Appeal from judgments of convictions entered after a six-week trial before the Honorable Edward Weinfeld, United States District Judge, and a jury, for conspiring to violate the federal securities anti-fraud and mail fraud provisions (18 U.S.C. § 371), and with 41 substantive offenses, including the sale of unregistered securities (15 U.S.C. § 77e), securities and mail fraud (15 U.S.C. §§ 77q (a) and 77j(b) and 18 U.S.C. § 1341), filing a false bank loan application (18 U.S.C. § 1014), perjury (18 U.S.C. § 1623) and false statements before the Securities and Exchange Commission (18 U.S.C. § 1001).
Waterman and Meskill, Circuit Judges, and Bartels, District Judge.*fn*
James E. Corr, III ("Corr") and Roger Drayer ("Drayer") appeal from judgments of convictions entered on March 5, 1976, in the United States District Court for the Southern District of New York, after a six-week trial before the Honorable Edward Weinfeld, United States District Judge, and a jury.
The indictments charged Corr, Drayer and six other defendants, R. Bruce Buschbaum, Barry Drayer, Barry Chajet, Allen Kern, William Murphy and Richard Sobel, with conspiring to violate the federal securities anti-fraud and mail fraud provisions (18 U.S.C. § 371), and with 41 substantive offenses, including the sale of unregistered securities (15 U.S.C. § 77e), securities and mail fraud (15 U.S.C. §§ 77q(a) and 78j(b) and 18 U.S.C. § 1341), filing a false bank loan application (18 U.S.C. § 1014), perjury (18 U.S.C. § 1623) and false statements before the Securities and Exchange Commission (18 U.S.C. § 1001).*fn1
By the time of trial Buschbaum, Kern, Chajet and Sobel pled guilty to one of the offenses charged in the indictment and Murphy pled guilty to a superseding information charging him with fraud in connection with the purchase and sale of securities. Each of these five defendants testified for the Government at the trial which commenced on December 9, 1975. On January 15, 1976, the jury returned guilty verdicts with respect to Corr and Drayer on all counts submitted and a mistrial was granted as to Barry Drayer on January 16, 1976, when the jury was unable to reach a verdict.*fn2 On March 5, 1976, Judge Weinfeld imposed on the defendants who pled guilty sentences of imprisonment for terms varying from three to six months with the exception of Murphy for whom the execution of sentence was suspended. On the same day Corr was sentenced to two and one-half years imprisonment and fined $10,000*fn3 and Drayer was sentenced to two years imprisonment pursuant to 18 U.S.C. § 3651, to serve four months with execution of the remainder suspended. We affirm.
Before dealing with the claims on appeal it is necessary to engage in a tedious review of the relevant evidence in order to indicate the scheme, pattern and the roles played by Corr as the principal actor and the supporting cast of various defendants, including Drayer, in the scenario which resulted in the loss of millions of dollars to the investing public and brokerage houses.
Viewed in the most favorable light to the Government, the evidence reveals a conspiracy by Corr and others to manipulate the sale and purchase of the stock of Jerome Mackey's Judo, Inc. ("Judo") supported by substantive offenses covering the period from June 1, 1971 to approximately June, 1973. During this period Judo stock was both purchased and sold through various brokerage firms, primarily at Corr's direction or with his knowledge and assistance, and in various accounts at brokerage firms without the authority of those in whose names the accounts were opened. To accomplish their purposes and to screen their activities, techniques of placing "wooden tickets"*fn4 and "parking"*fn5 securities were employed by some of the defendants. In the course of the operation Corr filed a false application for a loan from the Underwriters Bank & Trust Co., New York, and testified falsely before the Securities and Exchange Commission ("SEC"). At all relevant times Mackey appeared to be the chief operating officer of Judo and owned a majority of Judo's outstanding shares of stock. The following is an approximate chronology of the subsequent events.
Public Offering and Marketing
The Judo corporation was founded by Jerome Mackey in 1958 for the purpose of giving instructions in the martial arts. Corr first met Mackey in August, 1970. Later, on January 9, 1971, Corr entered into an employment contract with Judo. Pursuant to this contract Corr was employed by Judo at a salary of $500 per week and agreed to assist Judo in its franchise program, to secure and organize Judo's schools in Florida and to work on acquisitions for the company. On August 16, 1971, a registration statement of Judo became effective authorizing a public offering of up to 165,000 shares of Judo stock which was traded over-the-counter. By November 21, 1971, the approximate expiration date of the registration statement, Judo had sold 104,700 shares to the public. On November 23, 1971, Corr and Judo entered into a second contract wherein Corr agreed to assist Judo in mergers, acquisitions, public relations and financing. In order to insure the success of this public offering Corr persuaded Dorsey Buttram and James Diamond, two Oklahoma businessmen, to purchase a substantial amount of Judo stock, guaranteeing them against any loss from the purchases.
In January, 1972, Corr contacted R. Bruce Buschbaum, who was employed as a trader with the brokerage firm of Sterling, Grace & Co. ("Sterling Grace"), for the purpose of retailing Judo's securities to the customers of Sterling Grace and of making a market in Judo. Buschbaum undertook the task and continually kept Corr informed of who was buying and selling Judo stock. In February, 1972, Corr met Richard Sobel and Daniel Salant, registered representatives for the firm of CBWL-Hayden, Stone, Inc. ("Hayden Stone"), and successfully induced them to solicit their customers to purchase Judo stock.
In April or May, 1972, Corr met Barry Chajet, a trader at Morgan, Kennedy & Co., Inc. ("Morgan Kennedy"), who at the time was "shorting" Judo. He convinced Chajet to stop "shorting" Judo by explaining to him that he, Corr, was involved with Judo, that the company was doing well and that Corr had the "box in the stock"*fn6 and further that 60% or 70% of the outstanding shares were in the hands of either himself, friends, relatives or people he felt he controlled. This was demonstrated by Corr's showing Chajet a list of all Judo stockholders. Shortly thereafter Chajet covered his "short" position and went "long" in the stock by soliciting his customers to purchase Judo stock. In June, 1972, Corr purchased from Mackey 125,000 restricted shares of Judo stock at $1.25 per share, which agreement was backdated to February, 1972. It was also in June, 1972, that Corr was introduced to William Murphy, a trader at Piper, Jaffrey & Hopwood, Inc. ("Piper Jaffrey"), by Buschbaum. Thereafter Corr successfully persuaded Murphy to solicit buyers for Judo stock.
Throughout 1972 Corr kept in constant contact with each of the above brokers who were encouraged to solicit purchases of Judo stock and was informed by each of them as to their positions in the stock and the names of all buyers and sellers. During this time Corr frequently "directed orders"*fn7 to and from each of these brokers and advised them when and where to buy and sell Judo stock among the marketmakers and the retail houses. In addition, at various times Corr directed both Buschbaum and Chajet, who were the two principal marketmakers in Judo stock, to maintain the high bid on Judo stock. In order to keep shares from being sold on the market, Corr directed and arranged for the "parking" of Judo securities with various brokers, one of whom was Buschbaum. For example, when Buschbaum exceeded the dollar limit of Judo stock placed upon him by his superiors at Sterling Grace he arranged to "park" thousands of shares of Judo stock with Murphy at Piper Jaffrey and thereby kept those shares out of the market supply. Judo securities were thus "parked" by Murphy on four separate occasions.
At the same time that Corr was directing these transactions he was buying and selling Judo stock, unbeknown to the marketmakers, for his own benefit through his own accounts and accounts opened in the names of others. Such transactions were effectuated when Corr opened accounts in the names of Kathleen Newberry, his former wife; Joseph Sonberg, his half-brother; and Raymond Corr, his natural brother, after he had induced them to sign brokerage account cards for that purpose. Throughout the year Corr traded Judo securities through these accounts without the knowledge or consent of any of the above persons in whose names the accounts were opened.
In approximately May, 1972, when Corr learned that Sobel and Salant had begun selling Judo stock for their customers he persuaded them to cease such selling and instead induced them to solicit their customers to purchase Judo stock by offering each of them an option to purchase 500 shares of Judo at $5.00 per share. The offer was ...