The opinion of the court was delivered by: KNAPP
Defendant Carl W. Anderson moves to set aside this Court's sentence of imprisonment imposed on June 16, 1975. He argues that no imprisonment may be imposed under the circumstances of this case because of the peculiar interplay of the conspiracy statute, 18 U.S.C. § 371, and the sentencing provision of the Securities Exchange Act of 1934, 15 U.S.C. § 78ff(a). We disagree.
The defendant was convicted after a month-long jury trial of conspiring to violate the federal securities laws, particularly 15 U.S.C. § 78q(a) and three Securities and Exchange Commission regulations promulgated thereunder, 17 C.F.R. §§ 240.17a-3, 4, and 5. The cited statute provides, in pertinent part, that every broker or dealer
"shall make, keep, and preserve for such periods, such accounts, correspondence, memoranda, papers, books, and other records and make such reports, as the Commission by its rules and regulations may prescribe as necessary or appropriate in the public interest or for the protection of investors."
The three SEC regulations here involved -- promulgated pursuant to that statute -- list the specific records and documents that must be accurately made, preserved and filed.
The charges in this case arose out of the financial collapse of Orvis Brothers & Co., a member of the New York Stock Exchange. The motivation for the conspiracy, according to the government's proof at trial, was a desire among certain partners at Orvis, including Anderson, to hide the fact of the firm's deteriorating financial condition from the Stock Exchange and the appropriate regulatory agencies. The method for achieving this purpose was the making and filing of inaccurate records and documents, all in contravention of the securities laws.
The main issues litigated at Anderson's trial were twofold: first, was there a conspiracy among certain of the partners at Orvis to maintain false records and file false financial statements with the SEC; and secondly, was the defendant Anderson a knowing and wilful participant in such an unlawful enterprise. The jury resolved both of these issues against the defendant.
In arguing against the imposition of a jail sentence, Anderson relies, as noted above, on the interplay between the conspiracy section under which he was convicted, 18 U.S.C. § 371, and the penal provision of the Securities Act, 15 U.S.C. § 78ff(a).
The conspiracy provision, after defining the crime and prescribing the penalty, contains a proviso which states:
"If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor."
Anderson thus maintains that it is necessary to determine whether the conspiracy of which he was convicted had as its object the commission of an offense which is solely a misdemeanor. This inquiry requires reference to 15 U.S.C. § 78ff(a), the penal provision of the 1934 Securities Act. This statute reads as follows,
"(a) Any person who willfully violates any provision of this chapter, or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $10,000, or imprisoned not more than two years, or both, except that when such person is an exchange, a fine not exceeding $500,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation." (emphasis added)
18 U.S.C. § 1 classifies this offense as a felony.
However, the statute's final clause (emphasized above) carves out a special exception which prohibits imprisonment of a person convicted under 15 U.S.C. § 78ff(a) for a violation of a rule or regulation of which such person ...