The opinion of the court was delivered by: MARSH
The defendant, Albert N. Dukow, and three codefendants were charged on March 7, 1968, in an indictment with four counts of violating 15 U.S.C. § 77q(a), securities fraud; four counts of violating 18 U.S.C. § 1341, mail fraud; 18 U.S.C. § 2(a), aiding and abetting; and one count of violating 18 U.S.C. § 371, conspiracy to commit the substantive offenses of securities fraud, mail fraud and wire fraud (18 U.S.C. § 1343). His codefendants were Thomas S. Crow and Saul Brourman, the executive officers of Crow, Brourman and Chatkin (CBC), an over the counter brokerage firm, and William J. Abbott, the sales manager of that firm.
After a protracted trial, the jury acquitted Abbott of all counts; acquitted the other defendants of conspiracy; found Dukow guilty of the eight fraud counts; and found Crow and Brourman guilty of Counts 3 and 4 (securities fraud),
and not guilty as to the other fraud counts.
Dukow has moved for judgment of acquittal and, in the alternative, for a new trial.
It is the opinion of the court that both motions should be denied.
The accusations stemmed from certain sales made by CBC over the counter of common stock of Champion Industries, Inc. At the trial it was proved that during 1962, Dukow acquired Champion Industries, Inc. (Champion), which was essentially a paper corporation with no substantial assets. In July, 1962, Champion purchased the Forsberg Manufacturing Company (Forsberg) for a price of $500,000; the down payment was $100,000 raised by a mortgage on Forsberg's equipment, admittedly a bootstrap operation, and promissory notes given for the remainder. The Forsberg stock was placed in escrow to secure payment. Default was declared by Forsberg in October, 1962; breach of warranties by Forsberg was claimed by Dukow for Champion; renegotiation of the purchase price was proposed and considered but was not consummated, and Forsberg repossessed the plant on February 19, 1963.
Dukow was the principal link between Champion and CBC; he met with Abbott and Crow in October, 1962; he addressed CBC's salesmen in Pittsburgh on January 24, 1963 upon the merits and prospects of Champion; and he presented to them a brochure. Undoubtedly, he was then aware of Champion's poor financial status, nebulous prospects for acquiring subsidiaries, the problems at the Forsberg plant, including the breach of warranties, and the lurking danger of its being repossessed for non-payment, none of which did he reveal to the CBC salesmen. Subsequently, he sent reports and statements about Champion's financial condition, and engaged in telephone communications with the officers of CBC. Dukow was CBC's principal source of information concerning Champion, its stock and Forsberg.
There was evidence direct and circumstantial from which reasonable inferences could be drawn that Dukow engaged with the officers and employees of CBC in a scheme or artifice to defraud investors by the sale of Champion stock and the use of the mails in furtherance thereof; and that this scheme began in 1962 and continued until at least the end of March, 1963. Dukow was the major stockholder and became president of Champion and remained such until April, 1963. CBC participated in making the market for Champion stock, beginning to retail it in January, 1963, and continuing to sell it after March 7, 1963.
Dukow did not make any stock sales personally. All were made by the brokerage personnel of CBC.
There was proof that the mails were used by CBC in sending confirmation of sales of Champion stock to purchasers on March 15, 1963, on May 2, 1963, and sending a stock certificate in June, 1963, in furtherance of the scheme to defraud.
Motion for Judgment of Acquittal
The reasons stated in support of this ...