Com. v. David

• Decision Date: 02 April 1974
• Parties: , Blue Sky L. Rep. P 71,129 COMMONWEALTH v. Nathan H. DAVID.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 484

309 N.E.2d 484

365 Mass. 47, Blue Sky L. Rep. P 71,129

COMMONWEALTH v. Nathan H. DAVID.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 8, 1974.

Decided April 2, 1974.

Lawrence D. Shubow, Boston, for defendant.

Howard J. Camuso, Asst. Atty. Gen., for the Commonwealth.

Before TAURO, C.J. and REARDON, HENNESSEY and KAPLAN, JJ. HENNESSEY, Justice.

The defendant, who is and was at all material times an attorney, by this bill of exceptions challenges his convictions, after a trial without jury in the Superior Court, on all five counts of an indictment for violations of the Sale of Securities Act, G.L. c. 110A. ¹ A fine of $200 was imposed on each count. The five counts, identical but for dates, amounts, and buyers, charged that the defendant 'on or about . . . (a specified date), at Boston, within the County of Suffolk, did knowingly sell a certain security, to wit: . . . (a number of) shares of the common stock of Synergistics, Inc., to . . . (a named buyer), said sale not being then and there exempted by section three of chapter one hundred and ten 'A' of the General Laws of said Commonwealth; and said Nathan H. David not being then and there registered either as a broker or as a salesman by the commission supervising and controlling the Department of Public Utilities.'

The particular section of G.L. c. 110A which establishes as a violation of law the sale of securities by one who is not a registered broker is § 9. That section, in relevant part, reads as follows: 'No person shall sell any security within this commonwealth, whether or not such security is exempt under section four, except as provided in section three and section fifteen (a), unless he is registered as a broker or salesman by the commission.' Punishment for such a violation is provided in § 19 of that chapter. Section 3 of that chapter lists various kinds of sales of securities to which the chapter does not apply, and the defendant, as shown below, relies on three of these 'exemptions' in particular.

The defendant's argument in this court is that there was not sufficient evidence to warrant conviction on any count. There is no question that he was not registered either as a salesman or a broker under G.L. c. 110A. More specifically, the defendant argues (1) that he was not involved in any sale within the meaning of the statute, and (2) that the burden of proof was on the Commonwealth to prove that the transactions were not exempt under the statute, and the Commonwealth failed to sustain its burden. Thus the defendant says that the Commonwealth did not prove that the transactions were not exempt under published regulations (G.L. c. 110A, § 3 (k)), did not prove that the transactions were not exempt as sales to registered brokers (G.L. c. 110A, § 3(h)), and did not prove that these transactions were not isolated sales (G.L. c. 110A, § 3 (a)).

We affirm the convictions as to all five counts of the indictment.

1. We turn first to the defendant's contention that he was not involved in any sales within the meaning of G.L. c. 110A. As to each of the five counts there was evidence to warrant the judge in finding, as he did, that the defendant 'sold' the stock in violation of the law, as alleged. 'Sale' is defined in G.L. c. 110A, § 2(d), to include any 'solicitation, looking to a sale, or offer or attempt to sell in any form, whether spoken or written.' The defendant's involvement in the prohibited transactions, while he was not the owner of any of the stock sold, was hardly that of an innocent participant. Either directly or indirectly he was the initiator of all the transactions, and he served as the intermediary through whose active and aggressive course of conduct, continued over a period of several months, the illegal sales were consummated.

Count 1 of the indictment charges a sale by the defendant to one David Freedman of 6,000 shares of the stock of Synergistics, Inc. The defendant and David Freedman had been acquainted for about thirty-five years. In February, 1968, the defendant called Freedman, whom he had not seen for many years, to invite him to lunch, at which meeting the defendant told Freedman about a stock named Synergistics, Inc. As a result of this conversation, Freedman bought 200 shares of Synergistics on the open market in March, 1968, which he sold at a profit in August, 1968.

In late August, 1968, the defendant called Freedman and invited him to his office, saying he had something interesting to tell him about Synergistics. At this meeting the defendant went into great detail explaining the stock. He said the company had $4,000,000 in assets, had developed a new machine which would revolutionize the credit card business, and was going into the cable television business. The defendant told Freedman that 'the company was going like bandits.' No stock was purchased as a result of that meeting.

About a week later, in early September, 1968, the defendant again invited Freedman to his office and told him: 'I might get--make up a good deal here on the Synergistics stock.' He told Freedman the purchase price would be about $100,000. The defendant suggested that Freedman aggregate this amount from a group of investors; he knew that Freedman was a member of an investment group. The defendant would try to get him a lower price than that previously quoted. At a later meeting the defendant told Freedman that he had been able to get the price lowered by $1 a share.

In early October of 1968 the defendant called Freedman to check on the progress of the transaction. Freedman told him some money had been gathered and, in response to the defendant's request that the checks be personally delivered rather than mailed, brought them into the defendant's office. These checks, totaling $93,000, had been made out to 'Nathan H. David, Trustee,' at the defendant's request. Freedman received a certificate for 6,000 shares from the defendant. The defendant told Freedman he was receiving $1 a share from the sellers. Freedman signed an investment letter addressed to Synergistics and a second letter addressed to the four owners of the shares he was purchasing as each letter was presented to him by the defendant David in the defendant's office. One of those owners testified that he assembled 'as a favor to Mr. David, the 6,000 shares that his (David's) clients desired to purchase.'

Count 2 alleges that the defendant sold 200 shares of Synergistics stock to one Hyman Freedman. At the defendant's request, David Freedman talked to his brother Hyman about purchasing Synergistics stock. Hyman was not interested in making a purchase at that time, and David relayed this information to the defendant. Hyman was not a party to the purchase of the $93,000 block of stock.

However, Hyman later gave his brother David Freedman a check for $3,100 for 200 shares of Synergistics stock, made out to Nathan David, and David Freedman delivered it to the defendant. Hyman told his brother David that the defendant had called him regarding the purchase of stock, and that he (Hyman) had bought some. According to Hyman, he had discussed the stock with the defendant, who had told him: 'The company is doing well. It's a good company, and they have some possibility in CATV.'

Count 3 alleges that the defendant sold 1,000 shares of Synergistics stock to one Marshall Sterman. ² Sterman testified that the defendant did not solicit him to buy Synergistics stock, although Sterman talked with the defendant prior to the purchase. Sterman was not sure who brought up Synergistics in the conversation. The defendant thought there were some shares available from an insider and that if Sterman wanted them he could probably buy them at a price of $16 a share. The defendant received an amount for his services equal to $1.50 a share.

Count 4 alleges that the defendant sold 1,500 shares of Synergistics stock to one Joseph Spagnuolo. Sterman told the defendant that Spagnuolo might be interested in purchasing some Synergistics stock. The defendant told Sterman that he would see if there was some available. In November, 1968, Spagnuolo, who was then in the restaurant business, purchased 1,500 shares at $16 a share. Spagnuolo testified that he was solicited to buy shares by Sterman rather than by the defendant, but did testify that he bought the stock from the defendant David.

Count 5 alleges that the defendant sold 1,000 shares of Synergistics stock to one Jeffrey Power. Sterman testified that Power was a close friend of his, and he (Sterman) talked to the defendant about buying stock for Power. Power was a stockbroker. He had never met the defendant; Sterman told him about the stock.

Power bought 1,000 shares at $16 a share. Power made out the check for $16,000, leaving the payee's name blank. When the paid and cancelled check was returned, the payee named was 'Nathan David, Trustee.'

In sum, the defendant played a key role in each of the transactions, whether he offered the stock to the purchaser personally or operated through an intermediary. The judge was warranted in rejecting the conclusions of those buyers who testified that the defendant did not 'solicit' them in light of their further testimony as to the details of their dealings with him. For example, there were inherent contradictions in the testimony of Spagnuolo, who, while denying that he was solicited by the defendant, testified that he 'bought the stock from the defendant David.' There was no error in the judge's finding that in each case the defendant sold the stock within the meaning of c. 110A, § 2(d).

2. We now turn to the defendant's argument that the Commonwealth had the burden of proving beyond a reasonable doubt that the sales were not exempt under certain provisions of G.L. c. 110A, that the Commonwealth failed in that burden, and that therefore the judge was not warranted in reaching findings of guilty. In support of his argument, the defendant correctly states, inter alia, that the...