International Controls Corp. v. Vesco
| Decision Date | 24 January 1979 |
| Docket Number | 323,Nos. 159,D,s. 159 |
| Citation | 593 F.2d 166 |
| Parties | INTERNATIONAL CONTROLS CORP., Plaintiff-Appellee, v. Robert L. VESCO, Defendant-Appellant. INTERNATIONAL CONTROLS CORP., Plaintiff-Appellee, v. Robert L. VESCO, Harry L. Sears, Frank G. Beatty, Norman LeBlanc, Stanley Graze, Milton F. Meissner, Ulrich J. Strickler, Richard E. Clay, Wilbert J. Snipes, Frederic J. Weymar, Gilbert R. J. Straub, C. Henry Buhl, III, Ralph P. Dodd, Alwyn Eisenhauer, George Phillipe, Joel Grady, Shirley Bailey, Vesco & Co., Inc., IOS Ltd., Columbus Trust Company, Limited, Bahamas Commonwealth Bank, International Bancorp, Kilmorey Investments Ltd., Value Capital Ltd., Global Holdings Ltd., Global Financial Ltd., Butlers Bank, Ltd. (Now Known as Who Holdings Ltd.), Allan J. Butler, Bank Cantrade Ltd., Fairfield Aviation Corporation, Fairfield General Corporation, Skyways Leasing Corporation and Marine Midland Bank, New York, Defendants, Robert L. Vesco, Defendant-Appellant. ockets 78-7279, 78-7092. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert D. Foglia, New York City, for defendant-appellant.
Milton S. Gould, New York City (Daniel L. Carroll, Thomas J. Johnson and Shea, Gould, Climenko & Casey, New York City, on brief), for plaintiff-appellee.
Before MEDINA and MANSFIELD, Circuit Judges, and WARD, District Judge. *
We have before us two consolidated appeals by Robert L. Vesco. The first is from an order of Judge Charles E. Stewart, Jr., dated February 1, 1978, denying a motion pursuant to F.R.C.P. 60(b)(4) by Vesco, on certain papers and "on all the proceedings heretofore had herein" to vacate a default judgment entered against him on October 5, 1973. The second is from another order of Judge Stewart entered on May 3, 1978, denying a motion by Vesco in an entirely different action, also made "upon all of the proceedings heretofore had herein," to vacate a default judgment entered on September 11, 1974. We shall proceed with the first appeal, leaving the second until the end of this opinion. Judge Stewart's opinions in the two cases are not officially reported.
After probing and analyzing a considerable number of side issues, digressions and a morass of procedural detail raised in the briefs and on the oral argument of the appeals, we have concluded to affirm, as dispositive of the two appeals, Judge Stewart's findings that: (1) the service of the summons and complaint on Vesco on July 30, 1973 at his Brace Ridge Road residence in Nassau, Bahamas, gave the Court In personam jurisdiction over Vesco (73 Civ. 2518); and (2) the service of the summons and complaint on Vesco on April 17, 1974 in the separate action in the Southern District of New York (74 Civ. 1588) at the same Brace Ridge Road residence in Nassau, Bahamas, gave the Court In personam jurisdiction over Vesco. With regard to the attempted service of the amended complaint on October 24, 1973, referred to in Vesco's brief on the first of the two appeals, we also approve Judge Stewart's finding that this service did not give the Court In personam jurisdiction over Vesco. We do not reach Judge Stewart's ruling that Vesco's motion to vacate the default judgment of October 5, 1973 was not timely made.
As this Vesco controversy will probably reach this Court again from time to time for some years to come, we think it may spare other judges the time and effort we have spent studying the briefs and the twelve large manila folders in the Clerk's Office containing the "proceedings heretofore had herein," and constituting the original record in Appeal 78-7092, if we make a preliminary statement describing the salient features of the prior proceedings and especially the prior opinions filed by various panels of this Court. This we think is especially important as it will serve to place the matters dispositive of these appeals in their proper relation to what has already been decided and what has not already been decided.
Prior History of the Case.
For some years prior to 1972 the SEC took note of the conduct of Vesco and his manipulation of corporate entities, spin-offs, the shuffling about of individual officers and directors and the use of foreign banks as depositaries of the alleged hundreds of millions of dollars he is said to have misappropriated from investors in violation of the federal securities laws. The result of the ensuing investigation was that on November 27, 1972 the Commission filed a suit against Vesco, 20 other individuals and 21 corporate entities in which the complaint, based upon a vast array of alleged wrongdoing by Vesco and his associates, prayed for extensive legal and equitable relief. This action in the District Court for the Southern District of New York is entitled Securities and Exchange Commission v. Robert L. Vesco, No. 72 Civ. 5001. 1 The complaint in this action alleged "a scheme of extraordinary magnitude, deviousness and ingenuity in violation of the anti-fraud provisions of the Securities and Exchange Act of 1934 * * * masterminded by Vesco." One of the defendants was International Controls Corp., alleged to be a principal vehicle used by Vesco to implement various features of the scheme to defraud investors. On March 16, 1973 ICC consented to the entry of final judgment against it in the SEC action, and Judge Stewart, in lieu of the appointment of a receiver sought by the SEC, appointed a Special Counsel and a new interim board of directors to represent ICC.
David M. Butowsky, the Special Counsel appointed by the Court as authorized by the terms of the consent judgment, on June 7, 1973 filed in the District Court for the Southern District of New York the complaint in the action in which we have the first of the two consolidated appeals (78-7092). In this action plaintiff ICC sued 32 individual and corporate defendants, 22 of whom were defendants in the already pending SEC action (72 Civ. 5001) and 10 of whom were not. These new defendants included Vesco & Co., Inc. and various corporations connected in one way or another with a Boeing 707 aircraft purchased for $1,375,000 and refurbished by an expenditure of $600,000 to $700,000 "for the personal comforts, conveniences and zest for living" of Vesco and with the yacht Patricia III, located in Miami, Florida, to be fitted up at great expense to suit Vesco's "Sybaritic tastes." On June 20, 1973, Vesco, Patricia Vesco, his wife, and Vesco's family boarded the yacht, and Vesco and his family remained its sole users until shortly before it was put into Miami for repairs.
The first phase of this case (International Controls Corp. v. Vesco, 73 Civ. 2518 (S.D.N.Y.)) 2 to reach this Court was an appeal from an order of Judge Stewart granting a preliminary injunction, among other things enjoining the control or disposition of certain assets, including the Boeing 707 and the yacht Patricia III. This is Appeal No. 1. The opinion affirming Judge Stewart's injunction, with a certain modification, was written by Chief Judge Kaufman, for a panel consisting of himself, Judge Mansfield and Judge Mulligan, the latter of whom dissented in part. This Appeal No. 1 was argued on December 10, 1973, decided on January 15, 1974, and it is reported as International Controls Corp. v. Vesco, 490 F.2d 1334 (2d Cir.), Cert. denied, 417 U.S. 932, 94 S.Ct. 2644, 41 L.Ed.2d 236 (1974).
The part of that opinion pertinent to these two present consolidated appeals states that Vesco was not one of the appellants but Vesco & Co., Inc. was one of the appellants. The default judgment of October 5, 1973 is mentioned (490 F.2d at page 1350); also that Vesco & Co., Inc. was incorporated by Vesco on July 12, 1972 as an estate planning device, all the voting common stock of which is owned by Patricia Vesco as custodian for Vesco's children, and the officers are Mrs. Vesco and Shirley Bailey, Vesco's personal secretary (490 F.2d at page 1349). Judge Stewart, in the findings upon which the preliminary injunction was based, stated that "Vesco & Co. is a corporate alter ego for defendant Robert Vesco and was created by him during and after the perpetration of the fraud charged in the complaint." This is the finding referred to in Chief Judge Kaufman's opinion (490 F.2d at page 1350). Because of the relevance of this alter ego finding to the disposition of the two appeals now before us, however, we think it proper to state that, at a later date and on August 22, 1975, in connection with a different application in this same action, Judge Stewart repeated this finding. We shall find that an appeal was taken to this Court and the upshot was that the finding was not reversed or modified and that it stands now as the law of this case for all purposes. We shall discuss this particular matter later in some detail.
For our present purposes this opinion in Appeal No. 1 by Chief Judge Kaufman, made as above stated on the appeal from the order of Judge Stewart granting the preliminary injunction, also refers to the fact that Vesco had already absented himself from the territorial limits of the United States, had refused to return and was "safely ensconced in Nassau, the Bahamian capital" (490 F.2d at page 1338). The order to show cause, on which this motion for the preliminary injunction was made, is dated June 8, 1973.
After the affirmance of the order of Judge Stewart granting the preliminary injunction Special Counsel for plaintiff proceeded with the utmost diligence to try to reach assets to satisfy the default judgment, which did not provide for the payment of any specific sum as the damages had not yet been proved. This led to extended and time-consuming hearings which resulted in a finding of "specified damages of $2,433,466.72, but left open the possibility that ICC might be able to prove further damages in subsequent proceedings." A second default judgment in this amount was entered against Vesco on July 16, 1974. All this time, quite obviously aware of the...
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