Wiley v. Hughes Capital Corp., Civ. A. No. 89-1444.

Citation746 F. Supp. 1264
Decision Date31 August 1990
Docket NumberCiv. A. No. 89-1444.
PartiesJerry Wayne WILEY and Charles P. Moraglia, individually and on behalf of a class of similarly situated persons, Plaintiffs, v. HUGHES CAPITAL CORPORATION, First Securities Transfer Systems, Inc., Robert Zaunere, John Knoblauch, Frederick Mascolo, John Perfetti, Fred Galiardo, Morton Greenberg, Alan Lieb, Sheldon Kanoff, Leonard Tucker, Albert Weiss, Lionel Reifler, Gilbert Beall, Calvo Bofshever & Perry, Howard Ackerman, Susan LaChance, Ira Victor, Dominick Fiorese, John Doe and Richard Roe, Inc., Defendants.
CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Howard G. Schlesinger, Jaffe & Schlesinger, P.A., Springfield, N.J., and Gerald J. Resnick, Edison, N.J., for plaintiffs.

Stanley Moskowitz, Moskowitz, Altman & Frankel, and Ross & Matza, New York City, for defendant First Securities Transfer Systems, Inc.

Robert L. Zaunere, Pompano Beach, Fla., pro se defendant.

David L. Hertzog, Fromkin, Hertzog & Becker, P.C., Omaha, Neb., for defendant John L. Knoblauch.

Charles E. Oman, III, Moynahan, Ruskin, Mascolo, Mariani & Minella, Waterbury, Conn., for defendant Frederick Mascolo.

John Perfetti, Bayville, N.Y., pro se defendant.

Dennis R. LaFiura, Pitney, Hardin, Kipp & Szuch, Morristown, N.J., and James M. LaRossa, LaRossa, Mitchell & Ross, New York City, for defendant Fred Galiardo.

Stephen N. Dratch, Greenberg, Margolis, Ziegler, Schwartz, Dratch, Franzblau & Falkin, Roseland, N.J., and George Berger, Berger & Paul, New York City, for defendant Morton Greenberg.

Paul J. Linker, Robinson, Wayne & LaSala, Newark, N.J., for defendant Alan Leib.

John Sand Siffert, Lankler, Siffert & Whol, New York City, for defendant Sheldon Kanoff.

Edward A. Bertele, Levy & Lybeck, P.C., Union, N.J., and Howard B. Sirota, Sirota & Sirota, New York City, for defendant Leonard Tucker.

Barry A. Bohrer, Morvillo, Abromowitz & Grand, New York City, for defendant Albert D. Weiss.

Martin R. Raskin, Raskin & Graham, Miami, Fla., for defendants Lionel Reifler, Susan LaChance and Howard Ackerman.

Gilbert Beall, Dallas, Tex., pro se defendant.

Richard P. Green, Harold Bofshever, Mark C. Perry, Fort Lauderdale, Fla., for defendant Calvo, Bofshever & Perry.

Waller, Mark & Allen, P.C., Denver, Colo., for defendant Ira Victor.

OPINION

LECHNER, District Judge.

This class action arises from the initial public offering of securities in Hughes Capital Corporation ("Hughes Capital") on or prior to 25 August 1986 pursuant to a registration statement (the "Hughes Registration Statement") declared effective by the Securities Exchange Commission (the "SEC") on 5 May 1986 and amended by post-effective filings on 8 May, 6 June and 14 July 1986. The basis for this dispute is the finding of the SEC that the Hughes Registration Statement contained material omissions and misrepresentations of fact. This finding led the SEC to issue a stop order on 20 July 1987 (the "Stop Order") suspending the effectiveness of the Hughes Registration Statement.1

Plaintiffs Jerry Wayne Wiley ("Wiley") and Charles P. Moraglia ("Moraglia") (collectively the "Plaintiffs") filed this class action on 19 July 1988. Wiley and Moraglia are the name Plaintiffs in this class action and are proceeding individually and on behalf of a putative class of similarly situated persons who purchased the securities of Hughes Capital between 25 August 1986 and 20 July 1987 (the "Aftermarket"). The putative class has yet to be certified pursuant to Rule 23 of the Federal Rules of Civil Procedure.

The Class Action Complaint and Demand for Jury Trial (the "Complaint"), which was refiled on 4 April 1989,2 names as defendants Hughes Capital, the principals of Hughes Capital3 and the principals of the brokerage firm of F.D. Roberts Securities, Inc. (the "Roberts Firm"),4 which acted as underwriter and market maker with respect to the Hughes Capital public offering pursuant to the Hughes Registration Statement. Additional defendants include the law firm of Calvo, Bofshever & Perry, which was primarily responsible for preparing the Hughes Registration Statement, as well as John Doe and Richard Roe, Inc., who are unknown directors or officers of Hughes Capital or the Roberts Firm.

The Complaint contains eight counts alleging violations of federal and state securities laws and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). Briefly stated, Counts One through Eight of the Complaint assert violations of: Section 12(2) of the Securities Act of 1933 (the "1933 Act"), 15 U.S.C. § 77l(2) ("Count One"); Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. § 78j(b), 17 C.F.R. 240.10b-5 ("Count Two"); Section 24(a)(1) of the New Jersey Uniform Securities Law ("NJUSL"), N.J.Stat.Ann. 49:3-71(a)(1) ("Count Three"); Section 24(a)(2) of the NJUSL, N.J.Stat.Ann. 49:3-71(a)(2) ("Count Four"); Section 517.221(1) of the Florida Securities and Investor Protection Act ("FISPA"), Fla.Stat.Ann. § 517.211(1) ("Count Five"); Section 517.221(2) of the FISPA, Fla.Stat. Ann. § 517.211(2) ("Count Six"); Section 1962(b) of RICO, 18 U.S.C. § 1962(b) ("Count Seven"); and Section 1962(c) of RICO, 18 U.S.C. § 1962(c) ("Count Eight").5

Presently before the court are the motions of the principals of the Roberts Firm to dismiss the Complaint as against them. For purposes of this Opinion, the moving defendants will be referred to collectively as the "Roberts Defendants."

Defendants Perfetti, Galiardo, Greenberg, Lieb and Weiss have moved to dismiss the Complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.6 Defendant Knoblauch, although not alleged to be a principal of the Roberts Firm, has joined in that motion.7 Defendant Kanoff has joined in the motion to the extent that it challenges the specificity of the Complaint and compliance with the statute of limitations.8 Defendant Tucker has filed a motion on his own behalf arguing for dismissal of the Complaint on the same grounds as asserted by the other defendants.9 Defendant Fiorese has not joined in these motions or filed a motion on his own behalf. The Plaintiffs filed a consolidated opposition brief to the motions of the Roberts Defendants.10 This motion is decided on the basis of the papers submitted pursuant to Fed.R.Civ.P. 78.

Facts as Alleged in the Complaint

The Complaint consists of 164 separately numbered paragraphs purporting to set forth the various elements of Plaintiffs' eight claims. Paragraphs 35 to 109 of the Complaint, which are contained in Count Two and incorporated by reference into Counts Three through Eight, allege in detail the components of a scheme to manipulate the price of Hughes Capital securities and defraud purchasers of Hughes Capital securities. The Stop Order of the SEC, which explains in detail the existence of the scheme, is incorporated by reference into the Complaint and made a part thereof. Complaint, ¶ 81.

The Complaint explains the purpose of the scheme as follows:

40. In or about August 1985, defendants Reifler, Beall, Mascolo and other individuals attended a series of meetings over the course of a weekend at a country club in Boca Raton, Florida. In those meetings, defendant Reifler proposed that he, defendant Beall and defendant Mascolo form or acquire an entity whose securities would be sold to the public and whose nominal business would be to acquire and hold other corporate entities.
41. Defendant Reifler further proposed that he, defendant Beall and defendant Mascolo identify and proceed to personally obtain control of suitable acquisition targets. Defendant Reifler explained that the participants in such a scheme would be able to obtain stock in the publicly traded vehicle in exchange for their stock in the entities it would acquire. He further explained that they could enrich themselves by either selling that stock to the public, or by using it to collateralize personal loans.

Complaint, ¶¶ 40-41.

Pursuant to the scheme outlined in the Complaint, defendants Reifler, Beall and Mascolo agreed to acquire Hughes Capital as a "shell" company for purposes of holding the securities of targeted acquisition companies. The former owners of Hughes Capital had filed a form S-18 with the SEC on 19 August 1985 for a planned public offering of securities but, due to the death of one of the former owners of the company, the public offering was dropped and the company was to be sold. In December 1985, Reifler and Beall negotiated a stock purchase agreement to purchase Hughes Capital. Rather than execute the stock purchase agreement themselves, however, Reifler, Beall and Mascolo induced and directed certain nominees to execute the stock purchase agreement and to tender funds belonging to Reifler, Beall and Mascolo, in the acquisition of Hughes Capital. Complaint, ¶¶ 38-48.

In January 1986, Reifler, Beall and Mascolo began to meet with counsel for Hughes Capital to discuss amendments to the Hughes Registration Statement. These meetings resulted in the filing of a first amendment to the Hughes Registration Statement on 28 February 1986, which changed the stock-to-warrant ratio of each unit to be offered by Hughes Capital from 1:3 to 1:21. Pursuant to the first amendment, the securities of Hughes Capital included 90,000 units, each of which consisted of one share of common stock priced at $2.00 per share, seven class A warrants exercisable at $2.50 per share, seven class B warrants exercisable at $3.50 per share and seven class C warrants exercisable at $4.50 per share. Complaint, ¶¶ 8, 49.

The first amendment to the Hughes Registration Statement failed to disclose the stock purchase agreement by which defendants Reifler, Beall and Mascolo obtained control of Hughes Capital through the nominee purchasers and failed to disclose their roles in the management of Hughes Capital and...

To continue reading

Request your trial
35 cases
  • Brennan v. National Telephone Directory Corp., 93-CV-5899.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • 28 April 1994
    ...summary judgment by considering the outside materials attached thereto is a matter of discretion for the court. Wiley v. Hughes Capital Corp., 746 F.Supp. 1264, 1275 (D.N.J.1990); Kelley ex. rel. Michigan NRC v. Arco Indus., 721 F.Supp. 873, 877 (W.D.Mich.1989). However, courts have held th......
  • Biase v. Kaplan, Civ. A. No. 93-4951 (AJL).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • 9 May 1994
    ..."When making a determination under Rule 12(b)(6), the court cannot consider matters outside the pleadings."13Wiley v. Hughes Capital Corp., 746 F.Supp. 1264, 1275 (D.N.J. 1990); see Allison v. General Motors Corp., 604 F.Supp. 1106, 1119 (D.Del.), aff'd, 782 F.2d 1026 (3d a. Qualified Immun......
  • In re Cendant Corp. Litigation
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • 27 July 1999
    ...exists where the defendant has direct or indirect power over the management or policies of a person...." Wiley v. Hughes Capital Corp., 746 F.Supp. 1264, 1281 (D.N.J.1990) (citing Rochez Bros., Inc. v. Rhoades, 527 F.2d 880, 890 (3d Cir.1975)). In the determination of whether a person is a ......
  • Ep Medsystems, Inc. v. Echocath, Inc., Civ.A. 97-4926(AJL).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • 19 October 1998
    ...644, 651 (3d Cir.1991) (citing Warner Communications, Inc. v. Murdoch, 581 F.Supp. 1482, 1492 (D.Del.1984)); Wiley v. Hughes Capital Corp., 746 F.Supp. 1264, 1287 (D.N.J.1990). Consequently, a plaintiff who fails to available documents cannot plead ignorance of the falsity of the oral misre......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT