U.S. v. Dixon, No. 483

CourtU.S. Court of Appeals — Second Circuit
Writing for the CourtBefore LUMBARD, FRIENDLY and MULLIGAN; FRIENDLY; LUMBARD
Citation536 F.2d 1388
PartiesFed. Sec. L. Rep. P 95,471 UNITED STATES of America, Appellee, v. Lloyd DIXON, Jr., Appellant. ocket 75-1317.
Decision Date12 March 1976
Docket NumberD,No. 483

Page 1388

536 F.2d 1388
Fed. Sec. L. Rep. P 95,471
UNITED STATES of America, Appellee,
v.
Lloyd DIXON, Jr., Appellant.
No. 483, Docket 75-1317.
United States Court of Appeals,
Second Circuit.
Argued Nov. 26, 1975.
Decided March 12, 1976.

Page 1390

Herald Price Fahringer, Buffalo, N. Y. (Lipsitz, Green, Fahringer, Roll, Schuller & James, Buffalo, N. Y., of counsel), for appellant.

Page 1391

Robert H. Plaxico, Dept. of Justice, Washington, D. C. (Richard J. Arcara, U. S. Atty., Western District of New York, Robert C. Stewart and Dennis P. O'Keefe, Buffalo, N. Y., Shirley Baccus-Lobel, Washington, D. C., of counsel), for appellee.

Before LUMBARD, FRIENDLY and MULLIGAN, Circuit Judges.

FRIENDLY, Circuit Judge:

I.

Appellant Lloyd Dixon, Jr., was the president of AVM Corporation of Jamestown, New York, a manufacturer of voting machines which became subject to the proxy and reporting requirements of the Securities Exchange Act of 1934 (the Act) in 1965 as a result of the addition of § 12(g) in the amendments of 1964. His prosecution arose from violations of those provisions of the Act.

One of these, § 14(a), deals with the solicitation of proxies. It provides that:

It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to (§ 12) of this title.

Acting under this authority the Securities and Exchange Commission (SEC) has long provided that no solicitation of proxies may be made unless each person solicited is or has been "furnished with a written proxy statement containing the information specified in Schedule 14A," 17 C.F.R. 240.14a-3. Item 7e of Schedule 14A provides in pertinent part:

. . . State as to each of the following persons who was indebted to the issuer or its subsidiaries at any time since the beginning of the last fiscal year of the issuer, (i) the largest aggregate amount of indebtedness outstanding at any time during such period, (ii) the nature of the indebtedness and of the transaction in which it was incurred, (iii) the amount thereof outstanding as of the latest practicable date, and (iv) the rate of interest paid or charged thereon:

(1) Each director or officer of the issuer;

(2) Each nominee for election as a director; and,

(3) Each associate of any such director, officer or nominee.

Instructions. 1. Include the name of each person whose indebtedness is described and the nature of the relationship by reason of which the information is required to be given.

2. This paragraph does not apply to any person whose aggregate indebtedness did not exceed $10,000 or 1 percent of the issuer's total assets, whichever is less, at any time during the period specified. Exclude in the determination of the amount of indebtedness all amounts due from the particular person for purchases subject to usual trade terms, for ordinary travel and expense advances and for other transactions in the ordinary course of business. 17 C.F.R. 240.14a-101.

The other set of provisions requires the filing of reports with the SEC. The basic requirements are laid down in § 13, with the SEC having power to fill in the details. Acting under this authority the SEC has required the filing of an annual report, commonly known as a 10-K report. One item required in such reports is as follows, 17 C.F.R. 210.5-04:

Schedule II Amounts receivable from underwriters, promoters, directors, officers, employees, and principal holders (other than affiliates) of equity securities of the person and its affiliates. The schedule prescribed by § 210.12-03 shall be filed with respect to each person among the underwriters, promoters, directors, officers, employees, and principal holders (other than affiliates) of equity securities of

Page 1392

the person and its affiliates, from whom an aggregate indebtedness of more than $20,000 or 1 percent of total assets, whichever is less, is owed, or at any time during the period for which related income statements are required to be filed, was owed. For the purposes of this schedule, exclude in the determination of the amount of indebtedness all amounts receivable from such persons for purchases subject to usual trade terms, for ordinary travel and expense advances and for other such items arising in the ordinary course of business. 1

The instant indictment, in the District Court for the Western District of New York, contained six counts. Count II charged that Dixon "did knowingly, wilfully and unlawfully" solicit proxies in violation of the SEC's Rule quoted above, as the proxy statement did not disclose loans to Dixon during the fiscal year ended December 31, 1970, and he was not within the exemption provided for borrowers whose loans at no time exceeded $10,000. Count VI charged that Dixon and the AVM Corporation "unlawfully, wilfully and knowingly" violated § 13 of the Securities Exchange Act by filing a 10-K report for 1970 which omitted to include a Schedule II although such inclusion was required to reflect any loans to insiders which, like Dixon's, amounted to more than $20,000 at any time during the year. Counts III, IV and V charged violations of the mail fraud statute, 18 U.S.C. § 1341, 2 in that on three separate days Dixon "having devised a scheme and artifice to defraud" a scheme to deny the SEC information to which it was entitled and to solicit proxies in violation of its rules, by reason of the failure of the proxy statement to contain the required information concerning Dixon's indebtedness effected

Page 1393

this scheme by taking receipt from the mails of proxies executed by shareholders. Count I, the conspiracy count, under 18 U.S.C. § 371, was a hybrid. An opening paragraph, which charged that Dixon conspired with two unindicted co-conspirators, Kenneth Hammond and William Lewis, to commit offenses against the United States, was followed by two others. The first charged use of the mails and instrumentalities of interstate commerce to solicit proxies by means of an incomplete proxy statement. The second charged an offense as being "to knowingly, wilfully and unlawfully devise a scheme and artifice to defraud the stockholders" of AVM, by making false and fraudulent entries in AVM's books in violation of § 14 of the Securities Exchange Act and the Proxy Rules, 3 in order to deny the stockholders information required by law which was material and necessary to their assessment of the qualifications of officers on whose behalf the proxies were being solicited and that "in furtherance of the scheme and artifice to defraud as aforesaid," Dixon and the co-conspirators received mail matter in violation of the mail fraud statute.

A jury returned a verdict of guilty on all counts. The judge sentenced Dixon to one year's imprisonment on each count, the sentence to be served concurrently, and to fines of $10,000 each on Counts I, II and VI and of $1,000 on Counts III, IV and V.

II.

The Government presented its case through two witnesses, William Lewis and Robert M. Entwisle, who were respectively AVM's secretary-treasurer and its general counsel at the time here in question. Lewis testified under a grant of immunity.

The proof left no doubt that the highest aggregate balance of loans to Dixon during 1970 substantially exceeded the $20,000 exemption from the 10-K Schedule II filing and the $10,000 exemption from the proxy statement disclosure. His loans from AVM were channeled through two accounts, # 2410-00 and # 2512-02. The 1970 debits to these accounts were:

# 2510-00: $13,800 carryover from 1969
                 28,000 Jan.
                 13,000 Apr.
                 5,000 May
                 4,000 Feb.
                 6,500 Oct.
                 11,000 Oct.
                # 2512-02 $ 4,068 carryover.
                

At the same time, Dixon was paying back sums into the # 2510-00 account, so that by November 30 the confirmation statement reflecting these loans and signed by him to be sent to Ernst & Ernst, the accounting firm doing the AVM annual audit, showed a total debt of $67,868.08 for both accounts. Dixon stipulated that at least $65,368.08 of this was personal debt.

In December 1970, Dixon initiated a number of transactions which gave the appearance that he had retired a large portion of his debt. He instructed Lewis to transfer $9,000 to Dixon's father's account, the elder Dixon being at that time Chairman of the Board of AVM. This transaction had the effect of canceling the February and May debits of $5,000 and $4,000 from the # 2510-00 account. Dixon paid AVM $30,000, which he had borrowed from a Jamestown bank, to be applied to the # 2510-00 account. He then had Lewis take an advance of $5,000 on Lewis' account and apply the money to the # 2510-00 debt. Finally, Dixon retired the # 2512-02 account and paid an additional $700 on the # 2510-00 account. He thus reduced his total indebtedness to $19,100 as of December 31, 1970. Dixon stipulated that $14,600 of this constituted loans used for personal purposes.

As was his practice, Dixon renewed his AVM loans after January 1 and used the monies to pay off the loans from the bank and Lewis by which he had reduced his AVM accounts prior to the year's

Page 1394

end. Thus on February 1, 1971 he took a fresh $30,000 advance, debited to the # 2510-00 account, and on February 22 used the account to obtain $5,000 with which to repay Lewis. A $300 advance at the end of the month brought the # 2510-00 total back up to $54,400.

The evidence thus established that the proxy statement sent out March 19, 1971 and the 10-K report filed on March 25, 1971 did not contain the information on Dixon's indebtedness that was required. Dixon's principal defense was that he thought the "SEC rules"...

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109 practice notes
  • US v. Lang, Crim. No. WN-90-0404.
    • United States
    • U.S. District Court — District of Maryland
    • February 21, 1991
    ...SEC only if they are made "willfully and knowingly" and are misleading "with respect to any material fact." See United States v. Dixon, 536 F.2d 1388, 1396 (2d Cir.1976). Section 32(a) also provides defendants with a "no knowledge" defense to imprisonment which is not available under 18 U.S......
  • U.S. v. Lemire, Nos. 82-2492
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 4, 1983
    ...poses an independent business risk to the employer. Other courts have so held. Von Barta, 635 F.2d at 1005 n. 14; United States v. Dixon, 536 F.2d 1388, 1400-01 (2d At the same time, we are not unaware that undisclosed conflicts of interest create fertile ground for subsequent misuse of the......
  • Gervase v. Superior Court, No. C017925
    • United States
    • California Court of Appeals
    • January 26, 1995
    ...commit the prohibited act and that a specific intent to violate the statute or rule is unnecessary. (United States v. Dixon (2d Cir.1976) 536 F.2d 1388, 1397; Kronfeld v. First Jersey Nat. Bank (D.N.J.1986) 638 F.Supp. 1454, 1471.) It has also been said that under section 10(b) and rule 10b......
  • People v. Simon, No. S036981
    • United States
    • United States State Supreme Court (California)
    • January 23, 1995
    ...to do the proscribed act is enough (see, e.g., United States v. Schwartz (2d Cir.1972) 464 F.2d 499; United States v. Dixon (2d Cir.1976) 536 F.2d 1388) and again, with few exceptions, the decision construing Section 32(a) of the 1934 Act postdate the enactment of the Corporate Securities L......
  • Request a trial to view additional results
109 cases
  • US v. Lang, Crim. No. WN-90-0404.
    • United States
    • U.S. District Court — District of Maryland
    • February 21, 1991
    ...SEC only if they are made "willfully and knowingly" and are misleading "with respect to any material fact." See United States v. Dixon, 536 F.2d 1388, 1396 (2d Cir.1976). Section 32(a) also provides defendants with a "no knowledge" defense to imprisonment which is not available under 18 U.S......
  • U.S. v. Lemire, Nos. 82-2492
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 4, 1983
    ...poses an independent business risk to the employer. Other courts have so held. Von Barta, 635 F.2d at 1005 n. 14; United States v. Dixon, 536 F.2d 1388, 1400-01 (2d At the same time, we are not unaware that undisclosed conflicts of interest create fertile ground for subsequent misuse of the......
  • Gervase v. Superior Court, No. C017925
    • United States
    • California Court of Appeals
    • January 26, 1995
    ...commit the prohibited act and that a specific intent to violate the statute or rule is unnecessary. (United States v. Dixon (2d Cir.1976) 536 F.2d 1388, 1397; Kronfeld v. First Jersey Nat. Bank (D.N.J.1986) 638 F.Supp. 1454, 1471.) It has also been said that under section 10(b) and rule 10b......
  • People v. Simon, No. S036981
    • United States
    • United States State Supreme Court (California)
    • January 23, 1995
    ...to do the proscribed act is enough (see, e.g., United States v. Schwartz (2d Cir.1972) 464 F.2d 499; United States v. Dixon (2d Cir.1976) 536 F.2d 1388) and again, with few exceptions, the decision construing Section 32(a) of the 1934 Act postdate the enactment of the Corporate Securities L......
  • Request a trial to view additional results

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