Lumbard, Chief Judge, and Smith and Hays, Circuit Judges.
Joseph Abrams, Sydney L. Albert and Richland Securities, Inc. appeal from their convictions by a jury in the Southern District of New York on numerous counts of an indictment charging use of the mails and other means and instruments of interstate commerce in selling to the public, during middle and late 1956, stock of the Automatic Washer Company for which no registration statement had been filed with the Securities and Exchange Commission, as required by law, and for conspiracy to violate the registration provisions of the Securities Act. 15 U.S.C. §§ 77e(a), 77x and 18 U.S.C. § 371. Abrams was sentenced to five years imprisonment, Albert was sentenced to three years imprisonment, and Richland was fined $5,000.*fn1 Appellants claim that numerous errors requiring reversal of their convictions were committed during their trial which lasted from September 4, 1963 to February 15, 1964.
Of the claims which we think merit discussion, seven were briefed and argued for Joseph Abrams and Richland Securities, and adopted by Sydney L. Albert, and the eighth was briefed and argued by Albert, as follows:
I. The Sufficiency of the Evidence
II. Alleged Errors in the Admission and Exclusion of Evidence
III. Alleged Errors in the Judge's Charge
IV. Whether Abrams Secured Immunity by Testifying Before an Examiner of the SEC
V. Whether Abrams should have been tried by the Court instead of by the Jury
VI. Whether Abrams had a right to participate in the hearing after trial on Albert's mental capacity
VII. Whether a new trial should have been granted because of allegedly newly discovered evidence
VIII. Whether Albert's right not to testify was violated by an opening statement made by Knohl's counsel; whether the court should have granted a mistrial.
As we find ample evidence to support the convictions and no errors in the conduct of the trial, we affirm the convictions.
I. THE SUFFICIENCY OF THE EVIDENCE
The indictment, filed April 3, 1961, charged Abrams, Richland and Albert and co-defendants Larry Knohl, Charles Gordon and David Schindler with unlawful use, during various times in 1956, of means and instruments of communication in interstate commerce to sell the common stock of Automatic Washer Company, there not then being in effect with the SEC a registration statement as to said security. Knohl was tried with the appellants and acquitted by the jury, Schindler died prior to trial, and the charges against Gordon were severed and were later dismissed.
It was the government's contention that Abrams and Albert were "underwriters" of the Automatic stock, as that word is used in the statute, 15 U.S.C. § 77b(11), since they purchased from the issuer with a view to selling or distributing the stock. Therefore, being underwriters, they violated the statute by selling stock which was not registered,*fn2 and for which there existed no exemption from the registration requirements of the Securities Act of 1933.*fn3 Thus, it was relevant on the issue of intent, purpose and willfulness for the government to show the interest of Abrams and Albert in the Automatic Washer Company and its stock and the financial arrangements and agreements which preceded their disposition of the many thousands of shares of Automatic stock which they thereby acquired. We therefore summarize the record facts regarding:
Acquisition of Automatic Stock by Abrams and Albert
In February 1955 Albert acquired control of Bellanca Aircraft Corporation, then a corporate shell, by purchasing 82% of its stock. Upon becoming president and a director, Albert exercised complete control of its affairs. On March 10, 1955 Albert, for Bellanca, contracted to acquire N. O. Nelson, then a profitable plumbing supply concern with headquarters in St. Louis, Missouri, and its subsidiary, Joplin Supply Co., for approximately $4,800,000. To accomplish this Albert borrowed $4,000,000 for Bellanca from the Mastan Company for a "fee" of $500,000 and repayment in 11 months, with 6% interest. As security Albert assigned Bellanca's Nelson and Joplin stock, 100,000 shares of Bellanca stock, and gave guarantees of various companies, his wife and himself, and a guarantee of $500,000 by Abrams, for which he also pledged Bellanca stock to Abrams. After making two monthly repayments to Mastan -- one by Bellanca and one paid by himself, Albert refinanced the Mastan loan through a loan of $3,600,000 to Nelson and Joplin from the Walter E. Heller Company. For this new loan Nelson and Joplin pledged all their assets. The borrowed $3,600,000 was transferred to Bellanca on December 5, 1955 and on the following day the Mastan loan, now $3,212,950, was retired and Albert received the balance of $387,050.
In late November 1955 Abrams had met John Chamberlin, president of Automatic, a washing machine company with its principal place of business in Newton, Iowa, which was then badly in need of financing. This led to discussions in early December as a result of which Albert agreed that his company, Pierce Governor Company, would buy 330,000 shares of Automatic original issue stock for $2.55 per share, which was 15% under the then market price. As there were only 292,594 shares then issued and outstanding this arrangement would give Albert control of Automatic. Abrams and Schindler provided the money by finding purchasers for Pierce stock and by buying 100,000 shares of Automatic in the name of Richland.
On December 10, 1955 Automatic purchased the assets of the Washer-Dryer Corporation which was located in a garage in Skokie, Illinois, for 228,000 shares of Automatic which it was to issue and these shares were distributed to the shareholders of Washer-Dryer. Three days later, on December 13, Abrams suggested to Chamberlin that Automatic should buy Nelson which he said had a net worth of about six and a half to seven million dollars. Abrams told him nothing about the $3,600,000 loan to Nelson and the mortgages of the Nelson and Joplin assets and accounts.
On December 22, Albert, Abrams and Chamberlin agreed that Automatic would issue to Bellanca 1,255,000 shares for Bellanca's ownership of 96.7% of Nelson's issued and outstanding stock. Albert arranged that of the Automatic shares to be issued to Bellanca, 305,000 shares would be issued to him personally in payment of a note for $1,525,000 which he caused Bellanca to make payable to himself. Albert then endorsed the note and delivered it to Chamberlin as the consideration for the 305,000 shares.*fn4
To enable Bellanca to pay off the Mastan loan the parties arranged for Nelson to declare a $3,600,000 dividend payable to Bellanca on January 4. This required a revision of the December 22 agreement which had prohibited such a payment, but this was done about the middle of January by an agreement which was pre-dated to December 23. It was not until mid-January that Chamberlin first heard of the Heller loan. The result of all this was the depletion of Nelson's working capital.
On March 1 Bellanca issued a news release of its sale of Nelson to Automatic for 950,000 shares, the recent closing price of which had been 8 1/8 on the Midwest Exchange. Although the release stated that Bellanca had received dividends of $3,466,800 from Nelson, nothing was said either about the Heller loan and the resulting serious financial condition of Nelson and Automatic or the 305,000 shares issued to Albert.
On April 6, 1956 Automatic delivered to Albert 105,000 shares which, with the 200,000 already delivered to him about February 23, totalled the 305,000 shares in payment of the so-called note to him from Bellanca. Automatic also delivered 950,000 shares to Rothschild, treasurer of Bellanca, who then gave 50,000 shares to one Hayutin, acting as agent for Abrams, and turned over the remaining 900,000 shares to Albert. Earlier, on February 21, Abrams had received 50,000 shares of Automatic in return for what Abrams alleged to be $300,000 worth of rubber machinery which Abrams claimed to own but which he never turned over to Automatic.
Thus, by early April, Abrams and Schindler had acquired 210,000 shares of Automatic and Albert had or controlled 1,435,000 shares -- through Pierce and Bellanca -- a total of 1,645,000 out of the 2,155,594 shares then outstanding. Abrams himself in a letter written to Albert's attorney, Albert Kahn, on March 2, characterized these transactions: "The N. O. Nelson deal for Automatic is the worst kind of robbery this side of heaven, insofar as the Automatic stockholders are concerned." And six days later he again wrote Kahn that "Automatic Washer is taking the most terrible beating that it could possible (sic) take in making the Nelson deal." These characterizations by Abrams could well have been found by the jury not to be overstatements of the truth.
Abrams and Albert Dispose of Their Stock
The evidence showed that Abrams disposed of 56,300 shares. He sold 7,000 shares for $21,000 to four or five friends in early 1956. Through accounts which he set up at H. Hentz & Co. for nine relatives and close friends, he sold 8,500 shares from April 30 to July 20, 1956. One of these, Gabriele Gurland, testified that she knew nothing about the account. From the testimony of the others in this group of nine the jury could well have concluded, as the government contended, that Abrams simply used their names without their knowledge and gave all the instructions to Robert Berk of Hentz & Co. Through the brokerage firm of Montor and Company, Abrams sold 40,800 shares in August, September and October 1956.
There was evidence that Albert distributed to the public 291,651 shares of Automatic which belonged to him or Bellanca by direct sales or by pledging the stock and causing it to be sold under such circumstances that the jury could find that the purpose was distribution to the public. The proof presented a question for the jury whether Albert had placed Automatic stock with five institutions, as collateral for the repayment of loans, with the legitimate intent to use the stock as collateral or whether so pledging it amounted to an indirect means of selling the stock as he never intended to repay the loans and knew that the stock would be sold upon his default. The jury found Albert guilty of sixteen such transactions in 1956, as follows:
Count 80 Dreyfus & Co. 100 ...