Kaufman and Hays, Circuit Judges, and Ryan, District Judge.
We have here two appeals from judgments of conviction following separate trials, but emanating from the same indictment.
Nash's appeal is from a conviction on five counts after the first trial -- on which the jury had disagreed as to Hayutin but convicted 5 other defendants. Hayutin appeals from his conviction on 14 counts after his retrial. Because Nash's sentence had been deferred until February 20, 1967, he did not appeal when his co-defendants did, United States v. Bilotti, 380 F.2d 649 (2d Cir. 1967).*fn1
The indictment filed on March 4, 1965, charged 14 individual defendants in 48 separate counts with violations of the anti-fraud provisions of the Securities Act of 1933 (15 U.S.C. Sec. 77q(a)). The prosecution arose from the public marketing and the unregistered sale of common stock of Allied Entertainment Corporation of America during the period from July 1, 1962 through May, 1963. Nash was sentenced to a year and a day on each count, sentences to run concurrently, and fined $500. Hayutin was sentenced to 2 1/2 years on each of 14 counts, sentences to run concurrently, and he was fined $14,000. Since the appeals are from judgments of conviction following separate trials,*fn2 we have considered and decided them separately.
Both convictions are affirmed.
Nash was convicted of conspiring to make illegal unregistered sales of common stock of Allied Entertainment Corporation of America, Inc. (Allied) and to use the mails and telephone in furtherance of a scheme to defraud in the sale of the Allied stock (Count 1);*fn3 making unregistered sales of the Allied stock in violation of Section 5 of the Securities Exchange Act of 1933, 15 U.S.C. § 77e(a) (Counts 4 and 5); and making fraudulent sales of Allied stock in violation of Section 17 of the Securities Act of 1933, 15 U.S.C. § 77q (Counts 22 and 23).
These are the facts as they implicated Nash and by necessity Hayutin, which were developed at the trial.
The conspiracy and the subsequent substantive crimes were born of the efforts of two dentists -- Breger and Blistein -- to rescue Allied, a small popular music publishing business they had formed, from financial disaster due to an earnings deficit accumulated over four years and lack of working capital. The two dentists-turned financial operators were having difficulty selling 60,000 shares of Allied stock which Allied was offering publicly at $2.50 per share pursuant to an exemption from registration under Regulation A of the Securities and Exchange Commission Rules.*fn4 By August 20, 1962, only 20,000 to 25,000 shares of the total 60,000 shares offering had been sold. Although Reuben Rose & Co., a brokerage firm, was the underwriter, the actual peddling of the stock was done by Breger and his associates. At this time the securities markets were depressed and a partner of the Rose firm informed Breger that, unless an additional 10,000 to 15,000 shares were sold by September 17, 1962, the date of the expiration of the Regulation A offering, the proceeds already realized would have to be refunded. Breger sought help from one Gearhart, a "stock trade" and market manipulator. Gearhart introduced Breger to Hayutin.
Breger related his problems to Hayutin, who then arranged a meeting between Breger and Gravino. It was following this that Gravino approached Nash on the matter. Gravino and Nash were over-the-counter brokers; Gravino was the sole stockholder of Albion Securities Co., Inc., and Nash the sole stockholder of Seaboard Securities Corp. Both of them had had prior dealings with Hayutin.
Gravino told Nash that Hayutin had told him of Breger, of Allied's offering and of the necessity to sell a large number of Allied shares in a short period. Gravino also told Nash that, if he and Nash were to help to sell these shares, they would receive 50 to 75 cents per share in cash over the underwriting commission.*fn5 Nash told Gravino to arrange for a payoff of $1.25 per share.
On September 2, 1962, there was a meeting at Hayutin's apartment, at which Hayutin, Nash, Breger and Blistein were present. Hayutin made good on the recommendation Gearhart had given Breger that Hayutin "could do the job." Hayutin negotiated a deal. Gravino and Nash undertook to sell approximately 10,000 shares by the close of the offering on September 17, 1962; Breger agreed to pay them a secret cash commission of $1.00 for each share sold, which was to be additional to an offering commission of 25 cents per share, which they were to share with Rose & Co., the underwriters. Gravino and Nash agreed to pay Hayutin 25 cents per share out of what they collected. Gravino and Nash also promised to sell additional shares after September 17, 1962, by which date, Gravino and Nash had sold 7,000 of the 10,000 shares. A meeting was held that day at Gravino's office, which Hayutin, Gravino, Nash, Breger and Gravino's partner attended. Breger then paid Gravino and Nash $7,000 in cash, to be divided between them, and they paid 25 cents a share or $1750 in cash to Hayutin.
While Gravino and Nash were selling the 7,000 shares of the offering, Gearhart was the principal trader in Allied Stock. He, working with and protected by Breger's promise to buy from him every share he was forced to purchase, maintained an inflated and rigged price for the stock. Nash and Gravino had met with Hayutin, Breger and Gearhart when the details of this rigged bid operation were set, and, in fact, Nash encouraged and policed Gearhart's activities to the extent of offering him a call at $2.50 when Gearhart succeeded in raising the price to $4 and reporting him to Hayutin when he failed to maintain the price.
Hayutin's, Gravino's and Nash's connections with Breger's activities and Allied financing did not end with the public offering. Breger had told Hayutin in September, 1962, that even with the underwriting, Allied needed some $50,000 in working capital. Hayutin suggested to Breger and Blistein that, during the offering, they buy 5,000 shares of Allied to help in the success of the offering and that these shares could later be resold through Gravino and Nash. After the close of the offering, Hayutin arranged with Gravino and Nash to have them sell publicly these shares which Breger and Blistein had purchased in nominee names. Gravino and Nash agreed with Hayutin that they would pay him 25 cents for each share so sold and that they would equally divide the balance received from Breger. They undertook the sale of the stock, and Hayutin arranged for its delivery. On October 2, 1962, Breger, Hayutin, Nash and Gravino again met in Gravino's office. Breger had with him the 5,000 certificates for the shares purchased by him and Blistein in the names of the nominees. At Nash's suggestion, the stock of Breger's nominees was sold through Gravino and that of the Blistein's nominees through Nash. Breger had brought no ready cash for the payoff to Nash and Gravino and Hayutin, but this presented no obstacle to their ingenuity. Breger endorsed the name of his nominee to a check payable to her, it was cashed and the proceeds turned over to Nash and Gravino, who, in turn, paid over to Hayutin his 25 cents per share. The remaining nominee shares were later sold by Gravino and Nash, and certificates delivered to them by Breger who paid them off as before. The evidence showed that Nash sold a total of 14,000 Allied shares, receiving payoffs of $15,000.
The unregistered sale of some of this 5,000 lot by Nash's firm to two customers is charged in Counts 4 and 5 to be in violation of Title 15 U.S.C. Sec. 77b(11), 77d(1) and 77e(a), because they were shares owned by Breger and Blistein "controlling persons" of Allied.
Count 4 charges that on October 1, 1962, Nash sold 100 Allied shares to George F. and Eloise T. Roebrig and used the mails to send them a confirmation of the sale. Count 5 charges Nash with the sale on October 9, 1962 of 300 Allied shares to one Bart Feller, and mailing to him a confirmation.
The stock involved in these sales was registered in the names of Chusid and Pisapia, sisters of Blistein who was a person in control. The Chusid-Pisapia shares were part of the shares which had been purchased by Blistein in the names of his sisters as nominees during the initial Regulation "A" offering.
On these two counts, Nash urges that the evidence was insufficient to convict him in that there was confusion arising from the lawful sales of the Regulation "A" securities through September 17, 1962, and the subsequent alleged unlawful sales of unregistered securities; and that there was insufficient proof that the Blistein stock sold by Nash, part of which he sold as evidenced by the ...