The opinion of the court was delivered by: MIRIAM GOLDMAN CEDARBAUM
At the beginning of the trial, Sprecher stipulated that at all times relevant to the Indictment, he controlled Kahila Kadeshia Parkofski ("KKP"), a New York religious corporation that was granted exemption from federal income tax by the Internal Revenue Service ("IRS") pursuant to 26 U.S.C. § 501(c)(3). KKP was a recipient of funds in the Towers transaction and stock in the World wide deal, and was the subject of SEC investigations leading to the perjury and obstruction of justice counts of the Indictment. Sprecher also stipulated that he had more than an attorney-client relationship with NAV-AIR, another corporation involved in one of the obstruction of justice charges, and that witnesses would testify that he has controlled NAV-AIR since 1986. Finally, Sprecher and the Government agreed during the trial that the testimony of Charles Kahn at a pretrial bail hearing held on October 4, 1991 would be received in evidence as if Kahn had so testified at trial.
After a thirteen-day bench trial at which the Government presented fourteen witnesses and many documents and the defendant presented three witnesses and a number of documents, and after evaluating the credibility of all the witnesses and weighing the evidence, I find beyond a reasonable doubt as follows.
Sprecher is an attorney who has represented various individuals and participated himself in a number of transactions involving small issuer stocks. From the mid-1980's, he maintained an office for the practice of law within a suite at 350 Broadway in New York City. Prior to that time, his office suite was located at 11 Park Place. In both locations, Sprecher sublet some of the office space within the suite to other attorneys and business people, some of whom were associated with him in his law practice and some of whom transacted business with him.
Kahila Kadeshia Parkofski ("KKP")
In January 1979, Sprecher incorporated KKP as a New York religious corporation. According to its certificate of incorporation, KKP was established for the purpose of maintaining a place for religious worship in accordance with Orthodox Jewish traditions, that is, as a synagogue. The KKP certificate lists Sprecher as rabbi, presiding officer, and a subscriber and trustee of the organization, and states that the "principle [sic] place of worship" will be at 138-49 77th Avenue, Flushing, New York -- Sprecher's home. (GX 101A.)
At the end of 1980, Sprecher applied to the IRS for tax-exempt status for KKP. The application was approved in January 1981, and KKP was assigned tax identification number ("TIN") 11-2549681.
The address for KKP was changed sometime in the early 1980's to 187 Hooper Street, Brooklyn, New York. James I. Levine, an SEC investigator, testified credibly, however, that when he visited 187 Hooper Street in the spring of 1986 he found it to be a Hasidic elementary school, and did not observe any signs of KKP activity at that address.
KKP bank accounts and monies
KKP has had at least four bank accounts in the United States. Signature cards for two accounts opened at Atlantic Bank in New York in 1978 and 1983 and for a third account opened at Nassau Federal Bank in New York in 1984 identify Sprecher as president and a signatory of KKP. The signature card for a fourth KKP account opened at Citibank in New York in 1985 lists Sprecher as attorney and a signatory.
In addition to the accounts in the United States, KKP maintained a bank account at Bank Leumi in Jerusalem, Israel.
Bank Leumi produced copies of account opening documents for KKP, including two corporate resolution forms that are blank except for the signatures of Benjamin and Victoria Sprecher, as well as monthly account statements for the years 1989 and 1990. The bank also had KKP's certificate of incorporation and a copy of its tax-exempt status letter from the IRS.
The KKP account in Jerusalem was opened in September 1987. The documents submitted to Bank Leumi show Benjamin Sprecher as the director and secretary of KKP, and list 187 Hooper Street in Brooklyn as KKP's address. Benjamin Sprecher and Victoria Sprecher are the only names that appear on any of the documents executed in connection with the opening of the Bank Leumi account. There is no indication in the Bank Leumi papers that KKP had a presence in Israel distinct from the New York corporation, or indeed that KKP was related in any way to an Israeli entity.
Sprecher's purchase and sale of securities in the name of KKP
In addition to its bank accounts, KKP has maintained securities trading accounts at Datek Securities ("Datek"), Network One, Monarch Funding, and Western Capital Securities. It was Sprecher who dealt with the brokers and controlled each of these accounts.
An account card produced by Datek shows that Sprecher opened the trading account for KKP. The card lists KKP as a "citizen" of Israel, but also has the KKP TIN as the social security number for the account. Other records for KKP's Datek account indicate that that account was active from at least December 1982 through November 1985. During that period, checks totaling almost $ 945,000 were issued by Datek to KKP.
Caryl Bernard, who was a credible and forthcoming witness, testified about opening trading accounts for both KKP and Sprecher while she was employed at Network One in Les Vegas in 1989. Network One marketed securities through a cable television show that aired in California. The KKP and Sprecher accounts were established for the purpose of marketing, through at television program, shares of Greater Bancshares, a shell corporation controlled by Sprecher. Bernard testified that after the program aired, Sprecher called her on more than one occasion to inquire about the success of the promotional effort, and that all of her dealings in connection with the KKP account at Network One were with Sprecher.
NAV-AIR Industries Ltd. ("NAV-AIR") is a Utah corporation that was the product of a 1986 merger between MTM Enterprises ("MTM"), a Utah corporation owned by Sprecher, and Navair Manufacturing and Research, Inc. ("Navair Manufacturing"), a New York corporation. Sprecher had purchased MTM (as well as a number of other corporate shells) from Robert Lund.
A schedule of disbursements for the NAV-AIR bank account at Citibank similar to that prepared by the Government for the KKP bank accounts indicates that checks drawn on the account were made out to Sprecher and his wife, to Sprecher employees, to cash, to pay credit card expenses, and to KKP. Like KKP, NAV-AIR maintained a bank account at the Jerusalem branch of Bank Leumi, which was also opened in September 1987. Benjamin and Victoria Sprecher are listed in the account opening documents as the only signatories of this NAV-AIR account; the address given for NAV-AIR is Sprecher's office at 350 Broadway.
NAV-AIR also maintained a securities trading account at Western Capital Securities ("Western Capital"). According to a statement of the NAV-AIR account at Western Capital, World Wide Medical stock was deposited into and sold out of this account in the latter half of 1988.
The Towers Conspiracy -- Counts One and Two
Counts one and two of the Indictment arise out of the sale of shares of the Towers Financial Corporation as part of a settlement entered into between Towers and Louis Foti, a business associate and client of Sprecher's with whom the Government contends Sprecher and his law partner G. Alexander Novak conspired to mislead the IRS. Foti, who cooperated in the Government's investigation of Sprecher, testified at trial as a prosecution witness. Count one charges Sprecher under 18 U.S.C. § 371 with conspiring to defraud the United States and the IRS and with conspiring to violate 18 U.S.C. § 1001 by making a false statement within the jurisdiction of the IRS. Count two charges Sprecher with making a false statement within the jurisdiction of the IRS in violation of 18 U.S.C. §§ 2 and 1001.
The Foti-Towers litigation
In 1986, Foti controlled a corporate shell known as O.G. Consulting, Inc. ("O.G.") through stock held by his nominees. In June of 1986, with Sprecher acting as attorney for O.G., Foti sold most of O.G.'s stock to a private company, Professional Business Brokers, Inc. ("Professional Business Brokers") and the resulting entity became Towers Financial Corporation ("Towers"). Under the terms of the merger, each share of O.G. was converted into a share of Towers. Foti, through his nominees, retained shares of the new corporation.
Sprecher wrote a letter on June 3, 1986 to Professional Business Brokers in connection with the Towers-O.G. merger regarding the Towers shares that remained under Foti's control (the "Foti shares") agreeing that three Foti nominees would sell no more than 1,000 shares of Towers stock per month in the open market for a period of one year, and no more than 750 shares a month thereafter (the "lock-up agreement"). To ensure compliance with the lock-up agreement, Towers took physical possession of these Foti shares.
In late 1988, Foti sued Towers to enforce a settlement agreement signed in 1987 (the "1987 settlement agreement") that had ended a dispute between Foti and Towers concerning the rights to the Foti shares after Foti had surreptitiously sold some of those shares by having a duplicate stock certificate issued to his brother by a stock transfer agent (since Towers had possession of the original certificate). Novak, under Sprecher's direction, commenced the 1988 litigation in state court on behalf of Foti; in 1989, a law firm acting on behalf of Towers initiated a related suit in federal court.
In mid-November 1989, Novak received what he considered to be a very favorable settlement offer from Towers, and proceeded to negotiate a settlement with Towers based on that offer (the "1989 settlement agreement").
During early December 1989, Novak researched the tax consequences of the settlement agreement and concluded that Foti's tax exposure would be significantly less than that contemplated by the settlement agreement. It seemed to Novak that Foti would not face tax liability on the funds that were earmarked for Towers. Novak discussed his research with Sprecher prior to the signing of the 1989 settlement agreement (the "closing"), and Sprecher discussed it with Foti. As Novak testified: "Dr. Sprecher then told me the following of the tax fund whatever it would be, and at that time we were estimating it to be approximately $ 800,000, 50 percent would go to Foti, 25 percent would go to me as a bonus for doing such a smart bangup job in this case, and 25 percent would go to KKP." (Tr. at 1674.) Novak testified that in another conversation, Foti remarked to Novak that Novak was getting a lot of money, and that Sprecher was being quite generous with Novak. There was a clear understanding among Sprecher, Novak, and Foti as to the division of the tax fund.
Novak and Sprecher also agreed prior to the closing that the tax fund would first be deposited into Novak's law firm escrow account. A check payable to KKP would later be drawn on the escrow account, and Sprecher would take that check to Israel where it would be deposited into KKP's Jerusalem bank account.
Shortly before the closing, Novak mentioned to Sprecher that he anticipated that there would be a request at the closing for the tax identification number for the recipient of the tax fund. Sprecher, who was not to be at the meeting, instructed Novak to use the TIN belonging to KKP at the closing and supplied Novak with that number on a piece of paper. Novak carried the piece of paper with him to the closing. He also took along the TIN for his law firm as a "fallback position," that is, in case someone challenged the use of the KKP TIN. (Tr. at 1743.)
At the closing, which took place on December 15, 1989, Mitchell Brader, a Towers employee, telephoned M.H. Meyerson & Co., Inc. ("Meyerson"), a brokerage firm, to tell Meyerson that the contracts had been signed and that the Foti shares could be sold. Brader instructed Meyerson to title the brokerage account according to the terms of the settlement agreement, that is, "Novak, Novak & Sprecher as Attorneys for Louis Foti" (the "NNS account").
Novak was then asked by Brader what the TIN for the account should be and he responded by giving the KKP number. Michael Rosoff, who represented Towers at the closing, testified credibly that, at the meeting, he heard Novak give an employer identification number -- which Rosoff recognized as such because it began with two digits followed by a hyphen -- as the TIN for the transaction, rather than an individual's social security number. Novak did not explicitly state to Brader that the KKP TIN was the TIN for the NNS account. But in responding as he did, it is clear that Novak intended to give and did give the false impression that the KKP TIN was the appropriate TIN for the transaction, in accordance with his agreement and plan with Sprecher.
That Novak gave the KKP TIN at the closing is further evidenced by the fact that that number appears on brokerage documents created in connection with the sale of the Foti shares. These include the account opening form of Meyerson and the forms of Ernst & Co. ("Ernst"), the clearing broker to which Meyerson referred the transaction.
Transport of funds to Israel and their laundering through KKP
Novak eventually received checks amounting to some $ 2 million representing the proceeds of the Towers stock sales, which he deposited into his law firm escrow account. On January 17, Novak drew a check on that account for $ 760,000, representing the tax fund, and gave the check to Sprecher to transport to Israel and to deposit into the KKP account there.
In mid-January, Sprecher carried this check to Israel and deposited it into the KKP account at Bank Leumi in Jerusalem. During this trip, Sprecher also opened two corporate accounts at Bank Leumi, S.J. Ventures and Jakarta Ventures, on behalf of Novak and Foti, respectively, using documents he had prepared with Novak and Foti after the Towers closing and prior to leaving for Israel.
That Sprecher carried the tax fund to Israel, deposited the money in the KKP account, and thereafter withdrew from the KKP account Novak and Foti's shares of the fund and deposited those sums into the S.J. Ventures and Jakarta Ventures accounts is further evidence of the plan that existed among Sprecher, Novak and Foti to divide the tax fund among themselves and to use the KKP TIN to misrepresent to the IRS the identity and tax status of the true beneficiaries of the fund.
Novak's Participation in the conspiracy
Sprecher argues that he could not have conspired with Novak to give a false TIN at the Towers closing because Novak believed that the KKP TIN was an appropriate TIN to supply for the transaction since Sprecher had told him that KKP was entitled to some portion of the proceeds. In support of this argument, Sprecher points to the 1986 lock-up agreement, which provides in part:
These three individuals, pursuant to your concern, have agreed not to sell in the open market more than 1000 shares a month of Towers Financial corporation, par value .0005 for one year from the date of this letter and thereafter no more than 750 shares, up to a total of 50,000 shares.
This agreement in no way prevents the individuals from donating the balance of these shares, or selling such shares in a private transaction.
As you are aware, these individuals have already agreed to sell and/or donate such shares and the new owners of the shares will be purchasing unlegended shares and therefore may sell these shares.
In the event that you desire to make arrangements with such individuals or the charitable institution, I shall be more than happy to provide you the names of such individuals and/or charitable institutions and you may make any arrangements that you desire with them.
The evidence does not support Sprecher's contention, however. KKP is not mentioned by name in the lock-up agreement or either of the settlement agreements, and the vague reference to a charitable institution in the lock-up agreement is of no significance since the lock-up agreement was specifically rendered null and void upon the execution of the 1989 settlement. I believe the testimony of Rosoff, Towers' attorney at the closing, that he had never heard of KKP or a KKP interest in the Foti shares prior to or at the time of the closing. Novak himself did not testify to having a clear understanding of such an arrangement, but rather that it was "kind of a slippery thing." (Tr. at 1723.) In any event, Sprecher and Novak agreed prior to the closing that Foti, Novak, and Sprecher -- for whom KKP was an alter ego -- would be the ultimate beneficiaries of the tax fund.
As a defense witness, Novak testified that he felt "comfortable" in giving the KKP TIN at the closing "because my understanding of -- my understanding was that by giving the -- I had some basis that I thought, based on the [lock-up agreement] that says there was delivery of the stock,
share certificates, from Foti to Sprecher, and Sprecher telling me that he took them for KKP." (Tr. at 1680-81.) The defense made much of Novak's "comfort" at trial, but I do not. Although I found Novak in certain respects to be a forthcoming and credible witness, on this point his demeanor, combined with the hesitating quality of his testimony, showed that he did not believe that KKP was the actual beneficiary of the tax fund or that KKP's TIN was a legitimate TIN to attach to the transaction. I accept as true Novak's more credible testimony about his understanding of the agreement with Sprecher and Foti, which directly contradicted his halting and confused attempt at justification: "The KKP number would go in the black hole and out of that Foti would get his 50 percent, and I would get 25 percent, and [the] IRS would have a difficult time tracking what happened in a foreign country." (Tr. at 1682.)
The World Wide Conspiracy -- Counts Three, Four, Five, Six, and Seven
Counts three through seven of the Indictment relate to a plan conceived by Sprecher and others to merge World Wide Medical Technology ("World Wide"), a shell corporation without significant assets or operations, with a private company so that unregistered shares off world Wide stock could be sold illegally to the public for the benefit of Sprecher and his coconspirators (the "World Wide conspiracy"). Count three charges Sprecher under 18 U.S.C. § 371 with conspiring with others to sell unregistered securities in the market in violation of 15 U.S.C. §§ 77e and 77x and to violate 18 U.S.C. § 1001 by making false statements in a matter within the jurisdiction of the SEC. Counts four through seven charge Sprecher with violating 18 U.S.C. §§ 2 and 1001 by making false statements in four different documents filed with the SEC.
World Wide was incorporated in Nevada in 1982. Thirty-nine million shares of World Wide stock were offered for sale to the public in 1983. The 1983 registration statement lists Sprecher as World Wide's attorney and Sprecher's 11 Park Place address as the corporations's principal executive offices and place of business.
The original officers of World Wide were Herman Freund, Aharon Markovitz, and Abraham Markovitz. Freund, who was listed as World Wide's president, testified that he never attended a World Wide meeting or received physical possession of the one million World Wide shares that the 1983 prospectus records as having been issued to him. Roth routinely sent various World Wide documents by messenger to Freund for his signature; Freund signed them without studying their contents. On at least one occasion, Freund signed a blank sheet of writing paper and sent it back to Roth. The Markovitzes, too, were figurehead officers and Roth nominees. In April 1987, Roth replaced Aharon Markovitz as the third director of World Wide.
In early 1988, Foti and a friend of Foti's, John J. "Jay" Hastings III, were seeking to effect a merger between a corporate shell and a private company. They approached Sprecher, who recommended World Wide as a "very good" shell since few of its shares were in the hands of the public, and its SEC filings were up to date. (Tr. at 395.) The three agreed that Foti and Hastings would pay, through Sprecher, a total of $ 20,000 to Roth for World Wide, and that Sprecher, Foti, and Hastings would each thereby acquire a one-third interest in the shell.
Since Roth's World Wide stock was unregistered, in order to sell it in the market at a profit as soon as the contemplated merger went through, the stock had to be exempt from the registration requirements of the securities Act of 1933, 15 U.S.C. §§ 77a-77aa (the "1933 Act"). Roth had held the stock for more than three years, which rendered it potentially eligible to be "freed up," that is, declared exempt from registration, if the conditions described in Rule 144(k) promulgated under the 1933 Act were met. As Sprecher, Foti, and Hastings understood it, the Rule 144(k) exemption would appear to be satisfied if at least three months before the sale of Roth's shares to the public, World Wide corporate documents were to show that Roth was no longer a control person.
Since they were eager to consummate a merger, Sprecher, Foti, and Hastings decided to meet at Sprecher's office on March 30, 1988 (the "March 30 meeting") to "elect" new officers and directors of World Wide retroactively, and to create and backdate false minutes of a board of directors meeting. Foti testified credibly that both Sprecher and Hastings remarked to him prior to the March 30 meeting that the change in the directorship of World Wide "would have to be three months earlier in order so the stock could be freed up." (Tr. at 400.) Sprecher, Foti, and Hastings thus shared an understanding that the creation of false backdated minutes was an essential step in ostensibly validating the sale to the public of unregistered insider stock of World Wide.
The March 30 meeting in Sprecher's office was recorded on a NAGRA tape (the "March 30 tape") made through the use of a body wire worn by Foti. The tape is compelling evidence of the existence off a conspiracy among Sprecher, Foti, and Hastings to sell unregistered World Wide stock in the market through the falsification of corporate records. On the March 30 tape, the three engage in a discussion of various merger possibilities. Sprecher dominates this conversation, at times alluding to his superior expertise in such matters. In the course of the discussion, Sprecher expresses his disapproval of a proposed transaction between World Wide and Mark Engler, an associate of Hastings. He also brags that he conceived of the 1984 1,000-for-one reverse stock split which resulted in so few World Wide shares in the hands of the public.
Anticipating that some deal would go through shortly, however, Sprecher explains to Foti and Hastings:
(GX 330T at 36-37.) Hastings first mentions "Vince"; laughter follows, and "Vince" is rejected. Hastings next suggests as the new board of directors and officers of World Wide, himself, his mother, Kathleen Gephart, and his sister, Holly Reed.
Later in the meeting, Sprecher requests $ 20,000 from Hastings to pay Roth for the World Wide shell. Rather than have Hastings write Sprecher a check -- since Hastings is connected with the transaction -- it is decided that Hastings' mother will write the check, and that "Young Jimmy" Bullard will therefore be used in place of Hastings' mother as the third World Wide officer.
Next, Sprecher, Foti and Hastings plan the division of the shares held by Roth. It is decided that Roth will retain some of these shares, and that Sprecher, Foti, and Hastings will receive 34%, 33%, and 33%, respectively, of the remaining shares. Sprecher explains that he is entitled to an extra one percent because he is "more instrumental in the thing." (GX 330T at 69.)
Finally, during the last Part of the March 30 tape, Sprecher dictates the minutes for a special World Wide board of directors meeting to his secretary, Anna Tokarski. Sprecher instructs "Anna" to date the minutes December 15, 1987.
The December 15 minutes and resignations
The minutes dictated by Sprecher at the March 30 meeting (the "December 15 minutes") purport to record a meeting held on December 15, 1987 between 5:00 and 6:50 p.m. at which all World Wide officers and directors were present. According to the minutes, at this meeting, Roth and the other World Wide officers and directors unanimously "elected" Hastings, Reed, and Bullard as their successors after Freund had elicited "a brief background" of the three individuals who had agreed to take over the leadership of World Wide. (GX 304.)
Despite their ostensible participation in this "meeting," Roth, Freund, and Abraham Markovitz somewhat incongruously executed resignations from their official positions that purported to be effective as of 2:00 p.m. on that same day.
Also in evidence are minutes purporting to record a special World Wide board of directors meeting that took place on December 16, 1987 (the "December 16 minutes"). There is no NAGRA recording of the creation of the December 16 minutes. The December 16 minutes, however, which contain certain typographical errors identical to those in the December 15 minutes, are clearly based upon the December 15 minutes.
In the December 16 minutes, which are signed by Reed as secretary of World Wide, Hastings is supposedly awarded 46,377,000 newly issued shares of World Wide as consideration for his services as president. Beyond a reasonable doubt, the December 16 minutes were created after the December 15 minutes, that is, on or after March 30, 1988, since they purport to record a meeting of the new World Wide officers who were "elected" at the March 30 meeting in sprecher's office.
Sham nature of the minutes and resignations
Sprecher argues that although the December 15 and 16 minutes may not be accurate in every particular, they do reflect actual events that occurred in December 1987 but which Sprecher did not prepare minutes of until a few months later.
It was further established through the testimony of Hastings that Reed and Bullard, who were "elected" as officers and directors in the December 15 minutes, never actually performed these functions for World Wide. Bullard testified credibly that he was unaware of his election to the post of vice-president and never authorized anyone to say that he had attended a World Wide board of directors meeting on December 16, 1987.
With regard to the resignations, Freund did testify that he specifically remembered resigning from the presidency of World Wide before Hanukkah, but I do not believe this portion of Freund's testimony. This immunized witness' demeanor and generally guarded and reluctant responses to questions, as well as his inability to remember dates or places, were in marked contrast to his eager and specific recollection of this one particular event. I find that the December 15, 1987 dates appearing in the one-sentence resignations signed by Freund, Roth, and Markovitz were, like the minutes, deliberately backdated. There would have been no basis for Freund and the others to have tendered their resignations in the absence of the December 15 "meeting," and that event and the minutes recording it were fabricated on March 30, 1988.
In further support of his position, Sprecher offered in evidence several excerpts of telephone conversations taped by Foti. These tapes were received for the limited purpose of impeaching Foti's credibility. Some of these are conversations between Foti and Sprecher; the others are conversations between Foti and Hastings. Each occurred after Foti agreed to cooperate with the Government in February 1988, although their precise dates were not established.
In the excerpts of the telephone conversations with Sprecher, Foti presses Sprecher on a number of occasions as to when the World Wide change of control took place, and Sprecher insists that the transaction was finalized in December 1987. Foti's conversations with Hastings are along similar lines, except that Hastings, while urging as "a matter of record" that a meeting took place in December, (DX T-27-6A), at times alludes to the fact that the minutes were drafted later. Hastings testified convincingly that there was no serious discussion about a change of control for World Wide until at least February 1988.
These conversations were not offered for the truth of their contents, but only for the purpose of challenging Foti's credibility. But even if the contents of these telephone conversations are considered for their truth, I do not find these excerpts to be at odds with the purposeful backdating of the minutes. Instead I find that Sprecher's statements were an attempt to preserve the fiction that he and his coconspirators had created and to persuade Foti that he should stick to the story as it appeared in the falsified documents.
Finally, Sprecher points to a canceled check dated January 19, 1988 in the amount of $ 28.49 written on the World Wide account by Roth which carries the notation "for closing this account." (DX X.) Apparently, defendant's argument is that this check somehow supports his contention that Roth gave up control of World Wide in December of 1987. There was no other evidence to shed light on the significance of this check, which could have been written for any number of reasons, and in any event postdates the supposed December change of control. Defendant's contention about the check is pure speculation.
In sum, I find beyond a reasonable doubt that both the December 15 and December 16 "meetings" and minutes are fabrications that were created to facilitate the conspirators' scheme of selling unregistered World Wide stock illegally in the market.
April 21 letter and accompanying filings
The December 16 Form 8-K enclosed with the April 21 letter purports to report a change in the control of World Wide resulting from the issuance of 43,377,000 shares of stock to Hastings at a December 16, 1987 board of directors meeting and as reflected in the December 15 minutes, which are incorporated into the 8-K. The Form 8-K includes a signature page dated December 20, 1987 and signed by Reed and Hastings. I find, for the same reasons outlined above with respect to the December 15 and 16 minutes, that the December 16 Form 8-K contains false statements and that the signatures on it are falsely backdated.
I further find that Sprecher caused the April 21 letter, the December 16 Form 8-K, and the December 15 minutes to be sent to the SEC. (There is no evidence that the December 16 minutes were sent to the SEC.) Hastings testified that Sprecher prepared and either mailed or delivered all of World Wide's SEC filings. Furthermore, Thomas Doonan, an investigator for the United States Attorney's Office who executed the warrant for Sprecher's arrest, testified in a highly credible fashion about statements volunteered by Sprecher in which Sprecher admitted creating and filing an 8-K and 10-Q for World Wide. At the time, Sprecher had not been told that his meetings with Foti and Hastings had been recorded, and he was responding aloud to a copy of the Indictment he had in his hand. According to Doonan, Sprecher, in the course of this monologue, said that "he was only acting as a lawyer when he filed the 8-K and 10-Q, in putting this information on the 8-K and 10-Q and submitting it to the SEC." (Tr. at 1235.)
During the defense case, it was stipulated that defendant's handwriting expert would testify, if called as a witness, that the April 21 letter was not actually signed by Sprecher. In addition, Sprecher argues that the typist's initials "mm" appearing on the bottom left corner of the letter could not be accurate because they refer to Marlene Mejias, Sprecher's office manager at the time, who testified that she never used the word processor and rarely typed anything herself. In an incredible feat of memory, Mejias also testified that she recalled seeing Hastings and Foti at a word processor together at 6 o'clock one evening "sometime in '88." (Tr. at 1626.) From this, Sprecher speculates that Foti and Hastings forged the April 21 letter and sent it and the accompanying documents to the SEC.
A notation on a check drawn on Sprecher's attorney-at-law account to Lorjon Personnel, Ltd., however, shows that in May 1988, Sprecher paid a $ 1,000 fee to that agency in connection with an officer worker other than Mejias who had the initials "MM." Furthermore, Edward Grushko testified credibly as a rebuttal witness that Sprecher often had other people in the office sign his routine correspondence so letters could be sent out at times when he was not available to sign them. Finally, the explanation given in the April 21 letter for the lateness of the enclosed filings -- that they had previously been sent but the label had gotten torn -- is strikingly similar to the content of another letter about the same purported meetings of the previous December that was sent by Sprecher to World Wide's stock transfer agent, Jersey Transfer and Trust Co. ("Jersey Transfer"). In this Jersey Transfer letter, which is discussed further below, Sprecher requests that 46,377,000 shares of stock be issued to Hastings in accordance with the December 16 minutes that are enclosed, explaining that "it should be noted that I am at fault in the delay in sending you this material. Due to an inadvertence on [my] part, I believed that a copy was sent to you." (GX 312A.) The similarity of the language and purpose of the two letters supports the other evidence that they were both composed by the same person.
All of the credible evidence establishes beyond a reasonable doubt that the defendant was the author of the April 21 letter and the accompanying SEC filings. Although he may not have penned the signature himself, it was Sprecher who caused the letter and its enclosures to be sent to the SEC.
May 6, May 31, and other meetings
From February through May 1988, Sprecher met with Foti and Hastings on a regular basis to plan the World Wide merger. Sprecher was also in communication with Roth, as evidenced by the fact that he represented Roth in the negotiations with Foti and Hastings, and had Roth sign the backdated resignation that related to the December 15 minutes. Hastings testified that he saw Roth in Sprecher's office sometime during the period in question.
Two of the meetings that foti and Hastings attended at Sprecher's office were recorded on a NAGRA tape. During the first of these, which took place on May 6, 1988, Sprecher, Foti, and Hastings discuss the merits of a deal with Harold House, the holder of options on licenses for Russian medical technology. House, who had been solicited by Hastings, was associated with a company called Med-Trade International ("Med-Trade"). On the May 6 tape, the three conspirators plan what the division of World Wide stock would be among themselves, Roth, House, and others should the Med-Trade deal go through. Hastings met with House at La Guardia airport in the same month to discuss the medical technologies and financial backing for the proposed merger.
The next recorded meeting took place on May 31, 1988. During a discussion with Foti before Hastings arrives, Sprecher agrees to put the shares of World Wide that Foti is to receive as a result of the transaction temporarily in the name of KKP, and explains how Foti can get them back in order to sell them. After Hastings arrives, Sprecher places a call on a speaker phone to Ray Griffen of Texas to discuss an alternative to the proposed House deal.
In addition to the April 21 letter, December 15 minutes, and December 16 Form 8-K, Sprecher prepared other World Wide documents that contained false statements and caused them to be filed with the SEC. These included an SEC Form 10-Q for the quarter ended February 29, 1988 (the "February 29 10-Q"), received by the SEC on June 1, 1988, and a Form 10-Q for the quarter ended May 31, 1988 (the ...