Freedman v. United States

• Decision Date: 18 July 1977
• Docket Number: Civ. A. No. 77-904 A.
• Citation: 437 F. Supp. 1252
• Parties: Ely FREEDMAN v. UNITED STATES of America.
• Court: U.S. District Court — Northern District of Georgia

437 F. Supp. 1252

Ely FREEDMAN v. UNITED STATES of America.

Civ. A. No. 77-904 A.

United States District Court, N. D. Georgia, Atlanta Division.

July 18, 1977.

COPYRIGHT MATERIAL OMITTED

Jacob W. Heller, Robert G. Fierer, Benjamin Geizhals, Bruce H. Morris (H. Sol Clark, Savannah, Ga., Weiss Rosenthal Heller Schwartzman & Lazar, New York City, Fierer & Devine, Atlanta, Ga.), for petitioner.

Harvey D. Harkness and Gary G. Grindler (Powell, Goldstein, Frazer & Murphy, Atlanta, Ga.), for intervenor, Dominion of Canada, Province of Ontario.

ORDER

RICHARD C. FREEMAN, District Judge.

On July 29, 1976, the Dominion of Canada, Province of Ontario hereinafter "Canada", filed the instant complaint in extradition seeking the return of petitioner Ely Freedman, a citizen of the United States and resident of Atlanta, Georgia, for the purpose of bringing him to trial in Canada on five criminal charges allegedly arising in connection with the sale of securities in Buffalo Gas & Oil Company hereinafter "Buffalo". See 18 U.S.C. § 3184. On November 30, 1976, the Crown determined that it would only seek extradition on two of the charges, the charge of bribery (payment of a secret commission) and of criminally defrauding Growth Equity Fund Limited hereinafter the "Fund". Following a full hearing, on June 1, 1977, the United States Magistrate sitting by designation of this court, issued an order and warrant of commitment directing that the petitioner be committed to the Attorney General of the United States to await the issuance of a warrant by the Secretary of State authorizing his surrender to Canada. The warrant of commitment recited the magistrate's finding that there existed sufficient evidence of criminality to warrant petitioner's extradition on the pending charges pursuant to the Webster-Ashburton Treaty of 1842. Prior to the Secretary of State's taking any action pursuant to the warrant, petitioner filed the instant application for a writ of habeas corpus seeking review of the magistrate's order of commitment. This court, in its discretion granted petitioner's application to be continued on bond pending a ruling on the merits of the petition, subject to certain additional restrictions which this court imposed. See, e. g., Wright v. Henkel, 190 U.S. 40, 23 S.Ct. 781, 47 L.Ed. 948 (1903); Jimenez v. Aristiguieta, 314 F.2d 649 (5th Cir. 1963); Shapiro v. Ferrandina, 355 F.Supp. 563, 567 (S.D.N.Y.1973).

Jurisdiction of this action is grounded upon the federal habeas corpus statute, 28 U.S.C. § 2241, and numerous decisions holding that review of the order of extradition and commitment — while not available by direct appeal — is subject to limited review by means of habeas corpus. E. g., Collins v. Miller, 252 U.S. 364, 369, 40 S.Ct. 347, 64 L.Ed. 616 (1920); Jimenez v. Aristeguieta, supra; Shapiro v. Ferrandina, 478 F.2d 894 (2d Cir. 1973). Habeas corpus review of an order of extradition is restricted to three issues: (1) whether the committing magistrate had jurisdiction; (2) whether the offenses on which extradition has been sought are within the terms of the applicable treaty between the United States and Canada; and (3) whether there was any evidence to support the finding of the magistrate that there was reasonable ground to believe that an offense was committed and to believe that the accused was guilty of the offense charged. E. g., Fernandez v. Phillips, 268 U.S. 311, 312, 45 S.Ct. 541, 69 L.Ed. 970 (1925); Garcia-Guillern v. United States, 450 F.2d 1189, 1191 (5th Cir. 1971); cert. denied 405 U.S. 989, 92 S.Ct. 1251, 31 L.Ed.2d 455; Shapiro v. Ferrandina, 355 F.Supp. 563, 567 (S.D.N.Y.1973) modified 478 F.2d 894 (2d Cir. 1973); cert. dismissed, 414 U.S. 884, 94 S.Ct. 204, 38 L.Ed.2d 133 (1973).

Petitioner challenges the magistrate's findings and order of commitment on numerous grounds: (1) that no criminal charges were pending against petitioner in Canada upon which extradition proceedings could be founded jurisdictionally; (2) that the extradition proceeding is barred by reason of the Canadian government's commitment not to extradite petitioner on the instant charges and petitioner's detrimental reliance on the Crown's commitment and promise; (3) that the Crown was guilty of inordinate delay in seeking extradition and that, therefore, the proceedings should have been dismissed for lack of a speedy prosecution; (4) that the proceedings should have been dismissed because of the acquittal of the four other individuals who were named as codefendants with petitioner in the 1974 criminal information; (5) that the crimes for which extradition has been sought were not extraditable since (a) not enumerated in the treaty and (b) because there are no comparable counterparts under Georgia law; (6) that the statute of limitations is an essential element of probable cause, and its expiration thereof bars the institution of extradition proceedings; and (7) that even assuming the truth of the Crown's allegations, probable cause for extradition was not sufficiently demonstrated. At this juncture, a brief review of the salient facts of the Crown's case and the procedural history of this action is warranted.

In 1970, petitioner Ely Freedman was a substantial stockholder in and the president of Guernsey Petroleum Corporation, a New York corporation which owned certain oil and gas properties in the State of Ohio. Guernsey desired to secure additional capital to further develop its properties, and it was estimated that the drilling of additional contemplated wells would increase the revenues of the company approximately $200,000.00 per month. In April, 1970, in Atlanta, Freedman first met Leonard Varah, a Canadian, to discuss Guernsey's need for funds and to consider various methods of raising funds both here and in Europe. In the following months, Freedman and several of the other large shareholders in Guernsey travelled to Montreal to meet with Varah and his attorneys, including a Mr. Kravetz. In order to consummate the various fund-raising transactions Varah, Freedman and Rosen met with Varah's attorney who agreed to incorporate a new Quebec corporation, called Buffalo Gas & Oil Company. Thereafter, Guernsey exchanged all of its shares for those of Buffalo and became a wholly owned subsidiary of Buffalo. The corporation was formed on July 14, 1970, and during the period between June, 1970 and September 18, 1970, the attorney undertook to draft a prospectus for the sale of Buffalo shares. At the same time Varah sought to get commitments for purchase of the shares of Buffalo until such time as the prospectus could be published and final approval for the offering could be secured from the Quebec Securities Commission. While it initially appeared that European commitments had been obtained for most of the issue, by the time listing on the securities exchange had been secured most of the European interest in the offering had evaporated.

Thereafter, in Montreal, in June 1970, one Edwin Lynch of the brokerage firm of Malone, Lynch was approached by the principals of Buffalo to discuss whether his brokerage firm might sponsor an offering in Canada or at least agree to maintain the orderly aftermarket for distribution of the stock subsequent to the completion of the primary offering, distribution, and sale. Malone, Lynch agreed to perform the latter function, and in connection therewith an account was set up at Malone, Lynch in which cash and securities of Buffalo could be deposited. Thereafter, the principals of Buffalo purchased an existing "shell" company named Affiliated Purchasing, and 160,000 treasury shares of Buffalo were issued to Affiliated and deposited in its new account at the brokerage firm.

In January, 1971, a meeting was held which was attended by Freedman, Lynch, Varah and Malone at the Toronto office of Malone, Lynch securities. The brokerage firm was requested to include information about Buffalo in its monthly newsletter to its customers and further asked that a "buy" recommendation be issued to the firm's customers. On the following day Messrs. Malone, Lynch, Freedman and Varah again met. At that time Malone stated that he thought he could arrange a large sale of Buffalo stock to an institutional investor with the aid of a friend named Donald (Danny) King. On the next day, Malone reported that he could probably place 100,000 shares of the stock but that the transaction would have to be fifty cents below the last trade. Around cocktail hour that evening, Freedman, King, Lynch, Malone, and Varah met at a hotel in Toronto to discuss further the sale of the large block of shares to an institutional investor and King informed those present that he thought he could handle it.

According to the affidavit of Varah, submitted by the Crown in support of its prima facie case and showing of probable cause, Freedman told Varah that he would have to pay an amount of stock equal to 10% of the trade to Danny King for his services. Varah further stated that about a week later he observed that a large trade in Buffalo Gas and Oil had been reported on a Canadian stock exchange.

During the time period in question, one William Farquaharson was the Vice President of Growth Equity Fund. His obligations in connection with that position included the managing of the Fund's portfolio and he, therefore, had authority to purchase and sell securities for the Fund's portfolio. Near the end of 1970 or the beginning of 1971, Donald King, of Grant Johnson, Ltd. a stockbroker, who was also an agent of the Fund first brought Buffalo stock to the attention of Farquaharson and recommended its purchase. On January 28, 1971, Farquaharson instructed King to purchase 35,000 shares for a price of $231,635.00; the trade was accomplished, and the Fund paid King a brokerage commission of $4,135.60. In April and December, 1971, the Fund liquidated its shares in Buffalo, at a loss to the Fund of $168,183.70. Farquaharson was not informed at the time of...