U.S. v. Aloi

• Decision Date: 07 July 1975
• Docket Number: D,Nos. 1144,1159 and 1171,1150,s. 1144
• Citation: 511 F.2d 585
• Parties: Fed. Sec. L. Rep. P 94,974 UNITED STATES of America, Plaintiff-Appellee, v. Vincent ALOI et al., Defendants-Appellants. ockets 74--1220, 74--1278, 74--1614 and 74--1727.
• Court: U.S. Court of Appeals — Second Circuit

Page 585

511 F.2d 585

Fed. Sec. L. Rep. P 94,974

UNITED STATES of America, Plaintiff-Appellee, v. Vincent ALOI et al., Defendants-Appellants.

Nos. 1144, 1150, 1159 and 1171, Dockets 74--1220, 74--1278,

74--1614 and 74--1727.

United States Court of Appeals Second Circuit.

Argued June 24, 1974.

Decided Jan. 31, 1975.

Rehearing Denied July 7, 1975.

Kristin Booth Glen, New York City (Michael D. Ratner, New York City, of counsel), for defendant-appellant Aloi.

Gretchen White Oberman, New York City (Jay Goldberg, New York City, of counsel), for defendant-appellant Dioguardi.

Joel A. Brenner, Mineola (Gustave H. Newman, New York City, of counsel), for defendant-appellant Lombardo.

Gerald L. Shargel, New York City (La Rossa, Shargel & Fischetti, New York City, of counsel), for defendant-appellant Savino.

Bancroft Littlefield, Jr., Asst. U.S. Atty. (Paul J. Curran, U.S. Atty., S.D.N.Y., Alan R. kaufman, T. Gorman Reilly, Peter I. Truebner, Daniel Beller, S. Andrew Schaffer, Asst. U.S. Attys., of counsel), for plaintiff-appellee.

Before MOORE and FEINBERG, Circuit Judges, and PALMIERI, ^* District Judge.

MOORE, Circuit Judge:

Vincent Aloi, John Dioguardi, Ralph Lombardo and John J. Savino were convicted under Count 1 of conspiracy to violate federal securities laws. 15 U.S.C. §§ 77q(a), 77s(a), 77x, 17 C.F.R. §§ 230.256 and 240.10b--5, 18 U.S.C. §§ 371, 372. All four were also convicted under Count 18 of use of a false and misleading offering circular. Aloi (Count 10), and Dioguardi and Lombardo (Count 9) were convicted of wire fraud. All defendants appeal. For the reasons hereinafter stated, we affirm the convictions of Aloi, Dioguardi and Lombardo and reverse the convictions of Savino.

The various appellants raise so many points of alleged reversible error, the separate points of each being incorporated by reference by the others, that some initial general analysis and sifting of the facts must be made.

The main charge, Count 1, alleges a conspiracy, the object of which was unlawfully, wilfully and knowingly to offer and to sell to the public common stock of a company, At-Your-Service Leasing Corp. (AYSL), which was in a weak financial condition and consistently operated at a loss. The original purpose of the financing was to raise money for AYSL to enable it to pay off loans on which certain of the defendants who owned AYSL were personally obligated and to raise additional funds to carry on the business.

A conspiracy of this nature resembles a mosaic or a jig-saw puzzle. The picture consists of a myriad of individual pieces which when placed together reveal the ultimate image. Many artisans are frequently required, each contributing his segment. Despite the number of separate participants, it is one picture. And so here. An effort will be made sketchily to portray the part each appellant-conspirator and certain co-conspirators played.

At all relevant times, AYSL was an automobile leasing corporation doing business in West New York, New Jersey. Its owners and managers were defendants Sanford L. Price, Arthur Ferdinand, Murray A. Handler, J. Jack Ganek, and Edmund Graifer. ¹ Defendants Andrew Nelson ² and Gerald Miller ³ conducted business as Tech-Ec Systems (financial consultants). Miller was also an attorney.

In and subsequent to July, 1969, Nelson, a financial consultant (Tech-Ec) agreed with the principals of AYSL to arrange an AYSL stock issue for a $20,000 fee. The issue was to be an unregistered exempt (Regulation A) issue of 100,000 shares at $3 a share, 50,000 shares of which had to be sold within 90 days of the SEC effective date, April 8, 1970, or the subscribed money refunded.

An offering circular was prepared by Nelson and Miller dated as of April 8, 1970. Apparently a broker-dealer, TDA Securities, Inc., whose principals were defendants Gilbert C. Dragani, Donald Fisher and Louis Nova, ⁴ was ostensibly To summarize briefly, at this point there was an offering circular under which $300,000, less proper expenses, could potentially be obtained from the public. Graifer's and AYSL's financial conditions were such that they needed money by fair means or foul. Fair means having failed, they chose to investigate the possibilities of the other alternative.

supposed to be the underwriter. The offering circular was most explicit. In bold type on the first page it stated: 'THESE SHARES INVOLVES A HIGH DEGREE OF RISK.' Under 'Risk Factors to be Considered,' were listed seventeen factors, any one of which should have deterred a prospective purchaser from buying the stock. And until the conspiracy commenced, no one did.

There being no AYSL stock sales, Graifer as an owner and manager was called upon by his associates to remedy the situation. From this point on, the pieces of the mosaic began to be filled in rapidly. Graifer had a friend, Ralph Lombardo, and another friend in Florida, Sebastian Aloi, ⁵ father of Vincent Aloi. ⁶ Graifer and Lombardo went to Florida to consult with Sebastian. Sebastian instructed Lombardo to get in touch with a Michael Hellerman, a well-known stock swindler, to see if he could put the sale across. Hellerman was associated with defendant John Dioguardi, who owned a percentage of Hellerman's profits.

Thereafter, Lombardo, to whom Hellerman owed $10,000 on a loan, approached Hellerman, who agreed, after seeing the offering circular, to sell 50,000 shares provided he received a secret kickback of $45,000, 'under the table', half of which, he said, had to be paid immediately in order to bribe brokers to tout the stock.

Lombardo and Hellerman then proceeded to Dioguardi's office to obtain Dioguardi's approval of Hellerman's participation therein, which was granted. Lombardo, Hellerman and Dioguardi then telephoned Sebastian in Florida and informed him of the terms. Thus, there was a guarantee by Sebastian of Graifer's performance and by Dioguardi of Hellerman's.

About the middle of June, because Graifer was unable or unwilling to pay the required $22,500, Lombardo produced and delivered $22,500 (half of the $45,000) to Dioguardi's office. ⁷ By July 7th, the expiry date for the sale of the 50,000 shares, Hellerman, despite his previous successes, had failed to cause the stock to be sold. Accordingly, Dioguardi returned the $22,500 to Lombardo.

Somewhat collateral to the stock sale but definitely related thereto was an incident which brought three additional defendants into the picture, Pasquale Fusco, ⁸ John Savino and Vincent Aloi, Sebastian's son. Hellerman in a previous unsuccessful stock deal had lost $10,000 belonging to Fusco and Savino. They were apparently without power to obtain its return without the aid of Dioguardi. Fusco and Savino were friends of Vincent and through an Aloi-Dioguardi arrangement, Hellerman was to pay the $10,000 when financially able to do it. When Fusco and Savino learned that Hellerman was going to receive $45,000 without making any provision to pay them, Fusco said that he would see Vincent to obtain his aid in getting their money back. This development temporarily halted any efforts to sell AYSL stock but Graifer, who was most seriously affected by the stoppage, again went to Florida, saw Sebastian and explained the difficulty. Sebastian told him not to worry, telephoned his son, Vincent, and although he spoke to Vincent in Italian, immediately thereafter told Graifer in English that everything would be straightened out and Despite the passing of July 7th, the expiry date for the legal sale of the stock, money came in from sales effected by Hellerman and his henchmen, namely, brokers engaged by him.

that Hellerman and the stock deal would be reinstated. Hellerman was informed by Dioguardi that he could continue with his scheme but that Vincent had specified some variation in the former terms. Out of Hellerman's $45,000, Fusco and Savino were to receive $10,000, Hellerman was to repay Lombardo the $10,000 loan and Dioguardi was to receive the $25,000 balance.

On July 28, 1970, some three weeks after the legal expiry date, a purported 'closing' under Hellerman's supervision took place. Present were Lombardo, Hellerman, Graifer, Ferdinand (a principal of AYSL), Nelson and Winter (Hellerman's attorney). Hellerman produced $150,000 in checks (50,000 shares at $3 a share), some bogus and some not honored. Hellerman arranged to have TDA backdate its records to July 7th to give an appearance of legality. Subsequently these checks to the extent of $127,500 became good.

In August 1970 Graifer, from the proceeds, delivered the $45,000 to Lombardo. Lombardo passed it on to Dioguardi. Dioguardi then gave $20,000 of this sum to Vincent who then distributed $10,000 to Fusco and Savino and $10,000 to Lombardo. The remaining $25,000 Dioguardi used to repay that amount on an indebtedness owned by him and Hellerman. This manner of this distribution was thereafter confirmed, each to the other, including Graifer.

Concerning activities after these events, it is sufficient to say that Hellerman, consistent with his reputed skill in this sort of activity, then conducted a series of spurious manipulations in the AYSL stock and reported them at least to Graifer and Lombardo.

Again to summarize, what had started as an effort to raise money for AYSL had been taken over by Hellerman, Lombardo, Vincent Aloi and Dioguardi as a scheme to obtain money from the public via the sale of AYSL stock for their own use and purpose without disclosure of this fact to the purchasers.

Before embarking on a more detailed analysis of the many points raised by appellants' counsel, some comment upon the trial must be made based upon an appellate perspective as obtained from the record. The trial lasted for over eight weeks. The transcript was almost 6000 pages, of which hundreds of pages were devoted to colloquy between court and counsel. The four appellants were represented by experienced defense lawyers whose seizure of every opportunity technical and otherwise on behalf...