Opinion ID: 270981
Heading Depth: 1
Heading Rank: 5

Heading: errors in the admission and exclusion of evidence

Text: 27 Appellants complain that much of the proof admitted over their objection went far beyond what was properly relevant to the narrow issue of illegally selling unregistered stock. We disagree. 28 It was relevant for the government to show that the failure to file a registration statement was motivated by the desire of Abrams and Albert to conceal their fraudulent activities. It was necessary to a proper understanding and decision of the charges to know how appellants acquired their Automatic stock and how they conducted the affairs of Bellanca, Automatic, Nelson, Joplin and other companies which they controlled. It was pertinent to show that these activities could not have withstood scrutiny by the SEC and that Abrams and Albert must have known that they could never have obtained registration of the Automatic stock by the SEC and therefore they had a motive for concealing their activities and the true condition of Automatic. We have so held when the fraud itself is at issue in counts in the case. See United States v. Doyle, 2 Cir., 348 F.2d 715, 720 (1965); United States v. Guterma, 281 F.2d 742, 746, cert. denied, 364 U.S. 871, 81 S.Ct. 114, 5 L.Ed.2d 93 (1960); United States v. Houlihan, 332 F.2d 8, 14-15, cert. denied, 379 U.S. 828, 85 S.Ct. 56, 13 L.Ed.2d 37 (1964). It is no less relevant on motivation where the fraudulent activities, if revealed, would prevent SEC registration. 29 For the same reasons the letters of March 2 and March 8, 1956 from Abrams to Albert's attorney, which characterized the Nelson deal as robbery and as a terrible beating, were clearly relevant on the question of intent and willfulness. Likewise, the testimony of Shiah Arsham that Abrams told him in late December or early January 1956 that he and Schindler would control and manipulate the Automatic stock was properly admitted. 30 Appellants complain of the exclusion of certain evidence, in particular a report from the Midwest Stock Exchange, and the refusal of the trial judge to direct the government to turn over to counsel a deposition of one Louis Carmick, a Chicago attorney. The Midwest report was properly excluded because it was nothing more than a collection of hearsay statements, opinions and conclusions. Even on the assumption that the document might have been admitted as a business record, which theory to us seems highly doubtful, Abrams as the moving party had the burden of showing that the document qualified under 28 U.S.C. § 1732, the statutory business record exception. He never offered to do so and hence, the document was properly excluded. 31 As for the Carmick deposition, we find that the court did not commit error when it refused to direct the government to turn over this document to Abrams' attorney while Chamberlin was on the stand. We find no authority for the proposition, advanced by Abrams, that hearsay statements by a third party may be introduced to impeach a witness. The court made it abundantly clear that if Abrams wished to obtain the document for any purpose, he could always obtain the document by serving a subpoena and using the document as best he could. In any event, Carmick was always available to be called as a witness and the defense chose not to call him. Thus, the deposition was properly excluded. III. ALLEGED ERRORS IN THE JUDGE'S CHARGE 32 Abrams claims that counts 2, 11 and 17 through 21 of the indictment were barred by the five-year Statute of Limitations, 18 U.S.C. § 3282, and that it was error for the trial judge not to inform the jury that the sales from Abrams to Carusi and Gordon on March 14, 1956, were beyond the limit. We find that the jury was properly instructed that the government had to prove that the sales to the public occurred within the five-year period prior to April 3, 1961, the date of the indictment, and that Abrams could be found guilty only if he was responsible for the sales out of the nominee accounts, all of which occurred within the statutory period. There is ample evidence to support the jury's finding that the real sales to the public were made from the nominee accounts from April 24 through July 16, 1956 and hence, were within five years of the indictment. 33 Appellants also claim that the trial court committed reversible error when it charged that if the defendants `took the Automatic Washer stock with the intention at the time of taking it to sell to the public, the fact that such defendants later suffered a severe change in their personal circumstances before they actually sold it to the public is not relevant and will not keep them from being guilty as statutory underwriters.' Appellants claim that, in effect, they were punished for criminal intent, notwithstanding that the act at the time of its execution was legal. 34 The Securities Act of 1933, 15 U.S.C. § 77b(11) defines an underwriter as one who takes from an issuer with a view toward distribution. Thus, if Abrams and Albert took stock from Automatic with an intent at the time of the taking subsequently to distribute the stock to the public, they could be considered to be underwriters. 6 If, in fact, they were underwriters, any transaction involving the stock so taken from Automatic could not qualify for exemption from registration under § 77d(1). And, distribution of stock which was not registered with the SEC was prohibited by § 77e(a) (1), a violation of which subjected Abrams and Albert to criminal liability. They were not punished, as Abrams contends on appeal, for having an intent to distribute when they took the unregistered Automatic stock, but for the subsequent distribution itself. 35 The change of circumstances doctrine to which appellants refer, is wholly inapposite. That doctrine applies to the situation where the original taking of unregistered stock is for investment purposes. If subsequently, there is a change in the financial position of the taker such that the holder is forced to raise money by selling the stock to the public, the courts have said that if the change of circumstances was wholly unforeseeable at the time the stock was originally taken, then the unregistered stock may be distributed without penalty to the seller. 7 The defense that the sales of unregistered Automatic stock were necessitated by the defalcations of Witkin, Abrams' confidential employee, is one which the jury could well have disbelieved. On the other hand, as we have stated above, there was much evidence to show that Abrams and Albert took the stock with an intent to resell to the public and hence, were statutory underwriters who were required to see that a registration statement had been filed before they could distribute Automatic stock to the public. 36