Moore, Smith and Hays, Circuit Judges.
Irving Projansky, Harry Brainin, Gerald Leavitt, and Michael Geier appeal from judgments of conviction entered against them in the United States District Court for the Southern District of New York on September 17th and 23rd, 1971, after a three and one-half month trial before Judge Lasker and a jury. The four appellants, with twelve others, were indicted on August 23rd, 1967, for their alleged participation in a concerted effort to raise by manipulation the price of the stock of Hercules Galion Corporation (Hercules), a company listed on the American Stock Exchange (AMEX).*fn1 We affirm all four judgments of conviction.
A. Events Prior to Spring of 1965
In September of 1963 Projansky, Brainin, and Irving Taub, the sole officers and directors of Argus Capital Corporation (Argus), an investment and finance company located outside Chicago, embarked on a program to gain control of Hercules, a manufacturer of heavy trucks. Pursuant to this program, during 1963 and 1964, approximately 275,000 of the 927,000 shares of Hercules stock then outstanding were purchased by Projansky, Brainin, Taub, and their associates. These shares, representing working control of Hercules, were deposited at Argus. Thereafter Brainin, as sole voting trustee of the shares, exercised the control they represented to elect himself, Projansky, Taub, and Charles Meyers to Hercules' nine-man board of directors and to install Meyers as president of Hercules.
Despite the general upward trend of the stock market from 1963 to 1965, the price of Hercules fluctuated moderately on low volume until the promotion here under focus took hold. This relatively poor performance of Hercules disgruntled the shareholders. They believed that Hercules was a sound investment. Moreover, the firm was developing a garbage truck expected to become dominant in the garbage truck market and building a new plant expected to increase productivity. Finally, Brainin and Projansky were interested in mergers and acquisitions, and if the price of Hercules stock were higher then the firm's bargaining power in any such negotiations would be enhanced.
B. June-July 1965: A Plan
During the spring of 1965 Projansky discussed the prospects of Hercules with Arthur Keller, president of the First National Bank of Lincolnwood, Illinois (FNBL). Projansky was chairman of the board of the FNBL. Keller, in turn, discussed Hercules with Gerald Leavitt, an acquaintance and a customer of the bank. A graduate of the University of Illinois with a Bachelor of Science Degree in Economics, Leavitt had recently left a firm in the ladies' garment wholesaling business with which he had been for sixteen years and was studying to become an investment advisor.
Thereafter in June of 1965 Leavitt brought his brother-in-law, Mark Rolland, to the FNBL for a meeting with Keller and Projansky. Rolland was a 50% partner in Investment Associates, a Chicago stock factoring firm (a firm that lent money for the purchase of stock, the loans collateralized by the stock bought). Projansky expressed his and the shareholders' interest in seeing the price of Hercules stock increase. Leavitt and Rolland responded by assuring Projansky and Keller that they could be of considerable assistance.
A. Well, yes, Mr. Leavitt stated that he had been taking an examination to become a security analyst, or some kind of security dealer, and that he anticipated giving up his present occupation, whatever that was, and going into the security business, and that he could be very helpful in getting people to take an active interest in the purchase of Hercules Galion stock.
Further, Mr. Rolland stated that he had a particular friend who singlehandedly doubled the price of a particular stock. I don't think he mentioned the name at that time. And that he, with his friends, could do an excellent job in creating sponsorship and developing the activity and raising the price of Hercules Galion stock.
A. I told Mr. Projansky that I had had experience along those lines, and that I had been involved with a stock or company called Pentron Electronics where I had raised the price of this stock considerably, doubled the price of this stock, and I thought I could be helpful to him if they should decide anything along those lines.*fn2
Shortly thereafter the parties met again at the FNBL. Rolland and Leavitt brought with them Spero Furla, a registered representative and a close friend of Rolland's. Furla was the companion of Rolland that had assisted in raising the price of Pentron.*fn3 At this second meeting Projansky again explained the reasons for his desire to see the price of Hercules increase, and stated that he would like to see it rise from its then level of around 6 to 12 or 13. Speaking for Leavitt and Furla, Rolland foresaw no difficulty in meeting this objective. In consideration for their services, the "Rolland group" asked for options to buy Hercules stock at bargain prices. They preferred this form of payment over cash because they wanted their expected income to be taxed at capital gains rather than ordinary income rates. The meeting concluded with Projansky's admonition that any deal depended on the approval of his fellow directors Brainin and Taub.
The Witness: Mr. Projansky said that he wanted the price of the stock higher for the reason that it was only selling at book value at that time, which was around $6, they wanted to acquire other companies and make acquisitions and it wasn't very practical or feasible at the price that the stock was selling at at that particular time, and he wanted to know if we were able -- capable of sponsoring the stock and making it go higher.
Mr. Rolland and I said that we were able to do this, . . .
A. Well, after Mr. Rolland introduced Mr. Furla, Mr. Furla stated that Mr. Rolland had told him about the desire for sponsorship in Hercules Galion stock and that he had been studying or making some charts of the stock and that he felt it would be a very simple task to develop sponsorship and get activity in Hercules Galion stock.
He also then told us that he, with a few associates, had doubled the price of a stock which I don't believe he mentioned at that time -- he may have, I don't remember -- from one-half to three, and from the description that he had of Hercules Galion stock, that that was a much more difficult task.
Mr. Furla then got into a general discussion as to the Pentron Electronics, and that we had a team of brokers throughout the United States that could help raise the price of the stock.*fn4
C. August-September 1965: The Deal Is Finalized
The agreement between Projansky's group and Rolland's group was finalized in a series of three meetings in August and early September of 1965. On the one hand were Projansky, Brainin, Keller, and Taub, representing the Hercules interests, and on the other were Rolland, Furla, and Leavitt, representing the promoters. During the first meeting Brainin repeated what Projansky had said in the earlier meetings about the soundness of Hercules and the desire to see its stock price increase to enhance Hercules' merger position. Brainin stated that there were approximately one million shares outstanding, but that 30 to 35% of these shares were held dormant at Argus and voted as a block by him. After Rolland and Furla repeated their experience in stock promotion, they eventually proposed these specific terms of agreement: the right to buy 36,000 shares of Hercules stock for themselves and the brokers who would be working with them; financing for the purchase of these shares to be provided by loans from Argus (secured by the shares purchased, the borrower incurring no personal liability);*fn5 five thousand dollars in expense money; the right to inspect Hercules' stock transfer records; and assurance that insiders would not sell while the promoters were leading Hercules up in price.
A. Mr. Brainin stated, "If we do make a loan to you, how are we to know whether you are going to really promote the stock? How are we to know if you are merely going to take this stock and then run the stock up and sell it and leave us without performing the job that we are paying you for?"
I indicated to him that I was only interested in a long-term capital gain, and that that means I'd have to be involved in the stock for a six-month period of time and that should make him feel at ease.
Then Mr. Rolland said, "As long as we are not getting any stock or anything right now, and we are ready to start this deal off, we will need $5,000 in cash to distribute to our cobrokers to show them good will and get them to work with us."
Q. Did you [Rolland] have a conversation with Mr. Furla and Mr. Leavitt at this time about how much stock you wanted?
Q. Was there any agreement reached among the three as to how much stock you were going to ask for?
A. We agreed that we would ask for 50,000 shares [initially] of stock to be purchased somewhere either below the market or very close to the market. It was also agreed upon that I would do most of the negotiations, and that whatever I agreed upon, that would be what the arrangements would be.*fn6
At the second meeting, attended by the same parties, the Projansky group agreed to the terms proposed by the Rolland group. The option price of the 36,000 shares was set at $7.25, but the parties agreed to execute the loan only after the price of Hercules rose above $7.25. Timing the loan in this way would not subject Brainin to criticism for making a loan equal to 100% of the value of the collateral. Rolland did demand, however, immediate payment of the $5000 in order to induce other brokers to enter the promotion. Finally, the parties agreed that Keller would coordinate the initial purchases of 10,000 shares of Hercules by himself and others and would place the orders through Furla.
Then Mr. Rolland said it would be advisable if -- no, he then said "We ought to have a kickoff order of a substantial number of shares to really start this thing off," and again Mr. Projansky and I had a discussion about the kickoff, and I said I would kick it off if Dr. Weitz and Morris Childs would join in kicking it off with me, and he said they would, they would.
Then Mr. Rolland said, "I believe and I feel that all orders should be funneled through Mr. Furla, that he is with Blair & Co." -- I believe it was -- "and that he will execute some of the orders and pass on or ferret out orders to his co-brokers, whoever they may be," but to leave it to him to arrange the total purchase of which he would execute only a portion thereof.*fn7
In preparation for the kickoff, Projansky and Keller informed Fred Weitz, a director of the FNBL, and Eva and Morris Childs, Projansky's sister and brother-in-law, of the plan to promote the stock of Hercules. In order to give some real punch to the kickoff, Weitz took out unsecured loans of $95,000 from the FNBL and gave the proceeds to Keller to purchase Hercules stock; the Childs borrowed $150,000 from the FNBL, half of which was unsecured, for the same purpose. On the loan committee that approved the loans were Projansky, chairman, and Keller, Weitz, and Taub.
Further fuel for the kickoff was provided during the third Argus meeting in early September of 1965. Rolland, Furla, and Leavitt signed notes backdated to August 26, 1965, for $261,000 in loans from Argus. The proceeds took the form of four checks, which the three promoters promptly endorsed over to the sellers of the 36,000 shares of stock purchased under the option term of the agreement. The sellers were Gary Brainin, Brainin's son, and Albert Green, Brainin's long-time business associate. On September 13, 1965, the FNBL executed a $100,000 unsecured loan to Argus to help cover the loan made by Argus to the Rolland group.
Keller delivered the expense money of $5,000 to Rolland on September 9, 1965. The $5,000 was in the form of two checks, one for $2,000 from Weitz, the other for $3,000 from the Childs. On the reverse of the Weitz check was written "Fee for Arranging Financial Advice." On the reverse of the Childs check was written "Fee for Consultation." Rolland in turn issued two checks to Leavitt ...