The opinion of the court was delivered by: BRIEANT
On October 20, 1971, in a proceeding in this Court (United States of America v. Deardorff, et al., 71 Cr. 1048), a jury, after trial, found defendant Irving B. Kahn and Teleprompter Corporation ("TPT") guilty of conspiracy to bribe and three counts of bribery. It also found Kahn guilty of one count of perjury in connection with testimony before a Grand Jury. The bribery is alleged to have occurred in connection with obtaining franchises, permits or privileges for the benefit of TPT from municipal officials at Johnstown, Pennsylvania.
Sentencing is presently scheduled for November 30, 1971 and accordingly, no judgment of conviction has as yet been entered. We are advised that following sentencing, an appeal will be taken.
Further, Kahn and TPT have been named as co-conspirators but not as defendants in an indictment presently pending trial in Mercer County, New Jersey. It is claimed in the Mercer County proceedings that public officials demanded and received money in exchange for official votes in connection with the award to TPT of a municipal franchise.
Two days following the coming in of the jury verdict in this Court, on October 22, 1971, plaintiff Cooke filed his original complaint (since amended once and supplemented once) based on diversity jurisdiction, seeking the removal of defendant Kahn as a director and officer of TPT, the further adjournment of the TPT Adjourned Annual Meeting, then scheduled for October 22, 1971, and an injunction to restrain the individual defendants from voting management proxies received as a result of prior solicitations, and intended to be used to reelect the incumbent directors, including Kahn, and for other relief. California Sports, Inc. ("CSI") has since joined as a plaintiff. It is a TPT shareholder owned or controlled by Cooke.
On October 22, 1971, plaintiff applied to this Court (Gurfein, J.) for an Order to Show cause, with a temporary restraining order to prevent the holding on that day, of the adjourned Annual Meeting. Since much emphasis has been placed, by both sides, on what took place before Judge Gurfein, his determination is quoted in full:
"An agreement has now been reached between the parties which the Court is glad to confirm as follows:
The shareholders' meeting called for this afternoon will be adjourned this afternoon until November 24th with the understanding that notice will be given by means of proxy materials to the shareholders concerning the recent conviction.
As to the suggestion by counsel for the plaintiff that the proxy notice should not permit the voting of old proxies, unless revoked, that is a matter which is not within the jurisdiction of the Court now because there are not sufficient facts upon which to form a judgment and because it is essentially an administrative matter that should be first determined by the Securities & Exchange Commission.
Senator Goodell, representing the plaintiff, has also stated in court that at the time he brought the restraining order he had not been informed of the action to adjourn the meeting."
TPT, a New York corporation is the largest operator of cable television facilities in the United States. It serves more than a half million subscribers with cable television pursuant to franchises obtained from local governmental units, such as Johnstown, Pennsylvania. Its operations are regulated to some extent by the Federal Communications Commission, which, however, has no authority over the award of local franchises. It has outstanding over 3,000,000 shares of stock, of which two-thirds are registered shares, and publicly traded.
Defendant Kahn, until recently Chairman of the Board and Chief Executive Officer, owns 34,070 shares in his own right. Other shareholders had committed their voting rights to Kahn with the result that in addition to his own shares he now claims the power to vote 256,070 shares, or approximately 8.2% of the shares now outstanding. Plaintiff Cooke owns 465,648 shares, and controls 45,000 additional shares belonging to plaintiff CSI, 500,000 shares of which were subject to the voting control of defendant Kahn, until his resignation on November 12, 1971. This amounts to over 16% of TPT's outstanding shares.
On November 1, 1971, plaintiffs brought on a motion by Show Cause Order for a preliminary injunction. This motion, originally returnable November 9th and thereafter by Stipulation adjourned until November 12th, sought a preliminary injunction pending trial which would (1) restrain TPT from holding the adjourned Annual Meeting of Shareholders until further order of the Court; (2) restrain the individual defendants from voting proxies heretofore solicited at the adjourned Annual Meeting or any adjournments thereof; and (3) enjoin ...