734 F.2d 1023 (5th Cir. 1984), 83-1655, United States v. DeVeau
|Citation:||734 F.2d 1023|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Frederix P. DEVEAU and Irving M. Drobny, Defendants-Appellants.|
|Case Date:||May 24, 1984|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Joseph A. Turner (court-appointed), Austin, Tex., for DeVeau.
Roy Q. Minton, Austin, Tex., for Drobny.
Edward C. Prado, U.S. Atty., San Antonio, Tex., Breckinridge L. Willcox, Washington, D.C., for plaintiff-appellee.
Appeal from the United States District Court for the Western District of Texas.
Before RANDALL, TATE and WILLIAMS, Circuit Judges.
Defendants-appellants Frederix DeVeau and Irving Drobny appeal their convictions for securities fraud, mail fraud, and submitting false statements to the Securities and Exchange Commission ("SEC"). Because none of the issues they raise requires reversal, we affirm.
The facts essential to deciding this appeal are as follows: In 1978, DeVeau, known then as Fred Pro, entered the Department of Justice's Witness Protection Program, after serving thirty-eight months in prison for racketeering activities. He was given a new identity and was relocated in San Antonio, Texas.
In February, 1981, DeVeau acquired control of the Electric Car Company, located in Huntington Beach, California, by promising to pay the sellers with whatever profits he could generate from the company. He relocated the business in San Antonio, and operated it under the name of the Marquess Car Company. The operation was never viable and, by late 1981, it had virtually ceased operations.
In early 1982, DeVeau was introduced to the management of Jet Industries, Inc. and he began efforts to purchase the company. Jet was a publicly-held corporation located in Austin, Texas, that was engaged in the business of manufacturing electric-powered vehicles. Jet was in desperate financial trouble, despite the fact that it was cash rich. Jet had been loaned more than $2 million by the United States Department of Energy, but was losing money precipitously and was actively seeking new management. After he acquired Jet, DeVeau planned to merge it with the defunct Electric Car Company, thereby giving the latter new funds and new life, and enabling it to pay off its creditors.
During negotiations with the directors and officers of Jet, DeVeau not only concealed his past criminal record, but also misrepresented his background and financial resources. An agreement was reached between DeVeau and Jet whereby DeVeau was to acquire 20% of Jet's stock for $1,200,000, with $300,000 cash as a down payment. The agreement also provided that DeVeau would become Jet's chief executive officer after his purchase of the stock.
DeVeau had no funds and he made arrangements to borrow the $300,000 down payment from the Plaza Bank of San Antonio with the help of the bank's president, Roy Diefendorf. At the February 12, 1982 closing, Jet's representatives discovered that DeVeau had pledged Jet assets to collateralize his bank loan. DeVeau was told that such collateralization was both illegal and unacceptable to Jet, and the closing was aborted.
Negotiations continued between DeVeau and Jet's representatives, which led to a new agreement. No change was made in the purchase price, but the down payment was doubled to $600,000, and the closing was scheduled for April 8, 1982. Diefendorf arranged to secure $300,000 of the down payment through loans from some of the bank's depositors, but DeVeau was still short $300,000 of the $600,000 needed to close the deal.
Enter Drobny, a Chicago lawyer who was the beneficial owner of a large block of Electric Car Company stock. In 1981, Drobny had agreed to obtain a loan from a Chicago bank for the benefit of a friend, David Jordan. Jordan supplied Drobny with Electric Car stock to be used as collateral for the $350,000 loan. Jordan failed to make the loan payments, causing Drobny to default on the loan. By late 1981, the Electric Car stock pledged as collateral was essentially worthless. Drobny was anxious for DeVeau to acquire control of Jet and merge it with the Electric Car Company so that the Electric Car stock would regain its value, and Drobny could pay off the defaulted loan.
Drobny agreed to locate for DeVeau the remaining $300,000 needed for the down payment. Drobny obtained $300,000 from his friend and landlord, Joseph Rosin, by promising Rosin that DeVeau would pay Rosin a $30,000 "fee" for the short term use of his funds. Rosin made Drobny agree not to hand over Rosin's $300,000 check until he had a certified check for $330,000 in hand as repayment. DeVeau agreed to pay Drobny a $200,000 "fee" for raising the money from Rosin.
On April 7, 1982, Drobny traveled to Austin for the Jet closing, carrying with him Rosin's cashier's check for $300,000. On April 8, Drobny gave DeVeau Rosin's check, which was used to conclude successfully DeVeau's purchase of the Jet stock. Later that day, DeVeau tendered to Drobny a series of checks drawn on a Marquess Electric Car Company account as repayment for Rosin and as partial payment of Drobny's $200,000 "fee." DeVeau told Drobny that the checks were not good, but that he would cover them with money from a family "trust fund" that was expected to arrive in San Antonio the following day. Drobny accepted the checks in partial payment of his fee, but refused the check for Rosin, informing DeVeau that Rosin would accept repayment only by cashier's check. DeVeau agreed to give Drobny a $330,000 cashier's check from the "trust fund" the following day.
The next day, DeVeau told Drobny that the proceeds from...
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