Court Opinion

ID: 9462826
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:51:21.248183+00
Date Added: 2024-06-11T17:37:48.458383
License: Public Domain

SNEED, Circuit Judge
(concurring):
I concur in Judge Jameson’s opinion which is written with his usual clarity and thoroughness. The law, as I read it, supports his conclusions.
However, I cannot let pass this opportunity to draw attention to the fact that so-called “public welfare offenses”1 do not generally, and clearly not in this case, encounter the same demanding constitutional and interpretive standards applicable to other criminal offenses. .
As Judge Jameson’s opinion makes clear, neither section 10(b) of the Securities Ex*356change Act, 15 U.S.C. § 78j(b), nor Rule 10b-5,17 C.F.R. § 240.10b-5, are interpreted narrowly when employed as a basis for criminal prosecution, even though a narrow interpretation is ordinarily considered proper with respect to statutes defining crimes. United States v. Campos-Serrano, 404 U.S. 293, 297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457, 461 (1971); United States v. Braverman, 373 U.S. 405, 408, 83 S.Ct. 1370, 1372, 10 L.Ed.2d 444, 447 (1963). In this case, for example, we find an indictable offense charged in the indictment despite the fact that there exists no case, not even one imposing civil liability, in which substantially similar facts have been treated as a violation of section 10(b) and Rule 10b-5. These provisions have been applied herein to the conduct of the defendants no differently than they would have been in a civil action: The expansive interpretation necessary “to insure the maintenance of fair and honest exchanges,” section 2 of the Securities Exchange Act, 15 U.S.C. § 78b, employed in civil actions is employed by us in this criminal case. Majority opinion, supra at 10-11. This is done even though Professor Bromberg cites only eight cases in which violations of section 10(b) and Rule 10b-5 have served as the basis of criminal prosecution. 3 A. Bromberg, Securities Law: Fraud,
§ 10.3 at 241 (1975). Professor Loss cites only a handful more. 3 Loss, Securities Regulation, at 1449 n.15 (1961). Also it is done even though the Supreme Court, speaking through Mr. Justice Rehnquist, recently observed:
“When we deal with private actions under Rule 10b-5 we deal with a judicial oak which has grown from little more than a legislative acorn. Such growth may be quite consistent with the congressional enactment and with the role of the federal judiciary in interpreting it, see J. I. Case v. Borak, supra, but it would be disingenuous to suggest that either Congress in 1934 or the Securities and Exchange Commission in 1942 foreordained the present state of the law with respect to Rule 10b-5.” Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 737, 95 S.Ct. 1917, 1926, 44 L.Ed.2d 539, 550 (1975).
“Employment of manipulative and devious devices” has a breadth, we assert, which permits us to find an indictable offense when it is necessary to do so “to insure the maintenance of fair and honest markets.” The resemblance from an analytic viewpoint between our approach and that employed in Shaw v. Director of Public Prosecutions, 2 A.E.R. 452 (1961), where the House of Lords recognized that the common law crime of corrupting public morals requires a residual power to proscribe unanticipated wickedness contra bonos mores, strikes me as disturbingly close.2 To protect and preserve honest markets we assert the residual power derived from a broad statute and rule to proscribe conduct surrounding a corporate takeover never heretofore branded improper by judicial decision, Commission rule or determination, or explicit Congressional act. And yet I am convinced that our assertion of this authority is in keeping with existing law.
The concern to avoid the taint of ex post facto application of a statute, a concern evidenced by the Supreme Court in Bouie v. City of Columbia, 378 U.S. 347, 84 S.Ct. 1697, 12 L.Ed.2d 894 (1964), where the Court refused to permit the application of a new and unusual interpretation of a state criminal statute to conduct taking place prior to the new interpretation, only feebly survives in the area of section 10(b) criminal prosecution. In this case, we are untroubled by the fact that never before has the section and rule been applied to a similar situation. Furthermore, in fixing criminal liability under section 10(b)- and Rule 10b-5, we attach reduced importance to assertions of vagueness. The fact that men of common intelligence — or lawyers and judges for that matter — “must necessarily guess at its meaning and differ as to its *357application,”3 does not require that we declare this section 10(b) void for vagueness. Cf. Coplin v. United States, 88 F.2d 652 (9th Cir. 1937), cert. denied, 301 U.S. 703, 57 S.Ct. 929, 81 L.Ed. 1357 (1937) (very similar language of section 17(a) of the Securities Act of 1933 held not vague); Hughes v. SEC, 139 F.2d 434 (2d Cir. 1943) (section 17(a) not vague). We heed not the command:
“No one may be required at peril of life, liberty or property to speculate as to the meaning of penal statutes. All are entitled to be informed as to what the State commands or forbids.”
Lanzetta v. New Jersey, 306 U.S. 451, 453, 59 S.Ct. 618, 619, 83 L.Ed. 888, 890 (1939).
Rather we respond to stern and demanding fatalism reflected in this passage appearing in Nash v. United States, 229 U.S. 373, 377, 33 S.Ct. 780, 781, 57 L.Ed. 1232, 1235 (1913):
“[T]he law is full of instances where a man’s fate depends on his estimating rightly, that is, as the jury subsequently estimates it, some matter of degree. If his judgment is wrong, not only may he incur a fine or a short imprisonment . ; he may incur the penalty of death.”
Finally, all these things we do while fully aware that under section 32(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78ff(a), the intent necessary to support a conviction is merely that of intending to do the acts prohibited, rather than intent to violate the statute. United States v. Schwartz, 464 F.2d 499, 509 (2d Cir. 1972). Proof of an “evil motive” appears unnecessary. Id. at 510, citing Loss, Securities Regulation. Moreover, it has been held that to avoid imprisonment on the ground of “no knowledge of such rule or regulation” requires more than the defendant merely asserting that he did not know that his manipulative activity was fraudulent under Rule 10b-5. See United States v. Lilley, 291 F.Supp. 989 (S.D.Tex.1968). The propriety of eliminating scienter or mens rea in statutes designed to serve a regulatory purpose has again been recognized by the Supreme Court in a recent decision. See United States v. Park, 421 U.S. 658, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975).
An expansive statute under which the prosecution encounters such reduced obstacles imposes a heavy responsibility upon the prosecutor. Many are his potential targets and few are the standards by which the exercise of his discretion can be measured. See Grayned v. City of Rockford, 408 U.S. 104, 108-9, 92 S.Ct. 2294, 2298-2299, 33 L.Ed.2d 222, 227-228 (1972). His decision to prosecute, no less than his failure to prosecute, may subject him to legitimate criticism. Whatever his decision, it is likely to be one in keeping with the political realities within which he functions. This is a part of the price that this type of statute compels us to pay.
Thus, although I have no choice but to join my brothers, I find no satisfaction or pleasure in doing so.

. See Morrissette v. United States, 342 U.S. 246, 255, 72 S.Ct. 240, 245, 96 L.Ed. 288, 296 (1951); Sayre, Public Welfare Offenses, 33 Col. L.Rev. 55 (1933).

. Hart, Law, Liberty, and Morality (1963) contains a discussion of Shaw and related problems.

. See Connally v. General Construction Co., 269 U.S. 385, 391, 46 S.Ct. 126, 127, 70 L.Ed. 322, 328 (1926).