Appeals from judgments of conviction after jury trial in the Southern District of New York, Constance Baker Motley, District Judge, finding all appellants guilty of conspiring to violate the federal securities law and the mail fraud statute in connection with the public offering of securities in violation of 15 U.S.C. § 77(q) (1970) and 18 U.S.C. §§ 371 and 1341 (1970); and finding all appellants guilty on substantive counts of mail fraud and aiding and abetting such fraud in violation of 18 U.S.C. §§ 1341 and 2 (1970), the principal issue on appeal relating to the scope of the mail fraud statute.
Smith and Timbers, Circuit Judges, and Tyler, District Judge.*fn*
Appellants Joseph Marando, Stanley Peltz, Arthur Berardelli and Lee Linder*fn1 appeal from judgments of conviction entered upon jury verdicts returned in the Southern District of New York on July 25, 1973 after a five week trial before Constance Baker Motley, District Judge, finding them guilty of conspiring to violate the federal securities laws and the mail fraud statute in connection with the public offering of securities in violation of 15 U.S.C. § 77 (q) (1970) and 18 U.S.C. §§ 371 and 1341 (1970); and finding them guilty on substantive counts of mail fraud and aiding and abetting such fraud in violation of 18 U.S.C. §§ 1341 and 2 (1970).*fn2
Of the numerous claims of error raised on appeal, we find only one to be of sufficient merit to warrant discussion: the claim that the mail fraud convictions should be reversed in light of the Supreme Court's decision in United States v. Maze, 414 U.S. 395, 38 L. Ed. 2d 603, 94 S. Ct. 645 (1974), because the mailings of the confirmation slips here allegedly were not "for the purpose of executing" the manipulative scheme charged in the indictment. Other subordinate claims of error are also raised.
In view of the issue to which this opinion is addressed, it is sufficient briefly to summarize the fraudulent scheme proven at trial, focusing upon the use of the mails in alleged violation of Section 1341.
The essential evidence, viewed in the light most favorable to the government, United States v. McCarthy, 473 F.2d 300, 302 (2 Cir. 1972), established the existence of a conspiracy from June 1, 1971 through November 1, 1971 among appellants and others to violate the federal securities laws and the mail fraud statute in connection with the public offering of the stock of All State Metals Stamping Co., Inc. (All State).
The government proved that the scheme which resulted in the instant convictions involved primarily a conspiracy in which co-defendant Schiffman and other employees of Kelly, Andrews & Bradley, Inc. (Kelly, Andrews), a financially ailing brokerage concern, obtained control of All State stock. They did so through co-defendant Feis of Feis Securities for the purpose of disposing of the stock at higher rigged prices. They ultimately sold or attempted to sell the artificially rigged All State stock with the assistance of Marando, Peltz, Berardelli, Linder and others.
Although there were various phases of the scheme, the mailings "for the purpose of executing such scheme", 18 U.S.C. § 1341,*fn3 consisted of appellants' sending broker confirmation slips to cover transactions in All State stock.*fn4 Counts Two through Seven involved the sending by Kelly, Andrews on July 19 and September 10 of confirmations either to various initial purchasers of All State stock or to two brokerage houses, Chartered New England, Inc. and A. G. Edwards & Sons, Inc.; All were sent in connection with transactions designed to manipulate the price of All State stock.
Counts Ten and Eleven related to appellants' transactions with the firm of A. H. Simon & Co. and its sole proprietor, Alan Simon. The mail fraud violations charged in these counts were predicated upon the mailing by Kelly, Andrews to A. H. Simon of confirmation slips on September 22 and 27. These confirmations covered Simon's "purchase" or "park" of 8,000 and 5,000 shares of All State stock. Pursuant to the fraudulent scheme, appellants had planned that Simon would never have to pay for the stock and that the stock never would be delivered. After the confirmation slips were mailed, Kelly, Andrews took copies of the confirmation slips, together with Simon's confirmations and the stock certificates, to the Chelsea National Bank and secured a $100,000 loan. Kelly, Andrews ultimately defaulted on this loan when Simon was unable to pay for the stock, although he had been told that the transaction was a "park".
Counts Thirteen through Seventeen related to mailings of confirmation slips to various purchasers of All State stock based on sales at artificially inflated prices. In each case, the confirmations were mailed by a broker who purchased from Kelly, Andrews for his customer's account. This was the aspect of appellants' scheme in which they sought to find brokers and other individuals in New York and the Bahamas who would place the manipulated stock. Specifically, Count Thirteen involved the mailing of a single confirmation slip by Hornblower and Weeks, Hemphill-Noyes, Inc. to a purchaser of 100 shares of All State stock who bought on the recommendation of a Hornblower employee who was a participant in the fraudulent scheme. ...