448 F.2d 815 (5th Cir. 1971), 27777, United States v. Hyde
|Citation:||448 F.2d 815|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Oscar E. HYDE et al., Defendants-Appellants.|
|Case Date:||June 23, 1971|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
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L. Drew Redden, R. Merritt, Rogers, Rogers, Howard, Redden & Mills, Birmingham, Ala., for Oscar E. Hyde.
James M. Fullan, Jr., Beddow, Embry & Beddow, Birmingham, Ala., for Richmond M. Flowers.
Reber F. Boult, Jr., Staff Counsel, The Roger Baldwin Foundation of ACLU, Inc., Charles Morgan, Jr., Director, Atlanta, Ga., for Joe B. Gantt; Melvin L. Wulf, Eleanor Holmes Norton, New York City, of counsel.
Wayman G. Sherrer, U. S. Atty., R. Macey Taylor, Asst. U. S. Atty., Birmingham, Ala., for plaintiff-appellee.
Before RIVES, WISDOM, and CLARK, Circuit Judges.
WISDOM, Circuit Judge:
Oscar E. Hyde, Richmond Flowers, Joe Breck Gantt, and James C. Kelly, were charged with extortion and conspiracy to extort 1 in violation of the Hobbs Act, 18 U.S.C. § 1951. 2 By statutory definition the extortion must affect interstate commerce. Shortly before the trial, Kelly suffered a heart attack and the court granted Kelly's motion for a continuance and a severance. (See Part VI of this opinion.) After a trial lasting six weeks, the jury found Hyde and Flowers guilty on all counts. Each was sentenced to serve a term of eight years on each count, the terms to run concurrently. Hyde was fined $10,000 on each of the first two counts and Flowers was fined $5,000 on each count. Gantt was convicted on the three counts with which he was charged. 3 He was given concurrent sentences of five years on the first two counts, which were suspended; he was sentenced to serve one year and a day on count four.
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Flowers was the Attorney General of Alabama from January 1963 to January 1967; Gantt was his top assistant. Hyde was close to Flowers as a friend, political supporter, and business associate. 4 The
theory of the Government's case is that during the years Flowers was in office the defendants conspired to extort payments from life insurance companies and small loan companies in Alabama under the threat of Flowers's taking certain action (or, in other cases, failing to take certain action) that would have the effect of preventing the companies from doing business in the State.
One of the duties of the Attorney General of Alabama, by statute, is to enforce the laws regulating small loan companies with respect to loans in excess of $300. The Attorney General is also the State Securities Commissioner. In this capacity his duties include the approval of all intrastate public offerings of securities and the regulation of broker-dealers handling intrastate sales of stock issues. Customarily in Alabama a particular Assistant Attorney General handled matters involving the Securities Commission. When Flowers assumed office he relieved Owen Bridges, longstanding Assistant Attorney General-Assistant Securities Commissioner of all duties relating to securities. In his place Flowers appointed Gantt. During the period that Bridges was Assistant Securities Commissioner, he had supervised all applications for the sale of stock and had affixed the signature of the Attorney General to orders permitting the sale of insurance stock. After Bridges's removal, Flowers himself, on Gantt's recommendation, would sign the orders approving the sale of public issues of stock. Flowers, therefore, knew or should be presumed to have known of every application to the State Securities Commission for approval of a public offering of securities.
To put this case in context we sketch some of the facts showing how the defendants operated.
The defendants threatened certain small loan companies that unless pay-offs were made to them they-through Flowers as Attorney General-would put the companies out of business by filing suits in state courts showing that the companies were charging illegally high rates for their loans. The defendants threatened certain life insurance companies that unless payoffs were made to them they-through Flowers as the Securities Commissioner-would not approve intrastate stock issues necessary for the companies to do business and would not license stock salesmen.
In a typical situation Hyde or one of the unindicted conspirators made threats -almost always oral threats-to the victims. In one case, however, Gantt, under the pretext of a routine inspection of Century Discount of Prichard, a small loan company, removed some of the company's records necessary to its business operations; at the same time, Flowers was causing a quo warranto proceeding to be filed against the company on the ground that it was operating contrary to law; later Hyde communicated to the parent company that the suit could be dismissed and the records returned for a price; the company paid the price-$62,000. Typically, the extortion was paid under seemingly legitimate contracts. For the loan companies, the contracts were for credit life insurance, a form of insurance on debtors to assure repayment of loans. For the life insurance companies, the contracts were usually for advisory services in connection with stock sales. All of these contracts were shams: the interested parties understood from the beginning that no insurance or advisory service of real value was being purchased. The companies to which payments were made channeled the funds to the defendants, usually to Hyde.
Hyde was the most visibly active of the defendants: he conveyed most of the threats and arranged the payments. Gantt's position, however, made him an important participant too. For example, he helped arrange the contract by which Trans-Southern obligated itself to pay $90,000 to the defendants. Trans-Southern
was interested in obtaining approval of the sale of stock in Alabama and also in obtaining approval of exempt sales prior to the public offering. Donald Orr, then organizing Trans-Southern, met with Hyde who told him that in order to have certain exemptions approved it would cost him $25,000 and to obtain approval of the public issue of stock it would cost him an amount equal to 5 percent of the amount of the issue. Orr agreed to this, paid the $25,000, and received the exemptions. At the direction of Hyde, checks totaling $20,000 were made payable to a law firm in Montgomery about which Orr knew nothing, a law firm that did no legal service for Orr, and $5,000 to a company that had no connection with Orr and performed no service for him or for his company. After the exemptions had been issued and the approval of the public issue had been obtained, Gantt called Orr and told him to come to Montgomery. The purpose of the meeting as Gantt explained to Orr was to put into writing the agreement Orr had previously made with Hyde. This agreement obligated Trans-Southern to pay $5,000 a month to Security Merchants, a shell corporation, until $90,000 had been paid. Orr paid some $70,000 on the contract but did not pay any more after Flowers left office. Even though under the terms of the contract the sum of $20,000 was still owing, Security Merchants took no action to recover this significant sum. When the details of the contract were being explained to Orr by Gantt, Flowers made a brief appearance and told Orr that the execution of the contract as suggested by Gantt and Moore was necessary "in order to keep Oscar [Hyde] happy".
Flowers attempted, not too successfully, to stay in the background. Essential to all the schemes however was the use of his office as an ever-present sword of Damocles dangling over the heads of his victims. He made a number of statements to victims and to neutral third parties indicating that Hyde spoke for him. For instance, Hyde offered Aspinwall, President of United Security Life Insurance Company, all of the credit life insurance business in Alabama. After Aspinwall questioned his ability to produce such business, Hyde arranged for Aspinwall to meet with Flowers. Flowers confirmed to Aspinwall that Hyde's deal was his deal and that he would padlock any company that refused to give credit life insurance business to United Security Life Insurance. The conspirators set a figure of $75,000 as the price Aspinwall should pay for a "package deal". The package Aspinwall was forced to buy amounted to this: In exchange for $75,000, Aspinwall received advance approval of the public issue of stock of Aspinwall Associates; help in obtaining a national bank charter; no difficulty concerning licensing of salesmen; and no trouble from the Attorney General's office.
The evidence showed that Flowers directly benefitted from some of the schemes. Shortly after one victim had paid $2500 to Pan-American Public Relations and Advertising, a sham Florida public relations company, a check from the company for the same amount was deposited in Flowers's personal bank account. Paramount Life Insurance Company of Alabama, a subsidiary of an Arkansas company, had difficulty securing approval of a public issue of the sale of stock. Gantt notified the company's attorney that approval of the stock registration might take a year. Hyde set a price of $25,000 to secure approval. Paramount paid the money by checks made out to an attorney selected by Hyde. The first pay-off, $10,000, was sent to Hyde's office; the attorney endorsed the check for deposit and then signed a check drawn on this account to the Richmond Flowers Campaign Committee in the amount of $8,000. At Hyde's direction, the company paid two additional amounts of $5,000 each to other persons. He described one of these payments as a "flat lay-off". The company secured approval for its stock issue within 48 hours after agreeing to make the $25,000 payment. The evidence also showed that part of the money extorted from First American
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