The opinion of the court was delivered by: PALMIERI
PALMIERI, District Judge.
The defendants move for a new trial based upon newly discovered evidence, pursuant to Rule 33, Fed.R.Crim.P. The defendants assert in their motion papers that Government's Exhibit 21, a memorandum of an interview with the defendant Wolfson and others which occurred on October 12, 1950, was a fabricated document. It bears the signature of the then Regional Administrator of the Securities and Exchange Commission at Washington, D.C., Mr. E. Russel Kelly,
and was dated October 16, 1950, four days after the interview took place. The charge of fraud and fabrication made by the defendants on this motion rests upon the asserted premise that the government watermarks on the paper used in this eight page document did not come into existence until 1952, or thereafter.
After considering the papers submitted upon the defendants' motion, this Court decided to hold an evidentiary hearing. This hearing began on November 12, 1968, and was concluded on November 20, 1968. The Court now has before it a large number of exhibits submitted by both sides and a hearing record of 1447 pages.
A brief description of the trial context in which this exhibit was used is essential to a proper understanding of the proceedings on this motion.
At the trial, the defendants Wolfson and Gerbert were charged with conspiring to violate the registration provisions of the Securities Act of 1933, 15 U.S.C. § 77e(a), in connection with the illegal distribution to the public of common stock of Continental Enterprises, Inc. Additionally, the defendants were charged with substantive violations of these provisions in eighteen counts in connection with eighteen separate sales of Continental Enterprises, Inc. stock to the public. The jury returned verdicts of guilty as to both defendants on all counts on September 29, 1967. Both defendants were sentenced to prison terms and to fines, on November 28, 1967, when judgments of conviction were entered in this court.
The appeals from these judgments are now sub judice before the Court of Appeals.
The defendants are presently at large on bail pending the determination of their appeals.
Upon the trial both defendants took the stand. They asserted by their testimony and by contentions of counsel that they had no knowledge of the registration requirements. They claimed that they were too busy in the conduct of their extensive business affairs to be concerned with the details of the securities laws and regulations; that they had never heard of Section 5 of the Securities Act of 1933; and that they relied upon others in matters of regulatory compliance.
To counter the position taken by the defendants at the trial, the Government called as a rebuttal witness Mr. James Duncan, an attorney and former Assistant Regional Administrator of the Washington Office of the Securities and Exchange Commission. Mr. Duncan, a man of advanced years, was retired from government service at the time of his testimony. Having refreshed his recollection from the memorandum of interview (Government's Exhibit 21), he testified from his recollection of what had occurred while he was present at the meeting. He also testified concerning office practices with respect to the preparation of memoranda of such interviews, and on the strength of his testimony Government's exhibit 21 was admitted into evidence.
The testimony of Mr. Duncan and the receipt of this exhibit into evidence tended to establish that Mr. Wolfson was indeed aware of the registration requirements of which he had previously claimed ignorance, since the pertinent regulations, and section 5 itself, were the very subject of the interview.
Mr. Duncan's testimony at the trial has, by stipulation, been made a part of these proceedings. The defendants have attacked it as false, although they have suggested no basis for impugning the integrity of Mr. Duncan, apart from the strictures levelled at the memorandum of interview. It is reasonable to assume that the jury believed Mr. Duncan's testimony and rejected at least that portion of defendant Wolfson's testimony which was inconsistent with it. This Court accepts Mr. Duncan's testimony as credible and persuasive.
Any recollection of other persons present at the interview, other than Mr. Duncan, was not available to the Court upon the evidentiary hearing. As above indicated, Mr. Kelly died many years before the trial and the hearing. Mr. Doran Weinstein, whose telephone call arranged the interview which he also attended, and who was a business associate of the defendant Wolfson, was not called as a witness, although he was available to the defense as well as the Government. The defendant Wolfson was questioned about the interview when he testified at the trial and his testimony was that he had no recollection of it. The four persons present at the interview, Messrs. Kelly, Duncan, Wolfson and Weinstein, are thus accounted for.
Thelma Spencer McLaughlin, a former stenographer employed by the Securities and Exchange Commission at the Washington office in 1950 and known at that time by her maiden name, Thelma Louise Spencer, was called by the Government as a witness at the hearing. She testified that she remembered the visit of Mr. Wolfson at the time of the interview and that she recognized the interview memorandum as having been typed by her. Further, she identified both the signatures and initials of Mr. Kelly and her own initials on various papers prepared at about the same time and having to do with the subject matter of the interview. Mrs. McLaughlin, now the mother of three children, has long been separated from government service and was a credible, disinterested and persuasive witness. Indeed, the impact of her testimony was dramatic. She was not cross-examined and her testimony was not impunged. Standing alone, Mrs. McLaughlin's testimony would be sufficient to establish that the questioned memorandum of interview was indeed prepared and filed in October 1950, following the interview with Mr. Wolfson, and that the document was not fabricated. Not a single reference is made to her testimony in the proposed findings submitted in behalf of the defendants.
The memorandum of interview now attacked as spurious has been subjected to extensive scientific tests and examinations. The testimony concerning them forms a part of the record now before this Court. Additionally, much evidence has been adduced by the Government with respect to the circumstances surrounding the preparation of this document, as well as its custody and control during the period of approximately fifteen years since it was prepared and filed. It is highly significant that four copies of this document were transmitted to four different addressees by its author, Mr. Kelly, and that three of these four copies have been recovered and introduced into evidence upon the hearing. One of them, a copy transmitted to the Regional Administrator of the Securities and Exchange Commission at Atlanta, Georgia, was filed in the Atlanta office along with numerous documents relating to Capital Transit stock, the stock affected by the general subject matter of the interview.
The findings and conclusions which follow are intended to amplify and supplement what has already been said and to demonstrate that the defendants have failed to establish that Government Exhibit 21 was fabricated or that it was prepared in 1952 or subsequent thereto.
I. THE CIRCUMSTANCES SURROUNDING THE PREPARATION, USE AND FILING OF THE WOLFSON INTERVIEW MEMORANDUM ALL INDICATE THAT IT CAME INTO BEING AT ABOUT THE SAME TIME AS THE INTERVIEW TO WHICH IT RELATES AND HAS BEEN IN APPROPRIATE AND SAFE CUSTODY SINCE THAT TIME.
A. The Preparation, Custody and Control of the Questioned Document and Its Carbon Copies.
1. Mr. James J. Duncan, former Regional Administrator of the Washington office of the Securities and Exchange Commission, testified at the Continental trial that he was present with Mr. Kelly, the Regional Administrator on October 12, 1950, during an interview of the defendant Louis E. Wolfson and one Doran Weinstein, a friend and associate of Wolfson, at the Washington, D.C. Regional Office of the Securities and Exchange Commission. He described the subjects of discussion and the lengthy explanation of the registration provisions of the Securities Act afforded Wolfson during the course of the meeting.
2. Mr. Duncan further testified that Mr. Kelly, who died in 1956, prepared a memorandum of the interview within a few days of the meeting. He identified Government Exhibit 21 as that memorandum. He added that he checked the interview memorandum for accuracy at the time and that it was thereafter placed in the files.
3. Although it is defendant Wolfson's claim on this motion that Mr. Duncan gave false testimony, Mr. Duncan's statements were not shaken in any way, nor was the impact of his testimony weakened by any suggestion of bias, prejudice or motive to give false or biased testimony. Mr. Duncan, an attorney, had been retired from government service for nine years at the time of his appearance on the witness stand in the Continental case and was not shown to have had any interest in the prosecution.
4. Thelma Spencer McLaughlin, the former Thelma Louise Spencer, a typist employed at the Washington, D.C., Regional Office of the Securities and Exchange Commission in October 1950, typed the interview memorandum, as well as a number of carbon copies, on October 16, 1950. She appeared as a witness at the hearing and gave substantially the following testimony. It was her practice to place her initials "TLS" on all copies of memoranda or letters typed by her, but not on originals. After her marriage in 1951, when she became Mrs. McLaughlin, it was her practice to place the initials "TM" on copies of documents typed by her. She did not, after her marriage, ever revert to the use of the initials of her maiden name. She acted as Mr. Kelly's stenographer in 1950 and was able to recall the occurrence of the interview and the subject matter of the interview because it generated a considerable amount of work for her. She was able to recall the physical presence of the defendant Wolfson at the office at the time of the interview as he passed her desk in order to gain access to Mr. Kelly's office where the interview took place. She never back dated a document at any time in her career. She was familiar with the printed ink corrections on the carbon copies of the memorandum which she testified looked like her printing. She recognized her typed initials on the copies indicating that she was the typist. She also recognized a number of details peculiar to her style and spacing which indicated that the memorandum conformed to the style customarily used by her in the preparation of similar documents. She also recalled office conversations the subject of which is reflected in portions of the memorandum.
5. Mrs. McLaughlin was an entirely credible and persuasive witness. She was not cross-examined at the evidentiary hearing, nor has she even been mentioned in the submission of final papers in behalf of the defendants at the close of the evidentiary hearing.
Mrs. McLaughlin, at the time of her testimony, had been retired from government service for over fourteen years, is the mother of three children, and was a disinterested witness. There has been no suggestion that her testimony was prompted by any bias or prejudice.
B. The Requisition of the W-525 File and the Removal of the Questioned Document for Its Eventual Use Before this Court.
6. Stuart Allen is a financial analyst on the staff of the Securities and Exchange Commission and was assigned to the investigation which eventually led to the prosecution of the defendants in the Continental Enterprises, Inc. case. He testified at the trial and at the evidentiary hearing to technical and formal matters. He testified cogently and persuasively and no basis can be found either in the trial record or the record of the evidentiary hearing ...