In re Alsco-Harvard Fraud Litigation, 54.

• Decision Date: 25 March 1971
• Docket Number: No. 54.,54.
• Citation: 325 F. Supp. 315
• Parties: In re ALSCO-HARVARD FRAUD LITIGATION.
• Court: Judicial Panel on Multidistrict Litigation

325 F. Supp. 315

In re ALSCO-HARVARD FRAUD LITIGATION.

No. 54.

Judicial Panel on Multidistrict Litigation.

March 25, 1971.

Before ALFRED P. MURRAH, Chairman, and JOHN MINOR WISDOM, EDWARD WEINFELD, EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH S. LORD, III, and STANLEY A. WEIGEL, Judges of the Panel.

OPINION AND ORDER

PER CURIAM.

These actions arise from an alleged multi-million dollar fraud on the United States perpetrated by Andrew L. Stone and Francis N. Rosenbaum through their controlled corporations, Chromcraft Corp. and its successor, Alsco, Inc., prime contractors in the production of rocket launchers. From approximately 1963 to 1965, these corporations allegedly represented to the Government that they had purchased launcher components from Bregman Electronics, Inc. and Scientific Electronics, Inc., when in fact they had purchased the raw materials for the components themselves and had them assembled by a third party at a materially lower price than was represented. The Government money paid to Bregman and Scientific was allegedly transferred to Swiss bank accounts controlled by Stone and Rosenbaum. The parties refer to this as the Bregman-Scientific phase of the fraud. Later, in what the parties refer to as the Republic phase, similar payments were allegedly made to and retained by Republic Electronic Industries, Inc. Stone, Rosenbaum and others¹ pled guilty to criminal charges resulting from their activities and are presently confined in federal penitentiaries.

Six civil actions growing out of the alleged fraud are now pending in four different districts. See attached Schedule A. The Government has filed essentially similar actions in two different districts, seeking recovery of its damages from Stone, Rosenbaum, Chromcraft and Alsco on theories of false claims, breach of warranties and Government mistake. Alsco and Harvard Industries, Inc., the survivor of a later merger with Alsco, each brought actions² alleging securities law violations in connection with the fraud against Stone, Rosenbaum and a number of other defendants. Albert G. Katz, an Alsco stockholder, filed a similar derivative suit in the Northern District of Ohio. Harvard also brought a separate action against Republic Electronics in the Southern District of New York for damages arising from Republic's participation in the fraud.

Following a hearing on the motion of Stone and Rosenbaum for coordinated or consolidated pretrial proceedings, the Panel has concluded that all related actions should be transferred to the District of Columbia for coordinated or consolidated pretrial proceedings. The parties admit that a number of fact questions concerning the alleged fraud are common to each of the involved actions.³ Those opposing the motion contend that for various reasons coordinated or consolidated pretrial proceedings would not serve the convenience of the parties or their witnesses or promote the just and efficient conduct of the litigation, but these contentions are unpersuasive.

The Government argues that information gathered for its earlier criminal action has made formal discovery unnecessary in its civil actions, that it will soon be ready for trial of those actions, and that coordinated or consolidated pretrial proceedings might delay it in reaching trial. Certain defendants in the Alsco and Harvard actions present the converse argument that their liability is dependent on the outcome of the Government actions and that allowing those actions to proceed on their own might well eliminate the multidistrict character of this litigation.

It is far from certain that the Government will be able to avoid formal discovery procedures. The criminal indictment and the present allegations of the civil complaints focus mainly on the Bregman-Scientific phase of the fraud, about which it is agreed the Government possesses substantial evidence. But all of these actions, including the Government's, also involve the later Republic phase of the fraud; and the Government's preparedness on this phase is disputed. The Government conceded at oral argument that it was considering amending its complaints and joining additional defendants to cover this phase more fully and this would apparently require at least some exploration of the relevant facts by deposition or otherwise. The movants assert that few of the documents thus far assembled by the Government relate to the Republic transactions and it is probable that even if the Government is satisfied with its files, the defendants may wish to use discovery procedures to prepare for trial.

Even if minimal discovery is required in the Government actions⁴, there is no reason why coordinated or consolidated pretrial proceedings should delay the Government in pressing for summary judgment or trial of its actions. We have previously stressed the competence of the transferee judge to pass on summary judgment motions, In re Butterfield Patent Litigation (J.P.M.L. Feb. 2, 1970) and Section 1407(a) authorizes the remand of an action by the Panel "at or before the conclusion of * *...