading Rank: 2

Heading: An Industrial Empire Is Begun

Text: 10 While Crosby's connections with the foregoing transactions can only tangentially be inferred, he here enters the scene, center stage. In August of 1955 he, with co-conspirator Lawrence Rosen, placed an ad in the Wall Street Journal seeking the controlling interest in a publicly held corporation. Among those responding to the ad were the controlling shareholders of Texas-Adams Oil Co., Inc., defendants Gordon, Goldberg and Reicher. They had incorporated Texas-Adams two years before and had financed it with a public issue exempt from registration under Regulation A. The company's headquarters were in the offices of the brokerage firm, Philip Gordon & Co., Inc. Texas-Adams had been relatively dormant during its short history — only in March of 1955 did it acquire an interest in some Texas oil producing properties which earned about $10,000 in gross income by the time of the sale of control to McCarthy and his associates in late September of that year. 11 Preliminary negotiations were held among Crosby, McCarthy and Goldberg and agreement was reached on the sale of 283,000 shares of Texas-Adams for $105,000 — $45,000 at closing, $20,000 in sixty days and $40,000 in ninety days; the lion's share of the stock certificates was to be escrowed pending payment on the time notes. 12 Closing of the transaction was twice postponed because of the buyers' financing difficulties, the second postponement being accompanied by a $1,000 check, on September 25, 1955, to evidence the continuing good faith of the McCarthy group. Defendant Pettit had by that time joined the purchasing group as that check was traced from his account in a Salt Lake City bank. 13 The closing was finally consummated on September 27, 1955. The buyers' arrangements for financing were most interesting. Crosby and McCarthy approached Joseph Spiotta, a New Jersey money lender, seeking $40,300 to meet the closing installment of $45,000. He agreed to furnish that sum on the strength of a representation that Texas-Adams would use the City National Bank & Trust Co. of Hackensack, New Jersey (where Spiotta was a director) as a repository for funds, and on the strength of a guarantee that Spiotta's account in that bank would be credited with $42,000 before he ever parted with his money. 14 The Texas-Adams bank account, some $60,000, had been kept with the Underwriters Trust Company in New York. When the buyers represented that they were going to move that account to the New Jersey bank, the sellers agreed to switch the funds, prior to closing, to the Chemical Corn Exchange Bank, scene of the closing and one of two New York banks serving as correspondent to the City National in Hackensack. 15 On September 26th, the buyers opened three new accounts in Hackensack in the names of Sundown, American Montana and Texas-Adams; a token deposit of $100 was placed in each account. Proper corporate resolutions and signature cards for all the companies were filed with the bank and the corporate seal of Texas-Adams was exhibited and used for that purpose. At the same time a set of checks and deposit slips was prepared reflecting a series of transfers to take place the next day. $51,700 was to be transferred from the Texas-Adams account at Chemical Corn to its City National account. Two Texas-Adams checks totaling $51,250 would then transfer funds to Sundown and American Montana; almost all of the amount deposited in Sundown's favor would be immediately credited to American Montana, the putative purchaser of Texas-Adams. Finally, an American Montana check for $42,000 was made out to Spiotta's account to reimburse that gentleman. 16 Next morning, the day of the closing (but before Texas-Adams changed hands), Crosby attempted to make a wire transfer to New Jersey. A Chemical Corn official refused to make that transfer because the resolutions and signature cards gave authority only to the old management. Crosby quickly cured that defect by executing new resolutions and signature cards — once again using the Texas-Adams seal. The money was wired to the City National and Spiotta, after personally checking by telephone to make sure his account was $42,000 richer, loaned American Montana the funds necessary for the purchase. 17 Only $42,000 of Texas-Adams funds was actually used in the purchase of control of the corporation; $9,250 remained in the American Montana account in Hackensack. This money too was quickly siphoned off, however. Pettit, whose $4,700 with Spiotta's $40,300 had made up the purchase price, was handsomely rewarded in the form of two American Montana checks, a total of $6,700, drawn by Crosby and credited to Pettit's Salt Lake City account. The remaining $2,550 Crosby paid to himself through a dummy and co-conspirator, George Jannis, about whom we shall hear more later. Thus the buyers successfully contrived not only to purchase Texas-Adams with its own money, but also enriched themselves, from the till, for their labors.