Appeals from judgments of conviction after a jury trial in the Southern District of New York, Constance Baker Motley, District Judge, finding appellants Rubinson and Levine guilty of conspiring to violate the registration and antifraud provisions of the federal securities laws and the mail and wire fraud statutes; and finding Rubinson, Chester and Reynolds guilty on a substantive count of violating the registration provisions of the federal securities laws.
Moore and Timbers, Circuit Judges, and Coffrin, District Judge.*fn*
Appellants Norman Rubinson, William Chester, Edgar Reynolds and Lawrence Levine*fn1 appeal from judgments of conviction entered upon jury verdicts returned in the Southern District of New York on March 23, 1975 after an eight week trial before Constance Baker Motley, District Judge, finding Rubinson and Levine guilty of conspiring to violate the registration and antifraud provisions of the federal securities laws and the mail and wire fraud statutes in violation of 18 U.S.C. § 371 (1970) (Count 1);*fn2 and finding Rubinson, Chester and Reynolds guilty on a substantive count of interstate transportation of unregistered securities in connection with the sale of the common stock of Stern-Haskell, Inc. in violation of Sections 5 and 24 of the Securities Act of 1933, 15 U.S.C. §§ 77e and 77x (1970) (Count 14).*fn3
Among the numerous claims of error raised on appeal, we find the following to be the essential ones: (1) that the conduct with which appellants were charged did not constitute an illegal means of selling unregistered securities; (2) that the evidence was insufficient to support the convictions; (3) that the evidence established multiple conspiracies rather than the single conspiracy charged; (4) that appellants' rights were violated by pre-indictment delay; (5) that Rubinson and Chester were denied their rights to court appointed counsel; and (6) that appellants were prejudiced by the prosecutor's rebuttal summation.
For the reasons below, we affirm the convictions of all appellants on all counts.
In view of the issues raised on appeal, including challenges to the sufficiency of the evidence, the following summary of events from late 1968 until mid-1969 is believed necessary to an understanding of our rulings on those issues.
There was ample evidence from which the jury could find a conspiracy to sell the common stock of Stern-Haskell, Inc. (S-H) to the public without prior registration as required by Section 5 of the Securities Act of 1933. The conspirators caused National Ventures (National), a dummy corporation under their control, to purchase the unregistered stock of S-H and to spin it off as a stock dividend to National's shareholders, most of whom were members of the conspiracy. By laundering the S-H stock through National, the conspirators hoped to claim that they had received the S-H stock as a lawful stock dividend and could sell it legally to the public without registering it. After reacquiring the stock, the conspirators intended to manipulate the market in S-H to drive up the price of the stock and then dump their stock on the public at windfall profits to themselves. The masterminds of the scheme were William Chester, a Florida attorney, and Norman Rubinson, both of whom had had considerable prior experience with similar schemes.*fn4
(B) Stern-Haskell Public Offering
S-H was a small, wholesale used car company which operated out of a large garage in the Bronx. Richard Stern (an unindicted conspirator) was the company's president. Jerome Haskell (a defendant who was acquitted) was its Secretary-Treasurer. During 1967 and 1968 Stern and Haskell rejected the idea of having the company go public because the company could not afford the cost of issuing a prospectus which they knew was necessary for a public offering.
In late 1968, Haskell began discussing with Chester, Rubinson, Sidney Stein*fn5 and Albert Feiffer (the latter two being defendants herein)*fn6 the less costly -- but illegal -- method of making S-H a public company by "spinning off" its unregistered stock through National.
At this time National was a shell corporation. Its president and chief stockholder was Chester. It was engaged in no business, had no offices other than Chester's home and law office, and had virtually no assets.*fn7 Chester owned 300,000 of National's 400,000 outstanding shares. Marinus Laboratories, a small company with which appellant Reynolds was associated, owned 24,000 shares of National. Reynolds' parents owned several hundred shares of National. Some of the National shares owned by Marinus and Reynolds' parents had been acquired from Chester in return for Reynolds' assistance in helping Chester obtain control of National.
As plans coalesced for the illegal sale of unregistered stock of S-H and several other companies, Chester began giving away ten-share certificates of National stock to friends and relatives so that the phony spin-offs would appear to be lawful stock dividends of a bona fide corporation. In this manner Chester increased the number of National shareholders from 100 to more than 800.
Chester and Rubinson also organized what they called the Stock Transfer Agency. This was a sole proprietorship in the name of one Nordin, Chester's law clerk. Its function was to act as the transfer agent for several of Rubinson's companies, as well as for National, S-H and other companies whose unregistered shares were to be illegally spun off and sold to the public.
On February 8, 1969, Chester, Rubinson, Feiffer, Stein, Haskell, Saul Weitzman and Louis Hochen (the latter two being unindicted conspirators) met with others at the offices of Weitzman's furniture company in Miami. There they agreed to effect a public offering of S-H stock by transferring 200,000 of its shares*fn8 to National which in turn would distribute those shares to National's stockholders as a liquidating dividend. Weitzman, Hochen, Feiffer and one Harry Silber were designated as nominees of Rubinson, Stein and Feiffer to hold National shares and later the S-H shares as a stock dividend. It also was agreed that each nominee, as payment for the use of his name, would receive 2,000 shares of S-H stock. Rubinson, Stein and Feiffer agreed to advance Weitzman enough money to purchase 37,500 shares of National in his own name. At the same meeting, Stein announced that he would arrange to drive up the price of S-H to about $5 per share on the public market.
In February 1969, Rubinson took Stern and Haskell to an attorney to obtain an opinion about the legality of the proposed transaction. The attorney selected was one Rubinson previously had described as a good attorney who "would go out on a limb" to render a helpful opinion for Rubinson's benefit. On the basis of false and misleading information furnished by Chester,*fn9 the attorney gave Rubinson, Chester, Stern and Haskell a 15 page opinion letter which stated, among other things, that the law was unclear with respect to the sale of unregistered securities by persons who had received them as a stock dividend in good faith, and who had no control over the company which paid the dividend. The opinion letter, however, stated clearly and unequivocally that shareholders who controlled the company which paid the dividend could not sell such unregistered securities and that spin-offs which were used merely to evade the registration requirements of the statute were illegal.*fn10
In March 1969, Chester and Stern executed an agreement which provided that National would purchase 200,000 shares of S-H stock for $5,000 and that National then would distribute the S-H stock to its stockholders as a stock dividend. On March 7, 1969, Chester sent to S-H a $5,000 National check in payment for the 200,000 shares. Six days later, however, S-H paid $5,000 to Chester purportedly as an attorney's fee.*fn11
On the same day that Chester sent National's $5,000 check to S-H, Chester announced to National's stockholders a 100% liquidating dividend of the 200,000 shares of S-H owned by National.
By this time, of the total of 400,000 outstanding shares of National, more than seventy-five per cent was held by Chester and his close associates or nominees. Chester had transferred 37,500 shares of his National stock to each of Weitzman, Hochen, Silber and one Andrew McKay, and 34,000 shares to Feiffer; all held the stock as nominees. Chester retained 116,000 shares. Feiffer also had acquired 5,000 shares from Marinus Laboratories which itself owned 24,642 shares. Small amounts of National stock also were owned by Chester's ex-wife, Reynolds' parents and one of Reynolds' business associates.
Accordingly, the distribution which Chester arranged on April 11, 1969 to National's stockholders of a dividend of one share of S-H for every two shares of National which they held resulted in transfers primarily to appellants, their nominees and associates.
In the meantime, Rubinson, Stein and Feiffer had arranged with appellant Levine to have the S-H shares traded publicly through Lockwood & Company, a New York brokerage firm where Levine was the head trader. Levine and Stein agreed that Lockwood would act as market maker for the S-H stock, purchasing it from Stein, Rubinson and Feiffer (who had all the nominee stock) and selling it to investors through other brokerage firms.*fn12 Lockwood was to be paid about $1 per share for its services, with slight adjustments if the stock should sell appreciably above or below $4 per share. Stein assured Levine that he and his associates had control of the S-H market and would not allow the market to become diluted so as to impede efforts to drive up the price. Stein, Rubinson and Feiffer also agreed to help Levine to stimulate buying of S-H stock.
During this same period, Chester instructed Nordin at the Stock Transfer Agency in Florida to issue the nominees' shares of the S-H stock dividend in Lockwood's name. Chester also told Nordin to issue the stock in 100-share certificates so that it could be easily marketed. Chester and Rubinson also instructed Nordin to issue 350,000 additional shares of S-H stock in 1,000-share certificates in Lockwood's name; but the ultimate disposition of these shares is unclear from the record.
During May and June 1969, the S-H stock owned by Rubinson, Stein and Feiffer was sold to Lockwood through three New York Stock Exchange member firms at prices ranging from $3 3/4 to $4 3/8 per share. The market price of S-H rose from $1 per share in mid-April 1969 to $4 3/8 in June 1969. In accordance with their arrangements, Levine would inform Stein, Rubinson or Feiffer when he had found a buyer for the stock. Stein, Rubinson or Feiffer then would sell ...