U.S. v. Brown, No. 1034

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: Before CLARK; MULLIGAN
• Citation: 555 F.2d 336
• Parties: Fed. Sec. L. Rep. P 96,052 UNITED STATES of America, Appellee, v. James Leonard BROWN, Defendant-Appellant. ocket 77-1033.
• Docket Number: No. 1034,D
• Decision Date: 16 May 1977

Page 336

555 F.2d 336 Fed. Sec. L. Rep. P 96,052 UNITED STATES of America, Appellee,
v.
James Leonard BROWN, Defendant-Appellant. No. 1034, Docket 77-1033. United States Court of Appeals,
Second Circuit. Argued April 15, 1977.
Decided May 16, 1977.

Page 337

Jacob Laufer, Asst. U. S. Atty., New York City (Robert B. Fiske, U. S. Atty., S. D. N. Y., Frederick T. Davis, Asst. U. S. Atty., New York City, of counsel), for appellee.

Michael B. Pollack, New York City (Charles L. Weintraub, New York City, of counsel), for defendant-appellant.

Before CLARK, Associate Justice, ^* MOORE and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

The only issue of any substance raised on this appeal is whether the elaborate fraudulent scheme admittedly perpetrated by the appellant James L. Brown constitutes a violation of the antifraud provisions of the federal securities laws. We hold that it does and therefore affirm the conviction. Other claims of error by the trial judge are clearly frivolous and not worthy of comment here.

After an eight-day trial before District Judge Charles S. Haight, Jr. and a jury, a judgment of conviction was entered against Brown on December 23, 1976 in the United States District Court for the Southern District of New York. Brown was convicted

Page 338

on one count of conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 and on eight counts of substantive violations of the federal securities laws, 15 U.S.C. §§ 77q(a) and 77x; 18 U.S.C. § 2. Following Brown's conviction, Judge Haight sentenced him on the conspiracy count to five years imprisonment, with execution of all but six months suspended, and four and one half years probation commencing upon the termination of incarceration. On the remaining counts sentence was suspended and Brown was placed on periods of four and one half years probation, each to be served concurrently with the period imposed on the conspiracy count. At the time of this appeal, Brown was incarcerated under a sentence imposed for a prior unrelated conviction. I

The government established by abundant proof at trial principally through the testimony of other conspirators the following facts which are not denied on this appeal. Sometime in March 1972 Brown met with Chester Gray, John Krappman and Harvey Axelrod, all of whom testified for the government, for the purpose of concocting and executing a scheme whereby American Home Products Corporation (AHPC) common stock certificates would be counterfeited. After considerable difficulty, phony stock certificates were finally produced bearing the forged signature of one Gerald L. Smith, an AHPC stockholder. The next step was to exchange the counterfeit AHPC certificates through the transfer agent of AHPC, Manufacturers Hanover Trust Company (MHTC), where Krappman was employed, for genuine certificates in smaller denominations. Axelrod had opened a trading account at Seed Capital Corporation (Seed), a brokerage firm where his relative, Benigno, was employed. The account was in the name of Gerald L. Smith. During October 1972, Seed accepted into the unauthorized Gerald L. Smith trading account 13,000 shares of the newly issued AHPC certificates which while genuine were derived from those which had been counterfeited and forged. Seed then sold the certificates to and through New York brokerage houses. It sold 6,000 shares directly to Weeden & Co. which mailed to Seed written confirmation of the purchase. Seed then sold 6,500 shares through Schweickart & Co. which also mailed confirmations to Seed. The final 500 shares were sold through Ferkauf & Co. which had its clearing operations handled by Loeb Rhoades & Co.

Seed ultimately delivered the certificates thus spawned through the counterfeit shares bearing the forged name of Gerald L. Smith against payment by the brokerage houses in the total amount of.$1.4 million. The money was deposited to Seed's account and its checks totalling close to that amount were delivered to Axelrod by his relative, Benigno. Axelrod then forged Gerald L. Smith's endorsement signature...